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So how come we don’t see hyper inflation with this excessive government spending? For decades politicians had one stable message: Turning the highly “balanced”

So how come we don’t see hyper inflation with this excessive government spending? For decades politicians had one stable message: Turning the highly “balanced” and austere fiscal machinery system towards spending yields only hyperinflation. They said look at Venezuela, Zimbabwe, Yugoslavia, Germany etc. And the worlds supposedly best economists produced models that legitimize this view, making it dominant in education and discourse. We now gave people basically a UBI, got many people out of poverty with, but all the issues they have been saying would appear and all the false excuses they put on the table have not materialized. Isn’t one very big scandal of 2020 that all of these people have been lying to the population? That we had the tools to fight poverty and create better living conditions all along but deliberately didn’t chose to do so? It appears they just want to bully and abuse people by artificially creating a bad situation and then bully and shame them that the people are in a bad situation.

digitalengineer 6y ago
> So how come we don’t see hyper inflation with this excessive government spending? Because the $ is the worlds reserve currency... The US moves the burden to ROW (rest of world). However there is the https://en.wikipedia.org/wiki/Triffin_dilemma https://en.wikipedia.org/wiki/Triffin_dilemma “The Triffin dilemma or Triffin paradox is the conflict of economic interests that arises between short-term domestic and long-term international objectives for countries whose currencies serve as global reserve currencies. “
- protoman3000 6y ago
  EU Countries have similar excessive spending programs and the Euro is not the worlds reserve currency, yet we don’t see Venezualian Hyperinflation. How is that reconcilable with this theory?
  - dismalpedigree 6y ago
    The money is not going into productive use in the hands of most recipients. Its being used to pay down debts owed to the creditors in large scale. Debt loads have decreased significantly with the money distribution. Those who end up with the money struggle to find assets to invest it in, which is why the stock market, private equity markets, and all other asset markets are heavily inflated now. The money had to go somewhere.
    - Leherenn 6y ago
      Doesn't the money has to go back into the "real" economy at some point, i.e. fill a need besides having a bigger number in the bank account/Forbes list? Or are the recipients of all this wealth already so rich they don't even need another sport car, yacht, villa by the sea or even another forward looking company? I have to admit I don't understand being so rich I don't know what to do with my money. It feels like even if I had billions, I'd try to be an Elon Musk and use my money to create something. Or maybe even buy and bankroll a NGO, a sport team, artists, whatever. Is this already saturated, are all the opportunities that don't look like a sure scam already taken? I feel so out of touch with this world, I struggle to even comprehend it.
      - dismalpedigree 6y ago
        I’m sure the wealthy are spending some, but on the whole people spend significantly less of their money as a percentage of income the more wealthy they are. All their needs are met. They can splash out cash for some things but not that much trickles down.
ninkendo 6y ago
You’ll hear answers about the USD being the world’s reserve currency, and maybe that does help, but I think the real answer is that we will see hyperinflation eventually. The math eventually must catch up with us.
- protoman3000 6y ago
  > The math eventually must catch up with us. I think it is flawed math if you completely ignore substantial parts of the equation. AFAIK leading analyses in leading economic scientific journals have discussed the excessive spending of inflationary countries as the and only root cause for the inflation. But, these leading papers often don’t even mention that the worlds biggest economies at these times (e.g. US) have cut ties and imposed economic sanctions on these countries just before the excessive spending and hyperinflation started. How are these countries then able to buy goods on the international market denominated in USD, if they are basically cut off from the US Dollar monetary system? It’s almost as if an excessive shock of raised import prices propagates to a general increase in prices. This would mean economic sanctions imposed by the US on to Chile put them into a crisis, not their socialist government from back then with its spending programs. But wait, that would not fit into the narrative so let’s just claim that these countries short term reaction to these shocks (print enough money in hopes to stabilize the economy) is the cause of the shock and hide it behind a wall of math that nobody wants to look at anyways. Excuse me, I don’t have the classics at hand now so I can’t point sources.
  - 14 6y ago
