Why Can't the US Print all the Money it Needs?

[Nakosis]

I guess the evil boogieman here is inflation.

Here's a response I found an economics professor.

Let me try to remove some of the confusion. Imagine the only good in the economy is corn and corn costs $1 a pound, and imagine you and all others earn $100 a month. Each month you buy 100 lbs of corn exchanging $1 for 1 lb of corn; so the real value of $1 is 1 lb of corn. Now suppose the government simply prints more dollar bills and gives you (and imagine everyone else) an additional hundred dollars. If you want to eat more than 100 lbs of corn a month, now you can do so but presumably, since others like you also want to do the same, the demand for corn in the economy would go up and very likely its price as well. Now you would have to give up, say $1.50 for each lb of corn. This, roughly speaking, is inflation, and it is eroding the real value of your dollars -- you are getting less corn for every dollar than you used to.
You ask, won't firms rush to meet this extra demand caused by everyone having an extra hundred dollars? Yes, they would but they'd have to hire people to work in the farms and the higher demand for workers would likely raise their wage. Also, workers will see the inflation around them and want higher dollar wages so they can continue to buy as much corn as before. In short, wages in real terms would rise and this would erode profits and as such, farms will not hire as many workers as you'd think. So yes, there can be a short-lived stimulative effect of printing money.
Bottom line is, no government can print money to get out of a recession or downturn. The deeper reason for this is that money is really a facilitator of exchange between people, a middleman in a trade. If goods could trade with goods directly, without a middleman, we would not need money. If you print more money you simply affect the terms of trade between money and goods, nothing else. What used to cost $1 now costs $10, that's all, nothing fundamental or real has changed. It is as if someone overnight added a zero to every dollar bill; that per se, changes nothing. Just as giving every student 10 extra points on a test changes nothing fundamentally.
Why can't we just print more money, since it really isn't representative of anything of value? | Department of Economics

So increasing the minimum wage, leads to inflation. A stimulus package leads to inflation. Printing more money leads to inflation.

You can't really defeat poverty by injecting more money into the economy. The real value of goods doesn't change. What changes is the number of "poker chip" you need to exchange for that value.

Do you agree or disagree?

If you agree, what is the answer to poverty?

 

[Twilight Hue]

Since the gold standard went to the wayside i have no idea how the economy is structured.

 

[Miken]

I guess the evil boogieman here is inflation.

Here's a response I found an economics professor.

Let me try to remove some of the confusion. Imagine the only good in the economy is corn and corn costs $1 a pound, and imagine you and all others earn $100 a month. Each month you buy 100 lbs of corn exchanging $1 for 1 lb of corn; so the real value of $1 is 1 lb of corn. Now suppose the government simply prints more dollar bills and gives you (and imagine everyone else) an additional hundred dollars. If you want to eat more than 100 lbs of corn a month, now you can do so but presumably, since others like you also want to do the same, the demand for corn in the economy would go up and very likely its price as well. Now you would have to give up, say $1.50 for each lb of corn. This, roughly speaking, is inflation, and it is eroding the real value of your dollars -- you are getting less corn for every dollar than you used to.
You ask, won't firms rush to meet this extra demand caused by everyone having an extra hundred dollars? Yes, they would but they'd have to hire people to work in the farms and the higher demand for workers would likely raise their wage. Also, workers will see the inflation around them and want higher dollar wages so they can continue to buy as much corn as before. In short, wages in real terms would rise and this would erode profits and as such, farms will not hire as many workers as you'd think. So yes, there can be a short-lived stimulative effect of printing money.
Bottom line is, no government can print money to get out of a recession or downturn. The deeper reason for this is that money is really a facilitator of exchange between people, a middleman in a trade. If goods could trade with goods directly, without a middleman, we would not need money. If you print more money you simply affect the terms of trade between money and goods, nothing else. What used to cost $1 now costs $10, that's all, nothing fundamental or real has changed. It is as if someone overnight added a zero to every dollar bill; that per se, changes nothing. Just as giving every student 10 extra points on a test changes nothing fundamentally.
Why can't we just print more money, since it really isn't representative of anything of value? | Department of Economics

So increasing the minimum wage, leads to inflation. A stimulus package leads to inflation. Printing more money leads to inflation.

