How to fix the economy
How to fix the economy
127 comments
-
-
Printing more money and using it for public works or giving it directly to the poor could be a valid form of wealth redistribution that doesn't require collecting taxes. The problem of course is capital, it's immune to this kind of inflation, though rich people who have their wealth in debt would be hurt.
-
To be fair, Economics is half imagination and magic. It’s why something like bitcoin could even become a thing.
-
One of the main things I learned during my economics degree is that money is fake.
-
To quote Brian Brushwood, "It's just pieces of paper that we believe in."
-
Money is made up, but it's definitely real. Magic is made up and fake. If it actually exists and does something, it's real. You can bring something from non-existence and make it real. It has no intrinsic value.
-
Money is fancy IOUs, that people mostly believe will be repaid.
-
Ehhh, not sure I'd go that far. Money, no matter what backs it, is just what people value it as. Just that when backed by real goods, e.g. gold, that it gives people a better reason to value it because the goods are worth something.
Mostly saying, money backed by a good have at least the value of the good itself. Which I would say makes money not fake.
When it's backed by belief, then it's fake.
-
And I suspect you might even suggest the only real aspect of economics boils down to supply vs demand regardless of what the thing in supply or demand is?
-
I’m proud to have properly digested how inflation works. But I still don’t understand it.
-
-
Dave Ramsey is a Jesus freak but he did have some fun truisms, one of which is if you want to know where value comes from, try taking dollar bills and bottled water into an area devastated by a hurricane and see which one has more value.
-
Or there's principles to economics that we just don't understand yet. It's gotten a lot more scientific since the 1970's.
-
-
All government spending is done by "printing money", at least in monetary sovereign countries like the US, UK, and other countries issuing their own cureencies. The government is the monopoly issuer of the currency and cannot run out of it, just like the scorekeeper of a baseball match cannot run out of points. Taxes are also not for funding the government, but for removing momey from circulation, precisely to curb inflation. (Also to drive the value of the currency by making people demand it to be able to pay their taxes). Thus "printing money" isn't in itself inflationary, as long as the newly created money is spent on something where there is excess production capacity. The question for the government is never "can we afford it", but rather "are the real resources there to achieve it".
-
Thus “printing money” isn’t in itself inflationary
Your conclusion doesn't follow from what you said.
Inflation is merely the change in subjective value of a currency over time. Inflation goes up when people want more money for the same stuff.
If the government creates money to fund something, that pulls resources (employees, production, etc) from other parts of the economy, increasing the costs of the remaining resources since there's less available. That's inflation.
The Covid stimulus packages are a fantastic example of this, because it directly resulted in more money chasing fewer goods (less production). There would've been inflation anyway since net production decreased, but the stimulus package exacerbated it. A significant amount of the inflation we saw recently was a mix of COVID supply chain disruption and Trump and Biden's stimulus bills.
Excess production is deflationary, but that doesn't mean printing money to cover isn't inflationary, it just means you can counter deflation from one source with inflation from another.
The question for the government is never “can we afford it”, but rather “are the real resources there to achieve it”.
Sure. But at that point we're not talking about inflation anymore. If the government really wants something, it can get it, but that will have consequences. The question is whether it's a net benefit, and how to fund it:
- a hidden tax through printing money (inflation)
- direct tax - income tax, capitation tax, etc
- indirect tax - sales tax, tariffs, etc
Each option has consequences, and generally speaking, you get less of whatever you tax, if the tax is high enough.
-
Please, multiple studies were done about the causes of the recent wave of inflation and they determined that the vast majority of it was a result of greedy corporations taking the opportunity to boost their profits.
-
[...] pulls resources (employees, production, etc) from other parts of the economy, increasing the costs of the remaining resources since there's less available.
That is why I specified that there needed to be excess productive capacity for whatever they are buying. As long as the economy is not at full employment, the government isn't bidding up the prices with its spending.
At full employment though, you are absolutely right.
-
This is such a fantastic summary of the theory of money. Holy shit.
-
At some level, everyone knows this.
But then we’ll go on and say stuff like “taxpayer money”, “how are we gonna pay for that”, or “our grandkids are gonna have to pay back the national debt”.
The pursuit of a “balanced budget” is one of the most successful bits of propaganda ever.
-
-
Yeah, this is the common MMT definition of money, I think.
Another way to think of it is that all money is IOUs. This one's a bit hard to wrap your head around, but it works.
Start with government spending. A mail carrier walks through sleet and hail to deliver mail, a service they're doing on behalf of the government. The government says "thanks for all that work, I owe you" and gives them a pile of IOUs in the form of dollars. Whenever the government receives a good or a service from a person or a company, it gives them an IOU in exchange.
