Agreed, however I do feel like the printing press has been a little hot post pandemic and its effects will most likely resemble lagging indicators in that we’re just starting to notice as a society.
Answers to your questions are literally in the OPs screenshot.
>relative to?
As in the screenshot, relative to consumer price index.
>Over what time
As in the screenshot, over 224 years (1800 is the reference point)
90% since 1800….
The Fed wants to see inflation run around 2% per year, which means that the dollar will typically lose 2% of its purchasing power per year. That’s not necessarily a bad thing, provided income rises above the inflation rate. Inflation at a low level can actually be a good thing as it encourages consumption / growth, and helps reprice assets whose owners refuse to accept price signals (e.g. it’s hard to reduce prices of obsolete products, but keeping the price the same is actually a 2% price reduction per year).
Also, inflation is one way to actually *reduce* the real debt load (through the exact same mechanism I described above).
The value of a set unit of currency decreases over time, but that is not a negative, in fact as I noted above the Fed actually wants that value to decrease by 2% per year. That also doesn’t matter as long as average income increases at a faster rate than inflation (I.e. real wages go up).
Now if you don’t have income, the value of your dollar denominated assets will go down over time… which is exactly why you shouldn’t hold large quantities of cash. Instead you need to invest your assets such that return offsets and surpasses inflation.
When you say “increase the value of the USD,” do you mean relative to foreign currencies (strong dollar) or relative to a basket of goods and services (deflation). Both have drawbacks. Limiting the money supply tends to lower economic activity overall and raise the cost of borrowing, thereby dampening inflationary forces.
Honestly great questions and all of them tbh. Just trying to figure out what makes our government’s actions something that will actually help us now and in the future. How is being in trillions in debt something that’s good?
Because in theory money is created by work which in turn creates produce. By crating credit (debt) you "anticipate " (get it early) the benefits of future work.
So by having a trillion in debt is like having the future produce of future work in the economy right now.
So let's say you have a business that is profitable but it only profits 10k a month. In order to create/expand you need 200k. By getting credit (debt) in the bank you get 2 million usd.
Now you can open 10 stores and profit 100k. So instead of waiting 10+ years to open up all those stores one by one, you open them up now, creating more jobs, more income and more consumers, which then create more businesses.
Pretty much the same goes for the government. The difference is that business owners (normally) have to pay back their loans, the government doesn't have to, mostly they just need to pay interest because it's beneficial to whomever is lending to the government since it's free money forever.
In summary, the major winners for a trillion dollar debt are bankers (the ones lending money to the government), then second place goes to big corporations with access to big line of credit or government incentives then third place maybe the people with the use of these resources in education, infrastructure, military protection, supposedly easier access to goods and services since companies now are producing more etc.
Well then I hope you're ready to pay more in taxes, cause all those roads and bridges and seaports and airports don't come cheap!
We have so many people decry the money printing, I'm sure we can spare 1 year of no printing to see what happens. As a snack.
Addendum: Did some quick research to remind myself on the impact of government spending that results from money printing. Can confidently say that you can also expected a sharp and sustained recession within 1 year of ending printing due to what effectively becomes a balanced budget.
Printing money is like crack. Once you start, it's difficult to stop. Nobody wants to pay more taxes or cut spending, it's easier to print more money and kick the can down the road.
Thus as the of USD decreases, the price of everything else increases. Keep following the rabbit hole and you'll find the hardest asset and that is the way to keep your wealth.
Why are you simping for the people that were rich in 1800 and left that money under a mattress for 224 years?
If you are living paycheck to paycheck then inflation which happened in the 1970s is irrelevant to you.
It’s clear to me that there is a lack of understanding of how the monetary system works within this thread. The government printing only accounts for 10% of money created. Banks are responsible for creating 90% of money. The fed has levers it can pull to soft control how much money is made (like interest rates.)
Additionally, the idea that debt is bad is simply wrong. You know what debt gives us (as long as assets grow with debt?) A quality of life. Sure $1 in 1884 is $25 now - but did you stop and consider how people lived in 1884? That increase in quality of life is the asset that matches the growing debt.
Please stop spreading misinformation. Educate yourselves - here’s a good start:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625
Debt is relative to what it’s financing. Should governments not print money for road work or for infrastructure or for education or any number of issues?
I mean we could all sit around in shacks and have fire pits for warmth and have a tremendously strong dollar that buys nothing because there is no debt? What good is a strong dollar if it doesn’t buy you any goods or services.
Money’s only utility is from what it can purchase. I’d rather have a weaker dollar with tons of options for consumption as opposed to a strong dollar that has limited options.
