Thue asks stupid basic economics questions

[Ecthy]

it's not, especially since the times you're speaking of were separated by the middle of the 20th century by some marked events in Germany.

[Asher]

Originally posted by Ecthy
it's not, especially since the times you're speaking of were separated by the middle of the 20th century by some marked events in Germany.

Is too. I'm right, you're wrong, because I was on the winning side of both wars. You can deal with that however you choose, just don't let me catch you lying again.

[Lorizael]

Originally posted by snoopy369
How does an 'inflation tax' not also tax the rich more than the poor? The rich, after all, have more ... money ... than the poor, don't they?

Because rich people have assets and investments that can survive or outpace inflation. Poor people don't.

[Colonâ„¢]

Originally posted by Thue
And why should it be better that the government print a treasury security instead of printing a $100 bill?

Since it seems to me that treasury securities and $100 bills are more or less interchangeable, I don't see why one should be substantially better than the other.

Borrowing from the markets with a fixed money supply creates an upward pressure on interest rates as there's an increased demand for funds. Printing money has the opposite effect.

[onodera]

Because as soon as you start printing money indiscriminately, inflation will shoot up, and we, Europe and China will pump your economy full of dollars trying to get rid of them, which will drive the inflation even higher. Poof, your savings are worthless, and Canadians are organizing vigilante border patrols that call themselves the Lumberjacks to keep you from crossing the border illegally.

[Blaupanzer]

The "Lumberjack" patrol rumor again. Some Apolyton memes never die.

[Whoha]

Re: Thue asks stupid basic economics questions

Originally posted by Thue
So I have a few questions:

Where will the $700 billion (at a time...) for the current bailout come from? Since the Federal Reserve issues money, can they not just say "*poof* - we now have $700 billion"?

By that line of though, why does the United state government have debt at all? If the US has a $400 billion deficit, then why not just magically have the fed create $400 billion in $100 notes, and pay with that?

It could come from taxes, printing, or selling bonds. As to your proposal, that is what happened under Carter, though at a smaller scale then this. In the long term however with an RTC style resolution we would be betting on a recovery which would let us sell the assets we bought and recoup our losses in part or even in full.

Originally posted by snoopy369
How does an 'inflation tax' not also tax the rich more than the poor? The rich, after all, have more ... money ... than the poor, don't they?

The rich would have far more hard assets that aren't dollar denominated then the poor.

[Zkribbler]

Re: Re: Thue asks stupid basic economics questions

Originally posted by Asher


Ask Germany from the mid-20th century why this is a bad idea.

Or Zimbabwa today. --The good news is you can convert your pocket change and become a millionaire!

[Heresson]

There was a nice caricature in 20's Poland.
A guy was thinking, after receiving his wages:
uh, I have too heavy load of money to carry it home by myself...
Yet it is all too little to buy me a taxi ride home...

[Impaler[WrG]]

How does an 'inflation tax' not also tax the rich more than the poor? The rich, after all, have more ... money ... than the poor, don't they?

When new money is added to the system the one who receives the money first and spends it first buys assets when prices are still low which causes prices to rise, by the time the money has been defused through the system those people at the end of the chain must buy at high prices. The net wealth transfer is upwards to the banks and wealth individuals who always receive new money first.

Deflation has essentially the same effect but rather then spread evenly it hits selectively, when the money supply contracts it makes it mathematically impossible for all loans to be repaid, some portion of the population defaults and loss the assets they put up as collateral, again net wealth is transfered upwards even if total wealth might drop.

This is cycle of increasing and decreasing the money supply has been named the buisness cycle.

[Vanguard]

Although I am opposed to the bailout, in fairness to the Fed and Treasury, I should point out that printing $700 billion will not necessarily result in any more inflation than we currently have.

After all, all the Treasury is planning to do with that money to buy assets at the same price as they were selling for 18 months ago. By themselves, they aren't "bidding" up the price of anything--- they are simply trying to return prices to the same level as they were.

Whether this is preventing "asset deflation" or whether is it locking in "asset inflation" is a question that is very difficult to answer.

[ColdPhoenix]

Originally posted by Vanguard
Although I am opposed to the bailout, in fairness to the Fed and Treasury, I should point out that printing $700 billion will not necessarily result in any more inflation than we currently have.

After all, all the Treasury is planning to do with that money to buy assets at the same price as they were selling for 18 months ago. By themselves, they aren't "bidding" up the price of anything--- they are simply trying to return prices to the same level as they were.

Whether this is preventing "asset deflation" or whether is it locking in "asset inflation" is a question that is very difficult to answer.

Printing the money wouldn't increase the value of the dollar economy as a whole but would increase the number of dollars in circulation and in doing so reduce the value of each dollar. This would cause inflation for food, fuel etc. The kind of things you and I buy.

How it affects the price of the banks assets? Does anyone even know what they're worth? They were certainly overvalued a year ago.

[Kidlicious]

Originally posted by ColdPhoenix


Printing the money wouldn't increase the value of the dollar economy as a whole but would increase the number of dollars in circulation and in doing so reduce the value of each dollar. This would cause inflation for food, fuel etc. The kind of things you and I buy.

I actually doubt that it would cause inflation at this point. The only thing that would cause inflation right now is higher fuel costs. Otherwise we are looking at deflation even with extra money in the economy. Money doesn't cause inflation if it's sitting in the banks.