[candiodari]

You can summarise this argument, and several of the other arguments in this thread as: It was large-scale government spending financed by seignorage/inflation instead of taxes that did this. "Free money" for politicians, hidden from the electorate. Not just in America, but as a global phenomenon.

With GREAT emphasis on the fact that is was not the large-scale spending that did it in, but the hidden aspect of it.

You correctly identify the catch-22 for governments: once one government (arguably France I guess, or at least they forced the world to follow them, I guess they didn't start it) showed you could do this, other politicians in other governments had little choice but to follow suit.

In a way you can say that the breaking of the gold standard was the problem. But that's like saying in a heart attack the heart is the problem. It's not wrong, but it's of course not the root cause: it's (usually) the decades-long excess of cholesterol in your arteries, mostly due to unhealthy eating habits, that's where you should look to the root cause. Hiding increasing government expenditures is the root cause.

[pjc50]

> You can summarise this argument, and several of the other arguments in this thread as: It was large-scale government spending financed by seignorage/inflation instead of taxes that did this.

That's the angle that a lot of people want to push, but is it actually correct? What about the trade deficit angle? Especially with regards to oil imports.

[candiodari]

Everything is connected. Since the government, despite what people seem to think these days, still represents something between 30% (only government directly) and 60% (government + contractors + fully dependent on government + ...) of the economy in the US, it can easily explain a 3% trade deficit.

But again, the actual spending is NOT the problem. Nor is the trade deficit. Using sovereignty (ie. government spending inflation) to take away normal people's ability to negotiate with accurate information (and voting) what their fair share of the economic pie is. THAT is the problem.

We could double government expenditures without causing a real problem. But if we double them and only 1% of people go to their boss "I need a raise" because they just don't know, then it'll be really bad: they'll have to compete for goods and services with the other side having double as much money as it does now.