Hacker News Reader

Comment by js8 | Hacker News Reader

> I had to stop reading after this. This is not how inflation works and it borders on the preposterous to surmise that CBs can monetize deficits without creating inflation because there is excess supply in one market.

I think the government doesn't have to run deficits, it can always tax the money back out of the economy. (The only problem is nobody likes that, for some reason. People seem to prefer inflation to taxation.)

It's actually more honest, because it better shows what actually happens. Government prints money, (hopefully) invests into places that benefit the society as a whole, and then taxes the excess money back from wherever they ended up, destroying them (by not spending them again).

View on HN

We’re not talking about the Treasury. We’re talking about Central Banks who lack the power to tax (directly at least).

> People seem to prefer inflation to taxation.

That’s because they’re not the same thing, not at all.

I think when Doctorow talks about the CB, he pretty much puts it under government at large. Which I think is fair, various attempts at making CB independent on the actual government are rather puny in my opinion.

Regarding inflation, you're right, there are other sources of inflation than just government printing money. Money are also created privately, and certain inflation is IMHO inevitable, because most goods and assets depreciate.

But I do think that the inflation, induced by government printing additional money, can be negated by taxation.

It's not too dissimilar if you think of from the perspective of the government taking away purchasing power from the individual

How is a 1% inflation rate meaningfully different to a 1% tax on savings and investments, and a 1% subsidy on debt?

It’s a tax on savings, but not on most investments which would typically be assets that rise with inflation.

It’s a tax on debt issuers. Anybody loaning money will have to charge a much higher interest rate or they’ll get back less than they lent out.

> (The only problem is nobody likes that, for some reason. People seem to prefer inflation to taxation.)

the reason for this is fairly obvious. if you have a positive net worth, cash is probably a small fraction of your total assets, which limits the direct harm you face from inflation. if you have a negative net worth (ie, you have debt), inflation erodes the real value of your obligations over time. in general, this is already priced into the interest, but you certainly wouldn't want to see inflation decrease while you're repaying a loan, and you might be happy to see it increase.

Reply on news.ycombinator.com