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Comment by pytester | Hacker News Reader

It will result in inflation, but that's not necessarily a bad thing. At its heart inflation is just a wealth transfer from creditor to debtor (god forbid, right? creditors are king).

The real issues are that:

* Inflation is treated as a bogeyman in the investor managed media rather than an integral and necessary part of a monetary system (you want real pain? try DEflation).

* Complete misrepresentation of the risks of hyper inflation and a total misrepresentation of why it happens (e.g. idiotically pretending that all zimbabwe/weimar/venezuela did was spend just a little bit too much on social programs).

I kind of wish inflation were kept in band between 7 and 12% via fiscal spending and taxation (as MMT says is possible). That would keep it below the level at which it would impact growth and above the level where wealth slowly gets hoarded by the 1%.

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Not exactly. Wealthy people will just move their assets into something other than dollars. Low and middle income people (which probably have more of their assets in dollars) will have their savings constantly devalued. Interest rates in loans will skyrocket in order to offset inflation.

>Low and middle income people (which probably have more of their assets in dollars) will have their savings constantly devalued.

Low and middle income people tend to have little in the way of savings (40% of Americans are one paycheck away from poverty) and a lot in the way of debts - debts which will be constantly devalued in a high inflation environment.

> debts which will be constantly devalued in a high inflation environment.

Why wouldn't lenders just charge higher interest rates to offset inflation?

They might on newly issued debt - that still allows the ~40 trillion USD of existing private debt to be watered down, however.

The survey of economists that the article poo-poos includes the comment by one economist that a government can print to pay its own debts exactly once (because people loaning to the government figure it out quickly). This argument falls into the same boat: sure, the banks will change how they price loans, but for the lucky guys with loans it’ll be glorious!

>The survey of economists that the article poo-poos includes the comment by one economist that a government can print to pay its own debts exactly once (because people loaning to the government figure it out quickly).

The government can pay its own debts as many times as it wants.

It can also dial the interest rate up and down virtually at will through QE or raising interest rates.

It actually makes less sense to think of government debt as debt and makes more sense to think of it mainly as a publicly run savings account.

The government can also push private sector loan interest rates up or down at will through the setting of the base rate.

Somehow I managed to skip a word when I wrote the comment. It should have been “a government can print money to pay its debts exactly once.”

Obviously governments can pay off debts as often as they want, and there was a time when that was common. But a government that runs up big debts and pays them by making the currency worthless soon has a hard time finding anyone willing to lend it money.

But sometimes they manage. Russia is notorious for defaulting on its debts (which isn’t the same thing as paying with devalued currency, but should be a lesson to future lenders), but they still manage to borrow money. But they do have to pay higher interest rates than other countries to make up for the higher risk of default.

Yeah, the fatal assumption there was assuming that they need to have money lent to them.

As I said, it doesn't really make sense to think of the national debt as a debt. It's a government run savings account accommodating the private sector's desire to save money.

In the same way if maxlybbert printed maxlybbert dollars, spent them and then "borrowed" them back it wouldn't really be doing it because he actually needed them. He's providing a service.

I’m only focusing on the fact that a nation that prints its own money can end up printing too much and devaluing it. And when a country shows its printing presses are controlled by people who have no clue what they’re doing, people tend to stop buying their bonds.

I don’t really care whether it’s truly borrowing when a country sells bonds and promises to pay the bondholders back with interest. As long as the country feels it has an obligation to pay those bondholders, it has a temptation to pay them with devalued currency. Most countries don’t do that because they expect few people will buy bonds the next time the government wants to sell some.

And the idea is that it only has to do it once. If the goal of the government is 2% inflation but the economy doesn't reach this goal because of deflation then the government not only can step in to pay off it's debts, it has to step in to fix the economy.

> The survey of economists that the article poo-poos includes the comment by one economist that a government can print to pay its own debts exactly once

Which is true.

OTOH, MMT observes that the government doesn't actually need to acquire debts to pay for a gap between spending and revenue in the first place.

> This argument falls into the same boat: sure, the banks will change how they price loans, but for the lucky guys with loans it’ll be glorious!

Sure, and that's why runaway inflation is bad. MMT doesn't favor more-inflationary policy, it just recognizes that inflation, not the availability of revenue, is the constraint on government spending.

At its heart inflation is just a wealth transfer from creditor > to debtor

That is one way to put it, but you could also say inflation punishes responsible people who work and save money, and rewards less responsible people who spend beyond their means.

This is what I call the "Paris Hilton is more responsible than my friends who were bankrupted over a medical debt" theory.

If you pretend that wealth is fairly distributed it makes a certain amount of sense.

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