3 ms·

Assuming you just print unlimited amounts of money because it convenient, how do you deal with the inflation that comes with that?

jcranmer 6y ago
At some point, the inflation does become a problem. But notice how it hasn't yet? Take a look at Japan, which has printed an awful lot of money and yet inflation is still hard to come by.
- freedomben 6y ago
  FYI to people trying to follow, this is MMT, Modern Monetary Theory: https://en.wikipedia.org/wiki/Modern_Monetary_Theory https://en.wikipedia.org/wiki/Modern_Monetary_Theory
- JumpCrisscross 6y ago
  > notice how it hasn't yet? We've been pumping new money into financial channels. A UBI would pump it into real channels. That said, this article is about a municipal program. Cities don't print money. They transfer it from some groups to others.
  - RHSeeger 6y ago
    The comment I was responding to was about the central bank.
    - toomuchtodo 6y ago
      I don't see the need to plan for inflation until a future point arrives that demonstrates there might be inflation. Looking at evidence from developed countries and their central banks, they are unable to generate an appreciable amount of inflation from monetary policy (significant quantitive easing operations). Maybe generous fiscal policy causes it (UBI, "helicopter money", and the like), it just seems a bit disingenuous to argue what we'll do about a hurdle that seems unlikely to present itself (many developed country central banks are near zero, at zero [ZIPR], or below zero interest rates [NIRP] [1] [2] and you're still not generating inflation [3] so ¯\_(ツ)_/¯). Spain is experimenting with something not quite UBI [4] (but close enough for this comment I will refer to it as such), and their inflation rate is currently negative [5]. Something to follow. EDIT: jcranmer said it better in a sibling comment ("To me, it seems a case of economists clinging to models that predict the opposite of reality, and it contributes to my general impression that economists prefer mathematical models even if their correlation to reality is poor.") [6]. [1] https://www.visualcapitalist.com/chart-the-downward-spiral-in-interest-rates/ https://www.visualcapitalist.com/chart-the-downward-spiral-i... [2] https://www.visualcapitalist.com/wp-content/uploads/2020/03/central-bank-moves.jpg https://www.visualcapitalist.com/wp-content/uploads/2020/03/... [3] https://voxeu.org/article/great-disinflation-emerging-and-developing-economies https://voxeu.org/article/great-disinflation-emerging-and-de... [4] https://www.nature.com/articles/d41586-020-01993-3 https://www.nature.com/articles/d41586-020-01993-3 [5] https://tradingeconomics.com/spain/inflation-cpi https://tradingeconomics.com/spain/inflation-cpi [6] https://news.ycombinator.com/item?id=24629128 https://news.ycombinator.com/item?id=24629128
      - notahacker 6y ago
        > Looking at evidence from developed countries and their central banks, they are unable to generate an appreciable amount of inflation from monetary policy (significant quantitive easing operations) Since QE operations were not designed to produce inflation (and were arguably designed specifically to not produce consumer price inflation), this isn't exactly surprising. They did, however, affect prices of the assets the government bought up as predicted. Suffice to say, there's a massive difference between monetary expansions in a time of deep recession - economic policy orthodoxy since Keynes - and the assumption that inflation isn't a thing in developed countries. It's much the same as a startup can pay for stuff by emitting more equity: pay for the right stuff and the value of the company might actually rise and there are many examples of valuations leaping afterwards, but you can't just assume these examples and the infinite divisibility of the cap table means no startup needs to worry about dilution or impact on future valuations. > Spain is experimenting with something not quite UBI [4] (but close enough for this comment I will refer to it as such), and their inflation rate is currently negative [5]. Something to follow. Spain reforming its benefits system to create a new payout to 5% off its population to be funded by debt and taxes isn't remotely similar to Spain reforming its benefits system to pay its entire population newly printed money, so the fact the former has little immediately evident inflationary impact in the middle of Covid tells us very little about the latter.
- RHSeeger 6y ago
  Given the nearly unlimited number of places one can find explanations of why printing more money causes inflation, I think it's reasonable to assume that, at worst, it _can_ do so. As such, throwing caution to the wind and just printing as much money as you need because "it wasn't a problem in <that country>" seems risky.
  - jcranmer 6y ago
    When you have a model that says something should happen under certain conditions, and every practical instantiation of those conditions have failed to cause the predicted effects, perhaps your model is wrong. I'm reminded of the Phillips curve which relates inflation and unemployment. If you graph these data points for the 1950s and the 1960s, you do get a great correlation. But extend the graph to the 1970s and the 1980s and the data instead looks a lot more like a random scatterplot. Yet the concept is important enough to be covered in Economics 101 textbooks. To me, it seems a case of economists clinging to models that predict the opposite of reality, and it contributes to my general impression that economists prefer mathematical models even if their correlation to reality is poor.
    - bdamm 6y ago
      Or, the model is right, but the system is being gamed in a way that isn't clear to us in the public. Then when we find out what the game is it'll be too late.
      - tptacek 6y ago
        Aren't you worried that there's really no model that you can't support with that logic, no matter how dumb it might be?
        notahacker 6y ago
        I'm more worried about the implicit economics textbooks cover how an old model was falsified in the 1970s, therefore we should assume every other economic model is also false argument he was responding to...
deleted 6y ago
[deleted]

jcranmer 6y ago

At some point, the inflation does become a problem. But notice how it hasn't yet? Take a look at Japan, which has printed an awful lot of money and yet inflation is still hard to come by.

