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If bitcoin causes the value of fiat currency to fall enough, the government will not be able to print money to fund wars. A war will require overtly billing the

If bitcoin causes the value of fiat currency to fall enough, the government will not be able to print money to fund wars. A war will require overtly billing the people for it or raising taxes. So it will be less likely the people will consent to start a war.

lottin 6y ago
How does, exactly, the US government print money to fund wars?
- yazaddaruvala 6y ago
  Without commenting on the "funding wars" part. The US leverages inflation as a taxation strategy (and doesn't really admit it). Most lay-persons don't understand it as a tax and therefore do not complain about it until they cannot afford things (housing, food, etc), and at which point the government distracts by bundling (hiding?) the inflation problem with the stagnant wage / income equality problem. Eventually (every 2 decades) minimum wage in increased to catch up to inflation. Basically the inflationary tax strategy results in the US budget getting 2 decades of "extra taxes" (burdened by the lower middle class and the working classes[1]), then a reset, and then repeat. [1] Note inflation as a tax strategy is actually a negative tax on low-interest debt holders like businesses, and home owners. It is also has a net-neutral effect on the investing class, because assets inflate proportionally. Meanwhile, credit card debt and other high-interest loans are not reduced as much (i.e. X% inflation of 19% credit card interest is a lot lower than, X% inflation of 2.5% mortgage interest).
  - lottin 6y ago
    Okay, the claim is that the US government raises funds by generating inflation, that is clear. The details are the problem. Say the US government issues a bond, some bank buys it, and eventually they sell it to the Federal Reserve. The US government has the same debt, and it seems to me that the only thing that has changed is that the bank now has cash where before it had a bond. How does this 1) create inflation and 2) is leveraged by the US government as a taxation strategy? That's what I'm asking.
    - yazaddaruvala 6y ago
      MMT[0] is relatively new in our lives, I find it hard to understand myself, let alone try to explain it. > Say the US government issues a bond, some bank buys it, and eventually they sell it to the Federal Reserve. The US government has the same debt, and it seems to me that the only thing that has changed is that the bank now has cash where before it had a bond. This is mischaracterizing the situation. It actually is: 1. A bank buys a newly issued bond; 2. The government spends that bond money on the private sector. 3. The Fed buys the bond by changing the values in its database (i.e. "printing money"). The best I can do to explain MMT is this: 1. The government spends as much as it wants and collects as much debt as it wants. 2. The government plays a game of chicken with the private sector (including other countries). 2.1. As long as everyone plays along, its a ponzi scheme that spirals upwards until it hits a ceiling (hyper inflation). 3. Meanwhile, until it hits the ceiling, it creates "manageable inflation" and/or deflates the rest of the world's assets. 3.1. As long as the rest of the world plays along (which it does), the extra cash funds innovation (i.e. the private sector) and improves quality of life world wide (i.e. better pharmaceuticals, cheaper computing, etc). 3.2. Meanwhile, in the US the "manageable inflation" is paid for by the poorest. My personal thought: the world's interconnected market is so complex, that no one understands cause and effect (including the people making the rules). Currently, there is an emergent property of that complexity that the US, Japan, etc can "print infinite money" and some large group of people somewhere are left holding the bag worse-off for the US' decision, but no one really knows who this group is nor how much those people got fucked. Even the impacted individuals don't realize they are impacted because individually its a small impact, and innovation keeps improving their lives enough to not complain. Hopefully a denationalized crypto (i.e. no ability for a single nation to print money) will help us simplify all of this to be understandable again. [0] https://www.youtube.com/watch?v=3QYJjisPMQY https://www.youtube.com/watch?v=3QYJjisPMQY
      - lottin 6y ago
        The fact that you don't understand monetary theory, doesn't mean economists can't figure it out. Maybe this is why developed nations haven't experienced hyperinflation in almost 100 years. And telling people that they should stop what they're doing for the sole reason that you don't understand the ramifications of their actions seems a little arrogant. I guess we also should get rid of money altogether, production and saving, in order to simplify the economy so you can finally understand it.

