Comment by mcny | Hacker News Reader

Comment by mcny | Hacker News Reader

There are some things like infrastructure that probably makes sense to centralize such as transportation or telecommunication. I think it still makes sense to run these things paid for by the government as opposed to people voting with cash. However, I might be wrong. There are real limits to how much money we have.

So a question like do we spend on a local transit subway system are difficult because there is so much politics. Even trying to get the F train go express in Brooklyn had so much opposition.

When I read the article headline I thought of course cash does not solve everything. We still need roads and bridges and fiber optic cables. However, if the period have the cash maybe they can decide for themselves what they want to prioritize.

Too bad we can't have a single tax system around the world so we could hand the same tax brackets around the world. That would make it so much easier to raise taxes on the top bracket without worrying about money fleeing the jurisdiction and we'd be able to fund things like a basic income.

> There are real limits to how much money we have.

I think it's very important for us to be aware that while this is true for private individuals, companies, and local governments, it is totally false for monetarily sovereign governments like the US federal government.

There is no limit to how much money it can spend. Any discussion of budgets at that level in terms of deficits etc. is completely flawed, and not just because a lot of politicians are extremely hypocritical about it, but because it just makes no sense in terms of economics and finance.

When thinking about the spending and taxation of a monetarily sovereign governments, the only real constraint is inflation. This is because the only real constraint is the amount of real resources that are available.

For what it's worth, this approach is part of what's called "functional finance".

So we can spend an unlimited amount of money? Seems like eventually you'll run out of space in the universe to hold all the zeros you'll be adding due to inflation.

There is no limit to how much money the government can spend but there is a limit because inflation? What?

Rather than being a hard limit imposed by a physical pile of rare metal (which it was in the U.S. until 1971), fiat currency is instead tied to the trust level of the government issuing it.

This means that theoretically, yes, the folks in charge of your country could expend tremendous effort filling up warehouses with printed cash (or bank accounts with billions of 'fresh' digital dollars) if they wanted.

However, there are innumerable practical limits on such behavior:

Any country that suddenly declared it had more money than all the others combined and was now buying up all the available land on the planet would find themselves in a heap of trouble. Trust still has to be earned & maintained, and this involves continuous demonstrations that no one is 'cheating'. Localized experiments by playing with 'created' money (responsibly) are fine, however, and through this aspect, fiat currencies provide very useful flexibility which is now essential to modern life.

If the government just gave everyone a million dollars, the purchasing power of that money would quickly disappear as purveyors of the most popularly sought limited resources raised prices to meet demand. This is inflation. Eventually most people's extra million dollars would be spent, and almost no one could afford the items with jacked up prices any longer. In turn, those prices would fall back down to - once again - meet demand (deflation). Sellers need buyers and vice versa. Money would change hands, there would be winners and losers, and it would be hugely disruptive-- but eventually life would return to normal for 99% of folks and it would pretty much be like it never happened.

All of this is clear to me and pretty obvious. My point was that the following paragraph from GGP is contradictory:

> There is no limit to how much money it can spend. Any discussion of budgets at that level in terms of deficits etc. is completely flawed, and not just because a lot of politicians are extremely hypocritical about it, but because it just makes no sense in terms of economics and finance.

> When thinking about the spending and taxation of a monetarily sovereign governments, the only real constraint is inflation.

A tad bit pedantic, but I see your point that "There is no limit" and "real constraint" are in opposition. I think the comment was just trying to say there is no fixed ceiling.

Different kinds of limits and constraints. I may not have made that perfectly clear in my original comment, but on the other hand, the real meaning should have been obvious if you had used a generous reading of what I wrote.

The point is that in the typical political discourse, people extrapolate their own personal experience to government. They seem to think that if the government spends too much, then at some point it will literally be unable to spend more -- and that's just wrong.

Inflation doesn't change that. Inflation is simply the answer to the obvious question that comes next. After all when you tell people the truth that government has no limit to how much it can spend, they tend to become understandably suspicious. TANSTAAFL and all that.

Inflation doesn't affect how much money the government is able to spend, but it does affect whether more (net) spending is a good idea, so it is a constraint in that sense. But it's qualitatively very different from the entirely fictional budget constraint that most people seem to be worried about.

I largely agree with you, although I think one should place less focus on "trust". It is too vague a concept, and I believe it is too often used to confuse rather than enlighten, and to beat well-intentioned politics into submission (aka, "you have to earn the trust of the market", which means precisely nothing).

In this particular case:

> Any country that suddenly declared it had more money than all the others combined and was now buying up all the available land on the planet would find themselves in a heap of trouble. Trust still has to be earned & maintained

... why not be more specific and say that if a country did that, its currency would immediately drop in value on the foreign exchange markets.

Anyway, I'm not saying that trust is irrelevant, and I do largely agree with you, I just think it tends to be overrated in these kinds of discussions.

> without worrying about money fleeing the jurisdiction and we'd be able to fund things like ...

That's a terrible idea. Freedom to leave is a powerful force to keep governments from going too far out of control. North Korea is horrible to its people so it has to lock them in. You're effectively wanting the same thing but for everyone. America has important things to attract value producers so that they'll tolerate paying the tax because they're still better off than trying to earn money in some worse country despite lower taxes. It's up to the government to squeeze as much out of them as it can without losing them.

> > without worrying about money fleeing the jurisdiction and we'd be able to fund things like ...

> North Korea is horrible to its people so it has to lock them in. You're effectively wanting the same thing but for everyone.

It would be nice if people paid taxes for the infrastructure that enables businesses worldwide,but that would turn us into north Korea? What? North Korea isn't horrible because of taxes friend (in fact, most of the most horrible places on earth have an official tax of zero, you just need to bribe everyone) What flawed logic enables this?

>America has important things to attract value producers so that they'll tolerate paying the tax because they're still better off than trying to earn money in some worse country despite lower taxes. It's up to the government to squeeze as much out of them as it can without losing them.

Ah, randian ideas of value producers and moochers, instead of participants in a society and economy. I see

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