6 ms·

All printing money does is transfer wealth from savers (people long the currency) to debtors (people short the currency) without their consent. Large financial

All printing money does is transfer wealth from savers (people long the currency) to debtors (people short the currency) without their consent. Large financial crises occur because this keeps happening. Bitcoin is a way out, as savers learn it's foolish to be long fiat currency.

lottin 5y ago
This is not true. Printing money may or may not cause inflation. And inflation may or may not benefit debtors at the expense of creditors. Unexpected inflation usually does. Expected inflation usually doesn't.
mohanmcgeek 5y ago
"printing" money does not cause inflation. Low interest rates can cause credit expansion, they don't necessarily cause inflation. Inflation rate higher than the deposit interest rate (negative real interest rate) is causes the wealth transfer. "Savers", in reality, lenders have always had a way out in this situation: investing. As in every investment boom, there are Ponzi schemes and during this one it happens to be Bitcoin.
- cheeseomlit 5y ago
  I don't understand how printing money could not cause inflation, it sounds like mental gymnastics to me. Expand the money supply without expanding the value that money represents and the money now represents less value than it did before, I don't see how that could ever not be the case.
  - JumpCrisscross 5y ago
    > Expand the money supply without expanding the value that money represents and the money now represents less value than it did before Prices are a function of money supply and velocity. Inflation can rage while no money is printed because velocity surges. Just as deflation can fester while central banks print as velocity toys with absolute zero.
    - cheeseomlit 5y ago
      > Inflation can rage while no money is printed because velocity surges. Just as deflation can fester while central banks print as velocity toys with absolute zero. What are some good examples of this? Historically it seems to me like major inflation issues usually coincide with an expanding money supply, not the other way around
      - shagmin 5y ago
        This is exactly Japan's lost decade - lots of government debt and only deflation - mainly in the 90s. I think the difference is Japan is a a country with all its needs met. People already had enough money to spend on basic needs (unlike post WW1 Germany or Zimbabwe recently) so additional money didn't change that but there was a housing bubble.
    - nonameiguess 5y ago
      Not only this, but it's also a matter of whether money supply expansion outpaces the growth of goods and services in the economy or not. As long as the growth rates roughly match, even without velocity decreasing, you wouldn't necessarily get inflation. It's way more complex than just "print money == inflation." You want a little bit anyway. Simplistically, if all you have in your economy is 10 dollars and 10 hamburgers, then hamburgers will probably be worth something like a dollar each. If you go to 20 hamburgers but stay at 10 dollars, now hamburgers are worth $0.50, which is great for dollar holders, not so great for hamburger makers. A healthy economy, however, is not one in which actors are incentivized to hoard currency. You want economic actors to be incentivized to produce goods and services. If you grow to 20 dollars and 20 hamburgers, that is price neutral, but you don't really want price neutrality. You want it to be more lucrative to produce goods and services than to hoard currency. There is some valid concern that this can harm retired savers, but we developed a solution to that a long time ago that doesn't require deflationary currencies. We split ownership shares of the companies that produce goods and services and trade them publicly so people can get a cut of the wealth growth without needing to become producers themselves. Retirees can own appreciating assets by buying stock in companies that make stuff, rather than holding their life savings as cash under a mattress.
  - deleted 5y ago
    [deleted]
  - lottin 5y ago
    It's much more complicated than that. For example, "printing money" doesn't necessarily expand the money supply [1], since the money supply isn't composed exclusively of central bank-issued money. And then there are other variables at play. [1] https://lazardfreresgestion-tribune.fr/wp-content/uploads/2020/09/graph-1-angl-semaine.png https://lazardfreresgestion-tribune.fr/wp-content/uploads/20...
  - dnautics 5y ago
    > I don't understand how printing money could not cause inflation Suppose the government prints one dollar and shortly thereafter everyone goes bankrupt and collapses the money multiplier. This will definitely result in net deflation. OK, that's extreme, but it should prove a point in extremis. But it is possible that the government could print money and suddenly people stop... paying off their debts, or something. Maybe they start thinking that dollar-denominated-capitalism is pointless because it's all cronies that get it anyways, and just exit the economy. Or like, screwing the poor through inflation triggers some sort of revolution and all the banks selectively are levelled by anarchist activists. So "printing money" could definitely cause deflation in some scenarios. You probably don't want to be participating in an economy that takes that turn.