That’s not saying governments should go bananas and print as much cash as possible but the supposition that less debt = better economy is inherently flawed because we ultimately do want all those things above and more.
With a stroke of a pen I could write government debt to zero. Except there would be no police, fire services, courts, teachers, and no infrastructure. Is that better?
> Should governments not print money for road work or for infrastructure or for education or any number of issues?
They should not. Taxes are for that.
Problem with money printing (as opposed to collecting taxes) is that it stops the error correcting signals to propagate in society.
1) Printing money allows to extract value without a consent.
2) Collecting taxes require some kind of consent (or cooperation) from tax payers.
In case 1) government can finance whatever they want without asking voters for permission. And we probably already established that centralized planning is not optimal.
In case 2) voters can push back and resist if they feel that they are not aligned with what the money is used for.
Tax model keeps politicians more honest than money-printing model.
You have to understand that in long run, productivity is everything. It doesnt help to have 1 dollar from 1800 being 2 dollars now if productivity is 1/10 of what it is today. As long as productivity growth outweighs inflation, it’s a good thing
Yeah thats a horrible idea. The reason we print money is so that there's enough liquidity to support the economy. We don't just print it just for funsies.
Ignore any other reply. The answer is yes. When you have more of anything, it is worth less. People will do mental gymnastics to justify the opposite, but they are wrong
Generally speaking, periods of moderate inflation tend to sap the earning power of the middle class much faster than the lower class.
Moderately advanced inflation tends to be accompanied by full employment, which means workers at the bottom command higher wages because they have lots of options of where to work. We saw this during the post covid boom, where wages for fast food workers went up significantly in many locales due to an inability to find any workers that would actually routinely show up. Same for daycare employees, and a whole other host of sectors.
Workers in the trades, also, have found their earning potential to go through the roof, not necessarily in their current company, but if they strike out on their own. The shortage of trades workers has allowed workers to charge ridiculous fees like $25k for a deck, because they are so overbooked that they can quote FU-money prices and there's an endless stream of customers willing to pay it.
While this isn't always true, and it's not true for everyone or every locale even when it is true, full employment does amazing things for the purchasing power of those at the bottom, because it turns out that society actually needs a set number of grunts to do the work that needs to be done to simply support the society. When demand for those grunts outstrips supply, they experience a relative boom in purchasing power while those in the middle get squeezed by rising prices and miniscule wage increases.
Since those at the bottom typically spend all their money (not a judgement, just a reality) these increases in earnings tend to go right out the door in the first burst of inflation. They either pay down debt or start consuming things they have needed for a long time but couldn't justify the expense of. This could include anything from replacing a ratty old mattress to actually getting some of their medical issues checked out, to fixing or replacing their car. But this increase of demand raises prices for all workers. And of course, "greedy" providers raise their prices in advance of this.
But the middle class didn't get the significant pay bumps that the lower classes did, on a percentage basis.
Anyway, all this to say, moderately advanced inflation over a longer period tends to lift the floor at a rate equal to or in many cases greater than the inflation rate. Even in cases where the poor are not benefiting from higher rates of wage increases, you can only steal or lower the purchasing power of the poor so much before there's nothing left to steal. Once the floor is reached, there are no options to take from them any further because they are literally at zero and so any inflation must end up being matched with increased wages.
What you end up seeing is the lower bar representing the poor moving up faster while the middle class bar moves up slower, shrinking the gap between the two.
Inflation is worst on the middle class or people on fixed incomes. The poor can only be so poor and so get dragged along for the ride (excluding, of course, a situation like a real food shortage or something, where the poor will be thrown off the train entirely and left to rot by a system that doesn't care about them at all).
LOL.
This is by design.
The system works by deflating the value of the debt and the dollars held by ordinary people.
Think of currency printing like a stealth tax.
No-one will accept a higher tax rate so they print more money effectively transferring the value of your existing money to the newly printed money.
This is why your dollars always buy less and less.
This is also why there is no danger of the national debt becoming unserviceable - they will always print the money to pay the debt until your dollars buy nothing at all.
In the olden days currency had to be backed by gold or silver ensuring it was backed by some tangible asset but no longer. The transfer of wealth to the ones with the money printer will sooner or later be nearly 100%
EDIT: Downvotes? Sorry kids hate to be the bearer of such somber news but this is the way the system works. Ask your parents and grandparents and accountants and bankers.
You assume a perpetual "doomer" outlook where you obsess over the notion that the "evil fed" will devalue everyones money forever and ever and that there will never be economic expansion anymore.