    Well I agree that the initial cause may not be the printing of the money itself, but it is hard to deny that “print enough money in hopes to stabilize the economy” is not a problem. It takes a bad situation and makes it worse. Because even if the US and Chile are having issues and Chile then prints 1 million for all its citizens and then comes to my county and they all say we have a million now we want to spend in your country it doesn’t really work. I think my point is it is two separate matter yes there was something crippling their economy ie sanctions but printing money still was the cause of inflation. Another option would be look at what is causing sanctions and work to resolve that.
kruxigt 6y ago
So your theory is that we can actually stop working and start getting UBI and things will turn out fine?
- ahelwer 6y ago
  Why does this all-or-nothing objection come up all the time? You see it with the minimum wage debate too, as in "why don't we pay everyone $100/hr" or whatever. It's just lazy thinking. The economy is a nonlinear system that affords many options beyond these ridiculous binaries.
  - cmoscoso 6y ago
    Can the government deliver non binary solutions?
  - notahacker 6y ago
    tbf the 'many options beyond these ridiculous binaries' appear to be what the OP in this thread aggressively dismissed with their argument that because gold bugs are wrong about immediate hyperinflation from deficit spending in a massive economic downturn, all other economists who argue government ability to eliminate poverty through deficit spending in other circumstances might face constraints or tradeoffs 'just want to bully and shame the people that are in a bad situation'
- II2II 6y ago
  Very few, if any, people are suggesting that UBI is a substitute for a healthy labour force. It is typically viewed as an acknowledgement that there are serious social issues which have economic ramifications that may be addressable through a basic income. Whether a basic income will address those problems is an open question. It may have a net positive, neutral, or negative effect depending upon the collective psychological response. In addition, how one views the outcome will depend upon their perspective. Suggesting that an UBI will result in people not working is a misleading ideological statement that has no basis in evidence. We simply don't know what the outcome will be. Even studies that indicate positive outcomes are limited by the scale of the implementation. Besides, it's probably best to look at UBI through the lens of political stability, rather than social well being or economic outcomes. EDIT: added a very important "not".
deleted 6y ago
[deleted]
CraigJPerry 6y ago
Just be a creditor (let me mark that statement with a heavy /s sarcasm tag). Most people might be losing their fair share of the pie in the current economic strategy but the creditor class has made out like bandits over the past 30+ years with no end in sight. Talk about free market ideals but socialise all losses with corporate bailouts. It’s just win win win. The only game in town today is “maximise shareholder value”. The pre-70s concepts of keep wages growing in lock step with capital’s gains (since the theory goes that boosts consumption and that keeps the world turning) has gone out the window. Capital takes 100% of the growth. Labour is easy to keep distracted - divide and conquer: “Hey, gay people/single mothers/people from other countries/people with brown eyes are taking free stuff at your expense...”
- andromeduck 6y ago
  https://www.reddit.com/r/badeconomics/comments/6rtoh4/productivity_pay_gap_in_epi_we_trust/ https://www.reddit.com/r/badeconomics/comments/6rtoh4/produc...
  - CraigJPerry 6y ago
    Would it be fair to summarise that post as “they’ve cherry picked the graph to make it look worse than reality, but their point still stands - productivity growth hasn’t trickled down to most workers” ? https://www.epi.org/publication/understanding-the-historic-divergence-between-productivity-and-a-typical-workers-pay-why-it-matters-and-why-its-real/ https://www.epi.org/publication/understanding-the-historic-d...
    - andromeduck 6y ago
      The assumption being that the rise in productivity was a diffuse one instead of the much more plausible concentrated one between international competition routing uncompetitive sectors and over regulation stymieing the continuance of tradional high paying jobs like construction, general failure to maintain public infrastructure.
caf 6y ago
When additional government spending doesn't lead to inflation, one obvious reason is that it is utilising what would otherwise be excess unused/idle capacity in the real economy. It's only when the spending exceeds the amount of otherwise idle capacity that inflation occurs, as too much money chases too little real production. It's evident that the economic shocks this year have idled a great deal of economic capacity.
CalRobert 6y ago
perhaps inflation should consider the cost of equities, healthcare, and housing (more thoroughly than it does now)? If I have a cash surplus that's where I'm most likely to use it.
- droro 6y ago
