[manojlds]

Why can't that be the central bank? We don't have private courts?

[fowtowmowcow]

I ask again: What happens if the government makes a ton of bad loans that never get paid?

[danaris]

The government would seem to have every recourse to collect.

[fowtowmowcow]

Hard to collect money on unemployed and dead.

[diordiderot]

Your thinking is too fine grained. Missing forest through the trees.

For a nation state with it's own currency, money is the sum of the production capacity / natural resources of that nation state.

You don't need Joe and Sue to pay you back.

[than3]

This line of thinking is just flat out wrong, and uneducated.

Price discovery is critical to any system, and money is the shared store of value of those that hold it so long as it retains that store of value.

Producers set prices to make a profit, if they can't do that they stop producing. Factor markets, same things happen, as an employee you don't do $1000 of work in exchange for $1 in purchasing power by the time you get paid.

When government debases currency, unproductive efforts unwind into losses at the individual level, and inflation at the macro level. You can't print money out of air and use it to pay for things without issues that result in cascade collapses over time. The more you do it, the bigger the bubble, deflation, and crash/collapse from a combination of interest rates (that need to raise to fight inflation) and bubble pressure.

If it continues, eventually credibility is lost, and the currency is abandoned. This usually happens sometime after a 3:1 debt to GDP ratio, though it can be much higher, anything after 3:1 is where the smaller effects become noticeable.

I'd suggest you educate yourself a bit more on this. I'd recommend Debt, the first 5,000 years by David Graeber as a starting point, and then Big Debt Crises by Bridgewater/Ray Dalio for case studies of how these things actually play out.

If pricing becomes irrational, you run into economic calculation problem, breakdown, shortages ensue, then death (its been tried in non-market socialist systems).

There's a good reason central banks were not allowed during our countries early years. Quite simply, its well known in a historic context that money printing can end civilizations.

[fowtowmowcow]

Okay Joe and Sue don't pay back their loan.

Either Beth now has to borrow for her house or business at a higher rate of interest OR we deflate the value of the currency (by increasing the money supply) to make up for the loss on the balance sheet.

Congratulations your civilization just discovered run away inflation.

[diordiderot]

The house is still there, it is repriced and sold.

The bank cannot lose money because money is a representation of all production and resources in the economy. (Edit: balance sheet is always zero)

There is no deflation because you are the bank and you can print money.

There isnt inflation because you can tax assets or reduce velocity of money (i.e. inflation) through transaction tax.

[pessimizer]

Joe and Sue also don't pay back their loans to private banks, and those banks get bailed out.

[willcipriano]

In a manner of speaking.

Take a look at student loans, how have they been intending to collect on those lately?

[0zemp2c]

those loans are being repaid

with votes

Democrats dangled loan forgiveness at the midterms, bought enough votes to blunt a Republican trouncing...never followed through to reward the voters but no worries, the promise can be re-made for the Presidential election

all Biden has to do is offer full loan forgiveness and the election is his

DeSantis will counter with auto loan forgiveness (just as big of a problem now), and it will be a battle to see who can buy more votes