  - mohanmcgeek 5y ago
    > Expand the money supply without expanding the value that money represents Literally the only way to increase the money supply is increasing the underlying assets' value overall. It's because people are somehow led into believing that the government can arbitrarily print money, everything that's normal seems like mental gymnastics.
- louloulou 5y ago
  Who said anything about inflation. It's about central planners arbitrarily moving around purchasing power in the system. If I have $10 and you have $10, and then someone prints $10 and gives it to you. You went from having the same purchasing power as me to double mine, without any change to the available goods and services. > lenders have always had a way out in this situation: investing Yeah, that's why we're investing in a fairer monetary system, where this power to create money arbitrarily doesn't exist.
  - mohanmcgeek 5y ago
    If you choose to "invest" in a Ponzi scheme that's your predicament. My point is that equity: public or private, has always been an alternative everytime lending money isn't worth the while. Bitcoin brought nothing to the table.
VHRanger 5y ago
Any asset that isn't the currency is "a way out" When people specify Bitcoin or Gold as a particularly good "hedge for inflation" they betray the fact that they failed Macroeconomics 101. Everything that isn't the currency is a "hedge for inflation".
- louloulou 5y ago
  Some things are better hedges than others. Bitcoin happens to have been the best over the past decade. Edit: I'd argue this is because it has better monetary properties than the alternatives.
  - lottin 5y ago
    Do you even know what a hedge is? The perfect hedge against inflation is a large basket of consumer goods and services, because it correlates perfectly with inflation. Anything else correlates less perfectly with inflation and therefore is a worse hedge against inflation compared to a basket of goods and services.
    - louloulou 5y ago
      You're talking about consumer price inflation, I'm talking about monetary supply inflation. A basket of consumer goods and services is a nonsensical way to hedge monetary inflation under anything but the most extreme conditions, since those things should be getting cheaper as production processes/technology/understanding of the world improve.
      - AnimalMuppet 5y ago
        But, unless you're a central bank or something, why do you care about monetary inflation instead of consumer price inflation? How is it going to affect you? Consumer price inflation is the one that affects you.
        louloulou 5y ago
BenoitEssiambre 5y ago
While printing money doesn't create value by itself, not printing enough really puts the economy into a gridlock. I tried to give an intuitive explanation here: "Imagine an isolated village where people farm for subsistence. This is a village disconnected from the world that has not had a currency up to now. People rely on barter instead. Every fall, villagers usually produce excess food to have something to eat in the winter, even if, the real returns on the investment is low. Because of spoilage, crops stored for the winter are only worth 90% of their usual real value. 10% rot away in storage. That is, these crops have a return of negative 10%. One day, this village mandates its government to create a currency that always keeps 98% of its real value on a yearly basis (2% inflation) even during times when private savings assets can’t retain this much. The government puts money into circulation by buying part of farmer’s crop during the summer (civil servants have to to eat). Most farmers produce enough food for the summer, sell some of their crop and keep their money to be able to buy something to eat in the winter. They do not produce a crop to store for the winter since it would only return -10% on their initial investment and the central bank promised money would keep value at a rate of at least -2% (plus maybe a bit of interests). What happens when winter comes? People have cash but few have anything to sell because they didn’t reinvest in the production of a crop to be stored! In this situation, it’s going to be very difficult for the government to control inflation because there will be too few goods for the amount of money people will want to spend. If the government does manage to control inflation, it will be through high taxes or by depressing the nominal value of the crops of the few farmers who did store something for the winter. The central bank might do this by giving high enough interests payments on cash to prevent people from wanting to spend it immediately. In any case, people won’t eat much during the winter because the food will simply not exist. The point is, government money can easily jam markets and crowd out productive investment." https://medium.com/@b.essiambre/the-world-deserves-a-pay-raise-302f25efd82a?source=friends_link&sk=cb180b2cf186b263b6c6c70ad29bc36e https://medium.com/@b.essiambre/the-world-deserves-a-pay-rai...

