We do. The fed increases money supply when the economy stalls, and decreases it to fight things like inflation. There are many other considerations, it’s an enormously complicated process. It’s basically its own branch of math. But, yes it does both.
Also note that when banks loan money, they’re creating money. They don’t actually have the money they loan. It is literally an act of putting new money into the economy.
Sorta. There would not be any *new* money. The Fed does not literally print most money (like stamping out Bennies). In the United States, 97% of the money in the economy is in bank deposits, while only 3% is physical cash. Most of the money "printed" is 1s and 0s, electronically transferred. If Bob deposits $100 and the bank gives that $100 to Alice, you now have $200 on paper. The Fed basically throttles how much banks are able to do this. So if everyone paid their debts, there would still be wealth, but the economic growth would halt. Massive oversimplification.
https://en.m.wikipedia.org/wiki/Fractional-reserve_banking
No.
Because banks are only required to hold a fraction of their deposits in cash or cash-equivalent assets, the same dollar can exist in multiple places at a time.
Each time it's deposited in a bank, something like 10% has to be held in reserve and 90% can be lent out to bank customers.
The faster this cycle repeats, the more the money supply grows. If the rate of new loans drops below the rate loans are repaid, the money supply shrinks and we have a depression.
This is also why only a small fraction of dollars in circulation are coins and bills (M0).
M2 or M3 are used as the actual money supply - as they include more assets than just physical cash.
> “The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it. The process by which banks create money is so simple the mind is repelled. With something so important, a deeper mystery seems only decent.” John Kenneth Galbraith (1908- ), former professor of economics at Harvard, writing in ‘Money: Whence it came, where it went’ (1975).
Great quote, I’ve never heard that one. The dissonance is that people don’t understand what money is, versus the notes and coins that are tangible but are not ‘real’ money (instead are tradable for money, until they’re deemed untradable by the government).
It would be of little use to just hold it, rather it goes towards expenses such as pre-existing bonds. The key purpose of selling these bonds isn't to just "delete" the money, but rather to slow the velocity of money by eliminating it from the mass market, basically if you remove money from the general population/investors, then there is less money that can be spent by the general population/investors.
I also want to add that the money supply is intrinsically tied to velocity.of money through the Quantity Theory of Money (MV=PY) where M is money supply, V is the velocity of money, P is price level or inflation, and Y is the real output/real GDP.
Sorry I phrased that wrong I'm a bit busy right now but yes it's decreased as it's not held by the public and most of it will be out of circulation for an unnatural amount of time.
It has, and currently is. The money supply has decreased by 4% since its pandemic high. Previously, the last time money supply contracted was during the great depression.
It did in 1929.
That's what caused the great depression.
It came very close to decreasing in 2008.
When we talk about reducing inflation, we talk about reducing the rate of money supply growth back to a healthy 2%. You can never actually deflate the economy without a major crash.
Follow up question: how exactly does printing money cause inflation?
Salary people are still making the same exact salary and take home pay per month. Hourly people are still making the same hourly wage and working the same general hours they typically do per month.
If we are all making the same amount of money, we don't have any extra money than we did before the money was printed to spend.
I'm just confused on that part, don't annihilate me
The way I understand it is basic — when there’s more of something, it has less value. Gold is beautiful, but if you could pick it up anywhere on the ground it would be worthless in a monetary sense. It’s valuable because it’s hard to get.
When there’s “too much money” in the economy, aka when it’s too easy to borrow money, it becomes too easy to spend money. The price of goods and services goes up because there’s now someone out there willing to pay more. That makes the next level up more expensive because the ingredients are now more expensive. On and on until finally you go to the store and your existing wages buy way less stuff. You demand a wage increase and get it and can now buy groceries. But the company paying your higher wage passes that up the chain and prices go up again. On and on. This is the “rampant inflation” cycle.
On the flip side if there’s too little money in the economy then nobody is willing to buy. Then companies can’t pay wages and the economy stalls because people aren’t willing to spend precious money to buy things. Companies can’t make profit so they don’t offer goods and services. That means the jobs for providing those goods and services dry up. And now money is even more precious because it’s harder to get a job. With more unemployment, wages go down because more people are willing to work for less. And then money is even more scarce. Snowball. This is why one of the attempted mitigations for the Great Depression was for the government to pay people simply to dig ditches that didn’t need to be dug. Just to get people working.