  This makes a lot of sense if you consider that increasing the supply of money is not enough to cause inflation on its own- there also has to be scarcity. Healthcare is scarce because it is tied to the availability of highly skilled labor and has seen significant cost increases in recent years as a result. Housing has been scarce because the amount of land near job opportunities has decreased as our economy has become more service-oriented. And this brings me to the one big item that was missing from the list in the OP: the pandemic has eased the housing crisis by encouraging everyone to spread out. The exodus of upper and middle class people moving into smaller cities and towns will bring more opportunities for service jobs to places with lower construction costs and a higher availability of land. The only question is whether the drawbacks of telecommuting are big enough to push everyone back into offices in a few years, reversing the trend.
  - protoman3000 6y ago
    > the pandemic has eased the housing crisis by encouraging everyone to spread out AFAIK there were a few weeks in the first wave of the pandemic where people fled the city and landlords would face sudden issues to fill their apartments but this time is over. Speaking from anecdotes by friends trying to get apartments in the big cities thoughout Europe it has not gotten easier at all.
    - csmiller 6y ago
      In Boston and New York it still seems to be a renters market
QuesnayJr 6y ago
It's mysterious to me how the public's opinion is formed of what economists say. The view inside the field is very different, and doesn't resemble what you say at all. Nobody in the field worries about hyperinflation for developed economies. The consensus is that governments can combat recessions. There was some challenge to this view in the late 70s and early 80s, when inflation was high, but by the end of the 90s the question was mostly settled. In the US, even the economic advisors to George W. Bush called for stimulus spending to combat the recession in 2000.
- mehrdadn 6y ago
  > Nobody in the field worries about hyperinflation for developed economies. They might not, but could you ELI5 why they shouldn't be? Because as the interest payment on national debt grows, what happens eventually if not hyperinflation? You can't keep borrowing money to pay interest on existing debt, so you'll have to start printing money, right? How do you avoid eventual hyperinflation when you keep borrowing more and more money to increase your debt even more?
  - protoman3000 6y ago
    Can you please ELI5 why a government would have to borrow money that it is able to print itself?
    - krupan 6y ago
      If you could get cash now by promising to pay it back with something you can manufacture for (nearly) free, wouldn't you make that deal too?
      - krupan 6y ago
        The catch of course is that there really isn't a guarantee that the U.S. will be able to keep printing dollars without the value going down
    - throw0101a 6y ago
throwaway-8c93 6y ago
> That we had the tools to fight poverty and create better living conditions all along but deliberately didn’t chose to do so? Yes, that's it in a nutshell. Even the standard 1940s mainstream Keynes doctrine is quite clear on the no hyper-inflation scenario - additional money supply will not result in excess inflation unless the economy is at full employment. And by full employment, it doesn't mean the headline unemployment rate of ~5% quoted in media. It means high labor force participation rates (currently at historical lows), low underemployment (currently at historical highs) and low unemployment rate. The fact we see persistently low inflation rates throughout the developed world for decades is intimately tied to these stats. By finally having time to read Keynes directly from his own works, it's amazing how prescient the man was. Sans the dandy early 20th century English, these quotes are just as applicable today as they were in 1930s: > ...the richer the community, the wider will tend to be the gap between its actual and its potential production; and therefore the more obvious and outrageous the defects of the economic system. > [on classical economics] That it reached conclusions quite different from what the ordinary uninstructed person would expect, added to its intellectual prestige. That its teaching, translated into practice, was austere and often unpalatable, lent it virtue. [...] That it could explain much social injustice and apparent cruelty as an inevitable incident in the scheme of progress [...] commended it to authority. > professional economists, after Malthus, were apparently unmoved by the lack of correspondence between the results of their theory and the facts of observation;— a discrepancy which the ordinary man has not failed to observe
- pbronez 6y ago
  This is fascinating. Can you recommend any specific works by Keynes to dig into?
  - deleted 6y ago
    [deleted]
- raverbashing 6y ago
  Keynes worked until stagflation happened. That's the issue that made other models come forward And of course, the hyperinflation episodes of those countries (and others) did really happen But maybe the issue is giving the money directly to people instead of using it to pay government debt
solatic 6y ago
