Greed is Good (Fodder for a broad discussion of economics :))

[jafs]

I think that's a distinction without a difference.  Our national debt currently exceeds our annual GDP, and that's only happened very rarely throughout our history.  And it's just going to get worse.  I'm sure that everybody on here understands that annual deficits increase the national debt.

How do you measure productive capacity?

This little thread started because of PS's comment:

* stop caring so much about the deficit; the USA has the luxury of not caring for a good long while as long as we don't destroy our own productive capacity.

...that you seemingly took issue with. 

I think the debt/deficit situation is at historically very high levels, so it's a valid concern, especially since too much revenue is going to pay interest on the debt.

PS's point, and mine, is that productive capacity is far more important than the national debt or the annual budget deficit.

Why do you think we should be so concerned with paying down the national debt?

If I remember right, we had some pretty high inflation over that time span - do you have a chart that takes inflation into account?

Indeed, and, not coincidentally, interest rates were higher too.  Which is why annual interest payments, as a percentage of GDP, were relatively high then, and relatively low now.  As I initially responded:

I think the debt/deficit situation is at historically very high levels, so it's a valid concern, especially since too much revenue is going to pay interest on the debt.

I haven't looked recently, but I would think the amount of revenue that goes toward national debt is relatively *low*, due to the low interest rates.

The first thing I think we should do is stop adding to it each year with half a trillion to a trillion dollars in deficits.  And, as I said, the revenue that goes towards paying interest could be spent in better ways, in my view.

I think there's probably some sort of "healthy" debt/GDP ratio, and I think we're exceeding that by quite a bit.

If we don't correct for inflation, then the comparison isn't as useful, I believe.  Any charts/graphs that do that?

[jafs]

How do you measure productive capacity?

To measure current productive capacity, I say:

Look around!

Ok - I did 

What do you see?  I see a lot of un and underemployment, slow if any economic growth, and the like.

If we continue to run deficits of about 3% each year, then we need about 3% of GDP growth just to maintain the current ratio of debt/GDP.  And I don't see many people predicting growth of much above that for the foreseeable future.

[Xan]

I think that's a distinction without a difference.  Our national debt currently exceeds our annual GDP, and that's only happened very rarely throughout our history.  And it's just going to get worse.

The question is, why does that matter?  Is the debt something that has to be paid back?

Well, first, if you think of it as an unsecured debt/income ratio, I doubt that any reasonable financial experts would think that having 100% of your annual income in unsecured debt is a good idea - our cc companies seem to think that about 30% of our annual income is a good limit.

Then, it depends - certainly at some point, bonds will mature, meaning that the bondholders must be paid back.  We could have a rolling series of bonds, of course.

Annual deficits increase the national debt and thus, increase the interest payments, which eat up more government revenue that could be used for better things.

For a currency user like a family, sure.  For a currency issuer like the federal government, maybe not.

As long as there isn't inflation, there isn't an either/or between spending money servicing the debt and spending money on other things.  Money isn't real.  Productive capacity is.

There are plenty of good reasons to argue that the federal government should be doing less, but that it will "run out of money" isn't one of them.  At least not in our current system.

[MediumTex]

I think that's a distinction without a difference.  Our national debt currently exceeds our annual GDP, and that's only happened very rarely throughout our history.  And it's just going to get worse.

The question is, why does that matter?  Is the debt something that has to be paid back?

I think that people are rightly suspicious of the conventional concern expressed over debts and deficits.

What does any of that stuff really mean in a situation where a currency issuer has a bond market that can absorb a near infinite amount of new government debt, including entities within the government itself that can buy up as much debt as it wants to and pay for it with the equivalent of unicorn droppings, with no effect whatsoever on interest rates on that debt?

The entire apparatus of government finance in the U.S. follows a set of surreal guidelines and principles that are so counterintuitive and downright goofy that I think even a lot of our political leaders don't really understand how it works, or they do and they are just very comfortable lying to the American people.