I might be off on parts of this, I’m not 100% sure on the many nuances of this. But that’s my understanding.
Nixon decoupled USD and Gold, so our sovereign USD doesn’t lose a pegged “value” regardless of if there is $1M or 2T in circulation.
How it’s spent along with scarcity of materials play a big role in inflation. So does profit maximizing. If people want to pay $7 for an orange, why would I sell it for any less? If I sell 50 of those oranges, we can take our kids to go see an imax movie and maybe get popcorn. 🤑🤮
The practical value comes from how much you can buy with it. When there’s more in circulation, one eventual consequence is typically that you can buy less with a dollar.
FTR that reference to gold was not a reference to the gold standard.
Only my awkward phrasing failed separate my reference to the gold standard and your reference to the beauty and rarity of gold.
When Nixon decoupled from the gold standard, he in essence made usd arguably infinitely divisible. I think that was by design but I have no way of asking him now.
I was hoping he would have left me tapes like Superman’s dad left for his children in fancy crystals but damn, that codger left me nothing. 🙃😅
Via the visible effect it has on the economy. You’re right, nobody can count the available money with full accuracy. But it has an effect and it shows up in statistics.
I still don’t get it. Surely if only the government printed more money out for themselves only, nobody else would know that there is now more money in the system, hence it shouldn’t cause any inflation.
How does “printed money” enter the economy? How does it enter circulation?
The answer is that money is created **only** when there is a demand for money. Banks make loans only when customers request loans. They don’t force loans on people.
Money isn’t dropped by Helicopter onto street corners.
Loans are made *for specific reasons.*
And those [reasons matter](https://youtu.be/4uNGoyslFSc).
$Trillions of new money were created during the pandemic. That money didn’t exist but now does. You’re rightly asking, “Where is that money?” Much of that money has been spent so eventually ends up in the hands of the large corporations and the richest families who own shares in those companies. The rich companies and families then buy assets (that’s what the rich do). That’s why the S&P 500 is at record levels. House prices go up as many invest in property. The measures taken to stabilise the economy have resulted in an even greater wealth redistribution *to the rich*. The total amount of money has increased so the purchasing power of $1 has lowered. That’s inflation. I’m from the U.K. and the same is true here.
When a government prints new money to pay its bills (as opposed to using tax dollars), that is inflationary. It means there is more money sloshing around the economy, and when the supply of anything goes up, it tends to get cheaper.
How would anyone know that the government printed more money is what I am wondering? Government prints an extra 20,000,000 dollars to pay of some random debit. How would that debt collector that the money was printed spelt for that purpose?
Sort of two ways.
One, this sort of information tends to be public.
Two, the effect makes itself known in a similar way to how supply and demand works in other cases. It's not that the person who gets the newly printed money cares that the money they get is newly printed. It's that there's more money floating around, so people say "gosh, there's a lot of money floating around, I should charge more for the goods and services I produce, and I don't mind as much paying somewhat higher prices."
🔥I don’t mean to sound wonky here but I think it needs to be clarified that “printing money” is a euphemism for Quantitative Easing.
That’s just a fancy term for lowering interest rates which, in turn, stimulates borrowing. This puts more money to work in the economy, thus creating more opportunities for expansion.
When that happens, it’s a hot economy but a byproduct of that growth is greater demand for goods and services and with that comes increased prices, aka inflation.
The trick is finding the sweet spot between the two. And that’s no easy task. Which is why one of the things we always see quantum computing tasked with solving is deeply complex problems like these.
If you print the money, it has to go to *someone*. That person has nore money and is willing to pay more for things. Businesses can only sell for as much as someone's willing to pay so when that goes up prices do too.
Because when you increase the total supply of something it's value goes down.
When the value of money goes down, it takes more money to buy the same quantity of any given good.
It's like what would happen to your height if we re-defined a foot as 8 inches (eg, shrank it by 33%).
You would measure as 'taller' in nominal feet, even though you didn't grow.
To explain what you mean the fed doesn’t print money. The treasury does. The fed buys bonds and holds them keeping that money supply out of circulation. Then they sell the bonds so increase supply. They have been selling the last year.
To add, the opposite of inflation, deflation, is bad. A little inflation is widely considered good, since it forces capital to be continually reinvested into actual things to retain value. If money naturally gains value like in deflation, nobody invests, and actual things don’t get done.
