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RE: Have You Heard of Modern Monetary Theory?
My mind is blown a little bit, I'm trying to wrap my head around the idea that deficit does not matter, and what does matter is what we are spending the money on. For the longest time I have firmly believed that inflation and in the case of the US dollar hyperinflation is without a doubt the road to poverty.
That being said, I had never thought of the fact that technically we have been printing money in the billions per day without a major consequence for a long time now, so...
The difficult question is... Why do we get away with it? Why is it that the US can print billions of dollars a day, hyper inflate the currency and still call itself the most powerful economy in the word.
What are then the metrics we are using to determine this?
Sometimes I find it useful to fall back to basics.
Powerful economy doesn't mean that you have less fiat tokens to represent the same amount valuable assets. It means that there is more real valuable resources being traded around.
If each paper bill represents an amount of something owed to someone by someone else, then it is logically attributed some value.
It is also logical that the economy doesn't need to become weak because the amount of such tokens circulating increases as the amount of goods and services available for trade increases.
There are a few things in the interveiw about how money initially came to be that are too simplistic. She says that the reason people were said to agree on gold was only due to intrinsic properties with no mention of scarcity which is perhaps the most important factor to consider when discussing inflation of all things.
Just my opinion of course. Not a scholar.
America gets away with their large debt and printing of money because the American economy is very strong compared to the world, and that America has the most political and cultural power out of any country. Most currencies are dependent on the USD being stable for them to have value, including the Chinese Yuan. Although Asia won big during the GFC, they were only able to take advantage of the situation, which a number of countries could have done.
Another reason is that the US national debt has not exceeded the GDP. If it does exceed GDP the economy will start to fall since trust will decrease significantly. America can keep piling up debt as long as the GDP grows consistently, which it looks like it will for a while to come.
They get away with their large debt because it isn't really a debt. For example, the portion that is Government securities is nothing more than a type of savings account. To pay it back, all the Government has to do is shift the balance from the savings account (securities account) to the deposit account (reserve account). Almost the entire debt would be wiped out at a keystroke.
The US has a floating currency, as does the UK, Canada, Australia, Japan, and many others. This means that they can create money every time they spend.
If people jack up their prices and there isn't enough money being spent to support those higher prices, then they'll probably come back down. However, if there's enough money being spent in the economy to support the higher prices, then they stay high. That's inflation.
As the government spends, the amount of money in circulation increases. To avoid hyperinflation, they need to remove some of that money from circulation. This is accomplished by taxing people. Taxation is deemed preferable to hyperinflation.