As best I can tell, the only real purpose of federal taxation is to provide a market for U.S. dollars.  Paying taxes to a currency issuer with no inflation constraint (due to shifting demographics accompanied by structural contraction of the economy) would be like me giving my son a $10 allowance for working around the house, but then telling him he had to turn over $2 of his allowance to me as a "housing surcharge."  My son might say: "Why didn't you just give me $8, dad?  What's with this weird financial charade?"

People throw around the terms "budget deficit" and "national debt" as if they were big public sector versions of the way a household or a business is run, but there is virtually nothing about the way a currency issuer operates that is similar to the way a household or business operates. 

If I want $100, I have to provide $100 of value to someone else, persuade them to loan me $100, or engage in some kind of theft.  A currency issuer has the additional option of simply hitting a button on their keyboard and $100 magically appears.  You can say that this keystroke is a form of theft, but if it doesn't create any measurable inflation, is it theft?

I used to think about the national debt and budget deficit like they were real things that actually existed out there somewhere, but more and more I am coming to see that they are really just abstractions, just plot devices in a story that is told to the American people so many times that we have it memorized, and yet we fail to realize that it is mostly a fairy tale.

If worsening budget deficits and increasing national debt are supposed to make it harder for a country to borrow money, I would say that the last 30 years in the U.S. and the last 20 years in Japan have put that theory to rest.  Instead, as people point out above, the key to a nation's economic vitality is its productive capacity, and one important component of productive capacity in the U.S. is a relatively well-educated workforce that is willing to work very long hours for pay levels that in real terms haven't risen in decades, all with a very low risk of labor strife.  In other words, a big part of the U.S. productive capacity is its bizarre labor force that complains loudly about trivial political issues, and yet doesn't say a thing about the fact that the rich in their society have economically neutered them by requiring more and more work for the same real wage, requiring women to enter the workforce (when they otherwise would prefer to stay at home) in order to maintain lifestyles, and poisoning peoples' minds at the cultural level on the entire concept of organized labor as a way to negotiate effectively for better wages and working conditions.  It's hard to imagine a more effective political/economic/cultural sleight of hand--it's like the rich are clever shepherds who have persuaded the sheep that getting sheared is actually something that is done solely for the sheeps' benefit.

The reality of the whole thing will bend your mind into a pretzel.  It's brilliant, sinister, and incredibly stupid all at the same time.

[MediumTex]

How do you measure productive capacity?

To measure current productive capacity, I say:

Look around!

Ok - I did 

What do you see?  I see a lot of un and underemployment, slow if any economic growth, and the like.

If we continue to run deficits of about 3% each year, then we need about 3% of GDP growth just to maintain the current ratio of debt/GDP.  And I don't see many people predicting growth of much above that for the foreseeable future.

If the government spent less money, do you think that there would be fewer unemployed people?

I think that talking about optimal debt/GDP ratios in relation to a currency issuer is like talking about ideal body fat percentages for unicorns.

[jafs]

The question is, why does that matter?  Is the debt something that has to be paid back?

Well, first, if you think of it as an unsecured debt/income ratio, I doubt that any reasonable financial experts would think that having 100% of your annual income in unsecured debt is a good idea - our cc companies seem to think that about 30% of our annual income is a good limit.

Then, it depends - certainly at some point, bonds will mature, meaning that the bondholders must be paid back.  We could have a rolling series of bonds, of course.

Annual deficits increase the national debt and thus, increase the interest payments, which eat up more government revenue that could be used for better things.

For a currency user like a family, sure.  For a currency issuer like the federal government, maybe not.

As long as there isn't inflation, there isn't an either/or between spending money servicing the debt and spending money on other things.  Money isn't real.  Productive capacity is.

There are plenty of good reasons to argue that the federal government should be doing less, but that it will "run out of money" isn't one of them.  At least not in our current system.

I know the analogy isn't perfect.

Sure there is - there's a finite amount of government revenue each year, and there are only two ways to increase that - by taxation or borrowing.  There are limitations on the government that disallow "printing money", probably to prevent hyperinflation.  Every dollar that goes towards interest payments can't be used for anything else.

[jafs]

I think that's a distinction without a difference.  Our national debt currently exceeds our annual GDP, and that's only happened very rarely throughout our history.  And it's just going to get worse.

