4 ms·

Google "hyperinflation." Printing money out of thin air causes the existing money to be worth about as much as toilet paper.

mitthrowaway2 3y ago
Depends on how much you print, and what happens with supply as you do so. Some countries (eg. Japan) are struggling to increase inflation, so this seems like a straightforward policy. At the same time it can solve the problem of weak consumer demand: productive factories making desirable goods that citizens nonetheless feel too poor to buy, causing those factories to shut down, resulting in the country getting poorer in real terms. After all, "demand" is desirability times spending power: if spending power is low in your target market, then demand is low, even when your products are desirable. Putting money in the hands of the largest number of people works well with production economies of scale. For the same total quantity of money, having it concentrated in a few hands means your society is incentivized to produce a few yachts and private jets, and too low on the quantity curve for economies of scale to make that production efficient. When that same money is distributed, the incentives are to produce large quantities of vacuum cleaners and washing machines, where mass production is very efficient, so total utility can be higher.
kelseyfrog 3y ago
Printing money is not a useful framing device. What is useful is thinking about money sources and money sinks. As long as the (source rate - sink rate) ≅ Δvalue of goods an services, inflation is checked. "Printing money", paired with a comparable sink, is completely fine and a more useful tool than "never print money". The biggest roadblock we have when it comes to employing this tool is that our system of governance has different systems when it comes to monetary and fiscal policy that over-complicate its use.
jstummbillig 3y ago
We are actually, right now, "printing money" out of thin air. The process is called "fractional reserve banking" and is a cornerstone of modern economics systems. You can of course read up on it, but, suffice to say, if we did not do it, financial systems would be extremely unergonomic. Hyperinflation is one of the things that could happen, when you do it badly, I suppose, but there is a lot of ways to get hyperinflation, if you do things badly.
- psunavy03 3y ago
  Thank you for insulting my intelligence by assuming I don't understand fractional reserve banking. My point remains. A government does not have carte blanche to inject money into an economy without hyperinflation beyond a certain point.
  - jstummbillig 3y ago
    If you were a little more honest and a little less into making a point of being offended, you would probably find it fairly easy to concede that the statements you made in both comments are substantially different.

mitthrowaway2 3y ago

Depends on how much you print, and what happens with supply as you do so. Some countries (eg. Japan) are struggling to increase inflation, so this seems like a straightforward policy. At the same time it can solve the problem of weak consumer demand: productive factories making desirable goods that citizens nonetheless feel too poor to buy, causing those factories to shut down, resulting in the country getting poorer in real terms. After all, "demand" is desirability times spending power: if spending power is low in your target market, then demand is low, even when your products are desirable. Putting money in the hands of the largest number of people works well with production economies of scale. For the same total quantity of money, having it concentrated in a few hands means your society is incentivized to produce a few yachts and private jets, and too low on the quantity curve for economies of scale to make that production efficient. When that same money is distributed, the incentives are to produce large quantities of vacuum cleaners and washing machines, where mass production is very efficient, so total utility can be higher.

kelseyfrog 3y ago

Printing money is not a useful framing device. What is useful is thinking about money sources and money sinks. As long as the (source rate - sink rate) ≅ Δvalue of goods an services, inflation is checked. "Printing money", paired with a comparable sink, is completely fine and a more useful tool than "never print money". The biggest roadblock we have when it comes to employing this tool is that our system of governance has different systems when it comes to monetary and fiscal policy that over-complicate its use.

jstummbillig 3y ago

We are actually, right now, "printing money" out of thin air. The process is called "fractional reserve banking" and is a cornerstone of modern economics systems. You can of course read up on it, but, suffice to say, if we did not do it, financial systems would be extremely unergonomic. Hyperinflation is one of the things that could happen, when you do it badly, I suppose, but there is a lot of ways to get hyperinflation, if you do things badly.

psunavy03 3y ago
Thank you for insulting my intelligence by assuming I don't understand fractional reserve banking. My point remains. A government does not have carte blanche to inject money into an economy without hyperinflation beyond a certain point.
- jstummbillig 3y ago
  If you were a little more honest and a little less into making a point of being offended, you would probably find it fairly easy to concede that the statements you made in both comments are substantially different.