lottin 6y ago

How does, exactly, the US government print money to fund wars?

yazaddaruvala 6y ago
Without commenting on the "funding wars" part. The US leverages inflation as a taxation strategy (and doesn't really admit it). Most lay-persons don't understand it as a tax and therefore do not complain about it until they cannot afford things (housing, food, etc), and at which point the government distracts by bundling (hiding?) the inflation problem with the stagnant wage / income equality problem. Eventually (every 2 decades) minimum wage in increased to catch up to inflation. Basically the inflationary tax strategy results in the US budget getting 2 decades of "extra taxes" (burdened by the lower middle class and the working classes[1]), then a reset, and then repeat. [1] Note inflation as a tax strategy is actually a negative tax on low-interest debt holders like businesses, and home owners. It is also has a net-neutral effect on the investing class, because assets inflate proportionally. Meanwhile, credit card debt and other high-interest loans are not reduced as much (i.e. X% inflation of 19% credit card interest is a lot lower than, X% inflation of 2.5% mortgage interest).
- lottin 6y ago
  Okay, the claim is that the US government raises funds by generating inflation, that is clear. The details are the problem. Say the US government issues a bond, some bank buys it, and eventually they sell it to the Federal Reserve. The US government has the same debt, and it seems to me that the only thing that has changed is that the bank now has cash where before it had a bond. How does this 1) create inflation and 2) is leveraged by the US government as a taxation strategy? That's what I'm asking.
  - yazaddaruvala 6y ago
    MMT[0] is relatively new in our lives, I find it hard to understand myself, let alone try to explain it. > Say the US government issues a bond, some bank buys it, and eventually they sell it to the Federal Reserve. The US government has the same debt, and it seems to me that the only thing that has changed is that the bank now has cash where before it had a bond. This is mischaracterizing the situation. It actually is: 1. A bank buys a newly issued bond; 2. The government spends that bond money on the private sector. 3. The Fed buys the bond by changing the values in its database (i.e. "printing money"). The best I can do to explain MMT is this: 1. The government spends as much as it wants and collects as much debt as it wants. 2. The government plays a game of chicken with the private sector (including other countries). 2.1. As long as everyone plays along, its a ponzi scheme that spirals upwards until it hits a ceiling (hyper inflation). 3. Meanwhile, until it hits the ceiling, it creates "manageable inflation" and/or deflates the rest of the world's assets. 3.1. As long as the rest of the world plays along (which it does), the extra cash funds innovation (i.e. the private sector) and improves quality of life world wide (i.e. better pharmaceuticals, cheaper computing, etc). 3.2. Meanwhile, in the US the "manageable inflation" is paid for by the poorest. My personal thought: the world's interconnected market is so complex, that no one understands cause and effect (including the people making the rules). Currently, there is an emergent property of that complexity that the US, Japan, etc can "print infinite money" and some large group of people somewhere are left holding the bag worse-off for the US' decision, but no one really knows who this group is nor how much those people got fucked. Even the impacted individuals don't realize they are impacted because individually its a small impact, and innovation keeps improving their lives enough to not complain. Hopefully a denationalized crypto (i.e. no ability for a single nation to print money) will help us simplify all of this to be understandable again. [0] https://www.youtube.com/watch?v=3QYJjisPMQY https://www.youtube.com/watch?v=3QYJjisPMQY
    - lottin 6y ago
      The fact that you don't understand monetary theory, doesn't mean economists can't figure it out. Maybe this is why developed nations haven't experienced hyperinflation in almost 100 years. And telling people that they should stop what they're doing for the sole reason that you don't understand the ramifications of their actions seems a little arrogant. I guess we also should get rid of money altogether, production and saving, in order to simplify the economy so you can finally understand it.