Why not print trillions of dollars?

[Chief_Pedant]

@Lemur866

Of course this is Not Good. But it ain’t Mad Max where everyone is now roaming the wastelands looking for gas and canned goods.

This is your scenario, not mine.

Mine is that the mechanism for collapse of the US will be relatively peaceful, with economic hardship suffered by quite a few and a fair amount of economic chaos. Governors will not be shot. I think you’ve seen too many movies. As I have said, I think the specific scenario is that states will (peacefully) secede, and particularly the fiscally sound ones.

But in any case–and I keep trying to get back to this–the point is that nations are not exempt from the fundamental principles of borrowing, nor from the consequences of overborrowing. It will catch up with you, and printing money will not save you from those consequences.

That’s why we can’t just print trillions of dollars. If the answer to the OP’s question is that it’s not a good idea to print your way out of debt, then the reason is that overborrowing is just as bad an idea for a nation as it is for a person. There’s no exemption for nations just because they are nations, and no exemption for the US just because it’s a particularly big and successful nation. Irresponsible spending is irresponsible spending. And it will catch up with us.

If you want to argue that the US has not yet overborrowed, have at it. And we’ll chat in 20 years.

If you want to argue that nations borrowing too much is somehow different from persons borrowing too much, you don’t understand economics and you haven’t read much history. In my view it’s exactly that sort of “it can’t happen to us” that is helping to ensure that it (financial collapse) will indeed happen to us.

[Exapno_Mapcase]

@Chief_Pedant

If you want to argue that nations borrowing too much is somehow different from persons borrowing too much, you don’t understand economics and you haven’t read much history.

If you want to argue there is a universe in which the states will be better off seceding than as a nation, you don’t understand history and you haven’t read much economics.

Honestly, man, this is a mythoughtslevel of understanding.

[Little_Nemo]

@Mr.Nylock

I don’t get the apples and oranges analogy. I think you make a coherent point in regards to paying down the house all at once; but just because GDP is measured yearly and and the debt accumulates over time does not mean that they are not interrelated or that one should not be weighed against the other along with many many other things when assessing the health of the economy. Servicing the debt is a part of the equation, among other things, but I don’t really want to go into it, we could start walking down a long boring path about the economy; I’m worried jiggerj will get so bored he(or she) will go to some other message board, or (gag me) yahoo answers.

I agree the two are related. But they don’t have the 1:1 relation that some people imply exists. They usually express debt as a percentage of GDP with the implication that once it hits 100% it’s game over - you now supposedly owe more than you have.

This obviously isn’t true. A country can have a debt greater than its GDP just as a person can owe more than his annual income. Japan currently has a national debt that’s well over 200% of its GDP - but we haven’t seen Japan collapse.

Is the debt higher than it should be? Is it causing problems for the country? Should we be doing more to pay it off? The answer to these questions are all yes. But it’s not something that’s going to end the country.

[Jiggerj]

@buddha_david

Short answer: Printing that much money would trigger massive hyperinflation, and what once cost a dollar would soon cost $1 trillion dollars. Just ask Zimbabwe.

But, why doesn’t it fall apart in the reverse? We can’t print out 13 trillion dollars, but we can get that far in debt without the whole system crashing. It’s been said that we can’t possibly ever pay that deficit down, but our economy is still running. And, aren’t we still borrowing money from elsewhere? Who would be crazy enough to loan the U.S. money under these circumstances?

[msmith537]

@Jiggerj

But, why doesn’t it fall apart in the reverse? We can’t print out 13 trillion dollars, but we can get that far in debt without the whole system crashing. It’s been said that we can’t possibly ever pay that deficit down, but our economy is still running. And, aren’t we still borrowing money from elsewhere? Who would be crazy enough to loan the U.S. money under these circumstances?

Because it’s not exactly true that the US dollar is backed by “nothing”. The US dollar is backed by the largest economy in the world. And that economy produces real goods and services. As long as we can make the interest payments on the debt, it’s not a problem (or not as big a problem as various economically ignorant people believe). Kind of like making the monthly mortgage payment on an expensive house.

Another thing that wasn’t mentioned. It’s not just that people “think” the US dollar has value. The government demands it. Conducting transactions that increase your wealth generates a tax obligation. And that obligation must be paid in US dollars.

[yorick73]

@Chronos

Who said anything about money? I was talking about a couple of farmers with a pig and a field.