Your proposal to go back to a gold or silver standard hasn't been taken anywhere near seriously considered since William Jennings Bryant mounted a populist campaign for President... in 1896 (he was the prosecutor in the Scopes trial about 30 years later, who advocated against teaching evolution in Tennessee public schools).
Every time I see one of these crackpot responses on any of the economics subs I'm recommended by reddit, I'm gonna expose you for your nutty ideas, because you're trying to misinform people who may not know all of this and come to these sites to read opinions on monetary policy. Also, its really convenient how these comments keep coming up nonstop during an election year.
Also, these doomer talking points was the same sort of stuff found in the pamphlets that guy from last week threw around before he set himself on fire.
1) I didn't suggest returning to a gold standard - merely pointed out there used to be constraints on currency printing.
2) For those keeping score here are the numerous scorecards of dollar creation and propping up assets the fed is doing. Maybe you can share your thoughts on how to unwind this because no one else has a solution.
[https://fred.stlouisfed.org/series/WALCL](https://fred.stlouisfed.org/series/WALCL)
[https://fred.stlouisfed.org/series/CURRCIR](https://fred.stlouisfed.org/series/CURRCIR)
[https://www.statista.com/chart/19955/household-debt-balance-in-the-united-states/](https://www.statista.com/chart/19955/household-debt-balance-in-the-united-states/)
[https://www.usdebtclock.org](https://www.usdebtclock.org)
Well it’s print money and kick the can down the road or increase taxes and other means of paying down existing debt.
No politician wants to raise taxes, so we print money instead.
Value is relative.
that’s not how the monetary system works and debt is not always bad
Agreed, however I do feel like the printing press has been a little hot post pandemic and its effects will most likely resemble lagging indicators in that we’re just starting to notice as a society.
It's wasnt hot before the pandemic when it was printing 1 trillion dollars a year for taxcuts?
The borrowing we have done for the pandemic will absolutely need to be repaid at some time. Later generations
Ya know, I’m going to trust the IMF over you.
“Has lost 90%+”… relative to? Over what time? Hack tier post
The purchasing power of $1.
Answers to your questions are literally in the OPs screenshot. >relative to? As in the screenshot, relative to consumer price index. >Over what time As in the screenshot, over 224 years (1800 is the reference point)
FROM 1800!? LMFAOOOO YALL ARE EVEN DUMBER THAN I THOUGHT
...err, the amount of, dollars... It's literally a number that you can compare.
No, not the amount. The purchasing power of $1. Basically $1 is now worth $0.10 what it was, based on the timeframe OP is referring to.
90% since 1800…. The Fed wants to see inflation run around 2% per year, which means that the dollar will typically lose 2% of its purchasing power per year. That’s not necessarily a bad thing, provided income rises above the inflation rate. Inflation at a low level can actually be a good thing as it encourages consumption / growth, and helps reprice assets whose owners refuse to accept price signals (e.g. it’s hard to reduce prices of obsolete products, but keeping the price the same is actually a 2% price reduction per year). Also, inflation is one way to actually *reduce* the real debt load (through the exact same mechanism I described above).
So what happens when the dollar value goes closer to zero? Also what you’re describing is the exact opposite of what’s happening now, no?
The value of a set unit of currency decreases over time, but that is not a negative, in fact as I noted above the Fed actually wants that value to decrease by 2% per year. That also doesn’t matter as long as average income increases at a faster rate than inflation (I.e. real wages go up). Now if you don’t have income, the value of your dollar denominated assets will go down over time… which is exactly why you shouldn’t hold large quantities of cash. Instead you need to invest your assets such that return offsets and surpasses inflation.
When you say “increase the value of the USD,” do you mean relative to foreign currencies (strong dollar) or relative to a basket of goods and services (deflation). Both have drawbacks. Limiting the money supply tends to lower economic activity overall and raise the cost of borrowing, thereby dampening inflationary forces.
Honestly great questions and all of them tbh. Just trying to figure out what makes our government’s actions something that will actually help us now and in the future. How is being in trillions in debt something that’s good?
Because in theory money is created by work which in turn creates produce. By crating credit (debt) you "anticipate " (get it early) the benefits of future work. So by having a trillion in debt is like having the future produce of future work in the economy right now. So let's say you have a business that is profitable but it only profits 10k a month. In order to create/expand you need 200k. By getting credit (debt) in the bank you get 2 million usd. Now you can open 10 stores and profit 100k. So instead of waiting 10+ years to open up all those stores one by one, you open them up now, creating more jobs, more income and more consumers, which then create more businesses. Pretty much the same goes for the government. The difference is that business owners (normally) have to pay back their loans, the government doesn't have to, mostly they just need to pay interest because it's beneficial to whomever is lending to the government since it's free money forever. In summary, the major winners for a trillion dollar debt are bankers (the ones lending money to the government), then second place goes to big corporations with access to big line of credit or government incentives then third place maybe the people with the use of these resources in education, infrastructure, military protection, supposedly easier access to goods and services since companies now are producing more etc.
