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All money is debt. Government always spends by "printing money". That's how bank payment and clearing works. So if it caused inflation then we'd have loads of
by neilwilson 6y ago
All money is debt. Government always spends by "printing money". That's how bank payment and clearing works.
So if it caused inflation then we'd have loads of it, and we don't.
Whether a bank ends up holding reserves, or holding a government bond is just a difference between a floating rate debt receiving the base rate, or a fixed rate debt receiving the bond rate. Just an interest rate and term difference - nothing else.
The last year has completely debunked any question that 'creating money' is inflationary. Believing otherwise is up there with anti-vax thinking.
- wizzwizz4 6y agoCreating money is inflationary when it's not backed up by something like bonds (which temporarily destroy money) or taxes (which permanently destroy money).
- neilwilson 6y agoAnd yet we have 30 years of QE in Japan, and 10 years of QE in the UK and US that debunk that belief as well. If the state creates $100 and you stick it in a drawer, or just leave it in your bank account, where's the inflation coming from? It's 'not spending' that causes deficits in the first place. If everybody spends and never saves then there can be no deficit for any positive tax rate. There is no magic in bonds. It's a myth.
- wizzwizz4 6y agoI was with you until “there is no magic in bonds”; you haven't shown that. Bonds are a way for everyone to know that that money is _staying_ in that drawer.