Going back to the mail carrier, their work day is done, so they stop off at a supermarket. They grab some milk and some sausages and go to the cash. Now, maybe it would be possible for the mail carrier to do some kind of work in exchange for the groceries. Maybe advise them on how to ship things efficiently, or maybe just help stock shelves. But, it's much easier just to hand over some IOUs. So, they hand over some of the IOUs (dollars) they got from the government. Now, the government owes the supermarket, rather than the mail carrier.
So, the store keeps doing business. It collects a bunch of IOUs from various customers, and issues a bunch of IOUs to its suppliers. When tax time rolls around, the store has a whole bunch of IOUs (originally from the government, but given in by various customers). Since the store owes the government for things like providing police to keep things secure, the FDA for keeping the food safe, and so-on, it effectively "cancels" that debt by almost ripping up the IOUs. Well, really, it hands the IOUs back to the government and allows the government to rip them up.
So, you can see the whole economy as the government issuing IOUs as spending. Those IOUs enter the economy and flow around, and people want to hang onto them because they know that in April the governments going to come around to settle things. Tax time is basically a point where people who didn't do any work directly for the government can say "Yeah, I didn't do any work for you, but I did give that mail carrier some milk and sausages, and he handed over your IOUs, so I'm giving those to you now". And the government says "Yep, fair enough". It collects the IOUs and rips them up, and the whole thing starts over.
In the past, this actually used to be a lot more explicit. When you could exchange your US dollars for gold, the idea that it was an IOU for the gold was a bit more explicit. These days we don't need the gold. It's an IOU not for gold, but for work done.
-
-
She's not totally wrong
If we gave every American 1 billion dollars the current billionaires would lose massive amounts of power and it would help fix wealth inequality.
-
That wouldn't work because the bilionaires don't have money, they have assets, AKA capital.
-
If they had their money scrooge mcduck style. But the assets they own will explode in value almost proportionally to the value of the dollar
-
Do that and get ready for 100,000 dollars for a dozen eggs cause the market will charge what it knows the customer can pay.
-
It would do nothing to wealth inequality. The assets the current billionaires own would just become valued at a trillion dollars, or even a quadrillion depending on how badly devalued the dollar became.
-
-
I think the problem isn’t that there is a lack of money which could be solved by printing more, but that there is a lack of money because like 6 guys have stolen most of it and piled it up under their mattresses with no intention of actually using it at any point.
Prices should be set by the king tho, the only acceptable rate of inflation is zero.
-
-
The funny irony is that because money is mostly made up bullshit anyway, we kinda could just decide to print more money and keep its value. Granted, it would take the unanimous agreement of basically everyone on this silly little planet, so the chances of this ever occurring are effectively absolute zero, but still, there is no actual rule that says we cant except for the ones we ourselves created
-
The US has such a huge pool of people using the dollar that when they do seigniorage they're essentially taxing the world instead of only their citizens. It's kind of obscene and why the imperialists are very hostile to BRICs.
-
The problem here is that a government does not in fact have the ability to decide how much their currency is valued, they can only indirectly influence it. When they try to pretend like it's just a "rule" they can set like "here is the mandated exchange rate, we'll put you in jail if you make trades at any other price" is when things get real stupid.
-
India made a run at wealth hoarding by issuing a new currency. They declared it was worth something like 5 old currency and you had to personally turn in old money to get new money. You couldn't just digital it.
I have no clue how well that did or didn't work but they haven't imploded yet. So there's a lot more play in this money thing than the finance industry would like us to believe.
-
Do you mean the 2016 demonetisation? It was allegedly aimed at reducing counterfeit notes, and involved removing the largest value notes in circulation and replacing them with new notes at a 1:1 exchange. It failed to stop counterfeiting, and resulted in at least 80 deaths, 15 lakh job losses and a measurable fall in GDP growth.
-
They declared it was worth something like 5 old currency and you had to personally turn in old money to get new money
Then it's not just backed by their declaration
-
-
-
Have you peeps never heard of modern monetary theory (mmt)? Macroeconomics is not so simple! Most people talking about have the knowledge of a minor in business econ though
-
So let me ask you this. If the U.S. "printed" 20T dollars (really just say it exists in an account). Then they start investing that in the market... The value of the money in theory would decay by 14% (rough math) but the market would thrive from the increase in buying.
That said. It would "hurt" the lower classes purchasing power at first. But the interest made off that 20T is enough to build every person in the U.S. a new house every 30 years assuming the average household is 2.5 people. At first you would be building new ones and repurposing old ones. But after 15 years or so, you would have the country all sans rent/mortgage payments, which frees up their money to be spent on things like resteraunts, movies, plays, sports, whatever it is people do. So the economy would be growing, while homelessness would be gone foreve and everyone would have a $250,000 equivalent house built/renovated every 30 years. Which because of the mass building projects and it all being purchased from one group.. would likely be like getting a $400,000 in todays market. This doesn't mean people can't save and invest money to have a larger dwelling and size up, just that everyone would have the base $400,000 equivalent house in a restabilized economy where everyone is less stressed and free-er to spend money at ease not worrying about becoming homeless if something goes wrong.