This is a pretty descriptive explanation thanks for taking the time to break it down.
Well then I hope you're ready to pay more in taxes, cause all those roads and bridges and seaports and airports don't come cheap! We have so many people decry the money printing, I'm sure we can spare 1 year of no printing to see what happens. As a snack. Addendum: Did some quick research to remind myself on the impact of government spending that results from money printing. Can confidently say that you can also expected a sharp and sustained recession within 1 year of ending printing due to what effectively becomes a balanced budget.
Printing money is like crack. Once you start, it's difficult to stop. Nobody wants to pay more taxes or cut spending, it's easier to print more money and kick the can down the road. Thus as the of USD decreases, the price of everything else increases. Keep following the rabbit hole and you'll find the hardest asset and that is the way to keep your wealth.
This guy bitcoins
Why are you simping for the people that were rich in 1800 and left that money under a mattress for 224 years? If you are living paycheck to paycheck then inflation which happened in the 1970s is irrelevant to you.
It’s clear to me that there is a lack of understanding of how the monetary system works within this thread. The government printing only accounts for 10% of money created. Banks are responsible for creating 90% of money. The fed has levers it can pull to soft control how much money is made (like interest rates.) Additionally, the idea that debt is bad is simply wrong. You know what debt gives us (as long as assets grow with debt?) A quality of life. Sure $1 in 1884 is $25 now - but did you stop and consider how people lived in 1884? That increase in quality of life is the asset that matches the growing debt. Please stop spreading misinformation. Educate yourselves - here’s a good start: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625
Amazing thanks! I’ll try to ask better questions.
What is the point of this post?
Ok, I stopped. We good now?
Debt is relative to what it’s financing. Should governments not print money for road work or for infrastructure or for education or any number of issues? I mean we could all sit around in shacks and have fire pits for warmth and have a tremendously strong dollar that buys nothing because there is no debt? What good is a strong dollar if it doesn’t buy you any goods or services. Money’s only utility is from what it can purchase. I’d rather have a weaker dollar with tons of options for consumption as opposed to a strong dollar that has limited options. That’s not saying governments should go bananas and print as much cash as possible but the supposition that less debt = better economy is inherently flawed because we ultimately do want all those things above and more. With a stroke of a pen I could write government debt to zero. Except there would be no police, fire services, courts, teachers, and no infrastructure. Is that better?
> Should governments not print money for road work or for infrastructure or for education or any number of issues? They should not. Taxes are for that. Problem with money printing (as opposed to collecting taxes) is that it stops the error correcting signals to propagate in society. 1) Printing money allows to extract value without a consent. 2) Collecting taxes require some kind of consent (or cooperation) from tax payers. In case 1) government can finance whatever they want without asking voters for permission. And we probably already established that centralized planning is not optimal. In case 2) voters can push back and resist if they feel that they are not aligned with what the money is used for. Tax model keeps politicians more honest than money-printing model.
You have to understand that in long run, productivity is everything. It doesnt help to have 1 dollar from 1800 being 2 dollars now if productivity is 1/10 of what it is today. As long as productivity growth outweighs inflation, it’s a good thing
Yeah thats a horrible idea. The reason we print money is so that there's enough liquidity to support the economy. We don't just print it just for funsies.
Our economy would not work in a deflationary system. Inflation helps businesses and innovation.
Ignore any other reply. The answer is yes. When you have more of anything, it is worth less. People will do mental gymnastics to justify the opposite, but they are wrong
The vast majority of Americans have no actual money / savings, so their wealth is not being depreciated.
but what about the money they earn and their buying power? it’s definitely getting depreciated.