You can't really defeat poverty by injecting more money into the economy. The real value of goods doesn't change. What changes is the number of "poker chip" you need to exchange for that value.

Do you agree or disagree?

If you agree, what is the answer to poverty?

The explanation is correct. However, it is not literally printing paper money that is going on. It is the Federal Reserve buying bonds from the Federal government to help cover budget deficits. The Fed is chartered to control the amount of money in the economy and they can essentially invent money. There is no paper involved, just bank accounts.

 

[Twilight Hue]

The explanation is correct. However, it is not literally printing paper money that is going on. It is the Federal Reserve buying bonds from the Federal government to help cover budget deficits. The Fed is chartered to control the amount of money in the economy and they can essentially invent money. There is no paper involved, just bank accounts.

That sounds pretty shady.

 

[Miken]

That sounds pretty shady.

'
In principle, the dividends paid on the bonds disappears again when it goes back to the Fed. It is massive deficit spending that is the problem.

Concerning addressing the problem of the poor. The solution as I see it is have have a healthy economy where the benefits actually get down to the poor. It has been a long time since both of those criteria were met for any significant period of time.

 

[Nakosis]

The explanation is correct. However, it is not literally printing paper money that is going on. It is the Federal Reserve buying bonds from the Federal government to help cover budget deficits. The Fed is chartered to control the amount of money in the economy and they can essentially invent money. There is no paper involved, just bank accounts.

“Money’s destiny is to become digital,” declared the Organization for Economic Cooperation and Development back in 2002.
The End of Cash? – Paper Currency's Place in the Digital Age

Do you think getting rid of paper money is a good thing?

 

[ChristineM]

Take the hyperinflation of the Weimar Republic as an example of printing money without being able to back it up


Payday

 

[Miken]

Take the hyperinflation of the Weimar Republic as an example of printing money without being able to back it up

View attachment 44651
Payday

 

[ChristineM]

Easier on the pocket than a wheelbarrow

 

[QuestioningMind]

I guess the evil boogieman here is inflation.

Here's a response I found an economics professor.

Let me try to remove some of the confusion. Imagine the only good in the economy is corn and corn costs $1 a pound, and imagine you and all others earn $100 a month. Each month you buy 100 lbs of corn exchanging $1 for 1 lb of corn; so the real value of $1 is 1 lb of corn. Now suppose the government simply prints more dollar bills and gives you (and imagine everyone else) an additional hundred dollars. If you want to eat more than 100 lbs of corn a month, now you can do so but presumably, since others like you also want to do the same, the demand for corn in the economy would go up and very likely its price as well. Now you would have to give up, say $1.50 for each lb of corn. This, roughly speaking, is inflation, and it is eroding the real value of your dollars -- you are getting less corn for every dollar than you used to.
You ask, won't firms rush to meet this extra demand caused by everyone having an extra hundred dollars? Yes, they would but they'd have to hire people to work in the farms and the higher demand for workers would likely raise their wage. Also, workers will see the inflation around them and want higher dollar wages so they can continue to buy as much corn as before. In short, wages in real terms would rise and this would erode profits and as such, farms will not hire as many workers as you'd think. So yes, there can be a short-lived stimulative effect of printing money.
Bottom line is, no government can print money to get out of a recession or downturn. The deeper reason for this is that money is really a facilitator of exchange between people, a middleman in a trade. If goods could trade with goods directly, without a middleman, we would not need money. If you print more money you simply affect the terms of trade between money and goods, nothing else. What used to cost $1 now costs $10, that's all, nothing fundamental or real has changed. It is as if someone overnight added a zero to every dollar bill; that per se, changes nothing. Just as giving every student 10 extra points on a test changes nothing fundamentally.
Why can't we just print more money, since it really isn't representative of anything of value? | Department of Economics

So increasing the minimum wage, leads to inflation. A stimulus package leads to inflation. Printing more money leads to inflation.

