The government can never run out of money.

Discuss the OP. As the sovereign issuer of the currency, the US government can never fail to credit accounts.

 

Credit accounts with what? Hyper-inflated numbers that can't buy a smile at mcdonalds?

If I loan you a dollar in 1950 and you repay me that dollar today, do you really think you have paid your loan off?

 

Credit accounts with keystrokes.
Hyper inflation? I don't see it. The only instances of hyperinflation are in relation to a massive drop in available supply with to much demand. (Zimbabwe, agriculture/infrastructure destroyed.. weimar, manufacturing decimated, war reps..) If I have a $100 FRN, it can buy me some nice things. It has nothing to back it apart from the government laying down a tax only payable in its own currency, which it issues. Your example seems silly, since all money is debt. Money is either created through commercial banks "expanding their balance sheets" and creating deposits when they make a loan, which comes with a corresponding liability that usually extinguishes the money created, or through government deficit spending, which adds new net financial assets to the domestic private sector. Hmmm.. the government debt simply represents all of the money the government has spent that has yet to be taxed away/treasury securities.. and I will bet you $200 that if you get a government bond, you will receive the interest when it matures.. Nothing is going to stop the government from crediting the initial account of the bond holder.

 

Let me just break it down for you. If I loaned you a dollar in 1950, you would have to pay me 10 dollars today. That is without interest.

All of that other nonsense you brought up is irrelevant when talking about inflation. If you only paid me a dollar today, you would still owe me nine dollars.

 

keynesian retardation at its finest.

 

I also paid lots of interest to you. That's why inflation is the norm, even in the absence of money printing, because every dollar is loaned into existence, and the interest on the loan has to be created in addition to the money loaned into existence. Without inflation there would be little borrowing and economic expansion would be likely low to non-existent.

 

Money is loaned into existence, but that's a loan that banks make good on by loaning it to people who can make a profit, and they end up paying back, and more money is loaned into existence as a result.

It's when the banks lose money on that loan that the poo hits the fan. When the amount of money exceeds the amount of wealth, you get inflation.

Your idea seems to be that because it's loaned into existence, then we must have inflation in order to pay that off.

You don't believe in the ability of people to turn something worth one dollar into something worth two dollars.

And that's why you are wrong.

 

No, you don't believe in that, which is why you like deflation.

Your example of loans not being paid back is exactly what we are experiencing now, it is called debt deflation. And debt deflation is usually a deathly spiral that is impossible to escape until the unsustainable debt is destroyed. This is private debt, btw, not government debt, so it has nothing to do with money printing.

The fiscal hawks usually like deflation, though. I don't know why, but is must be because of the misguided belief that it is great when things get cheaper, not realizing that wages fall even faster than prices, dragging everyone else into the economic gutter as well.

 

A government can never run out of money? Greece will be glad to hear it.

 

The Nazis borrowed so much money that they had to issue what were known as MEFO bills to those they were buying from. They were just IOUs with a vague promise to maybe pay them back in the future but where the government could keep extending the repayment period, you know, because they ran out of money.

The Germans had to invade all their neighbours just to keep fresh money and gold coming into their accounts.

 

Sure with a little ink and paper it can print out $100,000 securities by the millions. Governments have been coining money for thousands of years. Do you really think we are the first to think of this?

So in the past, when governments just decided to create money in mass abundance, unrelated to the production of goods and services, what happened?

Why would this work out differently for the US government today?

 

When a society fails:

"It's Pure Chaos Now; There Is No Way Back" - Venezuela Hits Rock Bottom As Its Morgues Overflow

Hyper inflation hits fast:



"This Is What The Death Of A Nation Looks Like" and said "there is no good news in any of the above for the long-suffering citizens of this "socialist paradise" which any minute now will be downgraded to its fair value of "socialist hell."

Venezuela is openly liquidating its gold reserves while its president, in an amusing twist, announced last week, that henceforth every Friday will be a holiday, to cut down on electricity usage as electricity rationing is imposed on this once flourishing Latin American nation.


Last month alone, Venezuelans learned of the summary execution of at least 17 gold miners supposedly by a mining Mafia, the killing of two police officers allegedly by a group of students who drove a bus into a barricade, and a hostage drama inside a prison at the hands of a grenade-wielding criminal gang. On Wednesday, three policemen were killed when an armed gang busted a member out of a lock-up in the capital.

At least 10 were killed in a Caracas shanty town after a confrontation between local thugs armed with assault rifles, while a local mayor was gunned down outside his home in Trujillo state last month. There are widespread reports of lynchings.

All this is creating a broad unease that Mr Maduro is unable to maintain order... There is a lack of basic goods. Analysts warn that the economic crisis risks turning in to a humanitarian one.

