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When Congress spends money, it doesn't print it. It borrows it, at interest. Everyone talks about the national debt, but then they start talking about printing
by jonnycomputer 4y ago
When Congress spends money, it doesn't print it. It borrows it, at interest. Everyone talks about the national debt, but then they start talking about printing dollars in the next breath. Makes no sense. New money comes through the banking system, not Congress, and banks create money when they lend--a decision that depends on economic factors. However, when Congress moves around money, e.g. by borrowing from investors to give checks to lower income and middle class folks, that can cause inflation by shifting dollars to where they will be used for consumption rather than in investments, which tend to increase productivity which offsets inflationary effects of spending. However spending on lower income folks is almost surely a good bet in the long term, and while it may be inflationary in the short term, in the long term it must increase the productivity of the work force (and its inflationary effects can go away as soon as production in expectation of increased demand of those consumer goods ramps up).
- robertlagrant 4y agoWell, true. Not literal printing :) For increasing the money supply my understanding is nothing to do with Congress - QE is the central bank purchasing (with new money) longer-term securities, and the other main process (I don't know the name of it) is where the central bank lends money (new money) to a commercial bank, which agrees to set some of it aside, and they can re-lend the rest out to other commercial banks. But neither process is borrowing. Those processes increase the money supply, which requires prices to go up, which requires wages to go up (or vice versa). Asset inflation is totally different, which was my original point.