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by mundo
2961 days ago
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> Inflating currency is a hidden way to spend money it doesn't have. This seems to be a recurring area of confusion in every thread about cryptocurrencies, so let's clear it up now: * The amount of money in circulation is manipulated by the Federal Reserve. When the Fed increases the money supply ("printing money"), it does so through banks, by creating money and letting them lend it. The recipient of the "printed money" is someone taking out a loan. * Deficits are when the government spends more money than it takes in in revenue. It borrows money (by issuing Treasury notes and bonds) and spends it on food stamps or bombers or whatever. The amount of money in circulation does not change and there's no direct effect on inflation. These are two separate things. The government can run a deficit without the Federal Reserve printing money. The Fed can print money without the government borrowing anything. Inflation is emphatically not something the government does so it will have more money to spend. When inflation is too low, we print money. When we want to spend more than we take in, we borrow. Two related but separate things. |
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This is really not how it works. Many economists think this is how it works but actual real world events have made it very clear that governments cannot simply manufacture inflation [1]. Governments like Japan wish they could produce inflation.
Inflation is much, much, much more complicated than merely "too much money." It's much more about real economic quantities affecting the price level [2]. This is usually driven by demand for something an economy cannot manufacture itself, not government spending. See oil shocks [3] for real inflation.
That said, it's always funny to see paranoid Americans go on about the government stealing money via inflation. What do you think money is? Talk about missing the forest for the trees.
[1] https://www.bloomberg.com/news/articles/2018-03-22/the-great...
[2] http://bilbo.economicoutlook.net/blog/?p=10554
[3] https://www.investopedia.com/ask/answers/06/oilpricesinflati...