freedomben 6y ago
FYI to people trying to follow, this is MMT, Modern Monetary Theory: https://en.wikipedia.org/wiki/Modern_Monetary_Theory https://en.wikipedia.org/wiki/Modern_Monetary_Theory
JumpCrisscross 6y ago
> notice how it hasn't yet? We've been pumping new money into financial channels. A UBI would pump it into real channels. That said, this article is about a municipal program. Cities don't print money. They transfer it from some groups to others.
- RHSeeger 6y ago
  The comment I was responding to was about the central bank.
  - toomuchtodo 6y ago
    I don't see the need to plan for inflation until a future point arrives that demonstrates there might be inflation. Looking at evidence from developed countries and their central banks, they are unable to generate an appreciable amount of inflation from monetary policy (significant quantitive easing operations). Maybe generous fiscal policy causes it (UBI, "helicopter money", and the like), it just seems a bit disingenuous to argue what we'll do about a hurdle that seems unlikely to present itself (many developed country central banks are near zero, at zero [ZIPR], or below zero interest rates [NIRP] [1] [2] and you're still not generating inflation [3] so ¯\_(ツ)_/¯). Spain is experimenting with something not quite UBI [4] (but close enough for this comment I will refer to it as such), and their inflation rate is currently negative [5]. Something to follow. EDIT: jcranmer said it better in a sibling comment ("To me, it seems a case of economists clinging to models that predict the opposite of reality, and it contributes to my general impression that economists prefer mathematical models even if their correlation to reality is poor.") [6]. [1] https://www.visualcapitalist.com/chart-the-downward-spiral-in-interest-rates/ https://www.visualcapitalist.com/chart-the-downward-spiral-i... [2] https://www.visualcapitalist.com/wp-content/uploads/2020/03/central-bank-moves.jpg https://www.visualcapitalist.com/wp-content/uploads/2020/03/... [3] https://voxeu.org/article/great-disinflation-emerging-and-developing-economies https://voxeu.org/article/great-disinflation-emerging-and-de... [4] https://www.nature.com/articles/d41586-020-01993-3 https://www.nature.com/articles/d41586-020-01993-3 [5] https://tradingeconomics.com/spain/inflation-cpi https://tradingeconomics.com/spain/inflation-cpi [6] https://news.ycombinator.com/item?id=24629128 https://news.ycombinator.com/item?id=24629128
    - notahacker 6y ago
      > Looking at evidence from developed countries and their central banks, they are unable to generate an appreciable amount of inflation from monetary policy (significant quantitive easing operations) Since QE operations were not designed to produce inflation (and were arguably designed specifically to not produce consumer price inflation), this isn't exactly surprising. They did, however, affect prices of the assets the government bought up as predicted. Suffice to say, there's a massive difference between monetary expansions in a time of deep recession - economic policy orthodoxy since Keynes - and the assumption that inflation isn't a thing in developed countries. It's much the same as a startup can pay for stuff by emitting more equity: pay for the right stuff and the value of the company might actually rise and there are many examples of valuations leaping afterwards, but you can't just assume these examples and the infinite divisibility of the cap table means no startup needs to worry about dilution or impact on future valuations. > Spain is experimenting with something not quite UBI [4] (but close enough for this comment I will refer to it as such), and their inflation rate is currently negative [5]. Something to follow. Spain reforming its benefits system to create a new payout to 5% off its population to be funded by debt and taxes isn't remotely similar to Spain reforming its benefits system to pay its entire population newly printed money, so the fact the former has little immediately evident inflationary impact in the middle of Covid tells us very little about the latter.
RHSeeger 6y ago
Given the nearly unlimited number of places one can find explanations of why printing more money causes inflation, I think it's reasonable to assume that, at worst, it _can_ do so. As such, throwing caution to the wind and just printing as much money as you need because "it wasn't a problem in <that country>" seems risky.
- jcranmer 6y ago
  When you have a model that says something should happen under certain conditions, and every practical instantiation of those conditions have failed to cause the predicted effects, perhaps your model is wrong. I'm reminded of the Phillips curve which relates inflation and unemployment. If you graph these data points for the 1950s and the 1960s, you do get a great correlation. But extend the graph to the 1970s and the 1980s and the data instead looks a lot more like a random scatterplot. Yet the concept is important enough to be covered in Economics 101 textbooks. To me, it seems a case of economists clinging to models that predict the opposite of reality, and it contributes to my general impression that economists prefer mathematical models even if their correlation to reality is poor.
  - bdamm 6y ago
    Or, the model is right, but the system is being gamed in a way that isn't clear to us in the public. Then when we find out what the game is it'll be too late.
    - tptacek 6y ago
      Aren't you worried that there's really no model that you can't support with that logic, no matter how dumb it might be?
      - notahacker 6y ago
        I'm more worried about the implicit economics textbooks cover how an old model was falsified in the 1970s, therefore we should assume every other economic model is also false argument he was responding to...

deleted 6y ago

[deleted]