[toomuchtodo]

To be fair, the Fed is going to bail out social security as well when they buy Treasuries to replenish the SS trust fund gap. The path to an attempted soft landing is inflating away the constraints the economy is encountering. We’re going to print, not repay, our way out of this.

[baconandeggs]

> We’re going to print, not repay, our way out of this.

Try to, we're going to try to print our way out of it.

[ethbro]

If the Fed wants to print their way out of this, the Fed can print their way out of this.

https://fred.stlouisfed.org/series/M2

[baconandeggs]

Nominally you can do whatever you want, that it solves anything is another question. And in fact, they've been printing money for over a decade and things have only gotten worse. The Enron balance sheet could handle a lot too.

[ahnick]

I am sincerely asking here... as long as the US dollar remains the majority reserve currency won't the US be able to successfully print its way out and basically ignore the balance sheet? If you think the US could experience repercussions while being the majority reserve currency what are the plausible scenario(s) that that would manifest itself?

[neilwilson]

It doesn’t matter whether it is reserve or not.

All floating currencies can do the same.

The issue is that the non government sector tends to hoard money rather than spending it.

The left want to confiscate those savings. The right try to mask them by pushing more and more people into debt.

The other option is that you realise net savings are largely inert in aggregate and essentially act like a tax.

Then you just accommodate them

[ahnick]

I agree with your statements about the non government sector and other items; however, I still don't follow your line of argumentation.

My understanding of why the US can print money without regard for consequences is because there are always "buyers" for US dollars, b/c countries need US Dollars to carry out business (e.g. China in order to maintain their export driven economy or the fact that the USD is used as the standard unit of currency in international markets for commodities such as gold and petroleum). Yes, there are technically other currencies that are part of the foreign exchange reserves, but none as prevalent as the USD.

As I understand it, this demand for US dollars is what allows USD to remain the dominant reserve currency and why when the US prints money it does not result in catastrophic inflation. If a country like Argentina tries to do what the US does it won't work out, because there is no demand for Argentinian dollars.

The conclusion I'm left with is that the balance sheet is largely irrelevant until the demand for US Dollar decreases. The real question in my mind is exactly what would cause that to occur? Most everything I read is that the network effect of the USD causes everyone to continue to use it, but perhaps something like a war between the US and China might be a precipitating event to decreased demand?

[TuringNYC]

I think one key consideration is optics. Printing our way out satiates the power base of the population, even if it does cause longer term damage. Swallowing a bitter pill now causes immediate unrest, which is why we’ve a souses this for 12yrs running now.

[dlp211]

Increasing money supply != printing money to get out of debt.

As a countries population and prosperity grow, increasing money supply is expected. The US does not in large quantities print inflationary dollars, they print borrowed dollars. This is a subtle difference, but it is has profound implications. When the borrowed dollars are paid back, the money can be destroyed. Inflationary dollars by definition do not carry this trait.

[hundreddaysoff]

How will these borrowed dollars be paid back short of real non-BS US economic expansion, which as I understand it is not presently occurring? If they are not actually paid back but just kicked down the road, are they still effectively borrowed, or are they effectively inflationary?

Not trying to troll, just trying to get a handle on the basics here.

[dlp211]

So you make a good point. Yes, borrowed dollars CAN become inflationary. We will see this when PPP loans become grants. There are however, also deflationary effects happening at the same time due to the current pandemic...so which will dominate is hard to tell right now.

We are also experiencing supply and demand shocks, so we are experiencing higher prices in certain goods, but this is not inflation, we would expect that prices would return to normal when the constraint of the virus is removed.

I have a hypothesis that modern supply chains combined with weak labor make consumer inflation basically a thing of the past and we worry far too much about inflation that won't materialize in our normally operating global economy.

[ahnick]

What is the difference between a borrowed dollar and an inflationary dollar?

[dlp211]

> When the borrowed dollars are paid back, the money can be destroyed. Inflationary dollars by definition do not carry this trait.

[ahnick]

I'm asking what the process of creating a borrowed dollar is versus the process of creating an inflationary dollar? Is there some financial instrument that the dollar is backed by that enables it to be paid back?

[cinquemb]

Nothing but a debt trap. Exchanging long term debt that yields for reserves that yield IOER and stay on bank balance sheets and enter the economy slower and slower the more they do it.

https://fred.stlouisfed.org/series/M2V

[charwalker]

Luckily, until the world gives up the USD as reserve currency we might float it. Inflation spread over 3-4 billion spenders won't hit as hard as 400 million but it will definitely hit eventually...