Yet you seem to believe that one moron who valued a pig at a billion dollars increased the nation’s wealth. You seem to not understand that, while the value of a commodity is what others are willing to pay for it, what one moron agrees to pay alone does not. The point here is that one moron is out one billion minus the true value of a pig and the nation’s wealth has not increased by one penny.

[Mr.Nylock]

@Chronos

Mr. Nylock, is this really the first time you’ve encountered the concept that trade increases wealth? I would have thought that was pretty basic economics. Heck, I have no formal education in economics whatsoever, and I know about it.

Huh? I don’t think you’re even trying any more. You are prattling on about the same thing leachim was confabulating upthread. I’m not even sure what comment of mine you are basing this on, but trade between the goods of two people in a nation does not increase the wealth of a nation, the wealth of a nation is increased when goods are increased, not just moved from one person to another - and the medium of exchange is irrelevant. If you want to extrapolate this into something like what GDP is then GDP is measured in a very specific way to measure the increase in production within the borders of a country from one year to the next and eliminate things like transfer payments the resale of second hand goods and on and on. And sure, trade between nations can increase wealth. But this is getting away from the OP and starting to feel like homework. Without an understanding of this, things like the OP is saying seem to make sense.

[Little_Nemo]

@Jiggerj

But, why doesn’t it fall apart in the reverse? We can’t print out 13 trillion dollars, but we can get that far in debt without the whole system crashing. It’s been said that we can’t possibly ever pay that deficit down, but our economy is still running. And, aren’t we still borrowing money from elsewhere? Who would be crazy enough to loan the U.S. money under these circumstances?

What happens is when the government wants to spend more money than it collects in taxes, it makes up the difference by selling bonds. People buy bonds because the government pays them back at a higher value in the future. They’re considered a solid investment because the American government has always paid off its bonds.

[Mr.Nylock]

@Little_Nemo

What happens is when the government wants to spend more money than it collects in taxes, it makes up the difference by selling bonds. People buy bonds because the government pays them back at a higher value in the future. They’re considered a solid investment because the American government has always paid off its bonds.

But then the Asians don’t want to buy the bonds and the feds buy them and then the world comes to an end and we have hyperinflation and the only people that survive are the preppers and they establish a new kindgom where the only means of exchange are gold bars and packs of newports - either that or nothing catastrophic happens. It’s always hard to tell which way these things are gonna go.

[Chronos]

Quoth Mr. Nylock:

Yet you seem to believe that one moron who valued a pig at a billion dollars increased the nation’s wealth.

If there really were morons that valued pigs that highly, then yes. But you’ll note that I immediately went on to say that the existence of people so moronic was absurd, and thus rejected that notion. The remainder of my post therefore ignored the billion dollars, and just considered the exchange of pig for land.

Huh? I don’t think you’re even trying any more. You are prattling on about the same thing leachim was confabulating upthread. I’m not even sure what comment of mine you are basing this on, but trade between the goods of two people in a nation does not increase the wealth of a nation, the wealth of a nation is increased when goods are increased, not just moved from one person to another - and the medium of exchange is irrelevant.

But goods are increased in internal trade. You seem to be arguing that the pig is one good and the piece of land is another good, and since we have one pig and one piece of land both before and after, nothing has changed. But the pig owned by one person is not the same good as the pig owned by a different person. The pig can have different values for different owners, and so the goods can be increased by a change of ownership.

[leahcim]

@Leo_Bloom

I know any number of political sources of power on the left, all the way to communism, in the obvious extreme, that would, and do, take issue with that, and act or would act, effectively, against this type of rationality.

I submit this because of your opening assumption of “a society” does not include other political considerations.

I don’t think anyone can argue that political considerations don’t affect the wealth of a society. And it can certainly go the other way, too, in that it may be more efficient to have the wealth more spread out than it is – Can the one pig farmer really handle a million pigs? It probably would be more efficient to have 10000 swineherds with 100 pigs each if this society doesn’t have the capacity for industrial-scale pig-shit removal.

The joy of free exchange of capital is that individuals, without planning, only looking out for their own interests, can move towards these more efficient solutions. The guy who has more pigs than he can handle can trade with the guy who wants to try his hand at pig farming, and the society eventually moves towards its most efficient configuration.