You can't really defeat poverty by injecting more money into the economy. The real value of goods doesn't change. What changes is the number of "poker chip" you need to exchange for that value.

Do you agree or disagree?

If you agree, what is the answer to poverty?

As I see it the problem with capitalism as it's currently practiced is that we've decided that the owners and investors in companies and corporations are entitled to 100% of the company's or corporation's profits. And that labor should be seen as nothing more than another commodity that should be obtained at the lowest possible price. The reality is that both investors and employees are essential for making any operation profitable, thus both the investors and the employees should be entitled to a certain percentage of the profits.

I recognize that investors should receive a greater percentage of the profits; however when labor is reduced to nothing more than a commodity that the investors attempt to obtain at the lowest possible cost then keeping a large percentage of the population in poverty becomes beneficial to the investor class, because it ensures a cheap labor force. There needs to be more equability between the labor class and the investor class.

For instance, if the approximately 6 billion dollars that investor's in McDonald made in 2019 had only been 5 billion and the remaining billion had been distributed among the more that 200,000 people employed by McDonalds, how would that have negatively effected the economy? The truth is if those 200,000 people living on McDonalds wages were to get $5,000 dollars more a year virtually all of that would have been put back into the economy, spurring additional economic growth.

The sad fact is that the investor class has convinced us that capitalism should be just like playing the game of Monopoly, where the goal is for one person to end up with everything and everyone else ends up with nothing. That's not a sustainable way to run an economy. It needs to be set up so that everyone can play and and expect to live in a decent neighborhood.

 

[Nakosis]

Take the hyperinflation of the Weimar Republic as an example of printing money without being able to back it up

View attachment 44651
Payday

What do you think about the US stimulus and or deficit?
Used to be a big issue. Now it seems of less concern.

Long time ago when I was a kid, I remember the Republicans pushing for a balanced budget. That was their political attack against the Democrats. When they got into power however, they seemed as willing to increase the deficit as anyone else.

And, poverty continues to get worse. Perhaps that proves what was explained in the OP?

 

[Nakosis]

As I see it the problem with capitalism as it's currently practiced is that we've decided that the owners and investors in companies and corporations are entitled to 100% of the company's or corporation's profits. And that labor should be seen as nothing more than another commodity that should be obtained at the lowest possible price. The reality is that both investors and employees are essential for making any operation profitable, thus both the investors and the employees should be entitled to a certain percentage of the profits.

I recognize that investors should receive a greater percentage of the profits; however when labor is reduced to nothing more than a commodity that the investors attempt to obtain at the lowest possible cost then keeping a large percentage of the population in poverty becomes beneficial to the investor class, because it ensures a cheap labor force. There needs to be more equability between the labor class and the investor class.

For instance, if the approximately 6 billion dollars that investor's in McDonald made in 2019 had only been 5 billion and the remaining billion had been distributed among the more that 200,000 people employed by McDonalds, how would that have negatively effected the economy? The truth is if those 200,000 people living on McDonalds wages were to get $5,000 dollars more a year virtually all of that would have been put back into the economy, spurring additional economic growth.

The sad fact is that the investor class has convinced us that capitalism should be just like playing the game of Monopoly, where the goal is for one person to end up with everything and everyone else ends up with nothing. That's not a sustainable way to run an economy. It needs to be set up so that everyone can play and and expect to live in a decent neighborhood.

I agree that we are not practicing a sustainable form of capitalism. Those that have and those that have enough don't care enough to do anything.

 

[ChristineM]

What do you think about the US stimulus and or deficit?
Used to be a big issue. Now it seems of less concern.

Long time ago when I was a kid, I remember the Republicans pushing for a balanced budget. That was their political attack against the Democrats. When they got into power however, they seemed as willing to increase the deficit as anyone else.

And, poverty continues to get worse. Perhaps that proves what was explained in the OP?

