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Personally, if I had the authority of the government to print money, I would find it easy not to go bankrupt.

by civilized 4y ago

daveslash 4y ago
That's not how money works. In fact, that's a good way to accelerate a trajectory towards bankruptcy.
- lxgr 4y ago
  No, it's just a trajectory towards inflation (all other things being equal; it can be the right choice in certain economic environments). A central bank (that issues a sovereign fiat currency) can definitionally not go bankrupt, since its liability is the issued currency itself.
  - unyttigfjelltol 4y ago
    A central bank operates within a framework of rules that, among other things, allow it to operate as a central bank. If those rules require it to raise capital before continuing to operate, and the capital cannot be raised, it is effectively bankrupt.
    - orangepurple 4y ago
      Central banks can freely create capital if necessary. They can generate anything they want because they are sovereign. The people are de-facto forced to utilize currency the central bank issues to pay taxes in that same currency. Without this system state run currencies would fail.
  - kodyo 4y ago
    It can go bankrupt if people stop trusting the currency.
    - orangepurple 4y ago
      The government forces its subjects to pay taxes in that same currency and enforces this policy through courts, police, and the military. That is where state run currencies get their value. You need $CURRENCY because it is required to pay your taxes. The only way it ever stops is overthrow.
      - nirimda 4y ago
        That isn't true. There's many cases where e.g. through corruption and distrust, the state's capacity to collect taxes has been seriously weakened and the currency has gone into freefall so the country begins to operate - even despite threats of harsh penalty - in alternative currencies. States regularly remain in existence (i.e. are not overthrown) even after their currencies have stopped being used for everyday transactions and as regular stores of value. It is one of many examples of governments playing catchup with the economy.
    - lxgr 4y ago
      The currency can become worthless, sure, but that does not make the central bank bankrupt. The concept simply does not make sense for a (fiat) currency‘s issuer.
      - kodyo 4y ago
        When the state can no longer function because it has allowed its currency to be debased, who gives a shit if the central bank is solvent or not? It’s worse than bankrupt, it’s irrelevant.
        lxgr 4y ago
        Sure, but arguably that‘s a bit like claiming that your house plant got a heart attack, i.e. can die – but not like that.
- civilized 4y ago
  Letting the central bank go bankrupt is also a good way to accelerate a trajectory towards bankruptcy.
legitster 4y ago
I mean, sure, you could print enough money to cover all outstanding debt. But try setting any meaningful monetary policy after that. Ain't no one going to buy a T-bill from you ever again once you do that.
- incrudible 4y ago
  No need to cover all the outstanding debt at once. The expectation of future debt monetization is already priced into the interest rate in much the same way as the risk of default would be. In fact, it is preferable that way. If you were a bond holder, would you prefer default over dilution?
  - legitster 4y ago
    I mean, maybe? If in default I get 75 cents on the dollar, or with inflation my bond loses 25% of it's value through inflation isn't it the same to me? I am skeptical of the infinite money thing though. Sure - theoretically people will buy up bonds at 1000% interest rates. But would they really though?
    - incrudible 4y ago
      It's not the people that would buy bonds at 1000%, it's the central bank that would buy bonds at whatever interest rate they deem appropriate. They would create all the required money out of thin air. It's not an infinite amount, but obviously at some point the compounding effect of printing new money to finance old debt is going to erode trust.

Personally, if I had the authority of the government to print money, I would find it easy not to go bankrupt.

daveslash 4y ago

That's not how money works. In fact, that's a good way to accelerate a trajectory towards bankruptcy.

lxgr 4y ago
No, it's just a trajectory towards inflation (all other things being equal; it can be the right choice in certain economic environments). A central bank (that issues a sovereign fiat currency) can definitionally not go bankrupt, since its liability is the issued currency itself.
- unyttigfjelltol 4y ago
  A central bank operates within a framework of rules that, among other things, allow it to operate as a central bank. If those rules require it to raise capital before continuing to operate, and the capital cannot be raised, it is effectively bankrupt.
  - orangepurple 4y ago
    Central banks can freely create capital if necessary. They can generate anything they want because they are sovereign. The people are de-facto forced to utilize currency the central bank issues to pay taxes in that same currency. Without this system state run currencies would fail.
- kodyo 4y ago
  It can go bankrupt if people stop trusting the currency.
  - orangepurple 4y ago
    The government forces its subjects to pay taxes in that same currency and enforces this policy through courts, police, and the military. That is where state run currencies get their value. You need $CURRENCY because it is required to pay your taxes. The only way it ever stops is overthrow.
    - nirimda 4y ago
      That isn't true. There's many cases where e.g. through corruption and distrust, the state's capacity to collect taxes has been seriously weakened and the currency has gone into freefall so the country begins to operate - even despite threats of harsh penalty - in alternative currencies. States regularly remain in existence (i.e. are not overthrown) even after their currencies have stopped being used for everyday transactions and as regular stores of value. It is one of many examples of governments playing catchup with the economy.
  - lxgr 4y ago
    The currency can become worthless, sure, but that does not make the central bank bankrupt. The concept simply does not make sense for a (fiat) currency‘s issuer.
    - kodyo 4y ago
      When the state can no longer function because it has allowed its currency to be debased, who gives a shit if the central bank is solvent or not? It’s worse than bankrupt, it’s irrelevant.
      - lxgr 4y ago
        Sure, but arguably that‘s a bit like claiming that your house plant got a heart attack, i.e. can die – but not like that.
civilized 4y ago
Letting the central bank go bankrupt is also a good way to accelerate a trajectory towards bankruptcy.

legitster 4y ago

I mean, sure, you could print enough money to cover all outstanding debt. But try setting any meaningful monetary policy after that. Ain't no one going to buy a T-bill from you ever again once you do that.

incrudible 4y ago
No need to cover all the outstanding debt at once. The expectation of future debt monetization is already priced into the interest rate in much the same way as the risk of default would be. In fact, it is preferable that way. If you were a bond holder, would you prefer default over dilution?
- legitster 4y ago
  I mean, maybe? If in default I get 75 cents on the dollar, or with inflation my bond loses 25% of it's value through inflation isn't it the same to me? I am skeptical of the infinite money thing though. Sure - theoretically people will buy up bonds at 1000% interest rates. But would they really though?
  - incrudible 4y ago
    It's not the people that would buy bonds at 1000%, it's the central bank that would buy bonds at whatever interest rate they deem appropriate. They would create all the required money out of thin air. It's not an infinite amount, but obviously at some point the compounding effect of printing new money to finance old debt is going to erode trust.