The question is, why does that matter?  Is the debt something that has to be paid back?

I think that people are rightly suspicious of the conventional concern expressed over debts and deficits.

What does any of that stuff really mean in a situation where a currency issuer has a bond market that can absorb a near infinite amount of new government debt, including entities within the government itself that can buy up as much debt as it wants to and pay for it with the equivalent of unicorn droppings, with no effect whatsoever on interest rates on that debt?

The entire apparatus of government finance in the U.S. follows a set of surreal guidelines and principles that are so counterintuitive and downright goofy that I think even a lot of our political leaders don't really understand how it works, or they do and they are just very comfortable lying to the American people.

As best I can tell, the only real purpose of federal taxation is to provide a market for U.S. dollars.  Paying taxes to a currency issuer with no inflation constraint (due to shifting demographics accompanied by structural contraction of the economy) would be like me giving my son a $10 allowance for working around the house, but then telling him he had to turn over $2 of his allowance to me as a "housing surcharge."  My son might say: "Why didn't you just give me $8, dad?  What's with this weird financial charade?"

People throw around the terms "budget deficit" and "national debt" as if they were big public sector versions of the way a household or a business is run, but there is virtually nothing about the way a currency issuer operates that is similar to the way a household or business operates. 

If I want $100, I have to provide $100 of value to someone else, persuade them to loan me $100, or engage in some kind of theft.  A currency issuer has the additional option of simply hitting a button on their keyboard and $100 magically appears.  You can say that this keystroke is a form of theft, but if it doesn't create any measurable inflation, is it theft?

I used to think about the national debt and budget deficit like they were real things that actually existed out there somewhere, but more and more I am coming to see that they are really just abstractions, just plot devices in a story that is told to the American people so many times that we have it memorized, and yet we fail to realize that it is mostly a fairy tale.

If worsening budget deficits and increasing national debt are supposed to make it harder for a country to borrow money, I would say that the last 30 years in the U.S. and the last 20 years in Japan have put that theory to rest.  Instead, as people point out above, the key to a nation's economic vitality is its productive capacity, and one important component of productive capacity in the U.S. is a relatively well-educated workforce that is willing to work very long hours for pay levels that in real terms haven't risen in decades, all with a very low risk of labor strife.  In other words, a big part of the U.S. productive capacity is its bizarre labor force that complains loudly about trivial political issues, and yet doesn't say a thing about the fact that the rich in their society have economically neutered them by requiring more and more work for the same real wage, requiring women to enter the workforce (when they otherwise would prefer to stay at home) in order to maintain lifestyles, and poisoning peoples' minds at the cultural level on the entire concept of organized labor as a way to negotiate effectively for better wages and working conditions.  It's hard to imagine a more effective political/economic/cultural sleight of hand--it's like the rich are clever shepherds who have persuaded the sheep that getting sheared is actually something that is done solely for the sheeps' benefit.

The reality of the whole thing will bend your mind into a pretzel.  It's brilliant, sinister, and incredibly stupid all at the same time.

Well, money is an abstraction, so anything having to do with money is abstract, for sure.

[jafs]

To measure current productive capacity, I say:

Look around!

Ok - I did 

What do you see?  I see a lot of un and underemployment, slow if any economic growth, and the like.

If we continue to run deficits of about 3% each year, then we need about 3% of GDP growth just to maintain the current ratio of debt/GDP.  And I don't see many people predicting growth of much above that for the foreseeable future.

If the government spent less money, do you think that there would be fewer unemployed people?

I think that talking about optimal debt/GDP ratios in relation to a currency issuer is like talking about ideal body fat percentages for unicorns.

I didn't say we should spend less money.

I'd prefer for us to spend it better, in a number of different ways, and also prefer "tax and spend" to "borrow and spend".

There are two ways to improve the situation - reduced spending, increased revenue - and of course a combination of both.  I'm pretty sure that there is a certain amount of waste in the system, which we could probably reduce without too many ill effects.  Then we could spend differently, and also raise more revenue.