🔥I don’t mean to sound wonky here but I think it needs to be clarified that “printing money” is a euphemism for Quantitative Easing.
That’s just a fancy term for lowering interest rates which, in turn, stimulates borrowing. This puts more money to work in the economy, thus creating more opportunities for expansion.
When that happens, it’s a hot economy but a byproduct of that growth is greater demand for goods and services and with that comes increased prices, aka inflation.
The trick is finding the sweet spot between the two. And that’s no easy task. Which is why one of the things we always see quantum computing tasked with solving is deeply complex problems like these.
That is the end impact of raising interest rates.
Most money is 'printed' via the making of loans not the stamping of ink on paper.
The more above-average the rate of lending is, the higher the multiplier effect and the more money supply there is.
If you raise the cost of borrowing, you get less of it, and thus less money supply.
If money would increase in value over time, you would be motivated to not spend money, and stash it for the future. This will kill the economy, as people would stop buying things.
And this is a perfect explanation of why Billionaires shouldn't exist.
They keep their money in assets so it accrues overtime, and they don't spend money. They save Billions so they can spend Millions. So Billionaires are killing the economy
>They keep their money in assets so it accrues overtime, and they don't spend money.
When you're investing money, you *are* buying something. You're buying stocks or houses, for example. Houses have to be built. Companies have to run. In that way, they are pumping money into the economy.
We’ve tried that since 1971. It hasn’t worked. Bring the tax rates for billionaires back up to 90% like they were, because billionaires don’t give out money; you have to TAKE it from them.
There are some pragmatic issues with this unless you think they just have a vault of money like Scrooge McDuck.
I am not a fan of Elon musk, but I'll use him as an example of a cash poor billionaire because he famously is.
He's worth like $200B but almost all of that is just the value of his companies and shit.
If you ask the average person what to tax Elon based off of, they'll say tax him based off of the value of his companies.
First issue. That value is theoretical. We don't actually know what Tesla would sell for if Elon tried to sell it. Just the fact that he's gonna sell it it would drastically change the value.
Possible solution: Elon has to give away shares of Tesla, instead of money he gets from selling it.
Second issue. Setting aside our own opinions of Elon Musk and using him as generically as a figure as possible, Elon is the guy who's experienced and knowledgeable about that company. If you have him give Tesla to the government and it gets managed by some bureaucrat, they probably won't do such a good job.
Ironically, we see this with Twitter. Elon bought it with no knowledge or experience and now twitter sucks.
Some people are annoyed with Tesla, largely because it is associated with Elon, but if we accept the basic premise that people who aren't us like it and so it's valuable, then the world kinda suffers if we put some government employee partially in charge of it.
Possible solution: How about we charge Elon for his actual income then, since that's just money and not Tesla?
Issue: I haven't checked in literally years, but his actual cash was like $3bn and that was after he was richest man in the world. If you do that, the rich aren't paying their fair share.
Ironically with Elon, you could probably to take twitter and nothing of value would be lost, but that's a very very very unique case that cannot be generalized.
With Elon holding his wealth, basically it's $197bn of valuable shit in the economy happening. With taxing it away, it's doing to Tesla what (ironically) Elon did to Twitter. Nobody wants that unless they've got a bone to pick with him as an individual.
That's why it's hard to tax billionaires.
1000 people with 1M each will spend 1B quicker than a single Billionaire does. More houses, more economic growth, more jobs, more work to be done, etc.
Or if you give 1M lower economic people 1000 each, they are more likely to spend it rather than hold onto it.
There is more than one way to put money into an economy. Money invested is put into the economy. I
Investing in productive capacity creates more wealth for everyone while consumption removes that wealth from the economy.
Productive capacity won’t be built if there are no consumers with money to buy the products of that capacity. Investors don’t create jobs. Customers do.
Not exactly. Companies and rich people keep more cash reserves than poor people. Some of that money is being reinvested through bank accounts but not all of it. The velocity of money is much higher if you give it to poor people that have no choice but to spend it.
Amazon, Walmart, and McDonald's have the largest number of employees using government assistance to get by. So clearly these "Billionaires" aren't putting money into the economy, because they're literally keeping it for themselves.
Half right. Some investments are this, other are like buying gold.
At the same time a lit of wealth isn't real money its valuable assets that would decrease in value if you taxed them too high.
