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In theory, they could. In practice, the typical way to "print money" is to do things like lower interest rates (incentivizing more borrowing, which increases th
by DennisP 5y ago
In theory, they could. In practice, the typical way to "print money" is to do things like lower interest rates (incentivizing more borrowing, which increases the money in circulation) and lowering bank reserve requirements (letting them loan more in proportion to their reserves). Both depend on people voluntarily taking out loans, which they might avoid if they're pessimistic about the economy or expect deflation.
- starfallg 5y agoGood summary but slightly out of date. What they rely on now is QE, with the central bank buying assets from banks to free up money for investment. Ends up similar to lowering reserve requirements, but without the drawbacks of lowering reserve requirements. Japan is dealing with it by massive infra projects like the new maglev Shinkansen. So when we are talking about loans, we aren't just talking about consumer credit, although that can be a major component in a consumption-led economy.
- jbay808 5y agoThat's why I was wondering about not doing that, and literally minting new cash and using handouts / UBI instead. We can't expect people to borrow money to spend on consumption, even at low interest rates, because they'll be worried about paying it back. No wonder they always just put it into asset purchases. Give them the money no strings attached and they'll spend it. Normally the downside to that is inflation, but since that's the goal anyway it seems like a win-win.
- DennisP 5y agoMakes sense to me.
- jollybean 5y agoSupply Side vs. Demand Side very different though. Poor people buying stuff they 'need' is different than coaxing businesses to invest more broadly with slightly cheaper loans but with the demographic decline still on their daily charts.