[MediumTex]

Well, first, if you think of it as an unsecured debt/income ratio, I doubt that any reasonable financial experts would think that having 100% of your annual income in unsecured debt is a good idea - our cc companies seem to think that about 30% of our annual income is a good limit.

Then, it depends - certainly at some point, bonds will mature, meaning that the bondholders must be paid back.  We could have a rolling series of bonds, of course.

Annual deficits increase the national debt and thus, increase the interest payments, which eat up more government revenue that could be used for better things.

For a currency user like a family, sure.  For a currency issuer like the federal government, maybe not.

As long as there isn't inflation, there isn't an either/or between spending money servicing the debt and spending money on other things.  Money isn't real.  Productive capacity is.

There are plenty of good reasons to argue that the federal government should be doing less, but that it will "run out of money" isn't one of them.  At least not in our current system.

I know the analogy isn't perfect.

Sure there is - there's a finite amount of government revenue each year, and there are only two ways to increase that - by taxation or borrowing.  There are limitations on the government that disallow "printing money", probably to prevent hyperinflation.  Every dollar that goes towards interest payments can't be used for anything else.

I would suggest that you broaden and loosen your thinking about these topics.

Money is an abstraction, and for a currency issuer government debt is an abstraction.  There is no limit other than that imposed by inflation, and the structure of our current economy makes sustained inflation virtually impossible, which means that in practice there is no real limit on the government's ability to issue more debt. 

We could probably issue triple the nation's current debt and it would have no appreciable effect on interest rates.  In a mature modern western economy, debt to GDP ratios are meaningless.  Guess which country has the lowest interest rate in the world on its debt?  Japan.  Guess which country has the highest debt to GDP ratio in the world?  That's right--Japan.

Loosen your mind.  Let the unvarnished truth flow in.  Let it blow up.

[jafs]

on the picture.

I said money is an abstraction.

It's not true that there's no limit on debt - each year, I believe, the government has to vote to raise the debt ceiling if they want to do that, so debt is limited by the ability to do that.

The fact that problems doing that created the fear/possibility of a government shutdown or inability to pay their bills is an indication that we have a system in which we apparently have to borrow more and more all the time just to pay bills, which doesn't seem good to me.

Also, even though it's an abstraction, most of us need a certain amount of it to exchange for real goods/services, so it's not just an abstraction like a unicorn.

[MediumTex]

I didn't say we should spend less money.

I'd prefer for us to spend it better, in a number of different ways, and also prefer "tax and spend" to "borrow and spend".

There are two ways to improve the situation - reduced spending, increased revenue - and of course a combination of both.  I'm pretty sure that there is a certain amount of waste in the system, which we could probably reduce without too many ill effects.  Then we could spend differently, and also raise more revenue.

The whole system is a waste.  Essential government functions could probably be covered with 10% of what we are currently spending on government.

What I am suggesting is that your whole mental model of how the government finances its operations may be flawed.  The government doesn't need any of the money that we "pay" in taxes.  The government could easily issue new debt and sell off its own vast property holdings if it really needed to raise money.

The U.S. government has a really bizarre symbiotic relationship with its people where the government promises to tell the people a fairy tale that will scare them and get them worked up every time they hear it, but in return for these storytelling services, the American people have to promise to only get upset about things that don't actually threaten the existing government in any meaningful way.  Many of the old-time storytellers in Washington have told the story so many times that they have started to believe it themselves, which makes them even better storytellers.  Reagan was perhaps the finest in our history at this sort of thing.

[MediumTex]

on the picture.

I said money is an abstraction.

It's not true that there's no limit on debt - each year, I believe, the government has to vote to raise the debt ceiling if they want to do that, so debt is limited by the ability to do that.

A currency issuer that is unconstrained by inflation has no limit on the amount of debt it can issue.  If the ants in the ant farm get together in their fancy any legislature and make a big deal out of voting to raise the ant debt ceiling, then good for them if they can get people to care, but it's a formality.

The fact that problems doing that created the fear/possibility of a government shutdown or inability to pay their bills is an indication that we have a system in which we apparently have to borrow more and more all the time just to pay bills, which doesn't seem good to me.

