3 ms·

Central bank prints a shitload of money

by liaukovv 5y ago

LudwigNagasena 5y ago
Printing money in real terms just means taking money from someone who holds it.
- liaukovv 5y ago
  Not really, the entire function of central bank is that it can create money at will.
  - LudwigNagasena 5y ago
    Imagine we own a company, I own 20 stocks, you own 10 stocks. I unilaterally decide to print 10 more stocks and give them to myself. Do you have the same amount of stocks? Yea, but in real terms now you have less stocks. The same thing with money. It doesn’t matter how much money you have, what matters is how much you have it relative to others.
    - liaukovv 5y ago
      I don't believe this would cause any additional inflation, since this is not scenario of creating money, but rather converting one class of money(bank deposit) into another class(reserve notes).
      - LudwigNagasena 5y ago
        The people may even simply move money from one bank to another, it doesn’t matter. What matters is that the bank goes insolvent. So what you have now is a bunch of loans not supported by anything.
    - bidirectional 5y ago
      Depends entirely on the velocity of money. Remember also that central banks can remove money by raising interest rates. If we're doing child-like examples, if the central bank prints a trillion dollars in notes and then sends them to the moon and promises never to use them, is anyone really poorer?
  - eloff 5y ago
    If that causes inflation then it is taking money from the existing holders.
  - ylem 5y ago
    @eloff I think our replies crossed. I think that the question is whether you are still at a net positive as a result of inflation (consider the counterfactual).
- ylem 5y ago
  In what sense? In a world of fiat currency, post-Bretton Woods, what does money mean? I am not an expert by any means, but to me, it seems like the USD has value (ignore the rest of the world for a moment) because the US issues taxes that it says can only be paid with this wacky tokens called dollars and if you don't pay your taxes, then bad things happen. The rest follows from there. I think that you are saying (correct me if I'm wrong) that printing money leads to inflation which lowers what you can exchange your tokens for (maybe it takes more of them to buy apples). So, the first question is whether that is actually true. We have seen a fair amount of printing of money in recent years, but fairly low inflation. It's not obvious to me at what point that changes. The second question is whether inflation if it does occur is net bad/good and for who. I think we can agree Weimar Republic style hyperinflation is bad. However, let's say that inflation is 1% is that good or bad? For who? I think this question doesn't have meaning on an absolute scale. I think it has meaning relative to growth (and the productive capability of the full economy). Let's say that the economy is growing at say 6%, but we have 1% inflation--I'm fairly happy with that. But, let's say that we have 2% growth and 1% inflation--I'm less happy. Deflation is deadly (which has historically been the fate of gold based currencies), so we could argue that having a bit of inflation is insurance that we pay to avoid disaster. But, what about beyond that? The typical argument is that it helps drive consumption and encourages investment. Do you disagree?
  - webinvest 5y ago
    It’s getting above my level of expertise but in addition to taxes, mortgages, corporate bonds, and state bonds also play a part. Also inflation in the range of 1%-3% is considered a good thing because it helps encourage trade and prevents deflation. The amount of interest one can earn in a savings account or CD should also be taken into account.
  - LudwigNagasena 5y ago
    > We have seen a fair amount of printing of money in recent years, but fairly low inflation. The money weren’t distributed proportionally to the wealth of the people. Another reason, which though applies only in short- and mid-term, there are various nominal rigidities: contracts mostly use nominal values. > The second question is whether inflation if it does occur is net bad/good and for who. Well, that’s a whole nother question. You can create inflation using direct deposits to the holders of money.

Central bank prints a shitload of money

LudwigNagasena 5y ago

Printing money in real terms just means taking money from someone who holds it.

liaukovv 5y ago
Not really, the entire function of central bank is that it can create money at will.
- LudwigNagasena 5y ago
  Imagine we own a company, I own 20 stocks, you own 10 stocks. I unilaterally decide to print 10 more stocks and give them to myself. Do you have the same amount of stocks? Yea, but in real terms now you have less stocks. The same thing with money. It doesn’t matter how much money you have, what matters is how much you have it relative to others.
  - liaukovv 5y ago
    I don't believe this would cause any additional inflation, since this is not scenario of creating money, but rather converting one class of money(bank deposit) into another class(reserve notes).
    - LudwigNagasena 5y ago
      The people may even simply move money from one bank to another, it doesn’t matter. What matters is that the bank goes insolvent. So what you have now is a bunch of loans not supported by anything.
  - bidirectional 5y ago
    Depends entirely on the velocity of money. Remember also that central banks can remove money by raising interest rates. If we're doing child-like examples, if the central bank prints a trillion dollars in notes and then sends them to the moon and promises never to use them, is anyone really poorer?
- eloff 5y ago
  If that causes inflation then it is taking money from the existing holders.
- ylem 5y ago
  @eloff I think our replies crossed. I think that the question is whether you are still at a net positive as a result of inflation (consider the counterfactual).
ylem 5y ago
In what sense? In a world of fiat currency, post-Bretton Woods, what does money mean? I am not an expert by any means, but to me, it seems like the USD has value (ignore the rest of the world for a moment) because the US issues taxes that it says can only be paid with this wacky tokens called dollars and if you don't pay your taxes, then bad things happen. The rest follows from there. I think that you are saying (correct me if I'm wrong) that printing money leads to inflation which lowers what you can exchange your tokens for (maybe it takes more of them to buy apples). So, the first question is whether that is actually true. We have seen a fair amount of printing of money in recent years, but fairly low inflation. It's not obvious to me at what point that changes. The second question is whether inflation if it does occur is net bad/good and for who. I think we can agree Weimar Republic style hyperinflation is bad. However, let's say that inflation is 1% is that good or bad? For who? I think this question doesn't have meaning on an absolute scale. I think it has meaning relative to growth (and the productive capability of the full economy). Let's say that the economy is growing at say 6%, but we have 1% inflation--I'm fairly happy with that. But, let's say that we have 2% growth and 1% inflation--I'm less happy. Deflation is deadly (which has historically been the fate of gold based currencies), so we could argue that having a bit of inflation is insurance that we pay to avoid disaster. But, what about beyond that? The typical argument is that it helps drive consumption and encourages investment. Do you disagree?
- webinvest 5y ago
  It’s getting above my level of expertise but in addition to taxes, mortgages, corporate bonds, and state bonds also play a part. Also inflation in the range of 1%-3% is considered a good thing because it helps encourage trade and prevents deflation. The amount of interest one can earn in a savings account or CD should also be taken into account.
- LudwigNagasena 5y ago
  > We have seen a fair amount of printing of money in recent years, but fairly low inflation. The money weren’t distributed proportionally to the wealth of the people. Another reason, which though applies only in short- and mid-term, there are various nominal rigidities: contracts mostly use nominal values. > The second question is whether inflation if it does occur is net bad/good and for who. Well, that’s a whole nother question. You can create inflation using direct deposits to the holders of money.