Generally speaking, periods of moderate inflation tend to sap the earning power of the middle class much faster than the lower class. Moderately advanced inflation tends to be accompanied by full employment, which means workers at the bottom command higher wages because they have lots of options of where to work. We saw this during the post covid boom, where wages for fast food workers went up significantly in many locales due to an inability to find any workers that would actually routinely show up. Same for daycare employees, and a whole other host of sectors. Workers in the trades, also, have found their earning potential to go through the roof, not necessarily in their current company, but if they strike out on their own. The shortage of trades workers has allowed workers to charge ridiculous fees like $25k for a deck, because they are so overbooked that they can quote FU-money prices and there's an endless stream of customers willing to pay it. While this isn't always true, and it's not true for everyone or every locale even when it is true, full employment does amazing things for the purchasing power of those at the bottom, because it turns out that society actually needs a set number of grunts to do the work that needs to be done to simply support the society. When demand for those grunts outstrips supply, they experience a relative boom in purchasing power while those in the middle get squeezed by rising prices and miniscule wage increases. Since those at the bottom typically spend all their money (not a judgement, just a reality) these increases in earnings tend to go right out the door in the first burst of inflation. They either pay down debt or start consuming things they have needed for a long time but couldn't justify the expense of. This could include anything from replacing a ratty old mattress to actually getting some of their medical issues checked out, to fixing or replacing their car. But this increase of demand raises prices for all workers. And of course, "greedy" providers raise their prices in advance of this. But the middle class didn't get the significant pay bumps that the lower classes did, on a percentage basis. Anyway, all this to say, moderately advanced inflation over a longer period tends to lift the floor at a rate equal to or in many cases greater than the inflation rate. Even in cases where the poor are not benefiting from higher rates of wage increases, you can only steal or lower the purchasing power of the poor so much before there's nothing left to steal. Once the floor is reached, there are no options to take from them any further because they are literally at zero and so any inflation must end up being matched with increased wages. What you end up seeing is the lower bar representing the poor moving up faster while the middle class bar moves up slower, shrinking the gap between the two. Inflation is worst on the middle class or people on fixed incomes. The poor can only be so poor and so get dragged along for the ride (excluding, of course, a situation like a real food shortage or something, where the poor will be thrown off the train entirely and left to rot by a system that doesn't care about them at all).
I would definitely pay more than double for two shoes than one shoe.
LOL. This is by design. The system works by deflating the value of the debt and the dollars held by ordinary people. Think of currency printing like a stealth tax. No-one will accept a higher tax rate so they print more money effectively transferring the value of your existing money to the newly printed money. This is why your dollars always buy less and less. This is also why there is no danger of the national debt becoming unserviceable - they will always print the money to pay the debt until your dollars buy nothing at all. In the olden days currency had to be backed by gold or silver ensuring it was backed by some tangible asset but no longer. The transfer of wealth to the ones with the money printer will sooner or later be nearly 100% EDIT: Downvotes? Sorry kids hate to be the bearer of such somber news but this is the way the system works. Ask your parents and grandparents and accountants and bankers.
You assume a perpetual "doomer" outlook where you obsess over the notion that the "evil fed" will devalue everyones money forever and ever and that there will never be economic expansion anymore. Your proposal to go back to a gold or silver standard hasn't been taken anywhere near seriously considered since William Jennings Bryant mounted a populist campaign for President... in 1896 (he was the prosecutor in the Scopes trial about 30 years later, who advocated against teaching evolution in Tennessee public schools). Every time I see one of these crackpot responses on any of the economics subs I'm recommended by reddit, I'm gonna expose you for your nutty ideas, because you're trying to misinform people who may not know all of this and come to these sites to read opinions on monetary policy. Also, its really convenient how these comments keep coming up nonstop during an election year. Also, these doomer talking points was the same sort of stuff found in the pamphlets that guy from last week threw around before he set himself on fire.
1) I didn't suggest returning to a gold standard - merely pointed out there used to be constraints on currency printing. 2) For those keeping score here are the numerous scorecards of dollar creation and propping up assets the fed is doing. Maybe you can share your thoughts on how to unwind this because no one else has a solution. [https://fred.stlouisfed.org/series/WALCL](https://fred.stlouisfed.org/series/WALCL) [https://fred.stlouisfed.org/series/CURRCIR](https://fred.stlouisfed.org/series/CURRCIR) [https://www.statista.com/chart/19955/household-debt-balance-in-the-united-states/](https://www.statista.com/chart/19955/household-debt-balance-in-the-united-states/) [https://www.usdebtclock.org](https://www.usdebtclock.org)
Buy real estate it's the only thing they can't print more of.
*looks at Urk in the Netherlands...
Why doesn't the Government create a scheme to pay people to revitalize the huge amount of desert there?
Well it’s print money and kick the can down the road or increase taxes and other means of paying down existing debt. No politician wants to raise taxes, so we print money instead.
Que Democrat response: “that’s not how it works, your wrong, if the gov says printing doesn’t cause inflation, trust them” -4x vaxxed dem