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So you're saying, yes, the move is to pressure others to buy US debt or otherwise prop up the otherwise insolvent US government.
I'm afraid I mostly didn't track what you were saying in that second-to-last sentence.
Promises only have worth because they can be trusted.
The main thrust here is that we are trading promises (however trustworthy or not) for actual goods. If you can do that with cheap money, as we have been, all the better. Worst case you just inflate the pain away. What matters is the underlying assets, the Oil the car company, the wafer fab, the farms, money is just an idea.
But in order to sell promises and get real goods, you need promises to sell. Promises are expectation of future goods. If you don't uphold those, you'll have to stop selling promises. This makes it harder to get the real goods you want, since you can no longer just offer promises and then pay them back.
Promises are better—that is, you can trade them for more—the more trustworthy you are. Being more profligate with your promises than you can afford tanks the value of your promises and makes it harder to keep getting those real goods from them.
This is precisely where the problem lies. Yes, you can always just inflate it away. The problem is that this has harmful effects. Namely, a change in trade balance. A high inflation rate will mean nobody wants their wealth in dollars, worldwide. A lot of dollars are overseas. For the past while, we've been able to get more stuff from importing than we export, because everyone wants dollars. This is great. Just now we're at a spot where if that changes, suddenly the economy will be a lot worse, as everyone tries to shed dollars, making everything more expensive in dollars, beyond just the direct effect of the increased money supply on inflation. Because the whole US runs on dollars, dollars going down relative to the world economy beyond just the direct effect of inflation is bad. It becomes harder to buy anything, especially things made overseas.
A lot of countries have tried "inflate the pain away." How did it work for them? (Hint: pretty disastrously)
Yes, they didn't control the world's reserve currency. But give the US dollar enough inflation, and it will no longer be the world's reserve currency, as everyone drops it.
Good writeup of basic economic policy and how it could impact currency valuations. Yes this is what happens when a place like Mexico or Venezuela starts reneging on their promises or nationalizing industries, capital flight, to places like the USA! Even it times of total crisis for the whole world, like in 2010, capital still came here and the value of the Dollar actually went up.
Yes if we nationalized every company and didn't pay out investors, stopped paying our debts etc....overnight. The value of the dollar would crater, It would be bad for the future of America, but now I that I'm thinking about it, what is the total value of all assets in the USA? 135 Trillion according to a quick search. That is enough to give every man woman and child ownership over $400,000 dollars (in assets) So a family of four would get $1.6 Million. So it could be an attractive short term play for a certain "Pay me now" segment of the population.
I'm not advocating for anything like that. What I've been saying here all along that within this new landscape of worldwide fiat currencies MMT is the only way to play. You don't go back to a gold or crypto deflationary hoarding mentality where the economy is constrained by tokens of wealth.(This caused a few major problems in the past if you recall)
You treat money like what it is, an idea to be experimented and played with for the betterment of your country, to get the most real resources for the least value in return. To do otherwise is to place your country at a major handicap for no reason other than stubbornness. As I have pointed out several times the USA is uniquely positioned to take this theory as far as it can be pushed due among other things to the complete financial, technical and military dominance that has allowed it to become the world's #1 reserve currency.
And a terrible long term one. This does not belong in the Overton window.
Let me try to understand your model. You are saying something like: the US prints money to buy foreign goods. (Or alternatively, buys loans which it expects to finance by printing money later.) The net effect of this is that we have more goods in the US.
Two thoughts on this:
High inflation is risky, because that could affect how desirable dollars are, which could be bad for trade.
Inflating currency doesn't increase purchasing power, if ownership of it is distributed the same way as before. So if I understood your model rightly, that you want to use it buy foreign goods and services, then the inflating part isn't relevant so much as the spend a lot of money on foreign goods part. But I don't think there's really any reason to spend more resources (Yes, resources. They'll use those dollars, or at least, many of them, if they're not sitting in a foreign exchange reserve or something. And if in a foreign exchange reserve, it's only in expectation of future value, that is, resources.) on foreign goods rather than on development of US resources and investment into our own economy. So why not just let the price system allocate things efficiently, as it will tend to, rather than attempt to force things with government spending funded by a tax on dollars?
What do you think of all the places that decided to hyperinflate their currency? Did it work out well for them?
Namely?
Sure. That's just not what your policy does, I don't think.
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