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Conservative economists are constantly wrong but somehow people keep believing them. Where's that runaway inflation that they've been predicting over and over a

by guelo 13y ago

Conservative economists are constantly wrong but somehow people keep believing them. Where's that runaway inflation that they've been predicting over and over again for years? In any case, the US cannot default on its debt because it is denominated in US dollars, and we can always print more dollars. That is unless Tea Party extremists force us to jump off that cliff.

grey-area 13y ago
In any case, the US cannot default on its debt because it is denominated in US dollars and we can always print more dollars. There's a name for that solution - it's called a soft default, and it's not a new idea. Clearly there is a limit to this, or politicians wouldn't bother with a budget or taxes at all - they'd just print money as required. It dilutes the value of existing currency and is a dangerous game which is not sustainable. Kingdoms and empires which have devalued their currency (and many have tried) have always paid for it in the end, with interest. It also punishes the poor disproportionately with inflation - which doesn't have to be hyperinflation to be damaging if it is sustained. So anyone suggesting it should also be suggesting a way to balance the budget and get back to a sane monetary policy. That's not hard though - the US spends a lot on military budgets (much more than any other country in the case of the military), pensions and healthcare. You might argue how to cut and how fast, but there is a lot which could be done if necessary. Printing money is not a solution, it's just a stop-gap to avoid a hard default.
- venomsnake 13y ago
  Inflation doesn't punish the poor. It punishes the savers. Balanced budget/deficit/surplus are tools and not goals. When the business don't/can't spend it is the government job to pick up the slack (deficit). And when business is investing it makes sense for the government to not compete for the same capital and labor with the private sector (balanced/surplus).
  - grey-area 13y ago
    There are different kinds of inflation of course, and if you have high wage inflation then the poor won't really be punished more than others, but asset inflation and the early stages of inflation (as we have seen in this particular crisis) do punish the poor, who in general don't have: savings in assets other than cash the flexibility to switch between asset classes to avoid inflation large assets large debts secured on assets On top of that, too much inflation (asset or wage) does hurt everyone just as deflation does, so it is a balancing act, and simply printing more money whenever it is required is not a balanced policy. I don't agree with the current shutdown or manufactured crisis, but that's not an excuse to present money-printing as the magic solution to all government funding problems. Balanced budget/deficit/surplus are tools and not goals I disagree with that. It's fine to act in a counter-cyclical way as you have laid out above, and naively aiming for a balanced budget at all times would of course be damaging, but I do think a balanced budget and low inflation should be the explicit long-term goal of governments - otherwise the temptation is always to inflate their way out of difficulty, to start endless wars and never to pay down debts. If a crisis is required to borrow more, they'll invent one to do so.
  - BrandonMarc 13y ago
    It punishes the poor because prices for goods and services rise much sooner than wages or salaries. Those making the lowest wages are hurt the most by this. If we are going to have a minimum wage, it would be a bit more sane to have it change automatically and regularly, pegged to inflation by some agreed-upon and not-constantly-screwed-around-with formula ... but that doesn't mean the BLS wouldn't fudge the numbers anyway, in order to help / hurt those in power.

by guelo 13y ago

grey-area 13y ago

In any case, the US cannot default on its debt because it is denominated in US dollars and we can always print more dollars. There's a name for that solution - it's called a soft default, and it's not a new idea. Clearly there is a limit to this, or politicians wouldn't bother with a budget or taxes at all - they'd just print money as required. It dilutes the value of existing currency and is a dangerous game which is not sustainable. Kingdoms and empires which have devalued their currency (and many have tried) have always paid for it in the end, with interest. It also punishes the poor disproportionately with inflation - which doesn't have to be hyperinflation to be damaging if it is sustained. So anyone suggesting it should also be suggesting a way to balance the budget and get back to a sane monetary policy. That's not hard though - the US spends a lot on military budgets (much more than any other country in the case of the military), pensions and healthcare. You might argue how to cut and how fast, but there is a lot which could be done if necessary. Printing money is not a solution, it's just a stop-gap to avoid a hard default.

venomsnake 13y ago
Inflation doesn't punish the poor. It punishes the savers. Balanced budget/deficit/surplus are tools and not goals. When the business don't/can't spend it is the government job to pick up the slack (deficit). And when business is investing it makes sense for the government to not compete for the same capital and labor with the private sector (balanced/surplus).
- grey-area 13y ago
  There are different kinds of inflation of course, and if you have high wage inflation then the poor won't really be punished more than others, but asset inflation and the early stages of inflation (as we have seen in this particular crisis) do punish the poor, who in general don't have: savings in assets other than cash the flexibility to switch between asset classes to avoid inflation large assets large debts secured on assets On top of that, too much inflation (asset or wage) does hurt everyone just as deflation does, so it is a balancing act, and simply printing more money whenever it is required is not a balanced policy. I don't agree with the current shutdown or manufactured crisis, but that's not an excuse to present money-printing as the magic solution to all government funding problems. Balanced budget/deficit/surplus are tools and not goals I disagree with that. It's fine to act in a counter-cyclical way as you have laid out above, and naively aiming for a balanced budget at all times would of course be damaging, but I do think a balanced budget and low inflation should be the explicit long-term goal of governments - otherwise the temptation is always to inflate their way out of difficulty, to start endless wars and never to pay down debts. If a crisis is required to borrow more, they'll invent one to do so.
- BrandonMarc 13y ago
  It punishes the poor because prices for goods and services rise much sooner than wages or salaries. Those making the lowest wages are hurt the most by this. If we are going to have a minimum wage, it would be a bit more sane to have it change automatically and regularly, pegged to inflation by some agreed-upon and not-constantly-screwed-around-with formula ... but that doesn't mean the BLS wouldn't fudge the numbers anyway, in order to help / hurt those in power.