Does printing new money to pay for things cause inflation?

[Votto]

This is often discussed in a variety of ways. I remember a few years ago there was this idea floated that Obama could order the mint to create two $10 trillion coins, then have them deposited into the federal reserve to pay off the debt. The pandemic emergency payments and unemployment benefits have often brought the conversation to whether we're simply making money out of thin air.

So let's talk about it. Do you believe that printing money will will cause inflation? Why, why not?

Nope, Putin done it

 

[Dadoalex]

This is often discussed in a variety of ways. I remember a few years ago there was this idea floated that Obama could order the mint to create two $10 trillion coins, then have them deposited into the federal reserve to pay off the debt. The pandemic emergency payments and unemployment benefits have often brought the conversation to whether we're simply making money out of thin air.

So let's talk about it. Do you believe that printing money will will cause inflation? Why, why not?

Increasing M1 is always a factor in increasing inflation.

Basic economics supply and demand.
Creating more money without increasing productivity (supply) means you've more dollars chasing a flat supply.
Prices, naturally will go up.

For the last 10 years or so the increases in M1 (and artificially low interest rates) have been offset by increased productivity.
The increasing productivity is now being offset by the trillions pumped into the economy under Trump and Biden.
Thus, more money chasing fewer goods.
Inflation.

The FED is acting to reduce M1 by increasing interest rates.
This will slow the economy possibly to the point of recession.

There are no free lunches.

When the economy is good, raise taxes. It is a blunt instrument but will serve to keep the economy from getting too hot. It also keeps the deficit and inflation down.
When the economy is slowing, lower taxes, at least temporarily. It will pump money into the economy but will add to the deficit and inflation.

You can look at the deficit as a percentage of the GDP as a lagging predictor of the inflation rates. The larger the deficit, more money printed to cover it, more money means more inflation.

As things sit, because of the huge deficits in 20/21 I think this round of inflation will last well into 23.

 

[Dadoalex]

This is often discussed in a variety of ways. I remember a few years ago there was this idea floated that Obama could order the mint to create two $10 trillion coins, then have them deposited into the federal reserve to pay off the debt. The pandemic emergency payments and unemployment benefits have often brought the conversation to whether we're simply making money out of thin air.

So let's talk about it. Do you believe that printing money will will cause inflation? Why, why not?

BTW...
Thanks for the serious topic.
Doubtful this collection of butt-hurt poop throwers will be able to discuss with any intellect but, thanks for the effort.

 

[Woodznutz]

How much interest do I pay at tax time if I hold one $20?
How much do I pay if I hold one thousand $20s?
How does the IRS know how many I hold?

Most receive income through wages and salaries, which is taxed. The taxes help pay the interest on the debt caused by printing the money. So chances are the $20's in your wallet have already been taxed at some point.

 

[Woodznutz]

An explosion of pent-up demand and profoundly damaged supply chains.

And the trade deficit, which sucks money out of the economy, which mitigates inflation.

 

[Woodznutz]

We are currently $30 trillion in debt.

What do you think printing an extra $30 trillion in cash would do?

We don't add more money. We pay some government obligations with cash, off the books. This infuses the economy with equity rather than more debt. It's like the money a Monopoly player receives to start the game. Without free startup money there is no game.

 

[Woodznutz]

Greenbacks were used in wars because gold and silver backed currency could not bring a war machine to full bloom fast enough. So, before 1913 temporary changes were made during conflicts if needed. If you noticed, we have been in many expensive conflicts since 1913 and our military has endless tens of trillions spent on it with many trillions unaccounted for.

Some of those $Trillions are still owed to us by our allies. Russia defaulted completely, and Britain is the only nation that has paid us in full.

 

[Toddsterpatriot]

For the last 10 years or so the increases in M1 (and artificially low interest rates) have been offset by increased productivity.

Not really.

 

[Toddsterpatriot]

Most receive income through wages and salaries, which is taxed. The taxes help pay the interest on the debt caused by printing the money. So chances are the $20's in your wallet have already been taxed at some point.

Most receive income through wages and salaries, which is taxed.

So I don't pay interest on my $20s?

The taxes help pay the interest on the debt caused by printing the money.

The debt isn't caused by the printing. Debt is caused by borrowing and spending.

 

[Toddsterpatriot]

We pay some government obligations with cash, off the books. This infuses the economy with equity rather than more debt.

Sounds like you're infusing cash, not equity.

 

[Woodznutz]

Most receive income through wages and salaries, which is taxed.

So I don't pay interest on my $20s?

The taxes help pay the interest on the debt caused by printing the money.

The debt isn't caused by the printing. Debt is caused by borrowing and spending.

After the money is 'printed' it goes to the Fed, where it becomes debt.

 

[Woodznutz]

Sounds like you're infusing cash, not equity.

Unindebted cash is equity. It's the difference between a loan and a grant.

 

[Toddsterpatriot]

After the money is 'printed' it goes to the Fed, where it becomes debt.

How do $20s "going to the Fed" become debt?

 

[Toddsterpatriot]

Unindebted cash is equity. It's the difference between a loan and a grant.

Printing $30 trillion in cash isn't inflationary if you call it equity?

 

[dblack]

It depends upon the macro picture. There was so much slack in the system between 2009 and 2021 that the Fed was able to add over $9T to its balance sheet, and while everyone was waiting for inflation, it didn't happen. And it ultimately only happened because of the worst of all worlds: An explosion of pent-up demand and profoundly damaged supply chains.

As a rule, theoretically? Yes. Necessarily? No.

Other factors may compensate for, or counter, the inflationary pressures, but there's no denying that printing money devalues currency. Just like rain makes things wet.

 

[Woodznutz]

How do $20s "going to the Fed" become debt?

The Fed loans the money to the country through the Fed banking system.

 

[Bootney Lee Farnsworth]

If banks quit loaning out money for cars, whats going to happen to the price of cars?

Exactly.

Same for healthcare.

If insurance companies quit paying for healthcare what happens to the price?

 

[Woodznutz]

Printing $30 trillion in cash isn't inflationary if you call it equity?

I propose reducing the debt a few $Billion at a time, over time.

 

[Toddsterpatriot]

The Fed loans the money to the country through the Fed banking system.

How much do you think the Fed is loaning to banks right now?

 

[g5000]

We don't add more money. We pay some government obligations with cash, off the books.

And where does that cash come from?