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Banks, QE, and Money-Printing

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Re: Banks, QE, and Money-Printing

#41

Post by ethbr0 »

travisoneill1 wrote: post #23
xuki wrote: post #10

Earlier quoted context omitted.

Yet it’s very tempting for politicians to implement exactly that, because to tax people to pay for stuff is not very popular politically. They will always, always, always kick the can down the road.

Yeah, I get the feeling that this theory is mostly based on the fact that the consent of elected representatives is required to raise taxes, but not to print money.

Not just the consent of representatives, but the very attention of the public.

Housing prices are going up = average citizen is happy, or at least not concerned

Fiscal austerity & inflation = average citizen is alarmed and votes you out of office

So yes, it's essentially a magician's version of the hard choices government has to make.

Re: Banks, QE, and Money-Printing

#42

Post by germinalphrase »

JumpCrisscross wrote: post #21
siwatanejo wrote: post #3

Earlier quoted context omitted.

The point of that woman is simply: let the deficit go up ad infinitum (in USD value), it doesn't matter because as the central bank keeps printing money, the value of the deficit actually goes down (because the USD value goes down), so the value of the deficit is stable even if we don't perceive it to be this way. Quite BS imo

MMT is a neat theory. The mathematics are quite elegant. Unfortunately, like a lot of beautiful macroeconomics, it isn’t a policy prescription. (Though it provides ivory tower cover for bad policy.) Reserve currency status does afford increased deficit-spending capacity. But it isn’t an immutable, environmental variable. Deficits and reserve currency status interact. If a country runs up large deficits in the name of…

Hasn’t the last ~15 years had been an experiment in printing money on the order of trillions (3-7 for wars in the ME, how many more T. for bailouts/QE)?

Re: Banks, QE, and Money-Printing

#43

Post by roenxi »

JumpCrisscross wrote: post #21
siwatanejo wrote: post #3

Earlier quoted context omitted.

The point of that woman is simply: let the deficit go up ad infinitum (in USD value), it doesn't matter because as the central bank keeps printing money, the value of the deficit actually goes down (because the USD value goes down), so the value of the deficit is stable even if we don't perceive it to be this way. Quite BS imo

MMT is a neat theory. The mathematics are quite elegant. Unfortunately, like a lot of beautiful macroeconomics, it isn’t a policy prescription. (Though it provides ivory tower cover for bad policy.) Reserve currency status does afford increased deficit-spending capacity. But it isn’t an immutable, environmental variable. Deficits and reserve currency status interact. If a country runs up large deficits in the name of…

> Unfortunately, like a lot of beautiful macroeconomics, it isn’t a policy prescription.

Nobody who decides the policy will have read the theory anyway, so that doesn't really matter.

It requires a suspension of disbelief to accept that economic policy is decided based on theory. It is the same fig-leaf as copyright supporting artists, then the law clearly being written by groups like Disney based on their own convenience.

Re: Banks, QE, and Money-Printing

#44

Post by lasagnaphil »

ChrisMarshallNY wrote: post #6
siwatanejo wrote: post #3

Earlier quoted context omitted.

The point of that woman is simply: let the deficit go up ad infinitum (in USD value), it doesn't matter because as the central bank keeps printing money, the value of the deficit actually goes down (because the USD value goes down), so the value of the deficit is stable even if we don't perceive it to be this way. Quite BS imo

Printing money is a bad idea. You think we had it bad, check out what happened here: https://alphahistory.com/weimarrepublic/great-depression/ I seem to remember something else, rather alarming, that happened after that...

I though the Weimar Republic's hyperinflation wasn't simply because the country printed her own currency; the more specific problem was that they then used that printed currency to pay back war reparations from other countries. Because the money is only going out of the nation's borders and isn't used to grow its own economy, the currency of the nation is devalued and international exchange rates fall, leading to a catastrophic amount of inflation.

One thing I heard Stephanie Kelton and other MMTers has always emphasized about MMT is that the main question of the theory isn't "Should we print the money?", but "HOW should we use the printed money?" The money-printing is already conceptually independent from yearly budgets; the big question is how we're going to use that money so that uncontrollable inflation does not occur (which the Keynesians failed to answer with stagflation). If the newly printed money improves the strength of the "actually existing" national economy, then its currency will become competitive with others and a hyperinflation moment like Weimar would probably not happen.

Re: Banks, QE, and Money-Printing

#45

Post by JumpCrisscross »

newdude116 wrote: post #29
kqvamxurcagg wrote: post #26

The fundamental issue with this article is that the inflation number is a lie. Housing costs are the key cost for every consumer but are excluded from CPI. Western countries have been running fiscal deficits consistently for decades, QE and low interest rates for 10 years. Yet for academics and central bankers the only answer to growth is more debt. Low interest rates benefit only the asset rich. They deprive everyon…

" Yet for academics and central bankers the only answer to growth is more debt." The uttermost definition of capitalism. "Our economies and culture have a skills crisis not a growth crisis." Capitalism can't survive without growth by definition. https://ourfiniteworld.com/2011/02/21/there-is-no-steady-sta...

> Capitalism can't survive without growth by definition

Capitalism prefers growth. It causes growth, which is good. (Growth does not have to mean resource intensity.)

It does not require growth. Zero-grow and shrinking economies can allocate resources well through markets.