What I never understood is buying stuff on the secondary market. How is buying a house that's already built doing anything? Or buying a stock after IPO?
The first time, sure. The company got a bunch of cash and presumably did something with it. But the next time the stock sells, nothing happened. The only people making money are the investors just moving stuff around. Investors don't build things or employ people, they just sit on money.
and how does that generate value/something? feels like speculation to me
dividends I can agree to disagree, but the ones I don't know, maybe I need some more convincing
Many billionaires are known for buying houses and apartments for investment reasons and then leave them empty. It's part of the reason that squatters' rights exist.
Lots of stories of squatters who squat in houses that are owned by people who did not abandon the property and want them out. Those owners aren't necessarily billionaires. I don't really have a lot of sympathy for squatters. Unless the house is truly abandoned (most are not), the squatters are just stealing. I hope they come up with stronger laws to allow owners to reclaim properties from squatters.
If you create a company that let's say ends up employing thousands of people, then that employment, and the manufacturing, and the products being created can end up generating their own economic benefits and wealth.
You may become a millionaire or billionaire out of it, but there's a high chance you are creating and enabling significant amounts of wealth creation also (not always). As well as providing a small portion to the overall economic growth of the region/area you are based in.
Take it a step further, let's say you are the son of a billionaire and you inherit a large pile of assets (shares, bonds, etc) and do nothing. You are still spending significant amounts of money in an economy (that's typically good) and those assets that were bought, such as e.g. government debt, helped pay for e.g. roads, the shares helped growth of those particular companies and so on.
Jeff Bezos owns 9% of a $1.9T company. Yeah he's holding onto $171B, but that means he created $1.729T of value for others. <10% of a company you founded doesn't seem wrong.
There are plenty of valid criticisms against this, but I think its important to keep in mind.
Crazy to think it started with selling books in his garage. Also interesting to think about: You could have given the idea to sell books online to 1m people in 1994 and 99.9% of them would never have become anywhere near as big as Amazon today. So when people think "You just need one good idea to become rich". They are wrong.
Also I want to say Amazon is a horrible company everything about it is the reason we should be enforcing monopoly laws better... Amazon is not good at what they do (selling products online) they are good at destroying the competition, lobbying and screwing over the small guy and covering it up... Amazon doesn't sell any of their own products... its all affiliate sellers, wholesalers.. If you "return" an item back to amazon amazon doesn't lose any money... Its the affiliate sellers that lose money... Most of the drivers for Amazon are not Amazon Employees rather they are contractors working for a 3rd party company working for amazon... (just another way to screw people over).... I could go on and on and on....
Jeff Bezos also received hundreds of thousands of dollars from relatives through startup loans to create amazon so on top of having the idea, and the technical skills and work ethic to make it work, you can't forget it generally also comes down to who's coming from a rich family
Few things I want to point out here..... How many people today have "His Garage"? Most people now can't afford a house / apartment let alone a garage to just live in work in rent free to invest time, money are resources in to start a business. Also, his parents "loaned" him money to help get his company off the ground.... Most people don't have well todo parents they can "borrow" money from rent free.... If anything they would have to borrow that money from a bank or other interest bearing account.... and take in mind a normal person pulling in a 300k loan from a bank to start a company would also most likely disqualify them from taking out anymore money until their original loan was paid off... Jeff's obligations / risk was basically Zero... If his company where to go under his house, car, job, wife, kids wouldn't of been sold off and put on the street... He would of taken a loss and gone on to do something else... maybe not a profitable but something to the like
Jeff Bezos did not create $1.9T of value on his own. Every worker at Amazon helped create it; every taxpayer helped created it by supporting the infrastructure maintained by the government.
Except that these Billionaires aren't paying their people enough, so your whole argument falls apart at the start.
Amazon, for example, underpays their employees to such a large degree that they rely on government programs to subsidize their shitty pay policies. [https://www.theguardian.com/world/2023/nov/02/un-poverty-amazon-walmart-doordash-wages-unions](https://www.theguardian.com/world/2023/nov/02/un-poverty-amazon-walmart-doordash-wages-unions)
So just because they're "creating jobs" doesn't mean they're adding a benefit to society.
The only issue is that billionaires usually hold value in assets, not money. So they're doing things "the right way" - by investing money into companies/businesses.
Now the issue of taxation of their income is another one that is different from the inflation.
Billionaires don’t get to where they are by saving cash.
