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Comment by arcticbull | Hacker News Reader

You know the fed can print money to pay off that debt right? That's the difference between you being personally $1T in the hole every year and the government. That's also why nobody really cares. At this point it's easier to do that than to find $1T in annual cuts the folks in office can agree on. Not that it's a good thing, of course.

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> You know the fed can print money to pay off that debt right?

No they can't, and they won't, unless you want the fed to crash the dollar and make it worthless. The money supply is a very tricky thing in that you want enough liquidity so that the market continues working, but too much money supply would make the dollar as worthless as seashells.

The fed expanded its balance sheet from less than $1 trillion in 2008 to over $4 trillion in 2016, practically dumping $3 trillion into the economy for all intents and purposes. What was the effect of that on crashing the dollar/making it worthless[0]?

[0] https://www.cnbc.com/2017/11/24/the-fed-launched-qe-nine-yea...

There was extraordinary demand for liquidity during and following the financial crisis. Because the Fed was expanding its balance sheet to meet market demand, it did not crash the value of the dollar.

>but too much money supply would make the dollar as worthless as seashells.

Sure, but what is the number that constitutes "too much"? Right now the M3 money supply is 15.3 trillion dollars and the CPI inflation has been below 4 percent since 1991. In that period the money supply has grown by 12 trillion. If quintupling the money supply in the same period that GDP only doubled doesn't not only not tank the value of the dollar but doesn't even cause serious inflation, I'm curious what would?

That's a serious question, by the way - I have a background in economics. This is unprecedented.

Yes they can. And they will, considering that the alternative is default and an even massiver crash

This would cause inflation, increasing interest rates, exacerbating the problem and spiraling out of control.

QE is not "printing money".

>This would cause inflation, increasing interest rates, exacerbating the problem and spiraling out of control.

So you would think from Econ 101, but that empirically has not been the case. We're in uncharted waters at this point.

Owe the bank $100,000?

The bank owns you.

Owe the bank $1,000,000,000,000?

You own the bank.

Not uncharted, just takes some persistence to find a precedent. See John Law.

QE is money printing to buy financial securities. It is money printing.

You can print an unknown but finite amount of money before hyperinflation sets in. It's not actually free money, just another finite resource that can be drawn - the credibility of the US government's promise to pay.

And like every other finite resource that doesn't come with an accurate accounting system, it is being overexploited, and will come back and bite us all eventually.

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