There is inflation. The dollar is incredibly weak right now on currency markets, relative to other currencies. Businesses that are not already sitting on large piles of cash are bearing the brunt of inflation right now, as they get screwed between the rising costs paid to foreign suppliers and the stubbornly low prices that American domestic consumers can afford. The performance of the average American business has drastically decreased this past year, contributing to layoffs and making the problem worse. You don't see it in the stock market because the prices of stocks are being propped up by the Federal Reserve, but it's been an open discussion over the incredibly fast gains in the stock market over the last several months whether stock prices are coupled to corporate fundamentals or not.
- thrav 6y ago
  You clearly believe the dollar is worth less, and is likely to be devalued further, but aren’t willing to tie that to the higher stock market prices?
  - jonwalch 6y ago
    There are many factors that go into stock market prices besides the strength of the dollar. With interest rates this low, there's hardly anywhere else to invest one's money.
  - krupan 6y ago
    With inflation, the price of everything goes up, from candy bars to stocks.
  - solatic 6y ago
    Correlation does not imply causation. True economic strength would result in both higher stock prices (reflecting stronger companies) and a stronger dollar (reflecting increased demand for those companies' goods and services). One needs to take the stock market prices in the context of the actions of the Federal Reserve and despite the weakness of the economy.
slv77 6y ago
The reason that stimulus spending doesn’t result in hyper-inflation is that the increase in the money supply from the debt creation is almost completely offset by a drop in monetary velocity. This is because most of the money injected due to a stimulus is quickly locked up due to structural issues where excess savings is quickly funneled to corporate profits, landlords and the ultra wealthy. These funds do not recirculate do the velocity of money drops and inflation doesn’t materialize. In fact the structural issues are so strong in places like Japan that deflation has will naturally result if the money supply isn’t increased with constant stimulus measures. This creates a company store economy where the underclass or government has to perpetually roll an increasing amount of debt.
- im3w1l 6y ago
  Kind of thinking aloud here, but could the Japanese situation be a consequence of their culture? That they have a higher psychological need for feeling safe, which means sitting on more cash for a rainy day. Maybe the solution could be to run an unbalanced book. Money and debt are often created together, but if all actors of the economy really want to be cash positive, then maybe it calls for having more money than debt.
  - throw0101a 6y ago
    > Kind of thinking aloud here, but could the Japanese situation be a consequence of their culture? Could be a component, just like in Germany. When your central bank rate is zero: * https://tradingeconomics.com/euro-area/interest-rate https://tradingeconomics.com/euro-area/interest-rate And your borrowing costs are negative going out thirty years: * https://ca.investing.com/rates-bonds/germany-government-bonds https://ca.investing.com/rates-bonds/germany-government-bond... That's a pretty good indication that spending should increase. Demographics is often said to be a major component. The older a population is, the less spending there tends to be, which tends to impact economic growth, and has a pretty good correlation with (low) interest rates: * https://financialpost.com/opinion/the-natural-rate-of-interest https://financialpost.com/opinion/the-natural-rate-of-intere... * PDF: https://www.fraserinstitute.org/sites/default/files/why-are-interest-rates-so-low.pdf https://www.fraserinstitute.org/sites/default/files/why-are-...
krupan 6y ago
It is simple supply and demand. At the start of the pandemic people all over the world were selling stock, commodities, bonds, all demanding dollars. When demand goes up for something you can produce more of it without it losing value. When the supply of dollars outpaces demand, then you get inflation. The only remedy there is to somehow decrease the supply of dollars, usually through increased taxes.
commandlinefan 6y ago
> how come we don’t see hyper inflation It’s only been, what, 6 months? And we’ve only done one stimulus. Give it 10 years and a hundred stimuli.
Der_Einzige 6y ago
Not sure why you're being downvoted for good analysis. The key is for your country to not have a significantly higher debt to GDP than competitors of similar economic development. The USA has further advantages in that much of its debt is owned by other Americans (who have strong vested interest in the ability for the USA to pay its debts). That being said, we could have spent FAR MORE and increased debt FAR MORE in the USA without serious downsizes - even if COVID hadn't happened! It turns out that "fiscal responsibility" literally does not matter and is in fact DETERMINTAL to the economy. The velocity of money is all that matters. This is why VCs who are never profitable are still a net positive for the economy, because they facilitate velocity. The US govt pumping money into the economy PREVENTED A FAR WORSE LIQUDITY CRISIS which we were at serious risk of earlier given that it looked like we'd be seeing DEFLATION rather than inflation earlier on...

