The government can never run out of money.

Please give examples

I've been hearing about the "dangers" of hyper inflation for almost 8 years now.

I'm getting tired of waiting for it

 

We are not saying it will happen, just that the possibility may exist, and that people should use more caution when it comes to what sort of monetary policies they advocate.

 

The possibility for almost anything "exists".

The "likelihood" however is something completely different.

 

Right, so we've just had the MMT side of things admit that the government doesn't contract spending during the boom period as suggested by Keynes. But they propose that money printing isn't a problem, so long as it keeps on track with inflation.

If you give politicians more excuses to create money out of thin air because "well, technically the US government can never run out of money" do you think they'll be careful to ensure that it keeps in line with inflation, or will they take this as a blank check as they have done with Keynesianism so far?

It is true that technically the government can always issue more money. That doesn't mean that it's a good thing to pursue this as a policy-- the more government controls resources, the less the private sector has to create wealth. And even if bonds can always be repaid, that doesn't mean they won't be repaid in useless dollars. You don't get to escape these economic realities because you have a printing press.

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We've seen the "likelihood" of politicians to use Keynes as an excuse to print and spend, and not contract during a boom period. Why do you think this will be any different?

 

Monetary expansion is IMO not a very good way to get stimulus into the economy, because so much of the money goes to people who don't spend it and of the risks in unduly expanding the money supply.

The much better method is through fiscal stimulus. More spending in the economy, cutting taxes on middle income earners, raising taxes on the wealthiest who otherwise hoard the money.

Unfortunately, when you have a Congress that insists on imposing austerity as ours has done, monetary expansion is the only game in town.

 

So... why don't extremely poor countries just print more money? Isn't wealth?

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I too support MMT. As you can see from the posts here, most people do not fully grasp what fiat money is...keep it up, they need a lesson in finance.

 

It was my understanding that the conventional wisdom in economics holds monetary stimulus ought to be tried first. Or is it just that both Monetarists and Keynesians agree with expansion of the money supply, but not fiscal stimulus?

 

They can but if they owe debts in other currencies or rely upon imports, they will have issues. We do not owe money in anything but dollars. Big difference.

 

So, regardless of the money they print, there is only diminishing wealth behind it. Right?


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Oh my lord!! A fellow intelligent human being. Be warned. You're not dealing with the brightest here.

 

I can't speak to the "conventional wisdom" or what folks with those labels think. I can only speak to my own opinions.

The goal of stimulus in a recession and/or recovery is to increase spending and demand for products and services in a scenario where the private sector is not doing it.

Creating more money puts the new money into the hands of the debt instrument the Fed buys, and most likely the seller is a wealthy individual or large corporation that was holding the debt. Wealthy individuals and large corporations don't necessarily spend a large portion of the money. They sit on it. So it doesn't as efficiently achieve the objective of creating more spending in the economy.

Fiscal policy can be more directly effective. Govt spending that supports jobs, whether they be existing or new ones, puts money into the pockets of the people who spend it. Which is what the economy in recession needs.

It's no coincidence that this recovery has been sluggish and slower than previous ones. Spending growth has been more sluggish and slower as well.

Take an economy where a larger and larger share of the gross income and wealth goes to the few who proportionally spend a fraction of it, and mix in a government practicing austerity at a time when spending and demand are suppressed, and you have the recipe for a sluggish recovery. That is exactly what we've seen.

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Creates the potential for inflationary problems, as several others have pointed out.

 

Be careful with this Iriemon cat. He doesn't think banks create money out of thin air. So he probably doesn't understand what you're talking about.

 

The US government is constrained in its ability to issue currency by the debt ceiling. The mechanism by which new money is introduced into the system is achieved through bonds issuance.

 

That is a constraint on borrowing by the US Govt, not really much of a constraint on money creation by the Fed.

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Starting off with falsehoods? How unusual for you.

 

That's a man made constraint based on an arbitrary value.

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Falsehoods? Lmao. You and your Libertarian buddy Dr. Righteous spent couple months, multiple threads, and hundreds of pages trying to tell me they don't. It was absolutely hilarious. I should bring those back up.

 

The fed can print new currency to meet deposit demands by banks, but to expand the money supply, it does it through the bond mechanism--they create the money and exchange it for bonds that have to be bought from the market which then inserts the money into circulation. If the government is not issuing bonds for them to buy, they have no mechanism that does not involve printing paper currency to match existing money supply. So the fed can order up about $16T in new money to buy out all the US bonds it does not own, but beyond that, they are constrained.

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So? Money is a "man-made" thing. It doesn't grow on trees.

 

So, it's a man made constraint. It's not a real constraint. Like you, me, Greece, California and Kansas have real constraints. Huge difference.

 

And? They still have a crisis. But if the US currency was not the world's reserve currency the dollar would be worth less than used toilet paper.

 

Lmao!!! It's still hilarious how you guys are so brainwashed by conservative/libertarian nonsense. Our currency would not be worthless if we weren't the world's reserve currency. Geez, I truly hope you don't honestly believe this.

 

Not sure what you mean by wealth but soveriegn banks have the power to print money. In our case, everything we buy is done in US dollars. We control our currency. A small nation does up to a point. If they buy everything locally and owe nothing internationally, then they can print as much as they want as long as they manage inflation.

 

Why do you think federal reserve notes have value? Why do people go to a job they'd rather not go to and work for pieces of paper?

It wouldn't be worthless, but it would be worth less. It can still be used to pay off the IRS which means you won't go to prison if you have enough of those pieces of paper, and staying out of prison does have value.

So yes, you are correct. It wouldn't be worthless.

 

Not because we are the world's reserve currency.

 

It's only a reserve currency in a few countries like cambodia and mexico. This is only true because people know that the currency exchange dude is right down the street, and the exchange rate is well known.

If you've ever travelled, you would understand that there are these things called "currency exchange" where you can take your dollars and exchange them for the local currency. There aren't that many currencies that are accepted worldwide, but the USD is not the only one. British pounds, euros, japanese yen, chinese yuan, hong kong dollars, canadian dollars, australian dollars...

In other words, don't get too comfortable with the notion of a reserve currency, just as you shouldn't be comfortable with the petro-dollar. You actually have to pay for that privilege in potential lives protecting a very evil country from other countries who might not like how saudi arabia treats women or gays or all of those wonderful people that you might think matter.

 

Well this depends..... You see the government no longer prints the money, the Federal Reserve does, and the government borrows money from the Federal Reserve at interest.

Now so long as the US government is more powerful than the Federal Reserve, the Federal Reserve must extend an unlimited amount of credit to the government.

But if the international bankers get their way, and are able to pull off the final stage of "globalization" they will form a OWG and be more powerful than the US government.

Once they do, they could foreclose on the governments debt and in doing so take the assets of the American people which are pledged as collateral for the governments debt.

Or they could use that debt as a bargaining chip to force the American people to "voluntarily" give up their Constitution and join a one world government in exchange for discounting or writing off the debt.......

You see there is a plan behind all of this.....