Im not that into american politics other than the effect it has on europe. However, politics makes the news, if the economy is not up there being broadcast its because politicians don't want joe public to know.

 

[QuestioningMind]

I agree that we are not practicing a sustainable form of capitalism. Those that have and those that have enough don't care enough to do anything.

Sadly their lack of empathy will come at a heavy price. People have a breaking point and when they reach it all hell can break loose.

 

[Quagmire]

Since the gold standard went to the wayside i have no idea how the economy is structured.

It isn't.

 

[Revoltingest]

I guess the evil boogieman here is inflation.

Here's a response I found an economics professor.

Let me try to remove some of the confusion. Imagine the only good in the economy is corn and corn costs $1 a pound, and imagine you and all others earn $100 a month. Each month you buy 100 lbs of corn exchanging $1 for 1 lb of corn; so the real value of $1 is 1 lb of corn. Now suppose the government simply prints more dollar bills and gives you (and imagine everyone else) an additional hundred dollars. If you want to eat more than 100 lbs of corn a month, now you can do so but presumably, since others like you also want to do the same, the demand for corn in the economy would go up and very likely its price as well. Now you would have to give up, say $1.50 for each lb of corn. This, roughly speaking, is inflation, and it is eroding the real value of your dollars -- you are getting less corn for every dollar than you used to.
You ask, won't firms rush to meet this extra demand caused by everyone having an extra hundred dollars? Yes, they would but they'd have to hire people to work in the farms and the higher demand for workers would likely raise their wage. Also, workers will see the inflation around them and want higher dollar wages so they can continue to buy as much corn as before. In short, wages in real terms would rise and this would erode profits and as such, farms will not hire as many workers as you'd think. So yes, there can be a short-lived stimulative effect of printing money.
Bottom line is, no government can print money to get out of a recession or downturn. The deeper reason for this is that money is really a facilitator of exchange between people, a middleman in a trade. If goods could trade with goods directly, without a middleman, we would not need money. If you print more money you simply affect the terms of trade between money and goods, nothing else. What used to cost $1 now costs $10, that's all, nothing fundamental or real has changed. It is as if someone overnight added a zero to every dollar bill; that per se, changes nothing. Just as giving every student 10 extra points on a test changes nothing fundamentally.
Why can't we just print more money, since it really isn't representative of anything of value? | Department of Economics

So increasing the minimum wage, leads to inflation. A stimulus package leads to inflation. Printing more money leads to inflation.

You can't really defeat poverty by injecting more money into the economy. The real value of goods doesn't change. What changes is the number of "poker chip" you need to exchange for that value.

Do you agree or disagree?

If you agree, what is the answer to poverty?

The simple view....
If the money supply increases faster than the economy expands,
then the money is simply reduced in economic value. This is cuz
more money will be chasing the same amount of goods & services.
We get "inflation".

One reason government likes inflation....
Income tax rates increase as income increases. This means
that the percentage of income paid as tax increases.

 

[Revoltingest]

It isn't.

It has a structure, but it's only partially command controlled.
Mostly it's a structure that emerges naturally from all the
individual elements acting largely separately.
It's analogous to behavior of a gas....no one tells the molecules
to increase in temperature & pressure as volume decreases. That's
just an emergent property of physics....a "structure" as it were.

 

[Nakosis]

The simple view....
If the money supply increases faster than the economy expands,
then the money is simply reduced in economic value. This is cuz
more money will be chasing the same amount of goods & services.
We get "inflation".

One reason government likes inflation....
Income tax rates increase as income increases. This means
that the percentage of income paid as tax increases.

But don't they suffer from the same inflation as the rest of us?

 

[Revoltingest]

But don't they suffer from the same inflation as the rest of us?

They endure price inflation, but income tax revenue increases
faster than inflation because of the graduated income tax.

Also, as the value of the dollar drops due to inflation, government
debt is reduced because the dollars to repay are worth less.
This is why foreign lenders carp about our monetary policy.

 

[Nakosis]

And isn't increasing the minimum wage just another way of injecting more printed money into the system? IOW it is not a sustainable solution.