Re: Banks, QE, and Money-Printing

#46

Post by HourglassFR »

zelos wrote: post #22
turbinerneiter wrote: post #15

If they print money to build new roads, bridges, (clean) power plants, schools -> good. If they print money to put in stocks and real estate -> bad. The one thing creates real value and enables more real value creation in the future. The other one has no effect on the real economy and wages. Driving real estate prices is even bad: at some point, no real economic strategy (aka. business model) is able to sustain the n…

As someone who really doesn't understand economics: if the government prints money to build infrastructure, where does the value they've added come from? I can't follow the logic of it: the government makes some money and pays a load of workers to build a bridge. It seems like the bridge is 'free', paid for with bits of paper they printed. Is the real cost the increased price of bridge building for everyone else, bec…

> if the government prints money to build infrastructure, where does the value they've added come from?

From the labour of the worker. Notice that does not depend on where the money comes from in the first place. In our economic models, value always come from human labour (or capital, which is crystallized labour).

But of course those models are lacking, crucially they implicitly consider natural ressources as infinite, a fine assumption to make in the 19th century but is now quite ludicrous.

Re: Banks, QE, and Money-Printing

#47

Post by JumpCrisscross »

roenxi wrote: post #43
JumpCrisscross wrote: post #21

Earlier quoted context omitted.

MMT is a neat theory. The mathematics are quite elegant. Unfortunately, like a lot of beautiful macroeconomics, it isn’t a policy prescription. (Though it provides ivory tower cover for bad policy.) Reserve currency status does afford increased deficit-spending capacity. But it isn’t an immutable, environmental variable. Deficits and reserve currency status interact. If a country runs up large deficits in the name of…

> Unfortunately, like a lot of beautiful macroeconomics, it isn’t a policy prescription. Nobody who decides the policy will have read the theory anyway, so that doesn't really matter. It requires a suspension of disbelief to accept that economic policy is decided based on theory. It is the same fig-leaf as copyright supporting artists, then the law clearly being written by groups like Disney based on their own conven…

> suspension of disbelief to accept that economic policy is decided based on theory

Not decided on. But influenced by. Or at least, who gets to be influential is influenced by it.

MMT’s political bullet point of “deficits don’t matter so spend like crazy” empowers a unique set of policies. So those actors push it so voters will accept the cost of their goodies.

> the same fig-leaf as copyright supporting artists, then the law clearly being written by groups like Disney

Disney helped draft the Constitution?

Re: Banks, QE, and Money-Printing

#48

Post by cryptica »

x87678r wrote: post #39
cryptica wrote: post #14

Money printing is always inflationary. Either it causes CPI inflation immediately or it's stored up for later. When money printing does not cause immediate CPI inflation, surplus money is stored in scarce assets which creates asset price inflation and increasing fragility which will inevitably lead to CPI inflation later. The fact that new money is mostly backed by debt is irrelevant because those who own a lot of ca…

>Money printing is always inflationary. Either it causes CPI inflation immediately or it's stored up for later. Japan and Europe disagree.

Wealthy entities in those countries must be accumulating surplus fiat currency at a loss to themselves in order to suppress CPI inflation (maybe to artificially prevent the economy from crashing). But that's temporary. Whoever these entities are will eventually realize that this loss in value is not going to be recoverable and they will be forced to dump their fiat eventually. All the stored up CPI inflation will be released in a very short amount of time.

You can't increase the supply of a currency (or anything else) without it losing value unless the supply of goods can keep up with the supply of currency but that doesn't appear to be the case these days. The best you can do is hide the surplus currency from the markets as long as possible. But eventually, something will happen which will force the hidden currency to enter the markets.

Also, there is a myth that technology is causing exponential growth in efficiency but the reality of the last 10 years is that everything has been getting more bureaucratic and less efficient (I'm a software engineer so I've seen this first hand).

Re: Banks, QE, and Money-Printing

#49

Post by Angostura »

zelos wrote: post #22
turbinerneiter wrote: post #15

If they print money to build new roads, bridges, (clean) power plants, schools -> good. If they print money to put in stocks and real estate -> bad. The one thing creates real value and enables more real value creation in the future. The other one has no effect on the real economy and wages. Driving real estate prices is even bad: at some point, no real economic strategy (aka. business model) is able to sustain the n…

As someone who really doesn't understand economics: if the government prints money to build infrastructure, where does the value they've added come from? I can't follow the logic of it: the government makes some money and pays a load of workers to build a bridge. It seems like the bridge is 'free', paid for with bits of paper they printed. Is the real cost the increased price of bridge building for everyone else, bec…

The value comes from decreasing the value of the currency for everyone else.

Every additional banknote you put into circulation reduces the value of every existing banknote by a teeny-tiny bit.

Re: Banks, QE, and Money-Printing

#50

Post by JumpCrisscross »

germinalphrase wrote: post #42
JumpCrisscross wrote: post #21

Earlier quoted context omitted.

MMT is a neat theory. The mathematics are quite elegant. Unfortunately, like a lot of beautiful macroeconomics, it isn’t a policy prescription. (Though it provides ivory tower cover for bad policy.) Reserve currency status does afford increased deficit-spending capacity. But it isn’t an immutable, environmental variable. Deficits and reserve currency status interact. If a country runs up large deficits in the name of…

Hasn’t the last ~15 years had been an experiment in printing money on the order of trillions (3-7 for wars in the ME, how many more T. for bailouts/QE)?

> the last ~15 years had been an experiment in printing money

Through monetary policy. When the Fed creates a dollar it destroys a dollar of assets, e.g. by buying a bond.

Fiscal policy is different. When Congress appropriates it creates new money. That impacts the real economy differently. (This is why every crisis involves central bankers calling for fiscal stimulus. It is more powerful.)

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