Comments on: What If the Government Just Prints Money?

By: Scott Fullwiler

Scott Fullwiler — Wed, 30 Dec 2009 02:59:13 +0000

This post was highly unclear. In the figures, it would be helpful to clear the “+reserves” and “- reserves” to zero, if that is what they net to. That would simplify things, clarifying that banks are left without net reserves in the bond cases.

SORRY FOR ANY CONFUSION. IT’S PRETTY STANDARD FARE IN ACCOUNTING AND T-ACCOUNT ANALYSIS TO DO AS I’VE DONE. ALSO, THE POINT WAS TO SHOW THE ACTUAL ACCOUNTING FOR INDIVIDUAL TRANSACTIONS. THE “NET” IS SO OBVIOUS IT DIDN’T SEEM TO REQUIRE ANYTHING MORE.

While cash reserves are not currently limiting, they would be in more inflationary times.

WRONG. RESERVES ARE NEVER LIMITING EXCEPT FOR IN A GOLD STANDARD OR SIMILAR MONETARY SYSTEM.

But the more important point is that spending without bond sales creates net money flow to the private economy, while bond sales create net flow back to the government.

WRONG. THE BOND SALE IS AN ASSET SWAP, SO NO NET CHANGE. THE DEFICIT CREATES THE NET FLOW TO THE NON-GOVT SECTOR. AGAIN, THIS IS JUST ACCOUNTING 101.

While these bonds may be sort of “as good as” money in some forms, as collateral, etc, in the limit case of the government selling infinite treasury bonds and vacuuming out all the money in the economy, one could not very well have inflation, could one?

THAT DOESN’T MAKE ANY SENSE.

So they are not equivalent in the final analysis, and it is indeed more inflationary to not balance spending with bonds as to do such balancing. That said, we need a bit of inflation right now, so bond sales are entirely counterproductive tot he macroeconomic policy needed right now.

AGAIN, WRONG. THERE’S NO DIFFERENCE IN ANY POSSIBLE SCENARIO UNDER OUR CURRENT MONETARY SYSTEM, EXCEPT THAT BOND SALES ADD INTEREST PAYMENTS AND SO ARE MORE INFLATIONARY, IF ANYTHING. PLEASE SHOW WITH BALANCE SHEETS THE TRANSACTIONS YOU ARE SUGGESTING AS THE REAL WORLD CASE.

By: Burk

Burk — Fri, 25 Dec 2009 17:49:31 +0000

Dear Scott,

But the more important point is that spending without bond sales creates net money flow to the private economy, while bond sales create net flow back to the government. While these bonds may be sort of “as good as” money in some forms, as collateral, etc, in the limit case of the government selling infinite treasury bonds and vacuuming out all the money in the economy, one could not very well have inflation, could one?

By: somaie

somaie — Mon, 14 Dec 2009 07:45:09 +0000

Everyone has their favorite way of using the internet. Many of us search to find what we want, click in to a specific website, read what’s available and click out. That’s not necessarily a bad thing because it’s efficient. We learn to tune out things we don’t need and go straight for what’s essential.
This goal-oriented way of surfing the web is largely based on short-term results. For example, finding facts to write a blog post, doing a comparison before making a purchase and reading a news site to find out what’s happening right now.

By: flow5

flow5 — Wed, 25 Nov 2009 15:04:14 +0000

Your points are a wrap. No one else seems to understand the breathtaking possibilities of your IORs. IORs aren’t ideal, but they are politically palatable.

By: PTDBD

PTDBD — Mon, 23 Nov 2009 18:25:00 +0000

Lot’s of scams, plans and flim-flams. A torrent of calculations and rationalizations to avoid honest accounting, paying one’s obligations, and actually producing something of worth.

Our Honourable Legislators – by their broken promises shall ye know them. The biggest broken promise is that paper money will keep its value.It is the reward that we all strive for with our life work and education, yet it turns out to be a counterfeit fraud.

By: criss

criss — Mon, 23 Nov 2009 14:16:54 +0000

Printing money isn’t more inflationary than selling bonds.

By: Scott Fullwiler

Scott Fullwiler — Mon, 23 Nov 2009 13:46:45 +0000

So, do you have a particular place in the post that you can suggest I am incorrect? Or are you just going to do handwaving and say “you’re wrong”?

By: John Smith

John Smith — Mon, 23 Nov 2009 07:41:37 +0000

I give you the 12 Trillion but that was not my point. I also understand that there is not much difference between printing money and offering bonds since the money mostly comes from the same place. But suggesting that we just start printing money is at best irresponsible. That kind of practice will lead to exactly what I described above.

By: Scott Fullwiler

Scott Fullwiler — Mon, 23 Nov 2009 06:48:32 +0000

John . . . you’ve completely missed the point. The point is that for a GIVEN deficit, “printing money” isn’t more inflationary than selling bonds. Nowhere here did I suggest anything remotely like what you’ve said. In other words, the debt IS “printing money”; we’ve ALREADY done it (though, by the way, the debt owed to the non-govt is FAR less than $12 trillion).

By: John Smith

John Smith — Mon, 23 Nov 2009 06:32:36 +0000

Lets just print 12 Trillion dollars and pay off the debt. Then we don’t have to worry about paying interest at all. While you at it just print an other 12 Trillion and pay of every bodies mortgage and then remove all the taxes since we can just print money.

These are the arguments that people have been making for years thinking that somehow the world will go along with this kind of non sense. I guess that is why gold is closing in on 1200 USD because people really like the money printing.