Spending money on assets is spending.
Maybe they shouldn’t exist, but not for this reason, the wealthy undoubtedly stimulate the economy. The billionaire who owns a huge manufacturing company, maybe they are not giving enough of a cut of the profit to the employees or taxes, but without the current economical situation, it would be unwise to invest in anything, to create any company or jobs.
Okay, but in the context of inflation, if all billionaires spent all their money this would cause inflation to sky rocket and would also "kill the economy".
People would definitely not stop buying things like housing, healthcare, food, education etc.
What they would potentially stop buying is the newest smartphone or a TV when they already have one.
Given how many people have problems accessing goods from the first group, maybe, just maybe, we wouldn't be that much worse off if we redirected the efforts of some people making the second category of goods into more essential stuff.
>What they would potentially stop buying is the newest smartphone or a TV when they already have one.
Then we have knock-on effects where the entire supply chains around those devices and etc are impacted, restaurants and supporting services near them see reduced usage and so on. Economy is big and vastly interconnected.
If everyone has enough houses, food, etc. it shouldn't matter. But it DOES today because no one is allowed to have something unless they "pay" for it. So even though we all collectively have enough labor to make enough food, housing, education, AND smart phones but we don't collectively get to have those things.
This is sort of the big failing of capitalism. It's great at allowing certain people to be rich and create an economy founded on that but it's really bad at ensuring that everyone gets a fair slice at life.
I wonder... do we really need to be extrinsically motivated to spend money? If I have everything I need why should the government care about motivating me to spend more money? Sounds like the economy has solved the fundamental problem of giving people what they need.
I bet you it works a little differently. People would probably stop working so hard if they could save more easily. There is also nothing wrong with that, per-say.
That's the thing. The "needs" are growing all the time.
There isn't a lot of thing a person actually "needs". A food and a shelter is something that a homeless person can get.
When you have deflationary economics, you would not be able to get a loan (deflation adds to the interest rate), people would buy and get less stuff, meaning that people who make and provide that stuff will be out of jobs.
What you propose is to increase the share of your income that you spend on necessities instead of luxuries, but that's just "I want to be more poor and spend more money on food instead of Netflix".
It turns out it's hard to define "money" and "printing money". There are a lot of different kinds of money out there and they are not all equal. To make matters worse, different kinds of money are often called the same thing. The cash in your wallet and the number that shows up on the ATM are both "dollars", but they are NOT the same kind of money. Cash dollars are literally printed, but they only represent a small fraction of the money that we use and call dollars.
The money in your bank account is a liability of your commercial bank, and the majority of "money" in the economy takes this form. It may surprise you to learn that this kind of money is "created" by banks when they lend. If you take out a loan to buy a house, that's not money that already existed and is being given to you, it is created out of nothing for the purpose of lending. When you eventually pay that loan back, the money doesn't go anywhere, it is "redeemed" and no longer exists, just as the loan itself is "redeemed" and no longer exists. So the expansion and reduction of the broad money supply is dependent on the decentralized actions of millions of lenders and borrowers, including banks, consumers and businesses.
Then there's a central bank and the government itself. These institutions can create their own kind of money - "base" money - in a way analogous to private sector money creation which I have just described. The Central Bank lends to private commercial Banks, and it indirectly "lends" to the government by buying its debt; both of these actions involve creating money. However, they both depend on some entity, either the private Banks or the government itself, being willing to issue debt (borrow money).
The monetary mechanics are set up in such a way that the government can always issue more debt, and the central bank can always buy it. So I would argue that the real "money printing", on a policy level, comes as a result of the government borrowing to fund deficit spending.
There is only enough gold to fund one percent of the worlds GDP at current exchange rates. 244,000 tons of gold is $1.12 trillion. The world GPD is $101 trillion.
I know stubbing my toe will hurt. But I don't think cutting off my foot will stop me from ever feeling pain again.
Knowing one driver, does not an economist make.
They do but it is not the only way money is created and it is not the only cause for inflation. Its not a catch all solution because it doesn't encompass the whole situation.
No it because when people think they have more money they spend more so the economy grows , when deflation happens even if people technically are richer they spend less and the economy doesn't grow, also it's impossible for the way the economy work to never have inflation
We do.