digitalengineer 6y ago

> So how come we don’t see hyper inflation with this excessive government spending? Because the $ is the worlds reserve currency... The US moves the burden to ROW (rest of world). However there is the https://en.wikipedia.org/wiki/Triffin_dilemma https://en.wikipedia.org/wiki/Triffin_dilemma “The Triffin dilemma or Triffin paradox is the conflict of economic interests that arises between short-term domestic and long-term international objectives for countries whose currencies serve as global reserve currencies. “

protoman3000 6y ago
EU Countries have similar excessive spending programs and the Euro is not the worlds reserve currency, yet we don’t see Venezualian Hyperinflation. How is that reconcilable with this theory?
- dismalpedigree 6y ago
  The money is not going into productive use in the hands of most recipients. Its being used to pay down debts owed to the creditors in large scale. Debt loads have decreased significantly with the money distribution. Those who end up with the money struggle to find assets to invest it in, which is why the stock market, private equity markets, and all other asset markets are heavily inflated now. The money had to go somewhere.
  - Leherenn 6y ago
    Doesn't the money has to go back into the "real" economy at some point, i.e. fill a need besides having a bigger number in the bank account/Forbes list? Or are the recipients of all this wealth already so rich they don't even need another sport car, yacht, villa by the sea or even another forward looking company? I have to admit I don't understand being so rich I don't know what to do with my money. It feels like even if I had billions, I'd try to be an Elon Musk and use my money to create something. Or maybe even buy and bankroll a NGO, a sport team, artists, whatever. Is this already saturated, are all the opportunities that don't look like a sure scam already taken? I feel so out of touch with this world, I struggle to even comprehend it.
    - dismalpedigree 6y ago
      I’m sure the wealthy are spending some, but on the whole people spend significantly less of their money as a percentage of income the more wealthy they are. All their needs are met. They can splash out cash for some things but not that much trickles down.

ninkendo 6y ago

You’ll hear answers about the USD being the world’s reserve currency, and maybe that does help, but I think the real answer is that we will see hyperinflation eventually. The math eventually must catch up with us.

protoman3000 6y ago
> The math eventually must catch up with us. I think it is flawed math if you completely ignore substantial parts of the equation. AFAIK leading analyses in leading economic scientific journals have discussed the excessive spending of inflationary countries as the and only root cause for the inflation. But, these leading papers often don’t even mention that the worlds biggest economies at these times (e.g. US) have cut ties and imposed economic sanctions on these countries just before the excessive spending and hyperinflation started. How are these countries then able to buy goods on the international market denominated in USD, if they are basically cut off from the US Dollar monetary system? It’s almost as if an excessive shock of raised import prices propagates to a general increase in prices. This would mean economic sanctions imposed by the US on to Chile put them into a crisis, not their socialist government from back then with its spending programs. But wait, that would not fit into the narrative so let’s just claim that these countries short term reaction to these shocks (print enough money in hopes to stabilize the economy) is the cause of the shock and hide it behind a wall of math that nobody wants to look at anyways. Excuse me, I don’t have the classics at hand now so I can’t point sources.
- 14 6y ago
  Well I agree that the initial cause may not be the printing of the money itself, but it is hard to deny that “print enough money in hopes to stabilize the economy” is not a problem. It takes a bad situation and makes it worse. Because even if the US and Chile are having issues and Chile then prints 1 million for all its citizens and then comes to my county and they all say we have a million now we want to spend in your country it doesn’t really work. I think my point is it is two separate matter yes there was something crippling their economy ie sanctions but printing money still was the cause of inflation. Another option would be look at what is causing sanctions and work to resolve that.

