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Comment by voisin | Hacker News Reader

This is a terrifying and yet all too common view. When the central bank punches keys and creates money out of thin air this DOES come from your pocket and mine, but in a way that is not entirely as obvious as the way other costs are. It reduces the value of what was already in our pocket via inflation. The money in our pocket can no longer buy the same amount. That’s a cost.

God I wish we would go back to the gold standard so that the cost of government expenditures would be more obvious to the general public via payment from increased taxes or from allocation away from some other government expense. Instead, people are left thinking the government could magically solve all of our problems by printing more money, but for some reason doesn’t because it doesn’t care.

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What inflation? Gold bugs have been telling me that inflation was going to happen for my entire 20 year adult life. And being on the Gold standard did not in any way prevent inflation...but don't let that little fact get in the way of your hard money talking points.

If you want to have an honest discussion about the inflationary effects of adding more dollars to the money supply, then we have to talk about where those dollars come from and why they do and don't create inflation. Talk about what the real demonstrable alternatives are, and whether or not a higher inflation is really the devil that so many claim it is.

Where’s inflation? See real estate, all financial assets, medical costs, and education to name a few obvious examples. For many of the items actually included in CPI numbers, the inflation has been outsourced to third world countries.

The real demonstrable alternatives are those we had prior to eliminating the gold standard. We are now able to print our way out of recessions, at the cost of an incredibly destabilized economy comprised of asset valuations that are so high they lead to perfect correlation downward when there is a shock to confidence.

Real estate is local, my house in Alabama has returned sub 1% annualized in appreciation, my house in Washington as returned about 6% annualized. Where supply is constrained, prices are going up, where there is excess, prices aren't even keeping up with inflation. Seems like a perfectly rational market to me.

Financial assets is far too broad a category, but "markets can remain irrational far longer than you can remain solvent" isn't some new statement. I'd argue that this is more a consequence of a confluence of factors including the end of general scarcity of capital, low interest rates, and low taxes.

Medical and Education costs are structural issues within the US, see most of Europe for a counter example.

As far as outsourcing, well that has lifted over 1 billion people out of poverty...so yea, I got nothing for you if you think American's being able to buy more goods for fewer dollars while simultaneously making the world a better place is something to be concerned about.

And our economy is far more stable today then any time in the history of the US. Or are we going to pretend that multiple depressions didn't happen in the late 19th and early 20th centuries? The only reason that the 2008 recession was as bad as it was, was because of a lack of political will to spend money.

Inflation hasn't become a reality since the other nations still trust the value of the US dollars as reserve. With so high trade deficits, we are essentially saying to the world, "sell me goods in exchange for the paper that I printed some big numbers on it", without getting as much in return.

Do you think this is sustainable in the long run? Will they keep giving us more goods/services than they get? What would happen if they decide to not use US dollar as reserve or they start demanding another currency for trade?

If the US dollar ceases to be the world's de facto currency, we have much larger problems then the moderate inflation that may or may not follow. I'd argue it is far more a political problem than a monetary problem at that point.

And FED continuing to print excess money is one of the reasons believed to speed up the process to the "much larger problems".

It’s “all too common” because it’s how most 1st world economies work (though to be fair: your fear-based view and false belief that it is anomalous is the true “all too common” viewpoint). Case in point is the US that has been running deficit budgets for decades - and yet it still exists! It is still an economic power house! The general disconnect is that nearly all discretionary spending is directed towards the military, which somehow eludes all those who ask the question “but how are we going to pay for that?” whenever anyone proposes providing money to people who definitively need it.

I am unclear on your first sentence and bracketed section. My point was that people generally share the view that printing money is without cost and that this is incorrect. The government cannot magically print money and provide goods and services without cost, via future tax increases or inflation. There’s no free lunch.

The cost is so low as to be non-existent. The downsides of printing money are effectively nil. If this were not true the modern global economy would have died out decades ago, when printing money became the primary method of commerce. Your concern here cannot rationally be a concern for printing money, a ship that sailed long ago. So I’d have to assume your concern is how the printed money should or should not be used. And in this case you were replying with concern to a post that recommended using printed money to pay high-risk people a sustainable income when their jobs should be furloughed. But instead of making a case as to why high-risk people should continue to sustain high-risk, you instead want to falsely claim printing money is significantly detrimental.

If this is true then why do any of us pay taxes?

We could just print all the money we need.

Central banks create money, but governments don't spend that money. They spend money from taxes and bond sales.

About $15T USD exist [0]. $5T are held by foreign banks [1], because the USD is the world's reserve currency. All of those countries want the USD to remain stable, so their own economies can work smoothly. The countries cooperate with USA and side with USA in disputes. This benefits USA greatly. If USA went to the gold standard, this benefit would disappear.

Currencies on a gold standard experience inflation and deflation due to changes in the value of gold. The value of gold is primarily driven by demand for jewelry and manufactured products [2]. Demand fluctuates with the business cycle. Gold value is also affected by supply fluctuations. On a gold standard, these would become extra unwanted currency fluctuations.

Only $9T of gold exists above ground in the world. USA has only 3,000 tons of gold, worth 3,000 t * (1,000,000 g / t) * (oz t / 31.1 g) * (USD$1840 / oz t) = $177B. So to get $15T of gold, USA would need to mine or purchase 250,000 t of gold. This is equivalent to 72 years of the world's current gold production. So to make it possible, gold production would need to increase dramatically. And it would take a while. Meanwhile, the US economy keeps growing, increasing the need for currency.

Gold mining produces huge amounts of crushed ore which continually leaches heavy metal pollution into the environment. Gold mining uses cyanide which occasionally leaks and sterilizes a river or lake and kills all the birds and other wildlife nearby. Increasing gold mining would increase suffering around the world.

Another option is to increase the price of gold. This would negatively affect industry, especially electronics manufacturing. It would also cause an enormous wealth transfer to India and other countries that hold a lot of gold jewelry.

On a gold standard, governments have limited ability to solve problems in money supply, and their currency is subject to business cycle fluctuations and interference from cartels. USA will have difficulty getting enough gold to back its currency. Increased mining will poison people in many communities and devastate parts of nature.

[0] https://www.federalreserve.gov/releases/h6/Current/

[1] https://en.wikipedia.org/wiki/List_of_countries_by_foreign-e...

[2] https://en.wikipedia.org/wiki/Gold#Consumption

[3] https://en.wikipedia.org/wiki/Gold#Production

[4] https://en.wikipedia.org/wiki/List_of_countries_by_gold_prod...

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