Does this mean some people will choose to work less, maybe. But with automation growing the way it is, we really have less work and more people already. It would also give us the opportunity to build some new cities/towns built around more walking and less car dependency, which would promote public health and people not being as reclusive if they don't want.
Idk, it would never happen, but I'm just saying it could probably happen and we choose not to because people think helping everyone is bad.
Edit: the number of stress based mental issues alleviated by this would be huge. Less reasons to murder and rob people as well, so crime would likely drop
-
So where is the question?
I think there are flaws and oversimplifications in that statement even before taking into account the planetary boundaries and international development dynamics...
Basically the state can invest without causing inflation by printing money as long as it leads to activating productivity and not to competing with other consumers for goods and services which are at their limits already.
Btw I am not a macro economist by trade the mmt just makes the most sense in comparison to other (neoliberal or classic) models
-
-
-
I mean. Yeah honestly, lol
-
You laugh, but this actually kinda worked for 1980s Brazil.
-
Interesting story but it's also talking about how inflation was at 80% in Brazil in the 1980s, because they were printing money. What they did in 1993 with the URVs is a fascinating psychological experiment, but I'm not sure if it was the critical factor in stopping inflation. As per the article
It wasn't the only trick, obviously. While they put URVs in place, the group of economists made the government balance its budget and slow down on money creation.
So I feel like it was basic economic policy that mostly worked, rather than printing money and trying to dictate its value.
-
That’s a wild tale, thanks for posting
-
-
We can, and we do, for virtually everything.
That’s precisely why the DOGE takeover of the payment system is so scary. Government money isn’t being transferred from some limited pool of taxpayer funds, it’s spent into existence out of thin air.
We also borrow, in the form of bonds, but that’s mostly to tame inflation by taking currency temporarily out of circulation with the promise of a later profit for the bond holder. (And also to encourage long-term investment in domestic currency.)
-
I do sometimes wonder if you could technically still run a working government off printing money, just recognizing that doing so didnt create more value, but instead acted as a form of taxation. Imagine a government that currently holds no significant fraction of its currency. It then prints an amount equal to what is currently in circulation, doubling the money supply and in doing so presumably halving the value of a given unit of that currency. Once it has done so, no new value is created, but that government has gone from having no significant fraction of the money in circulation, to having half of it, which it can now spend.
Suppose you did this predictably, you let everyone know that you will be increasing the money supply by x percent every year, and will be re-denominating it to avoid difficult to work with numbers at set intervals. Wouldnt you technically have a functioning system for extracting value from the economy to pay for government functions?
It might not be a very good system, since all it would effectively tax is people's savings of currency and not stuff like property, and you would have to set up things like employment contracts or debts to compensate for constant high inflation rates, but Im not sure I see a reason why it technically couldn't be done.
-
You kinda just explained modern monetary theory. The US, UK, Canada, and a few other countries don't get money from taxes, they owe debt to themselves and earn it back through the next printing. There is a budgetary limit though, which is the amount of labor and resources available to the government
-
Taxation is necessary to counter overaccumulation
-
-
On a technical level, it would (probably) work. But I think it would feel terrible for the most people : the middle class would see it's savings melt away unless they lock a lot of it in investments, and people would have to reevaluate their value scale much more regularly than now. And the capital would likely not be "taxed" that in much in this setup.
-
-
Humans do make the rules, unfortunately only some of them get the chance to so they made the rules favor themselves.
-
This is literally how monet works though. It's made up.
-
-
Let’s see
Zimbabwean one hundred trillion dollar note
Hyperinflation in the Weimar Republic
The WORST Inflation in History | Tales From the Bottle
Any more examples?
-
these don't prove that printing money always leads to currency devaluation. that's a post hoc ergo propter hoc explanation.
-
Russia 2026
-
Both Weimar and Zimbabwe, and all other examples of hyperinflationary economies (many Latin American countries come to mind), had large debts denominated in foreign currencies, or had fixed exchange rates with such. This makes the government depenent on aquireing these forein currencies which they themselves cannot issue. Printing your own currency to pay these debts is definately inflationary, but doing so to pay for goods priced in your own domestic currency, when there is excess productive capacity, is not.
-
Hey! I bought one of these for like $2 USD online nearly a decade ago. That was still almost 1000x its face value at the time.
-
-
Price of gold goes Brrrrrrrrrrrrrrrtrtrtttrtrtttrrtrrtrtrttrr
-
Well, who ever created money can just uncreate it and we end capitalism, eat the rich and have a better planet
-
Sure buddy.......