kruxigt 6y ago

So your theory is that we can actually stop working and start getting UBI and things will turn out fine?

ahelwer 6y ago
Why does this all-or-nothing objection come up all the time? You see it with the minimum wage debate too, as in "why don't we pay everyone $100/hr" or whatever. It's just lazy thinking. The economy is a nonlinear system that affords many options beyond these ridiculous binaries.
- cmoscoso 6y ago
  Can the government deliver non binary solutions?
- notahacker 6y ago
  tbf the 'many options beyond these ridiculous binaries' appear to be what the OP in this thread aggressively dismissed with their argument that because gold bugs are wrong about immediate hyperinflation from deficit spending in a massive economic downturn, all other economists who argue government ability to eliminate poverty through deficit spending in other circumstances might face constraints or tradeoffs 'just want to bully and shame the people that are in a bad situation'
II2II 6y ago
Very few, if any, people are suggesting that UBI is a substitute for a healthy labour force. It is typically viewed as an acknowledgement that there are serious social issues which have economic ramifications that may be addressable through a basic income. Whether a basic income will address those problems is an open question. It may have a net positive, neutral, or negative effect depending upon the collective psychological response. In addition, how one views the outcome will depend upon their perspective. Suggesting that an UBI will result in people not working is a misleading ideological statement that has no basis in evidence. We simply don't know what the outcome will be. Even studies that indicate positive outcomes are limited by the scale of the implementation. Besides, it's probably best to look at UBI through the lens of political stability, rather than social well being or economic outcomes. EDIT: added a very important "not".

deleted 6y ago

[deleted]

CraigJPerry 6y ago

Just be a creditor (let me mark that statement with a heavy /s sarcasm tag). Most people might be losing their fair share of the pie in the current economic strategy but the creditor class has made out like bandits over the past 30+ years with no end in sight. Talk about free market ideals but socialise all losses with corporate bailouts. It’s just win win win. The only game in town today is “maximise shareholder value”. The pre-70s concepts of keep wages growing in lock step with capital’s gains (since the theory goes that boosts consumption and that keeps the world turning) has gone out the window. Capital takes 100% of the growth. Labour is easy to keep distracted - divide and conquer: “Hey, gay people/single mothers/people from other countries/people with brown eyes are taking free stuff at your expense...”

andromeduck 6y ago
https://www.reddit.com/r/badeconomics/comments/6rtoh4/productivity_pay_gap_in_epi_we_trust/ https://www.reddit.com/r/badeconomics/comments/6rtoh4/produc...
- CraigJPerry 6y ago
  Would it be fair to summarise that post as “they’ve cherry picked the graph to make it look worse than reality, but their point still stands - productivity growth hasn’t trickled down to most workers” ? https://www.epi.org/publication/understanding-the-historic-divergence-between-productivity-and-a-typical-workers-pay-why-it-matters-and-why-its-real/ https://www.epi.org/publication/understanding-the-historic-d...
  - andromeduck 6y ago
    The assumption being that the rise in productivity was a diffuse one instead of the much more plausible concentrated one between international competition routing uncompetitive sectors and over regulation stymieing the continuance of tradional high paying jobs like construction, general failure to maintain public infrastructure.

caf 6y ago

When additional government spending doesn't lead to inflation, one obvious reason is that it is utilising what would otherwise be excess unused/idle capacity in the real economy. It's only when the spending exceeds the amount of otherwise idle capacity that inflation occurs, as too much money chases too little real production. It's evident that the economic shocks this year have idled a great deal of economic capacity.

