I've never gotten real clarity on this, and would welcome input from those familiar with the subject.
I've heard the argument that deficit spending is not detrimental to a wealthy nation, because trading off debt is so lucrative that the country nets out on balance. Basically (AIUI), we can print money with abandon because our GDP is so staggering that we influence the rest of the planet and consequently it's global economy to the point that we steamroll the problem of playing with monopoly currency. Yes, we theoretically pay interest against the debt, but (again, AIUI)
the USD and what it bargains with is effectively erasing it's own debt. It's still there, but "means nothing". It is said that it is in a kind of bankruptcy-proof self-sustaining loop. So when the Ron Pauls of the world moan about returning to a gold standard, the fiat crew points out that we keep going up.
To a laypersons analogy, this sounds like living high on the hog on credit cards. But cards eventually have to be paid. The argument about trading debt is that it is paying its own interest and then some by just rolling the presses.
So of the many things I likely have wrong here, how does fiat currency pay for itself, if at all? Why are we not flat broke and hyperinflated to the point of economic collapse? Is it because we keep finding cheaper ways to buy stuff, like Chinese sweatshop labor, that temporarily infuses value to our economy? That eventually reaches critical mass though, doesn't it?
I've heard the argument that deficit spending is not detrimental to a wealthy nation, because trading off debt is so lucrative that the country nets out on balance. Basically (AIUI), we can print money with abandon because our GDP is so staggering that we influence the rest of the planet and consequently it's global economy to the point that we steamroll the problem of playing with monopoly currency. Yes, we theoretically pay interest against the debt, but (again, AIUI)
the USD and what it bargains with is effectively erasing it's own debt. It's still there, but "means nothing". It is said that it is in a kind of bankruptcy-proof self-sustaining loop. So when the Ron Pauls of the world moan about returning to a gold standard, the fiat crew points out that we keep going up.
To a laypersons analogy, this sounds like living high on the hog on credit cards. But cards eventually have to be paid. The argument about trading debt is that it is paying its own interest and then some by just rolling the presses.
So of the many things I likely have wrong here, how does fiat currency pay for itself, if at all? Why are we not flat broke and hyperinflated to the point of economic collapse? Is it because we keep finding cheaper ways to buy stuff, like Chinese sweatshop labor, that temporarily infuses value to our economy? That eventually reaches critical mass though, doesn't it?
via International Skeptics Forum https://ift.tt/lZxIKV1
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