I see there is a nice longish thread about Bernie's economic plan being "Print more money"...

[TreasonousBastard]

Well, that's not the whole plan, and he didn't say that, but one of his top advisers did.

The underlying problems with this are vast, but the obvious problem is that it is simplistic, like so many "plans" out there (not just Bernie's). We cannot simply "print" money unless we also have a way to control the resulting hyperinflation. "Modern monetary theory" says taxation is a large part of that-- basically, if you "print" too much money, you tax it back. Fat chance of that happening, so that being fundamental to MMT, fat chance of MMT working.

Now, as to printing that money... The government does actually print cash and make coins. But, this is only a tiny part of the actual money supply. M1 is that cash, plus all the money in checking accounts. Then you got M2 and M3 and a couple of other Ms some people use. That can include time deposits, some savings, some debt, and some other stuff.

Those checking accounts are the key, though. You put $100 in the bank. You can write checks up to $100, but the bank lends $90 of it, which goes into another checking account making the money supply in this example $190. Magic! This breaks down if both you and that borrower spend all your money at the same time. Or take it all out as cash-- which is what happened during the Depression and caused bank failures. Usually it works out fine, though, and a primary purpose of the Fed is to make sure it keeps working. (Do a search for the Fed's Discount Window for more about that)

Aside from lending banks money in a liquidity crisis, the Fed has a more common way to control this expansion of the money supply-- the reserve requirement. In the case above, the bank is required to keep 10% on hand so it can only lend 90 of your hundred bucks. The Fed decides what that percentage is, and if it goes up, the money supply contracts and if it goes down the supply expands. The real fun starts when those slick MBAs start figuring out what happens when you find a way to have a negative reserve.

Anyway, all of this is the real story behind "printing money". Overheating the presses to put out more Benjamins just means hyper- hyper-inflation. Like those storied German wheelbarrows carrying enough to buy a loaf of bread. Do a search on Weimar hyperinflation for the horrible story. And there's also Uganda's trillion dollar bill. And Venezuela today.

So, yes, we could "print" our way out of the problem, and we actually have been for years using debt instead of cash. But is that credible when other economic powers start getting uneasy about using the dollar as the reserve currency? We are just around the corner from when China is enough of an economic power to refuse to accept the dollar.

[mr_lebowski]

1. If the yuan were to become the worlds reserve currency and/or currency that oil is denominated in ..

It's Goodbye USA ... as we've known it. We will be thrust into 3rd World poverty.

And we have a fucking MORON in charge of making sure it doesn't happen, someone who's so cocky and fucking stupid, surrounded by equally stupid 'advisers' ... that it's very easy to foresee a scenario where it happens.

And believe me ... China is angling for EXACTLY THAT. And they're WAAAAAAAY smarter and more patient than their adversary.

[TreasonousBastard]

2. I have no argument with people who say China rips off our tech or pulls dirty tricks in trade...

It's true, but that is not the whole story.

They are trying to pull way ahead of us in research and productivity. Now they're even getting clued in about the environment. And they are slowly building up their military in the Pacific expanding their circles of power.

It is a whole new world we are looking at, and the asshole we elected has absolutely no clue.

[mr_lebowski]

4. Yup! We're in grave danger with this f***ing narcissistic, clueless, unqualified moron in charge nt

[questionseverything]

3. yes the dollar staying the worlds currency is the most important thing

I see trump trying to screw that up for us and it will be devastating if he accomplishes it

remember everything he does is to ruin America, that's putins goal

[TreasonousBastard]

5. Yes-- he is doing to us what he did to his businesses. It was almost OK when it was only his own...

stuff that turned to shit when he touched it. But now he has his fingers on the whole nation, and much of Western civilization.

I would love to see a crowd at the G7 pound their fists and stick a collective finger at his nose yelling "YOU fucked it up! We've been working our asses off for years trying to save the planet, and YOU waltz in and destroy everything."

That would be improper, of course, and stooping to his level, so we won't see it. But if Angela Merkel or Christine Lagard went ballistic on him, it would be a sight to see.

[murielm99]

6. They don't have to go ballistic.

They could freeze him out. They could make a terse statement, and ignore the little orange shit the entire time he is there.

[TreasonousBastard]

10. I think they've been trying to do that in the past, but it's tough to ignore a big...

smelly pile of shit like that who barges into every room and hogs the cameras.

And he is President of the US, which is a pretty big deal, after all. Or at least it was until this one.

[Voltaire2]

7. We "printed" 1T in new federal debt this year.

And inflation is threatening to become deflation.

How about instead of floating debt to subsidize billionaires or fight idiotic wars we actually used it to invest in our shared infrastructure, in building our “common” wealth?

I know, too socialistic.

Austerity Democrats are why we lose.

[riverine]

16. No, instead the US Treasury BORROWED $1 trillion more this past year. Thus the deficit.

Those investors in Treasuries could have all been private investors (and probably were). The Social Security Trust Fund is required by law to invest in Treasuries but is instead running an annual deficit too.

If the Fed had "printed" more money (QE) then their balance sheet would reflect such.

Instead the balance sheet of the Fed shrank.


(to the OP - nice summation. MMT is a fantasy)

[Celerity]

17. Cheerleading for Austerity

Not content to follow a news strategy that maximizes Trump’s prospects for re-election, the New York Times leads today with a story that combines economic illiteracy and reactionary scaremongering in a preview of what we’re likely to see in the 2020 presidential race.

https://econospeak.blogspot.com/2019/08/cheerleading-for-austerity.html

“Budget Deficit Is Set to Surge Past $1 Trillion” screams the headline, and the article throws around a mix of dollar estimates and vague statements about growth trends, leavened with quotes from budget scolds from both Republican and Democratic sides of the aisle. (That shows balance, right?) After terrorizing us with visions of a tide of red ink, the article concludes with a ray of sunshine in the form of prospects for a Grand Bargain under a lame duck Trump that would cut benefit programs like Social Security and Medicare to put us once again on a stable path.