CalRobert 6y ago

perhaps inflation should consider the cost of equities, healthcare, and housing (more thoroughly than it does now)? If I have a cash surplus that's where I'm most likely to use it.

droro 6y ago
This makes a lot of sense if you consider that increasing the supply of money is not enough to cause inflation on its own- there also has to be scarcity. Healthcare is scarce because it is tied to the availability of highly skilled labor and has seen significant cost increases in recent years as a result. Housing has been scarce because the amount of land near job opportunities has decreased as our economy has become more service-oriented. And this brings me to the one big item that was missing from the list in the OP: the pandemic has eased the housing crisis by encouraging everyone to spread out. The exodus of upper and middle class people moving into smaller cities and towns will bring more opportunities for service jobs to places with lower construction costs and a higher availability of land. The only question is whether the drawbacks of telecommuting are big enough to push everyone back into offices in a few years, reversing the trend.
- protoman3000 6y ago
  > the pandemic has eased the housing crisis by encouraging everyone to spread out AFAIK there were a few weeks in the first wave of the pandemic where people fled the city and landlords would face sudden issues to fill their apartments but this time is over. Speaking from anecdotes by friends trying to get apartments in the big cities thoughout Europe it has not gotten easier at all.
  - csmiller 6y ago
    In Boston and New York it still seems to be a renters market

QuesnayJr 6y ago

It's mysterious to me how the public's opinion is formed of what economists say. The view inside the field is very different, and doesn't resemble what you say at all. Nobody in the field worries about hyperinflation for developed economies. The consensus is that governments can combat recessions. There was some challenge to this view in the late 70s and early 80s, when inflation was high, but by the end of the 90s the question was mostly settled. In the US, even the economic advisors to George W. Bush called for stimulus spending to combat the recession in 2000.

mehrdadn 6y ago
> Nobody in the field worries about hyperinflation for developed economies. They might not, but could you ELI5 why they shouldn't be? Because as the interest payment on national debt grows, what happens eventually if not hyperinflation? You can't keep borrowing money to pay interest on existing debt, so you'll have to start printing money, right? How do you avoid eventual hyperinflation when you keep borrowing more and more money to increase your debt even more?
- protoman3000 6y ago
  Can you please ELI5 why a government would have to borrow money that it is able to print itself?
  - krupan 6y ago
    If you could get cash now by promising to pay it back with something you can manufacture for (nearly) free, wouldn't you make that deal too?
    - krupan 6y ago
      The catch of course is that there really isn't a guarantee that the U.S. will be able to keep printing dollars without the value going down
  - throw0101a 6y ago

throwaway-8c93 6y ago

> That we had the tools to fight poverty and create better living conditions all along but deliberately didn’t chose to do so? Yes, that's it in a nutshell. Even the standard 1940s mainstream Keynes doctrine is quite clear on the no hyper-inflation scenario - additional money supply will not result in excess inflation unless the economy is at full employment. And by full employment, it doesn't mean the headline unemployment rate of ~5% quoted in media. It means high labor force participation rates (currently at historical lows), low underemployment (currently at historical highs) and low unemployment rate. The fact we see persistently low inflation rates throughout the developed world for decades is intimately tied to these stats. By finally having time to read Keynes directly from his own works, it's amazing how prescient the man was. Sans the dandy early 20th century English, these quotes are just as applicable today as they were in 1930s: > ...the richer the community, the wider will tend to be the gap between its actual and its potential production; and therefore the more obvious and outrageous the defects of the economic system. > [on classical economics] That it reached conclusions quite different from what the ordinary uninstructed person would expect, added to its intellectual prestige. That its teaching, translated into practice, was austere and often unpalatable, lent it virtue. [...] That it could explain much social injustice and apparent cruelty as an inevitable incident in the scheme of progress [...] commended it to authority. > professional economists, after Malthus, were apparently unmoved by the lack of correspondence between the results of their theory and the facts of observation;— a discrepancy which the ordinary man has not failed to observe

pbronez 6y ago
This is fascinating. Can you recommend any specific works by Keynes to dig into?
- deleted 6y ago
  [deleted]
raverbashing 6y ago
Keynes worked until stagflation happened. That's the issue that made other models come forward And of course, the hyperinflation episodes of those countries (and others) did really happen But maybe the issue is giving the money directly to people instead of using it to pay government debt

solatic 6y ago

There is inflation. The dollar is incredibly weak right now on currency markets, relative to other currencies. Businesses that are not already sitting on large piles of cash are bearing the brunt of inflation right now, as they get screwed between the rising costs paid to foreign suppliers and the stubbornly low prices that American domestic consumers can afford. The performance of the average American business has drastically decreased this past year, contributing to layoffs and making the problem worse. You don't see it in the stock market because the prices of stocks are being propped up by the Federal Reserve, but it's been an open discussion over the incredibly fast gains in the stock market over the last several months whether stock prices are coupled to corporate fundamentals or not.