lottin 5y ago

This is not true. Printing money may or may not cause inflation. And inflation may or may not benefit debtors at the expense of creditors. Unexpected inflation usually does. Expected inflation usually doesn't.

mohanmcgeek 5y ago

"printing" money does not cause inflation. Low interest rates can cause credit expansion, they don't necessarily cause inflation. Inflation rate higher than the deposit interest rate (negative real interest rate) is causes the wealth transfer. "Savers", in reality, lenders have always had a way out in this situation: investing. As in every investment boom, there are Ponzi schemes and during this one it happens to be Bitcoin.

cheeseomlit 5y ago
I don't understand how printing money could not cause inflation, it sounds like mental gymnastics to me. Expand the money supply without expanding the value that money represents and the money now represents less value than it did before, I don't see how that could ever not be the case.
- JumpCrisscross 5y ago
  > Expand the money supply without expanding the value that money represents and the money now represents less value than it did before Prices are a function of money supply and velocity. Inflation can rage while no money is printed because velocity surges. Just as deflation can fester while central banks print as velocity toys with absolute zero.
  - cheeseomlit 5y ago
    > Inflation can rage while no money is printed because velocity surges. Just as deflation can fester while central banks print as velocity toys with absolute zero. What are some good examples of this? Historically it seems to me like major inflation issues usually coincide with an expanding money supply, not the other way around
    - shagmin 5y ago
      This is exactly Japan's lost decade - lots of government debt and only deflation - mainly in the 90s. I think the difference is Japan is a a country with all its needs met. People already had enough money to spend on basic needs (unlike post WW1 Germany or Zimbabwe recently) so additional money didn't change that but there was a housing bubble.
  - nonameiguess 5y ago
    Not only this, but it's also a matter of whether money supply expansion outpaces the growth of goods and services in the economy or not. As long as the growth rates roughly match, even without velocity decreasing, you wouldn't necessarily get inflation. It's way more complex than just "print money == inflation." You want a little bit anyway. Simplistically, if all you have in your economy is 10 dollars and 10 hamburgers, then hamburgers will probably be worth something like a dollar each. If you go to 20 hamburgers but stay at 10 dollars, now hamburgers are worth $0.50, which is great for dollar holders, not so great for hamburger makers. A healthy economy, however, is not one in which actors are incentivized to hoard currency. You want economic actors to be incentivized to produce goods and services. If you grow to 20 dollars and 20 hamburgers, that is price neutral, but you don't really want price neutrality. You want it to be more lucrative to produce goods and services than to hoard currency. There is some valid concern that this can harm retired savers, but we developed a solution to that a long time ago that doesn't require deflationary currencies. We split ownership shares of the companies that produce goods and services and trade them publicly so people can get a cut of the wealth growth without needing to become producers themselves. Retirees can own appreciating assets by buying stock in companies that make stuff, rather than holding their life savings as cash under a mattress.
- deleted 5y ago
  [deleted]
- lottin 5y ago
  It's much more complicated than that. For example, "printing money" doesn't necessarily expand the money supply [1], since the money supply isn't composed exclusively of central bank-issued money. And then there are other variables at play. [1] https://lazardfreresgestion-tribune.fr/wp-content/uploads/2020/09/graph-1-angl-semaine.png https://lazardfreresgestion-tribune.fr/wp-content/uploads/20...
- dnautics 5y ago
  > I don't understand how printing money could not cause inflation Suppose the government prints one dollar and shortly thereafter everyone goes bankrupt and collapses the money multiplier. This will definitely result in net deflation. OK, that's extreme, but it should prove a point in extremis. But it is possible that the government could print money and suddenly people stop... paying off their debts, or something. Maybe they start thinking that dollar-denominated-capitalism is pointless because it's all cronies that get it anyways, and just exit the economy. Or like, screwing the poor through inflation triggers some sort of revolution and all the banks selectively are levelled by anarchist activists. So "printing money" could definitely cause deflation in some scenarios. You probably don't want to be participating in an economy that takes that turn.
- mohanmcgeek 5y ago
  > Expand the money supply without expanding the value that money represents Literally the only way to increase the money supply is increasing the underlying assets' value overall. It's because people are somehow led into believing that the government can arbitrarily print money, everything that's normal seems like mental gymnastics.
louloulou 5y ago
Who said anything about inflation. It's about central planners arbitrarily moving around purchasing power in the system. If I have $10 and you have $10, and then someone prints $10 and gives it to you. You went from having the same purchasing power as me to double mine, without any change to the available goods and services. > lenders have always had a way out in this situation: investing Yeah, that's why we're investing in a fairer monetary system, where this power to create money arbitrarily doesn't exist.
- mohanmcgeek 5y ago
  If you choose to "invest" in a Ponzi scheme that's your predicament. My point is that equity: public or private, has always been an alternative everytime lending money isn't worth the while. Bitcoin brought nothing to the table.