Some refuse to acknowledge that a state erected on so much oil wealth can be a failed state:

“Failed state is a nebulous concept often used too lightly. That’s not the case with today’s Venezuela,” says Moisés Naím a Venezuelan distinguished fellow at the Carnegie Endowment for International Peace. “The evidence of state failure is very concrete in the country that sits on top of the world’s largest oil reserves.”

The murder rate rose last year to 92 killings per 100,000 residents.

If they can just print up a bunch of money, I wonder why they are liquidating their gold reserves?

http://www.zerohedge.com/news/2016-...nezuela-hits-rock-bottom-its-morgues-overflow

 

MMT is basically correct. Keep in mind that advocates of neo-chartalism (MMT) have never said that money can be created without constraint. Inflation is the basic constraint.

The basic idea is that as the economy contracts (reducing the money supply), government should spend (create new money) to balance the scale. As long as the total money supply remains in basic proportion to our output of goods and services, inflation will remain under control.

It should be noted that hyperinflation is a political phenomenon associated with revolutions and anarchy, and exacerbated by production blockages or external debt. The Weimar regime did not actually start printing money until well after hyperinflation was already under way - the money printing was a stupid reaction to hyperinflation rather than its cause.

When the money supply collapses, as it did in the Great Depression, the responsible action is for the Government to spend. When the money supply expands the opposite is true.
When you have a production problems combined with external debt combined with political collapse, then you are very likely to get hyperinflation, unless you have very smart leaders.

 

If the government keeps printing money, eventually interest rates are going to rise when it comes time to renew the debt.
This could even trigger a debt crisis with overnight hyperinflation, that will come seemingly out of nowhere with the majority of investors not expecting it.

You see, if interest rates continually rise with the market's accurate expectations of future inflation levels, there is no way the government can print its way out of the national debt. In fact, if investors get scared, the rates will spike and the interest will keep compounding to difficult to sustain levels.

Maybe it was unhealthy for the economy to "expand" so much in the first place beyond its actual means. So afterwards it could also likewise be unhealthy for them to try to prevent the economy from contracting back. Do you think trying to prop up asset prices by issuing more money to buy up all that equity is a good thing?

In my view, they're not actually changing real price so much, they have just caused inflation. The assets are valued at less than they were before the recession, but the dollar amount is the same; the dollar is just worth less because it has been diluted. Moving around a bunch of paper doesn't really change the fundamental economics of people having come to realize that the wealth they thought they held was not real.

 

But the government ISN'T going to keep printing money.

The Fed is actually the biggest "supplier" of money and it raises and lowers interest rates to balance inflation and borrowing.

Inflation is currently at near historically low rates and the Fed has kept interest rates low because of that.

As inflation increases the Fed adjusts interest rates.

That's how it's worked (successfully) for over 80 years now.

It worked well enough after WWII when the debt was higher in relation to GDP than now...and it worked in the late 70s early 80s when interest rates were 10%

 

I fully agree with your post, except that government doesn't seem to be able to restrict spending in good times. Reagan's presidency is the prime example. Despite the economy booming, he kept spending like crazy, because the government spending added to the short term expansion of prosperity brought about by private debt taking.

So, in theory, anticyclic government spending is ideal, and that's how Keynes actually envisioned it. It just doesn't work well in the real world.

 

Well...not when republicans are in the Oval Office anyway

http://www.thefiscaltimes.com/Columns/2012/12/05/Clintons-Spending-Cuts-Not-His-Tax-Hikes-Worked

 

It will be interesting to see if we are able to make that turn when the time comes.

 

Uh, the government has no money. It can print (inflation), it can borrow (debt), and it can tax. But it has no money of its own.

 

Perhaps you meant to say the government cannot create wealth, rather than the government cannot create money. We could debate the first proposition, but the second is definitively false.

Money is a unit of account (similar to a unit of measurement in science). Money is a measurement of wealth, but has no fixed value, unlike units in science. The value of money is determined by many complex forces, but it is fundamentally related to the wealth of the nation (in goods and services) divided by the amount of money in the economy. This value could not possibly ever be a fixed value under such dynamic circumstances - which is one of many reasons why the gold standard was doomed to failure.

 

"The government has no freaking money, people." - Stefan Molyneux

 

No, we can't turn when the time comes. A large part of it is that too many will cry for the government giving the money back to the people when there is a surplus (see GWB 2001). Thus, there will never be a lasting surplus in the good times -- because tax cuts will always erase it.

 

YUP. Ya can't argue with history.

Conservatives FREAKED OUT because we were "paying down the debt too fast" and demanded a tax cut instead.

I got me a whopping $600/year...on a hundred grand income.

 

Yes, people really need to understand this. The first warning sign is the accumulation of unsustainable debt levels, with the government beginning to resort to issuing new currency to pay its costs. Hyper inflation is not gradual, it comes very fast without giving people much time to realize what is happening.

 

Greece is not a sovereign issuer of its currency.