-
-
Imagine there's a new issue of a famous comic book being printed (the series doesn't matter; take your pick). But the caveat is that there's only going to be ONE copy printed. Only one in existence. That single issue could potentially be worth millions, because it's so desirable for comic book nerds and they all want to get their hands on it. Only the wealthiest of collectors will be able to throw enough money at it to win an auction, which raises its value significantly.
Now imagine the publisher decides to make 100 copies instead. The value of that issue is now much cheaper; maybe worth several thousand dollars per comic, because there are a handful of them floating around now. Still, only wealthy collectors will be able to afford bidding on a copy, but at least the top 100 bids will win a copy. Raising the value, but not as much as if they are all bidding on a single product.
Now imagine 100,000 copies are made. Now it's mostly a standard printing, and it's only worth the cover price for a comic nowadays (what, like $3.99 or so?)
The more copies that are out there, the easier it is to find and acquire, and thus the cheaper its value is. Same goes for money; the more printed bills that are out there, the less value each bill has, and you'll need more of them to afford basic products. Which is why inflation is a thing, because we're constantly printing more money each year.
In reference to my point about comic book values, there are only about 100 copies left in existence of the first Superman comic (Action Comic #1). A single copy sold last year for $6 million, and its condition was only rated 8.5/10, which means it's a little rough around the edges from wear and tear. Not even a pristine comic book, and it still cost millions to buy!
That same issue sold for 10 cents when it was first made in 1938, but the fact that comics were made to be read and then discarded back then means most people never held on to their comic books and their numbers have dwindled over the years. Now Superman is a huge deal - one of the best-selling comics of all time - and his first appearance in a comic book is so rare, people will spend millions just to have an original copy.
-
Then, imagine if the comic printing company had a guy with a gun going around demanding everyone give him an amount of comic books each year. Now suddenly everyone is looking to get the comic books, driving their values up.
This is how taxes are driving the value of modern money.
-
just print more of the comic
-
-
I started turning my American Dollars into Euros. Here's hoping that mitigates the economic damage that will come from Elon's stupidity.
Honestly, I don't like messing around with money since I don't really understand it...but if I don't, I fear that I won't be able to get onto a lifeboat. It also makes me feel silly being proactive. Here's hoping my Blue State would either vindicate or placate my fears.
-
We "print" money all the time. It's called "cryptocurrency".
-
are we still in the "the state should just go further into debt to pay for infrastructure" or already in the "fuck, that was a big mistake, what do we do with all that debt now?" stage? i can't tell anymore.
-
Why not both?
-
The government "debt" is not a problem whatsoever. It cannot be a problem. The so called debt is simply the difference between the amount of money created and the amount taxed. If there was no "debt" there couldn't be any saving in an economy. If the government wanted to, it could simply "print" the money to pay off all its debt tomorrow. It souldn't necessarily be a smart thing to do, but there wouldn't be any financial constraints stopping them from doing it.
-
Thank you for your well-formulated argument.
However, i'm worried that it does not actually work that way. It is short-sighted and ignores second-round consequences.
For example, first of all, where do all these savings go to? They go to the rich, making the poor poorer. As such, if the government goes into debt instead of taxing the rich, it actually contributed through its inaction to make the poor poorer. The government should tax the rich instead of printing more money.
Secondly, if the government does print more money to rid itself of its debt (as you have rightfully suggested), that leads to hyperinflation, which mostly tolls the poor, because they have more difficulty stabilizing in a shaking environment that the big companies.
Thirdly, probably the government can print lots of money once to rid itself of the debt, but it can only do so once. Because once it has done so, people will assume "money has no value anyway, if it can just lose all its meaning overnight", and stop considering that money as valuable in the first place. Therefore, that is the end of paper money. What do you do then?
-
-
127 comments
this could be one of those bell curve memes where the low end and high end are the moron/jedi guys saying “just print more money” and the middle of curve has a freshman Econ student trying to explain macroeconomics.
I came here to say this. I thought humans made the rules!
The world is run by middle-of-the-curve people.
Yeah but I hella refuse to see Yellen as a Jedi.
Yeah it's not as simple as just printing more money and not changing anything else, but she's right
Very good observation. On the high end of that bell curve, there's Modern Monetary Theory (MMT): https://en.wikipedia.org/wiki/Modern_monetary_theory
Yeah, exactly what I was thinking. Like, it isn't quite as simple as "print $1m for everyone and they can all go out and buy Ferraris." But, there are plenty of situations where the government can just print the money and it won't cause inflation or any other harmful effects.
There's a line from (I think) a Tyler Perry movie that goes "The only thing reparations will do is make Cadillac the best selling car in the country."