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Print Money

ExpectantlyIronic

e̳̳̺͕ͬ̓̑̂ͮͦͣ͒͒h̙ͦ̔͂?̅̂ ̾͗̑
I'm entirely sick of this not being on the table. It's ridiculous. What happens when a government prints money? Let's say they fire up the presses and send everyone a wad of cash. The answer: prices rise, wages go up, and unemployment goes down. That's not a controversial economic theory. That's what happens.

Most people will say, "yeah, but what about inflation. Zimbabwe, duh." Well, what about inflation? If production capacity were significantly exceeded by demand caused by the increased money supply, then inflation would be a major issue. As it is, though, America seems to have no problem as far as production capacity is concerned. Around 10% of Americans are looking for work.

"Yeah, but the government already printed a bunch of money, and around 10% of Americans are still looking for work," you say? They're not doing it enough, and haven't been for a long time, due to pretty much every politician and both political parties being majorly bankrolled by hardcore inflation hawks. Hell, inflation hawks own pretty much everything. Why? Inflation is bad for lenders, as it means they get less effective return on loaned money. The problem is they're too afraid of it, as significant inflation seems nowhere on the horizon.

The proper course to redress the nation's economic woes is right there in front of us, and it seems like nobody is talking about it.
 
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Sim

Registered Member
I'm sure this will be on the table soon enough. But politicians will better not talk about it too bluntly. You don't want people with shotguns running after you.
 

MenInTights

not a plastic bag
I'm sure this will be on the table soon enough. But politicians will better not talk about it too bluntly. You don't want people with shotguns running after you.
No politician will bring it up directly as they are punting it to the Federal Reserve. They will monetize debt which will increase money supply just as well as sending cash to people. And according to some people, there will be shotguns: Will the Federal Reserve's Ben Bernanke Cause a Civil War? - The Curious Capitalist - TIME.com
 

SmilinSilhouette

Registered Member

ExpectantlyIronic

e̳̳̺͕ͬ̓̑̂ͮͦͣ͒͒h̙ͦ̔͂?̅̂ ̾͗̑
SmilinSilhouette said:
With this policy will come inflation, that will be very destructive to the middle class and wipe out savings. They will then be dependent upon government to provide for them.
"Wipe out savings" is a whole lot of hyperbole when inflation rates have been so low.
 

SmilinSilhouette

Registered Member
Not hyperbole, reality. If you are like me then you have recently lost 40-50% on retirement savings, house worth less than paid, and possible hyper-inflation on the horision as a result of poor policy from inept governance. But you will see soon enough, when the rate of return on investment is less than the rate of inflation then investment and savings collapse. All but the elite will be dependant upon government.
 

MenInTights

not a plastic bag
I read recently that the S&P 500 companies have something like $1.5T in cash reserves and thats not including financial firms. Interest rates are near zero and they won't spend the money on R&D or expansion. Everyone wants them to release that money, the question is how to do it. Currently, it seems like uncertainty is keeping them from spending the money and creating jobs in the process.

There's too much sideline money to be toying around with money supply by Bush style stimulus checks or monetizing debt. If we see inflation at 4%-5%, corporations and banks are going to start flooding their dollars. That could also lead to trade deficient dollars coming back on shore making the situation even worse. And then finally sinking demand for Treasuries. There's just way too many dominoes set up - things are too fragile.

I think at least politically, 2+ years of gridlock will be a good thing for corporate America. For example, once we get past January we know that cap and trade will be dead. Corporate America tends to respond best to government slowdowns rather than Repub or Democrat governments.
 

CaptainObvious

Embrace the Suck
V.I.P.
I would be quite surprised if EI wasn't aware that is exactly what is being proposed.
Germany Says U.S. Federal Reserve Heading `Wrong Way' With Monetary Easing - Bloomberg

With this policy will come inflation, that will be very destructive to the middle class and wipe out savings. They will then be dependent upon government to provide for them.
I agree, simply printing money would cause major inflation which would not lead to unemployment going down but either staying the same or up.
 

ExpectantlyIronic

e̳̳̺͕ͬ̓̑̂ͮͦͣ͒͒h̙ͦ̔͂?̅̂ ̾͗̑
A modest increase in the money supply won't lead to major inflation, especially when there's excess production capacity*. Though, the longer companies build up their cash reserves, the greater the threat of a large inflation spike. Hence, the need to create an expectation of inflation in order to encourage money to be invested in growth sooner rather than later.

As for the effect of monetary stimulus on employment: inflation only rises if demand increase or supply decreases. I really see no way monetary stimulus can lead to inflation without having a positive effect on employment if the production capacity is there, unless suppliers act irrationally and raise prices without expanding, and nobody steps in to compete with them; and all this while they expect inflation that will cause them to take a loss on their built-up reserves. That scenario is well out of line with my (and I think most people's) understanding of how a capitalist economy functions.

To address savings: there will always be at least a modest level of inflation while the economy is growing, and everyone really should know that you have to beat the rate of inflation or effectively lose money on savings. Now, beating the rate of inflation is more difficult to do when you have an economic recession, or else a stagnant economy, so a certain level of inflation is generally a good sign for investors.

Honestly, if there were any serious reasons to think that hyper-inflation is on the way, then American corporations are not currently aware of them. Nobody holds onto cash reserves they think will become worthless. Furthermore, while it makes sense to mindful of inflation, deflation is just as bad if not worse, which is why companies are hedging against it.


* If growth of the money supply exceeds the ability of production levels to rise to accommodate it, then and really only then do you see runaway inflation. Assuming, of course, we're not dealing with an economy dominated by monopolies, which we aren't.
 

MenInTights

not a plastic bag
There was a good article in TNR about dangers of deflation and ways to increase money supply: Three Unorthodox Ways Obama Can Fix The Economy?Even With A Republican Congress | The New Republic. The article compared us to the lost decade in Japan. The problem I have with that is #1: Japan has a completely different economy than we do in a completely different global economy and #2: Japan ran stimulus after stimulus and they were still stuck in a decade long recession.
I need to study it more, but it seems to me that the real lesson of Japan may be that stimulus economies don't work.
 
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