[yorick73]

@Chronos

If there really were morons that valued pigs that highly, then yes. But you’ll note that I immediately went on to say that the existence of people so moronic was absurd, and thus rejected that notion. The remainder of my post therefore ignored the billion dollars, and just considered the exchange of pig for land.

The point you are missing is that, by itself, the trade does not create any wealth for the nation. The two people involved may create wealth by doing something productive with their new property. Alternatively, the nation’s wealth could actually be decreased if both people decide to do less than the other person was doing before with the property.

[Chronos]

The property doesn’t need to be productive at all to have value. Let’s say that instead of a pig and land, we have two people with a dog and a cat, both of which are purely pets. A has a pet dog, but prefers cats. B has a pet cat, but prefers dogs. So they trade. To A, cats are worth more than dogs, not for any practical reason, just because he likes them better. He loses something that’s worth little to him, and gains something that’s worth more to him: He has gained wealth, because to him, a cat is worth more than a dog is. Likewise, to B, dogs are worth more than cats, just because he likes them better, and he too loses something of low value and gains something of higher value. He also gains wealth.

[LinusK]

@njtt

Actually, many economists, most prominently Paul Krugman, think (very roughly speaking) that that is just what they ought to do. Although they would also point out that it would actually be a very bad idea to pay off all the debt, which would lead to much worse economic problems than we have now. National debts are really not at all like personal or business debts (to the extent that, really, it is very misleading to call them by the same name), and do not have to be paid off in the same sort of way.

The downside to the government “printing” more money (actually, there is point in actually printing it, all you need to do is change numbers in electronic accounts) is that it tends to cause inflation, meaning that the value of the currency declines if you “print” too much of it. However, inflation is currently very low and other economic factors are tending to keep it low, so even “printing” quite a lot more money probably would not raise it to unacceptable levels. (A moderate amount of inflation, like a moderate amoount of government debt, is generally considered a good thing by economists.)

I didn’t know that Paul Krugman agreed with me; but yes that would be a good idea. Actually, about 50% of the debt is already paid off since it’s owned by the government - the same government that issued it.

In any case, the Fed has already “printed” $3 trillion, and the result has been a modest reduction in unemployment, with no rise in inflation. So we don’t know how much would actually cause inflation - just that it’s more than $3 trillion. I’d suggest the Fed print at least another $3 trillion - and that the government spend it, to make sure it gets into circulation. That might get us to 5% unemployment, which would mean a much healthier more productive economy, in which everyone’s better off.

As an aside, the dollar is backed, not by “nothing”, but by the government’s continuing and ongoing ability to impose tax payments in the form of dollars. That, and the fact that almost every loan - mortgages, car notes, student loans, etc. - have to be paid back in dollars is more than enough to create a sufficient, and sometimes desperate, demand for them.

[leahcim]

@Chronos

The pig can have different values for different owners, and so the goods can be increased by a change of ownership.

The concept you are referring to is related to economic surplus. Because of arbitrage, the market for commodity goods will provide a single market price, but nevertheless, each consumer has his own idea of what the value of the commodity is, and each producer has his own idea of what they should be selling for.

In the end, the buyers who value the good more than the market price all buy, and nearly all of them are getting the good for less than they were willing to pay. The potential buyers who would have bought only if the price was lower, just don’t buy.

Conversely, the sellers who think the market price is a worthwhile price all sell, and nearly all of them are selling for more than the minimum they would have taken for it. Potential sellers who would have been drawn to the market by a price that is higher than the market price just stay at home.

So of the buyers who buy and the sellers who sell, they mostly all think they are getting a deal (and even the last few at least think they are breaking even).

[Lemur866]

The difference between the private debt of an individual, and the debt of a government is obvious. When you owe $1000 to Fat Tony and can’t pay, he sends some boys over to your house and they break your kneecaps. When you owe $1000 to the bank and can’t pay, they send a lawyer over to the IRS and seize your tax refund, or foreclose on your house, and so on.

But what happens when Fat Tony owes YOU $1000? You go by to collect, and Fat Tony explains that today is not your day, he doesn’t feel like giving you back your money, and his boys toss you out in the street. This is why lending money to Fat Tony is a bad idea, and also borrowing money from Fat Tony.