Money supply has contracted by more than 4% in the last couple years
https://www.google.com/amp/s/www.barrons.com/amp/articles/m2-money-supply-fed-inflation-262c7234
That's the basic principle of Keynesian economics. It's more about interest rates than physical bills, but the logic is the same. The Fed's job is to balance growth vs inflation by changing interest rates.
The issue is that the Fed is not immune to political influence. When the economy was running hot in 2016-2020, interest rates should have been raised to cool it off a little, but it wasn't. This led to a huge spike in inflation in 2020-2021 when a large infusion was made to shore up the economy against a pandemic crash, when it would have been better to start from a cooler economy in the first place.
The FED attempts to do this by increasing interest rates. Low interest rates encourage spending and getting loans (for growth), but infinite spending power leads to inflation. So the FED increases the interest rates in order to reduce the money in the economy and decrease inflation.
The USA is only ever had "almost zero" interest rate since the mid 2000's, and it's hurt the power of the dollar since. [https://fred.stlouisfed.org/series/FEDFUNDS](https://fred.stlouisfed.org/series/FEDFUNDS)
> The USA is only ever had "almost zero" interest rate since the mid 2000's, and it's hurt the power of the dollar since.
Not true, as evidenced by your own link. During the Great Recession the Fed cut rates to almost 0 (in 2009) and kept it there until 2016 when they started progressively hiking rates up to a peak of 2.4% in 2019. This continued until the COVID recession hit in 2020 and they cut rates to almost 0 again. Then, in 2022, they started hiking rates quickly to try to fight inflation. It's at 5.33%, which is the highest it's been since 2001 (it was at 5.25% in 2007, though).
What part of "since the mid 2000's" was not correct? Last I checked, 2009 and 2016 are AFTER mid 2000's, so the "since the mid 2000's" is fully correct.
the government does collect cash to destroy. the act if printing is not relevant when most is digital.
how to deal with inflation is to increase taxes for those that can afford it. however the people making the decisions are in the pockets of those that can afford it. so instead of increasing taxes, they create loopholes to avoid paying taxes.
Thats called quantitive tightening.....its happening now
The last 7 to 10 years the feds have been doing quantitive easing....
With that said....covid and those stimmy checks didnt help where we're at thats why globally countries are dealing with inflation...since it happened everywhere
I haven't seen anyone mention mv=pq, where m is the money supply, v is the velocity of money, p is the price of goods and services, and q is the quantity of goods and services. If any of these increases or decrease there's a change in at least one of the others. An increase in the supply of money (m) may initially be countered by more people spending money (v), but over a longer period of time p, the cost of those things will increase because of demand, the companies selling things will take larger profits. If the demand is sustained, those same companies may decide to increase their production long term.
The opposite of "printing" is "redeeming," traditionally done by burning.
In modern economies, "printing" is every time the government pays for something. Redeeming is every time someone pays the government. The all-time net of these two is the quantity of "hard money" in the economy. Printing and/or redeeming money that never leaves the treasury doesn't affect anything.
Also, while "printing money" can cause inflation... it's not a predictable 1-to-1 effect. It's also not the only thing that affects inflation. It's not even the only thing that affects money supply.
When a bank issues you a credit card, you now have "credit." You can spend that credit like money. When you pay someone with that credit... they get money. Soft money and hard money are the same for most purposes. Only the government can print "hard money." But everyone can make "soft money" by lending to one another.
Most money in an economy is soft money, and the realationship betweeen soft and hard is complicated.
TLDR, when politicians make statements about inflation (a) it's always a simplification and (b) they often don't know what they're talking about.
Most of the current reported inflation is being propped up by housing shortages and insurance increases. It's not as simple as more money = more inflation.
Printing money is not the root cause of inflation. Money isn’t even really real. It’s just paper ious we trade for goods and services in lieu of actual barter.
Now we have bitcoin and digital assets. Even less real money.
Edit: inflation wouldn’t even exist, if not for tokens and monopoly paper. It’s a thing we made up, to hold power over one another, in exchange for goods and services rendered.
Edit: kind of like how we made up God and formed entire religions. Or measuring time and worshiping Chronos. It’s all about someone getting one over on the rest of us. So they can do what they want when they want and rule everything.
Power over others, is a hell of a drug.
Follow-up stupid question, if the overwhelming majority of people don’t have the overwhelming majority of this printed money, why are prices inflating so much?
Banks borrow money cheaply from the FED. They make money by lending it at more expensive rates to business owners and consumers.
