I seem to recall that France used to do this -- create money for government spending, taxed money ceases to exist, no need for government debt. But I can't find anything about it, and I don't know if I'm just not using the right search terms. Has this been put into practice in large countries before?
Is France a small country now?
> Is France a small country now?
Frances’s GDP is 15% smaller than the single US state of California, and its population is only about 1.67x that of California.
Or alternately raise taxes in the good times (rather than interest rates) and pay down that debt... which at least in the US we've got one political party dead set against at all costs.
A generation ago, progressive cycles of deficit spending and taxation had put the top tax bracket in the US at 90%. Still, there was persistent inflation - and worse high unemployment. The belief was that the Federal Government had grown too large in the economy and needed to be "starved". To what extent government austerity vs. new monetary policy moved the needle for the US economy is unknowable. However many Ameri…
The perception is created by billionaires buying "news" media to spread propaganda to get people to vote against their own interests, leading to "hurts itself in its confusion" attitudes like "keep the government out of my Medicare".
The Kochs, leaders of the "small government" movement are the heirs of a billionaire whoade his fortune building oil refinery for communist USSR government. They only dislike government when it helps the people instead of the oligarchs.
If the inflation falls later on, that 1.5 won't look so bad. No reason risk to crash the economy right when it's just starting to recover. Overcorrecting is bad.
It has been high for a year already and everything points to it worsening (the 8% doesn't include Ukraine, which will push both energy and food prices up). It is because it is not temporary anymore than the Fed is forced to act now.
If you're right, the Fed can always raise it more later. No need to overcorrect. Some moderate inflation is far from the worst thing that can happen.
> It's rare that anyone pitches the government as competent outside of military spending Genuine question - do people see military as competent when it comes to spending?
I don't want to say yes but damn if we don't have a lot of military might, and as much as an American I want to say stop spending it who will fill the void? We're probably the least bad of all possibilities, and if you disagree, please teach me because I'm legitimately open minded!
Perhaps the void would be democratically elected governments who don't sell their countries to US corporations. Since WWII, USA has a poor record.
My point was that wealth gap increased due to QE and a class war masked as racial equity is being waged amongst the 99% as a result (without any net benefit to society since the 1. source of wealth come from excess supply of money which makes debt cheap for those in position to take advantage of it vs those who are oppressed by it 2. increasingly diminishing to non-existent value added widgets and services being sold…
"source of wealth come from excess supply of money which makes debt cheap for those in position to take advantage of it vs those who are oppressed by it" what do I need to read to understand this
You have to remember - someone who can make money at a risk is much more appealing if you can't make any at a low risk via bonds. Even people who have no business speculating on things get money thrown at them because borrowing money to fund these is also cheap, so there's two seperate forces squeezing a lot of money being thrown around. This can sometimes be a good thing - interest rates fell to these levels during 2008, because we desperately needed something to incentivize people to move money around and boost the economy. But we never raised it from those 2008 lows, kicking the can down the road - and cheap lending has made rampant speculation on both assets and securities much more common. This drives up the prices of both, leading to higher rents, impossible to buy cars, jobs at companies that are artificial pumped up by debt (think Silicon Valley stupidness, where money is being thrown at practically anyone who can breath), riskier and riskier business practices and investments (crypto!), and a lot of other really bad things. The Fed was too slow to raise interest rates and slow growth before it got out of control, and it's lead to very few people getting much richer off the ability to properly leverage these low interest rates, and that money has to come from somewhere - so it comes from the people too poor or unwilling to speculate on the price of houses or large companies.
Or alternately raise taxes in the good times (rather than interest rates) and pay down that debt... which at least in the US we've got one political party dead set against at all costs.
I assume you're taking a swipe at Team Red, but do remember that the recent TCJA had a provision that removed the ability to deduct state/local (SALT) taxes from your Federal taxes due, above a certain amount. One could consider this very fair: if you argue for higher (Federal) taxes, you should pay what's owed, regardless of what you paid to any local governments, especially since you have much more control over whe…
Somehow the Red "cut the taxes and spending" never give back the net inflows they take from Blue states....
Blue states have higher taxes to care for their citizens so they have to take less in Federal handouts.
The recency bias is amazing. No, if interest rates go up, buyers can afford less, housing prices go down.
Not necessarily true: Interest rates and home prices both roses during the most recent period of rising rates (2016-2019): https://fred.stlouisfed.org/series/FEDFUNDS https://fred.stlouisfed.org/series/USSTHPI
It's not guaranteed and in fact, what you'll likely see is continued home price growth as people pile in the "now or never" mentality as rates increase and mortgages are harder and harder to get a the historic low rates (see Canada).
But in the long run, when mortgage rates go from 3% to 6% affordability goes down - people buy based on monthly payments, not the size of the loan.
Of course if wages drastically increase, the affordability issue could be blunted.
I wonder why we'd want to pull levers to make things cost more, when the goal is to fight inflation, the bad phenomenon in which things cost more.
Increased costs lead to decreased demand, which ultimately will dampen further price increases. They're shifting the intersection of supply and demand.
So then inflation will defeat itself by its own, per your reasoning.
The actual truth is to the extent raising interest rates does anything at all to prices, it is via reducing employment.
so many people in this thread will play the common HN intellectual and exclaim how the fed is obviously trapped, or what they did wrong to do get us here. And in a different thread will trash bitcoin only focusing on its energy consumption and not its potential sound money properties. If Bitcoin is bad, and the Fed (and every government ever) created a situation which will only lead to poverty & widening wealth gap,…
Just look at the value of Bitcoin and try to argue that would create a better or more stable economy. Not to mention 99% of people are hoping their favorite coin is insanely deflationary so they can become rich, not to actually create any functioning economy.
Compared to a Great Depression type cycle in the middle of the pandemic, what is the other alternative?
Well I think a big contributor to the current inflation problem was the last round of stimulus passed right as the pandemic was starting to wind down. At that point unemployment numbers had almost gotten back to normal and most revenue numbers for things like restaurants, travel, etc. had recovered to at least 70% of pre-pandemic levels. And then some states like California dumped even more money into the economy thr…
I haven't seen the actual data, but a Stanford economist compared the stimulus payments with actual consumption and it's pretty apparent most stimulus dollars were not spent, but rather used to pay down debt or invest (hello r/WSB!).