There was never any fear of a real government shutdown or default.  It was all theater.  The "shutdown" probably cost more than it would have to just keep the government open because of the additional cost of rapidly shutting down and then starting up governmental operations amid such uncertainty.

Also, even though it's an abstraction, most of us need a certain amount of it to exchange for real goods/services, so it's not just an abstraction like a unicorn.

Yes it is.  You have a belief about the meaning of the paper in your pocket and the merchant shares the same belief and it facilitates transactions.  When, however, you put 10 pounds of meat next to a $50 bill when you're really hungry, you can often briefly see through the abstraction and understand that your belief in the meat is based on reality, and your belief in the money is simply a widely shared economic delusion (though a useful one).

[Pointedstick]

on the picture.

I said money is an abstraction.

It's not true that there's no limit on debt - each year, I believe, the government has to vote to raise the debt ceiling if they want to do that, so debt is limited by the ability to do that.

The fact that problems doing that created the fear/possibility of a government shutdown or inability to pay their bills is an indication that we have a system in which we apparently have to borrow more and more all the time just to pay bills, which doesn't seem good to me.

It's a political limitation, not an operational limitation.

Think of it this way. The deficit is about 500 billion a year right now. If the federal government wanted to eliminate the debt, all it would have to do is run a balanced budget for 30 years. 30 years of debt service will result in all the outstanding debt being paid off.

To balance the budget, the government would have to cut spending or raise taxes. Both would take $500 billion out of Americans pockets and bank accounts every year. Taxes do it directly, while cutting spending does it indirectly (every dollar of spending is a dollar of someone else's income).

Who wins from this arrangement? Let's really think about it. The American people lose since they have less money (currently the federal government is borrowing money from the future and giving it to people now). Bondholders lose since they will no longer have the option to invest in U.S. treasury securities (those bonds only exist because of the deficit; no deficit, no new treasury bonds). International capital flows will need to find a new safe haven for their money outside of the U.S., so investment in the USA falls too, and all that money probably goes to China, or maybe Switzerland.

Who's the winner from this policy? Due to the crazy way the U.S. monetary system is set up, I'm struggling to identify anyone.

If you want to think about something really weird, ponder this: the government could balance the budget instantly by simply printing the necessary money without any corresponding debt attached to it. I know, I know: "hyperinflation!!!" But look at the actual incidents of hyperinflation throughout history. They've almost always been accompanied by a massive government destruction of productive capacity. Assuming we can keep the Democrats out of power long enough to prevent that, I'm not really worried.

[Xan]

Not only that, PS, but they could issue a handful of trillion dollar bills or coins and put them in a vault.  Voila!  The debt is paid off.

I think that pretty well illustrates how much of an illusion all this is.

[MediumTex]

Not only that, PS, but they could issue a handful of trillion dollar bills or coins and put them in a vault.  Voila!  The debt is paid off.

I think that pretty well illustrates how much of an illusion all this is.

Yep.

If the borrowing wasn't inflationary, the printing of money to pay it off wouldn't be either.

[jafs]

on the picture.

I said money is an abstraction.

It's not true that there's no limit on debt - each year, I believe, the government has to vote to raise the debt ceiling if they want to do that, so debt is limited by the ability to do that.

A currency issuer that is unconstrained by inflation has no limit on the amount of debt it can issue.  If the ants in the ant farm get together in their fancy any legislature and make a big deal out of voting to raise the ant debt ceiling, then good for them if they can get people to care, but it's a formality.

The fact that problems doing that created the fear/possibility of a government shutdown or inability to pay their bills is an indication that we have a system in which we apparently have to borrow more and more all the time just to pay bills, which doesn't seem good to me.

There was never any fear of a real government shutdown or default.  It was all theater.  The "shutdown" probably cost more than it would have to just keep the government open because of the additional cost of rapidly shutting down and then starting up governmental operations amid such uncertainty.

Also, even though it's an abstraction, most of us need a certain amount of it to exchange for real goods/services, so it's not just an abstraction like a unicorn.