VHRanger 5y ago

Any asset that isn't the currency is "a way out" When people specify Bitcoin or Gold as a particularly good "hedge for inflation" they betray the fact that they failed Macroeconomics 101. Everything that isn't the currency is a "hedge for inflation".

louloulou 5y ago
Some things are better hedges than others. Bitcoin happens to have been the best over the past decade. Edit: I'd argue this is because it has better monetary properties than the alternatives.
- lottin 5y ago
  Do you even know what a hedge is? The perfect hedge against inflation is a large basket of consumer goods and services, because it correlates perfectly with inflation. Anything else correlates less perfectly with inflation and therefore is a worse hedge against inflation compared to a basket of goods and services.
  - louloulou 5y ago
    You're talking about consumer price inflation, I'm talking about monetary supply inflation. A basket of consumer goods and services is a nonsensical way to hedge monetary inflation under anything but the most extreme conditions, since those things should be getting cheaper as production processes/technology/understanding of the world improve.
    - AnimalMuppet 5y ago
      But, unless you're a central bank or something, why do you care about monetary inflation instead of consumer price inflation? How is it going to affect you? Consumer price inflation is the one that affects you.
      - louloulou 5y ago

BenoitEssiambre 5y ago

While printing money doesn't create value by itself, not printing enough really puts the economy into a gridlock. I tried to give an intuitive explanation here: "Imagine an isolated village where people farm for subsistence. This is a village disconnected from the world that has not had a currency up to now. People rely on barter instead. Every fall, villagers usually produce excess food to have something to eat in the winter, even if, the real returns on the investment is low. Because of spoilage, crops stored for the winter are only worth 90% of their usual real value. 10% rot away in storage. That is, these crops have a return of negative 10%. One day, this village mandates its government to create a currency that always keeps 98% of its real value on a yearly basis (2% inflation) even during times when private savings assets can’t retain this much. The government puts money into circulation by buying part of farmer’s crop during the summer (civil servants have to to eat). Most farmers produce enough food for the summer, sell some of their crop and keep their money to be able to buy something to eat in the winter. They do not produce a crop to store for the winter since it would only return -10% on their initial investment and the central bank promised money would keep value at a rate of at least -2% (plus maybe a bit of interests). What happens when winter comes? People have cash but few have anything to sell because they didn’t reinvest in the production of a crop to be stored! In this situation, it’s going to be very difficult for the government to control inflation because there will be too few goods for the amount of money people will want to spend. If the government does manage to control inflation, it will be through high taxes or by depressing the nominal value of the crops of the few farmers who did store something for the winter. The central bank might do this by giving high enough interests payments on cash to prevent people from wanting to spend it immediately. In any case, people won’t eat much during the winter because the food will simply not exist. The point is, government money can easily jam markets and crowd out productive investment." https://medium.com/@b.essiambre/the-world-deserves-a-pay-raise-302f25efd82a?source=friends_link&sk=cb180b2cf186b263b6c6c70ad29bc36e https://medium.com/@b.essiambre/the-world-deserves-a-pay-rai...