5 ms·

What are the arguments here? If it didn’t cause inflation, the USA should abolish taxes and just print trillions of dollars and buy everything in the world, and

by influx 3y ago

What are the arguments here? If it didn’t cause inflation, the USA should abolish taxes and just print trillions of dollars and buy everything in the world, and give each resident a million dollars a month as basic income.

consilient 3y ago
You're conflating several distinct things here: - The nominal quantity of money ("print trillions of dollars") - Aggregate demand ("buy everything in the world") - The velocity of money ("give each resident a million dollars a month") Increases in the quantity * velocity of money drive inflation in the long run: prices do not equilibrate immediately but have to be dragged up (or not, as the case may be) by supply and demand.
- jtbayly 3y ago
  So what are the arguments for why not to just print as much money as the government needs? If many people believe printing trillions of dollars doesn’t matter, then I’d like to hear why. I’d like to not have taxes…
  - closeparen 3y ago
    The government needs money to buy goods and services. Extra cash chasing the same pool of goods and services is definitely inflationary. It also needs money to do weird, dark magic with bank balance sheets so that businesses can continue to acquire the capital to maintain and grow the supply of goods and services. It’s less clear what extra money sloshing around the financial system does. In the post-2008 era, people were freaking out about it not doing enough.
- influx 3y ago
  I appreciate your response, if I wanted to educate myself quickly here, is there a layman's textbook you would recommend?
zhoujianfu 3y ago
Some people (including me) actually do think this is exactly what the USA should do. I think people think printing money causes inflation, and in general “know” that you shouldn’t “spend more than you make”… but I think things are different when you can print money. It would actually be a very efficient means of fund raising (vs the current tax code), as well as fighting income inequality (the basic income), and even if it did cause inflation, that’s basically just a very efficient progressive wealth tax (when coupled with a universal basic income).
- jtbayly 3y ago
  In 5 years a roll of TP would cost $1.4T, but we could just remove a few zeros every year or so, amiright?
- danenania 3y ago
  Inflation is the most regressive form of taxation there is. I'm in favor of basic income, but if you try to just print it all, prices will increase to the point that there won't actually be a meaningful increase in purchasing power. Imagine if the Fed just printed up 10 million dollars for everyone tomorrow. Do you think everyone would then be wealthy?
ethbr0 3y ago
I mean, to some degree, that's what the US has historically done and can do, as a consequence of being the world trade (and therefore reserve) currency. A side effect of that position is decreased sensitivity (aka inflation) of that currency to money printing. Because you're effectively amortizing each new dollar's dilution of value against {everything the US uses dollars for} + {everything the world uses dollars for}. Which is a much larger denominator than national-only currencies. (And side note that being a trade currency is somewhat of a Faustian bargain, because it carries an expectation/obligation that you will create sufficient amounts of your currency to facilitate international trade) If the US keeps using the dollar as a fast pass to imposing unilateral sanctions internationally, and de-dollarization expands, there will be a very different level of correlation between monetary policy and dollar inflation.
kasey_junk 3y ago
The argument that is peculiar to the Austrian school is that monetary policy is the _only_ thing that causes inflation. Not that it can’t contribute to it. And personally I think the last 15 years have done a pretty good job as a counterpoint to that school. The whole QE regime was chugging along without generating a large amount of inflation and then we had both the supply and demand numbers go bonkers. Then inflation. I think this period will be studied for years (though because it’s economics I doubt there will be much decided).
speakfreely 3y ago
Sounds like you've independently invented MMT.

by influx 3y ago

consilient 3y ago

You're conflating several distinct things here: - The nominal quantity of money ("print trillions of dollars") - Aggregate demand ("buy everything in the world") - The velocity of money ("give each resident a million dollars a month") Increases in the quantity * velocity of money drive inflation in the long run: prices do not equilibrate immediately but have to be dragged up (or not, as the case may be) by supply and demand.

jtbayly 3y ago
So what are the arguments for why not to just print as much money as the government needs? If many people believe printing trillions of dollars doesn’t matter, then I’d like to hear why. I’d like to not have taxes…
- closeparen 3y ago
  The government needs money to buy goods and services. Extra cash chasing the same pool of goods and services is definitely inflationary. It also needs money to do weird, dark magic with bank balance sheets so that businesses can continue to acquire the capital to maintain and grow the supply of goods and services. It’s less clear what extra money sloshing around the financial system does. In the post-2008 era, people were freaking out about it not doing enough.
influx 3y ago
I appreciate your response, if I wanted to educate myself quickly here, is there a layman's textbook you would recommend?

zhoujianfu 3y ago

Some people (including me) actually do think this is exactly what the USA should do. I think people think printing money causes inflation, and in general “know” that you shouldn’t “spend more than you make”… but I think things are different when you can print money. It would actually be a very efficient means of fund raising (vs the current tax code), as well as fighting income inequality (the basic income), and even if it did cause inflation, that’s basically just a very efficient progressive wealth tax (when coupled with a universal basic income).

jtbayly 3y ago
In 5 years a roll of TP would cost $1.4T, but we could just remove a few zeros every year or so, amiright?
danenania 3y ago
Inflation is the most regressive form of taxation there is. I'm in favor of basic income, but if you try to just print it all, prices will increase to the point that there won't actually be a meaningful increase in purchasing power. Imagine if the Fed just printed up 10 million dollars for everyone tomorrow. Do you think everyone would then be wealthy?

ethbr0 3y ago

I mean, to some degree, that's what the US has historically done and can do, as a consequence of being the world trade (and therefore reserve) currency. A side effect of that position is decreased sensitivity (aka inflation) of that currency to money printing. Because you're effectively amortizing each new dollar's dilution of value against {everything the US uses dollars for} + {everything the world uses dollars for}. Which is a much larger denominator than national-only currencies. (And side note that being a trade currency is somewhat of a Faustian bargain, because it carries an expectation/obligation that you will create sufficient amounts of your currency to facilitate international trade) If the US keeps using the dollar as a fast pass to imposing unilateral sanctions internationally, and de-dollarization expands, there will be a very different level of correlation between monetary policy and dollar inflation.

kasey_junk 3y ago

The argument that is peculiar to the Austrian school is that monetary policy is the _only_ thing that causes inflation. Not that it can’t contribute to it. And personally I think the last 15 years have done a pretty good job as a counterpoint to that school. The whole QE regime was chugging along without generating a large amount of inflation and then we had both the supply and demand numbers go bonkers. Then inflation. I think this period will be studied for years (though because it’s economics I doubt there will be much decided).

speakfreely 3y ago

Sounds like you've independently invented MMT.