31–40 of 241 posts
Personally, if I had the authority of the government to print money, I would find it easy not to go bankrupt.
Ain't no one going to buy a T-bill from you ever again once you do that.
Personally, if I had the authority of the government to print money, I would find it easy not to go bankrupt.
That's not how money works. In fact, that's a good way to accelerate a trajectory towards bankruptcy.
They don't go bankrupt in the conventional sense. When they go bankrupt economists like to use the term "Hyper Inflation". This means that the currency they produce becomes worthless.
Maybe you can explain it to me like I'm five. I've been occasionally watching the Turkish Lira this past year. The rates against the USD are still sinking. Against the EUR it's pretty stable. Yet allegedly they have something like 80-150% inflation in Turkey, while the EUR-zone has 10%. How does this work, why isn't the Lira becoming "worthless" with that amount of inflation?
> On the other hand, central banks are constructs of sovereign states and can literally create money out of thin air, which makes the whole bankruptcy question take on a different dimension. This is not true, at least in the US. The Treasury issues currency. What the Federal Reserve can do (and has done under QE) is perform an asset swap. An asset held by a bank (such as a treasury bond) is purchased by the Fed and h…
Earlier quoted context omitted.
No, it's just a trajectory towards inflation (all other things being equal; it can be the right choice in certain economic environments). A central bank (that issues a sovereign fiat currency) can definitionally not go bankrupt, since its liability is the issued currency itself.
A central bank operates within a framework of rules that, among other things, allow it to operate as a central bank. If those rules require it to raise capital before continuing to operate, and the capital cannot be raised, it is effectively bankrupt.
> On the other hand, central banks are constructs of sovereign states and can literally create money out of thin air, which makes the whole bankruptcy question take on a different dimension. This is not true, at least in the US. The Treasury issues currency. What the Federal Reserve can do (and has done under QE) is perform an asset swap. An asset held by a bank (such as a treasury bond) is purchased by the Fed and h…
Isn't this only half-true though? While they are not physically printing money, in a fractional reserve banking system they can certainly add to the money supply by exchanging illiquid assets for liquid ones.
Agreed though that this is not infinite nor out of thin air.
> On the other hand, central banks are constructs of sovereign states and can literally create money out of thin air, which makes the whole bankruptcy question take on a different dimension. This is not true, at least in the US. The Treasury issues currency. What the Federal Reserve can do (and has done under QE) is perform an asset swap. An asset held by a bank (such as a treasury bond) is purchased by the Fed and h…
For a reasonable definition of money (something you use to buy stuff) they are in fact creating money out of thin air. "Money" isn't a term that has an agreed upon definition.
Earlier quoted context omitted.
In Russia it feels like being a passenger in a hijacked plane flying towards tall buildings.
Does it, within Russia? Are you saying that as a person within Russia or an external observer? I feel like externally, the west feels like Russia is headed to certain doom, but a majority of Russians feels like they'll be fine and they're sticking it to the colonial west.
Russian war in Ukraine is about regaining control of former colony. They lost lot of them in eastern Europe but still have some in Asia.
> On the other hand, central banks are constructs of sovereign states and can literally create money out of thin air, which makes the whole bankruptcy question take on a different dimension. This is not true, at least in the US. The Treasury issues currency. What the Federal Reserve can do (and has done under QE) is perform an asset swap. An asset held by a bank (such as a treasury bond) is purchased by the Fed and h…
They don't go bankrupt in the conventional sense. When they go bankrupt economists like to use the term "Hyper Inflation". This means that the currency they produce becomes worthless.
In the context of a past generation of government sponsored entities, the answer was 'yes', they could go bankrupt but the political branches will bail them out. The issue here is that the political branches are in the middle of being bailed out themselves by the central banks, and it's been going on for a decade or two, so conceptually there is a serious problem with politicians bailing the bailer. The fact that hea…