Governments are in the position of Fat Tony. If they decide not to pay you, how are you going to make them pay you? They only leverage you have over them is that if they won’t pay then they’ll have a hard time finding more suckers to borrow from in the future. It turns out that this is actually a pretty serious problem for a government to have. But governments really do default on debts regularly, read history and you’ll see example after example of governments that borrowed money and then decided not to pay it back. This is of course equivalent to stealing the money but it turns out that people in power are often totally fine with that.

The times when government debts really have to be paid back is when you lose a war and have to pay reparations to the winner, and the threat here is that if you don’t pay the war starts again. So while Fat Tony can stiff YOU, he can’t stiff John Gotti, because Gotti is a bigger and tougher gangster than he is.

Note that dissolving the United States is just a fancy way of defaulting on the debt, such that when the debt holders come knocking we just say, “United States? Nobody here by that name, sorry, try next door.” The debt holders are just as screwed and lose just as much money, and we have the added problem that the national government is gone.

When payments on the debt reach the point where servicing the debt takes almost all our tax revenue that is obviously unsustainable. And what happens then is we default on the debt and fuck over everyone who borrowed money from us. Yes, it is against the law to default on the debt. So what?

[yorick73]

@Chronos

The property doesn’t need to be productive at all to have value. Let’s say that instead of a pig and land, we have two people with a dog and a cat, both of which are purely pets. A has a pet dog, but prefers cats. B has a pet cat, but prefers dogs. So they trade. To A, cats are worth more than dogs, not for any practical reason, just because he likes them better. He loses something that’s worth little to him, and gains something that’s worth more to him: He has gained wealth, because to him, a cat is worth more than a dog is. Likewise, to B, dogs are worth more than cats, just because he likes them better, and he too loses something of low value and gains something of higher value. He also gains wealth.

First, you were originally talking about the nation gaining wealth. It does not.
Second, in the above scenario you seem to suggest that these people have gained wealth. That is not at all clear. Placing a high value on something as an individual does not magically make it worth any more on the open market. Also, if one pet is worth more than the other then one party has gained wealth and the other has lost wealth.

[leahcim]

@yorick73

Also, if one pet is worth more than the other then one party has gained wealth and the other has lost wealth.

Then why did they trade at all? Is the person who traded away the more valuable pet for the less valuable one just stupid? Is the other party just a bastard who took advantage of his stupidity?

If the market-clearing price was the only way to value something, no one would ever trade anything ever and there would be no economy. After all, the value of one thing is either less than or more than the other so one party has to be losing out. In the absence of coercion, they both have a veto over the trade, and the owner of the more valuable thing should, by your principles, exercise that veto.

Of course the whole point of post-mercantilism economics is that different people do value things differently, so trade for mutual benefit is possible. This is real basic econ 101 stuff.

The market price is the price at which there is as much of a substance available for sale as there is people wanting to buy. It is a good summary statistic of how a market as a whole values a commodity, but not a prescriptive number that people must or should value anything at.

[Chronos]

Quoth yorick73:

First, you were originally talking about the nation gaining wealth. It does not.

Of course it does. To the vast majority of the people of the nation, the trade means nothing. To two of the people of the nation, the trade is a gain of wealth. To nobody is it a loss of wealth. If something is good for some parts of a nation, and not bad for any part of the nation, then it’s good for the nation.

[yorick73]

@leahcim

Then why did they trade at all? Is the person who traded away the more valuable pet for the less valuable one just stupid? Is the other party just a bastard who took advantage of his stupidity?

If the market-clearing price was the only way to value something, no one would ever trade anything ever and there would be no economy. After all, the value of one thing is either less than or more than the other so one party has to be losing out. In the absence of coercion, they both have a veto over the trade, and the owner of the more valuable thing should, by your principles, exercise that veto.

Of course the whole point of post-mercantilism economics is that different people do value things differently, so trade for mutual benefit is possible. This is real basic econ 101 stuff.

The market price is the price at which there is as much of a substance available for sale as there is people wanting to buy. It is a good summary statistic of how a market as a whole values a commodity, but not a prescriptive number that people must or should value anything at.

I’m not quite clear what you are trying to argue here. Of course something can be worth more to one individual than to another on a personal level. That does nothing to change the true value of it though. If a guy with a thousand pigs trades one for an apple because he really wants an apple that doesn’t, as **Chronos ** suggests, change the value of an apple.

The main point is that the nation’s wealth doesn’t increase just because one guy agrees to trade land for a pig