Yes it is.  You have a belief about the meaning of the paper in your pocket and the merchant shares the same belief and it facilitates transactions.  When, however, you put 10 pounds of meat next to a $50 bill when you're really hungry, you can often briefly see through the abstraction and understand that your belief in the meat is based on reality, and your belief in the money is simply a widely shared economic delusion (though a useful one).

It's not a "delusion" if you understand it's an abstraction.  It's a medium of exchange, which can be exchanged for real things that we need/want.

We'll see about the debt/deficit issue over time.

[jafs]

on the picture.

I said money is an abstraction.

It's not true that there's no limit on debt - each year, I believe, the government has to vote to raise the debt ceiling if they want to do that, so debt is limited by the ability to do that.

The fact that problems doing that created the fear/possibility of a government shutdown or inability to pay their bills is an indication that we have a system in which we apparently have to borrow more and more all the time just to pay bills, which doesn't seem good to me.

It's a political limitation, not an operational limitation.

Think of it this way. The deficit is about 500 billion a year right now. If the federal government wanted to eliminate the debt, all it would have to do is run a balanced budget for 30 years. 30 years of debt service will result in all the outstanding debt being paid off.

To balance the budget, the government would have to cut spending or raise taxes. Both would take $500 billion out of Americans pockets and bank accounts every year. Taxes do it directly, while cutting spending does it indirectly (every dollar of spending is a dollar of someone else's income).

Who wins from this arrangement? Let's really think about it. The American people lose since they have less money (currently the federal government is borrowing money from the future and giving it to people now). Bondholders lose since they will no longer have the option to invest in U.S. treasury securities (those bonds only exist because of the deficit; no deficit, no new treasury bonds). International capital flows will need to find a new safe haven for their money outside of the U.S., so investment in the USA falls too, and all that money probably goes to China, or maybe Switzerland.

Who's the winner from this policy? Due to the crazy way the U.S. monetary system is set up, I'm struggling to identify anyone.

If you want to think about something really weird, ponder this: the government could balance the budget instantly by simply printing the necessary money without any corresponding debt attached to it. I know, I know: "hyperinflation!!!" But look at the actual incidents of hyperinflation throughout history. They've almost always been accompanied by a massive government destruction of productive capacity. Assuming we can keep the Democrats out of power long enough to prevent that, I'm not really worried.

Well, sure it's political.

Do you have any sources/calculations on that idea?  I'd like to see them if you do.

I didn't say we had to/should pay off all of the debt - I just think there's some sort of better ratio than the one we have now, a lower ratio, of debt/annual GDP.

The government can't actually "print money" like that, actually. 

[Xan]

The government can't actually "print money" like that, actually.

Why not?

[jafs]

I don't remember the specifics, but I looked into it a while back and there are limitations on just printing money and using it, presumably to prevent hyperinflation.

There's some sort of difference with coins, which is where the trillion dollar coin idea came from, I think.

If you google the question "can the government just print more money", you should find a lot of interesting stuff.

[MediumTex]

It's not a "delusion" if you understand it's an abstraction.  It's a medium of exchange, which can be exchanged for real things that we need/want.

Okay, but unicorns are also an abstraction.  I'm just suggesting that money is a more imaginary and slippery concept than people may like to think.  People don't think of having a $100 bill in their pocket as having the idea of $100 of value in their pocket.  They actually think they have "one-hundred dollars" (whatever that is) in their pocket.

We'll see about the debt/deficit issue over time.

If you had made that statement in 1985, it would have been a timely thing to say.  At this point 30 years later, we now know how it will work "over time."  The future has arrived and we can now understand that debt and deficit levels have nothing to do with interest rates or the ability to issue new debt.  There simply isn't a relationship.

Some will say "you just haven't waited long enough", but three decades is long enough to form a working theory.  As soon as the theory is invalidated through experience, I will revise the theory, but so far all we have seen in Japan, Germany, the U.S. and every other productive first world economy is that the more you borrow the lower your borrowing costs go. 

[Pointedstick]

It's a medium of exchange, which can be exchanged for real things that we need/want.