thrav 6y ago
You clearly believe the dollar is worth less, and is likely to be devalued further, but aren’t willing to tie that to the higher stock market prices?
- jonwalch 6y ago
  There are many factors that go into stock market prices besides the strength of the dollar. With interest rates this low, there's hardly anywhere else to invest one's money.
- krupan 6y ago
  With inflation, the price of everything goes up, from candy bars to stocks.
- solatic 6y ago
  Correlation does not imply causation. True economic strength would result in both higher stock prices (reflecting stronger companies) and a stronger dollar (reflecting increased demand for those companies' goods and services). One needs to take the stock market prices in the context of the actions of the Federal Reserve and despite the weakness of the economy.

slv77 6y ago

The reason that stimulus spending doesn’t result in hyper-inflation is that the increase in the money supply from the debt creation is almost completely offset by a drop in monetary velocity. This is because most of the money injected due to a stimulus is quickly locked up due to structural issues where excess savings is quickly funneled to corporate profits, landlords and the ultra wealthy. These funds do not recirculate do the velocity of money drops and inflation doesn’t materialize. In fact the structural issues are so strong in places like Japan that deflation has will naturally result if the money supply isn’t increased with constant stimulus measures. This creates a company store economy where the underclass or government has to perpetually roll an increasing amount of debt.

im3w1l 6y ago
Kind of thinking aloud here, but could the Japanese situation be a consequence of their culture? That they have a higher psychological need for feeling safe, which means sitting on more cash for a rainy day. Maybe the solution could be to run an unbalanced book. Money and debt are often created together, but if all actors of the economy really want to be cash positive, then maybe it calls for having more money than debt.
- throw0101a 6y ago
  > Kind of thinking aloud here, but could the Japanese situation be a consequence of their culture? Could be a component, just like in Germany. When your central bank rate is zero: * https://tradingeconomics.com/euro-area/interest-rate https://tradingeconomics.com/euro-area/interest-rate And your borrowing costs are negative going out thirty years: * https://ca.investing.com/rates-bonds/germany-government-bonds https://ca.investing.com/rates-bonds/germany-government-bond... That's a pretty good indication that spending should increase. Demographics is often said to be a major component. The older a population is, the less spending there tends to be, which tends to impact economic growth, and has a pretty good correlation with (low) interest rates: * https://financialpost.com/opinion/the-natural-rate-of-interest https://financialpost.com/opinion/the-natural-rate-of-intere... * PDF: https://www.fraserinstitute.org/sites/default/files/why-are-interest-rates-so-low.pdf https://www.fraserinstitute.org/sites/default/files/why-are-...

krupan 6y ago

It is simple supply and demand. At the start of the pandemic people all over the world were selling stock, commodities, bonds, all demanding dollars. When demand goes up for something you can produce more of it without it losing value. When the supply of dollars outpaces demand, then you get inflation. The only remedy there is to somehow decrease the supply of dollars, usually through increased taxes.

commandlinefan 6y ago

> how come we don’t see hyper inflation It’s only been, what, 6 months? And we’ve only done one stimulus. Give it 10 years and a hundred stimuli.

Der_Einzige 6y ago

Not sure why you're being downvoted for good analysis. The key is for your country to not have a significantly higher debt to GDP than competitors of similar economic development. The USA has further advantages in that much of its debt is owned by other Americans (who have strong vested interest in the ability for the USA to pay its debts). That being said, we could have spent FAR MORE and increased debt FAR MORE in the USA without serious downsizes - even if COVID hadn't happened! It turns out that "fiscal responsibility" literally does not matter and is in fact DETERMINTAL to the economy. The velocity of money is all that matters. This is why VCs who are never profitable are still a net positive for the economy, because they facilitate velocity. The US govt pumping money into the economy PREVENTED A FAR WORSE LIQUDITY CRISIS which we were at serious risk of earlier given that it looked like we'd be seeing DEFLATION rather than inflation earlier on...