4 ms·

> Walking back to first principals, why can't the USD fail? Because you can print whatever adults in the room decide need to be printed to hold the economy up.

> Walking back to first principals, why can't the USD fail? Because you can print whatever adults in the room decide need to be printed to hold the economy up. You cannot do this with a deflationary digital asset, nor one tied to smart contracts. The practical implication of solving large scale bank failures with mass currency printing is hyperinflation. You would only get your money back in nominal terms, but its purchasing power would be greatly reduced. See also: Weimar Germany and Zimbabwe.

emn13 5y ago
The fed has expanded money supply to react to shocks before, and there was no hyperinflation. Even if clearly at some point, given enough money-printing, inflation would result, there's no reason to assume it's some binary thing; either hyper-inflation ala zimbabwe or normal inflation. It's more likely you'd see gradual inflation, and that the amount of money printed influences how much inflation results - so assuming that any expansion of the money supply is reasonable, and not egregious. Frankly, if banks start failing to the extent that FDIC is not only necessary on a large scale but even possibly unsustainable, I kind of doubt that a bit of inflation is going to be the worst of our worries.
- deleted 5y ago
  [deleted]
shadowgovt 5y ago
It is the differences between the US and Weimar Germany / Zimbabwe that make it possible for the US to print its way out of most problems. Other national governments didn't stuff Z$ into their armored-up national mattresses to bolster against the collapse of their local currency, and there wasn't an IMF holding debts denoted in Reichsmarks to create a demand for them internationally.
- emn13 5y ago
  The whole comparison is specious; there were far more factors at play than "printing money". Central banks print money all the time. It's not just in response to the 2008 crisis; the money supply in 2007 wasn't what it was in 1957 either, right? At the very least you'd need to quantify exactly how much money over what period of time might be a shock, and what kind other factors play a role. And then, yes, sure - let's not do things quantifiably similar to Zimbabwe or Weimar Germany. But I suspect there's a huge amount of room for most central banks to maneuver between status quo and hyperinflation; merely "some" printing of money isn't going to be a problem. Indeed there are regularly stories of smaller countries without the kind of reserve status the dollar enjoys that make problematic central bank policies - and even if that has consequences (e.g. Turkey now), that's still a far cry from Weimar Germany or Zimbabwe under Mugabe.
jrumbut 5y ago
Those two examples followed real world disasters, with two wars and major social changes playing important roles. These stablecoins appear to be much more fragile.
lottin 5y ago
The Fed already solved major large scale bank failures in 2008 without causing any semblance of hyperinflation, so your point is...?
- whateveracct 5y ago
  seems to be nothing besides "printing money is bad"

emn13 5y ago

The fed has expanded money supply to react to shocks before, and there was no hyperinflation. Even if clearly at some point, given enough money-printing, inflation would result, there's no reason to assume it's some binary thing; either hyper-inflation ala zimbabwe or normal inflation. It's more likely you'd see gradual inflation, and that the amount of money printed influences how much inflation results - so assuming that any expansion of the money supply is reasonable, and not egregious. Frankly, if banks start failing to the extent that FDIC is not only necessary on a large scale but even possibly unsustainable, I kind of doubt that a bit of inflation is going to be the worst of our worries.

deleted 5y ago
[deleted]

shadowgovt 5y ago

It is the differences between the US and Weimar Germany / Zimbabwe that make it possible for the US to print its way out of most problems. Other national governments didn't stuff Z$ into their armored-up national mattresses to bolster against the collapse of their local currency, and there wasn't an IMF holding debts denoted in Reichsmarks to create a demand for them internationally.

emn13 5y ago
The whole comparison is specious; there were far more factors at play than "printing money". Central banks print money all the time. It's not just in response to the 2008 crisis; the money supply in 2007 wasn't what it was in 1957 either, right? At the very least you'd need to quantify exactly how much money over what period of time might be a shock, and what kind other factors play a role. And then, yes, sure - let's not do things quantifiably similar to Zimbabwe or Weimar Germany. But I suspect there's a huge amount of room for most central banks to maneuver between status quo and hyperinflation; merely "some" printing of money isn't going to be a problem. Indeed there are regularly stories of smaller countries without the kind of reserve status the dollar enjoys that make problematic central bank policies - and even if that has consequences (e.g. Turkey now), that's still a far cry from Weimar Germany or Zimbabwe under Mugabe.

jrumbut 5y ago

Those two examples followed real world disasters, with two wars and major social changes playing important roles. These stablecoins appear to be much more fragile.

lottin 5y ago

The Fed already solved major large scale bank failures in 2008 without causing any semblance of hyperinflation, so your point is...?

whateveracct 5y ago
seems to be nothing besides "printing money is bad"