Where to begin? Should we start by mentioning that nowhere in this lead article does it give the single most relevant statistic, the ratio of the federal budget deficit to the size of the overall economy—the money part, GDP. The raw size of the deficit itself is meaningless, and the trillion dollar line is meaningless squared. As Dean Baker likes to say, the article shows its respect for our powers of thought by informing us the deficit is a Very Big Number. Scared yet?

Measurement aside, the article simply assumes that “large” deficits are unsustainable and bad, and that only irresponsible political motives prevent action on them. In the name of a nebulous, unspecified Evil of Debt, the population of the US must be subjected to a regime of austerity, beginning with cuts in the programs many depend on to keep themselves and family members out of poverty. Worse, it opines, Democrats will run for office next year on a platform of spending increases, demonstrating they are the party of ruin. We can only hope, goes the argument, that they are just saying these things to get votes from the gullible public, and once in power they will join the deficit-cutting crusade.

No reason is given for the assumed Evil of Debt, and it’s no surprise, since it’s based on ignorance, willful or otherwise. To begin with, federal debt is denominated entirely in US dollars, so servicing is not a problem. Countries that borrow in foreign currencies, like Greece (which had no control over the euro) and Argentina, can default; that’s not a problem for the US. Second, government debt is private wealth, and the relevant question is whether there are too many or too few government bonds in private portfolios. If private wealth holders are satiated with public debt and prefer other securities, it would be a problem. But that would be a world in which interest rates on the debt would be high in order to sell them, and rates are about as low as they can go without flipping negative (as they have elsewhere).

Meanwhile, government debt is an injection of spending power into the economy that counterbalances the leakage of a significant, ongoing trade (and current account) deficit. That’s not quite the right way to put it, since private and public net deficits, taken together, are the current account deficit. Once you understand what this means, you can’t avoid the economic shrinkage—austerity—aspect of deficit-cutting, since that’s what keeps the identity identical at any point in time. Of course, that doesn’t mean the government’s deficit is at the right level, just that the pluses and minuses of adjusting it have to be considered concretely. Is it difficult to imagine that, at a time when interest rates are very low and the need for new infrastructure and other public investment is very high, that the current level of borrowing may well above that terrifying $1 trillion figure?

snip

[Garrett78]

8. Banks essentially ignore the reserve requirement.

They make some effort to have capital on hand, but the value of that capital is subjective. Banks certainly aren't ensuring that they have 10% in reserves in spite of Fed requirements. They just trust that there won't be a run on the bank.

[TreasonousBastard]

9. Right. That's what I was getting at with the "negative reserve" comment...

We've dodged a few bullets so far with banks being "too big to fail" and I'm not sure how much longer we can hold out.

I didn't bring "quantitative easing" either, because it looks like a lot of smoke and mirrors even though it does increase the money supply. Or so they claim.

[comradebillyboy]

11. There is an aura of unreality about all of Bernie's plans.

He promises the moon but what has he actually delivered in real life?

[sandensea]

12. The Fed already does, to finance most of these budget and external deficits

And thank goodness they do, or we'd be in an Argentina situation (they can't print dollars, and no one outside Argentina takes pesos).

[TreasonousBastard]

13. That's debt, which works in its own odd ways. Some say the US debt is meaningless since...

we owe most of it to ourselves and it increases liquidity.

Others say external debt, like to Japan and China (together almost 10% of our total debt) is different because when they come to collect, we can't just sit back and play games. And even internal debt isn't as cozy as they like to think-- It's still a debt on someone's books.

[sandensea]

14. Well said. It's a balancing act - but which countries w/hard currencies can keep up for a LONG time

The GOPee knows this, and keep pushing the envelope by in effect forcing the Fed to buy colossal amounts of U.S. debt - public and corporate.

They can do this because (a little bow or curtsy, please) of the faith in the Almighty Dollar.

Trillions can be "printed" (a ledger entry, actually) practically on demand to satisfy any U.S. gummint shortfall, trade deficit, or Wall Street bad debt binge. The Bush debacle is proof of that.

Still, one wonders how long they can keep this up exactly. And Rethug presidents since Reagan seem hell-bent in stretching the world's faith in the dollar to the limit.

May it never falter, or it's bank bail-ins and riots.

[ismnotwasm]

15. I've always understood it to be a very bad idea

So it’s been fun looking it up. Here is me finding a page I can understand (exaggerating only a little)

Curious Kids: why don’t poorer countries just print more money


Why don’t poorer countries just print more money? – Clementine, age 12, London, UK
Thanks for the question, Clementine. When a whole country tries to get richer by printing more money, it rarely works. Because if everyone has more money, prices go up instead. And people find they need more and more money to buy the same amount of goods.

This happened recently in Zimbabwe, in Africa, and in Venezuela, in South America, when these countries printed more money to try to make their economies grow.

As the printing presses sped up, prices rose faster, until these countries started to suffer from something called “hyperinflation”. That’s when prices rise by an amazing amount in a year.

When Zimbabwe was hit by hyperinflation, in 2008, prices rose as much as 231,000,000% in a single year. Imagine, a sweet which cost one Zimbabwe dollar before the inflation would have cost 231m Zimbabwean dollars a year later.

https://www.google.com/amp/s/theconversation.com/amp/curious-kids-why-dont-poorer-countries-just-print-more-money-107633