Right. It's the things we want that matter, not the money. Without the things, money is meaningless and the people will starve and freeze to death; without the money, the things are still there and the people will just invent a new money system--and quickly, since functional money systems are essential to smooth production.

If the government is able to borrow $500 billion from the future and give it to people now, and that extra money does not cause any meaningful inflation, what that means is that there is not enough money in the right hands to allow people to buy all of the available stuff that has been produced and that they need or want. It points to a problem with the way purchasing power is produced and distributed throughout the society. For decades, the government has been papering over this major and fundamental problem by just giving money to the people who the economic system leaves with very little of it. Over time, the percent of people receiving some sort of direct government cash infusion (SNAP, medicaid, social security disability, unemployment comp, section 8 housing, free school lunch, winter heat assistance, etc) has been growing, pointing to an ever-worsening problem with purchasing power being distributed away from the lowest and middle rungs of society and toward the top. A more equitable system that distributed adequate purchasing power to everyone while still preserving the ability to better yourself and move up the ladder would instantly solve the nonexistent problem of a huge yearly federal government budget deficit.

Regardless, there is no operational reason why the government cannot print debt-free money. It's just a political convention that our money is debt-backed. The constraint is political, not operational. There is nothing stopping them from changing the law and creating unbacked paper and electronic money. At various points in U.S. history, there has been debt-free paper money, and in fact all extant coins are debt-free money. When the U.S. Mint makes a quarter, they're not borrowing $0.25 from someone. They're just increasing the size of the money supply. There is simply no particular reason to do this on a massive scale since debt-backed money works just fine right now.

You keep using the word "hyperinflation" but look up the history: it's only happened in countries where they destroyed their productive capacity, or where they owed debts to foreign governments denominated in the foreign governments' currencies, and things of that nature. I challenge you to find an example of a hyperinflation that was caused purely by a fiat currency issuer issuing too much sovereign debt.

[MediumTex]

I don't remember the specifics, but I looked into it a while back and there are limitations on just printing money and using it, presumably to prevent hyperinflation.

There's some sort of difference with coins, which is where the trillion dollar coin idea came from, I think.

If you google the question "can the government just print more money", you should find a lot of interesting stuff.

The banks are the ones who expand the money supply, not the government.  The government just helps the banks do it when it believes more money is needed to lubricate the economy.

In a productive economy with high wages relative to the rest of the world and excess productive capacity, a true upward spiral in wages and prices is almost impossible.  As labor costs rise, jobs are simply offshored, which pushes wages back down, which reduces overall demand, which exerts downward pressure on prices.

[Pointedstick]

If you google the question "can the government just print more money", you should find a lot of interesting stuff.

Respectfully, that you are able to write such a thing suggests that you are a novice when it comes to this subject. All of us here have been learning about and discussing the procrustean details of the U.S. monetary system for years. It's an interesting conversation that we're having, but it will stop being interesting if you don't have an open mind and we end up going in circles forever.

[jafs]

I give up.

You could certainly be right and I could certainly be wrong, as far as the odd nature of the monetary system.

[MediumTex]

In other words, a big part of the U.S. productive capacity is its bizarre labor force that complains loudly about trivial political issues, and yet doesn't say a thing about the fact that the rich in their society have economically neutered them by requiring more and more work for the same real wage, requiring women to enter the workforce (when they otherwise would prefer to stay at home) in order to maintain lifestyles, and poisoning peoples' minds at the cultural level on the entire concept of organized labor as a way to negotiate effectively for better wages and working conditions.  It's hard to imagine a more effective political/economic/cultural sleight of hand--it's like the rich are clever shepherds who have persuaded the sheep that getting sheared is actually something that is done solely for the sheeps' benefit.

The reality of the whole thing will bend your mind into a pretzel.  It's brilliant, sinister, and incredibly stupid all at the same time.

My gosh, that is beautiful.

This is a nice illustration of the relationship between the economic elite in the U.S. and the average middle class/working class citizen.

Note which one is smiling.

[img width=500]http://vignette3.wikia.nocookie.net/roa ... 0715152956[/img]