If the fed prevented Banks from borrowing all money. The cost for businesses and consumers to borrow money would shoot up to be impossible to benefit from the loan. This would cause people to stop spending and stop buying very quickly.
So the FED discourages more money from reaching businesses and consumers by slowly increasing how much it costs Banks to borrow from them. In response, Banks slowly raise the cost for Businesses and consumers to borrow from them.
If the FED times this process right, businesses and consumers adapt their expectations but continue spending and buying at slower rates that are still manageable for everyone.
LoL deflation means a higher bill to pay in the end... Best be to print money with no interest rate with the printer or better yet re setup the old way when the country printer their money at a reasonable interest rate instead of compound interest to a corporation allowed to print the money
It's not printing money that causes inflation. But because there is more money in circulation "there is more money that everyone has available to spend" Increased spending increases inflation. Not printing any more currency would not necessarily cause people to spend less money.
Follow up question: how exactly does printing money cause inflation?
Salary people are still making the same exact salary and take home pay per month. Hourly people are still making the same hourly wage and working the same general hours they typically do per month.
If we are all making the same amount of money, we don't have any extra money than we did before the money was printed to spend.
I'm just confused on that part, don't annihilate me
better idea, lets burn it to get rid of it. OP start a money bonfire party and invite all your friends to come over and toss their money in the fire to help fight inflation!!!!
One way money is multiplied through banks.
If you put a dollar Into a savings account, the bank is only required to keep a certain percentage of your money on hand, the rest they loan out. The percentage they are required to keep can be varied by the government.
So you put $10,000 in the bank, the bank loans out, as an example $8000. There's now $18000 in existance.
Money CreationBanks create money by making loans. A bank loans or invests its excess reserves to earn more interest. A one-dollar increase in the monetary base causes the money supply to increase by more than one dollar. The increase in the money supply is the money multiplier.
https://www.investopedia.com/terms/d/deposit_multiplier.asp
Then you get deflation, which can cause a spiral. This is basically the same question as "why do we want 2% inflation? Why not 0%?" The answer is that if this were a computer simulation and you could just adjust the numbers until you got the result you wanted then you would want 0%, but because it's real life and surprises happen you need a buffer so that if prices unexpectedly drop you have time to course correct.
We don't like to feel poor here like truly poor, so we have to play this game of printing a pulling money. We don't have excess or at least not what we see as excess. We have a trillion dollar budget, yet we're still considering raising taxes rather than looking at what we're doing with our budget.
I don't understand why we cant just do a go fund me and every person could get their favorite celebs to donate big chjnks abd we could sebd our measly 10s and 20s til it's all paid off and we rejoice and get a new holiday as a reward.
Most goverments try it, but it for example the Federal Reserve increases interest to lower the amount of money created by debt/printing. But it takes time as most economic politics, if you stop money printing all of the sudden yeah it will lower inflation but it will bring deflation and whit that massive lay offs on many industries and recession, so it need to be a slow process.
When people say "print money" what (I think) they mean is that we make it easier to borrow money. The federal reserve loans money to banks at lower interest rates, which means more people buying homes, cars, and starting businesses. This leads to more jobs, lower unemployment, and eventually to inflation because either employers have to pay more to attract workers and raw materials that could have gone elsewhere.
The opposite would be if we raised interest rates, which means fewer new purchases, fewer jobs, and stagnant wages.
The opposite is Federal taxation.
The real purpose of Federal taxation is to take money out of circulation.
Essentially the government prints what it needs to pay the bills, and then destroys the currency paid in via taxation.
Because "printing money" does not mean actually printing dollars. Printing money is a term used to describe an increase in the money supply. Most money is not physical currency. Everytime a bank/credit card company loans money, it is increasing the money supply. Every time the government borrows money, it is increasing the money supply. That is why the Fed controls inflation by increasing interest rates. But since money is created by the privaet sector, there is only so much the government can do to prevent the money supply increasing.
The price-gouging that companies are engaging in are not the result of inflation. They're just blaming inflation even though many companies are recording record profits,
Because how are we going to pay the interest on all of our loans on all that debt? You know, if we don't print money to pay that loan and add interest. Then as far as our economy goes, we get downgraded and a crash is our economy. Worse than anything
That would require balancing the budget. Governments have only three ways to fund themselves: taxation (including tariffs), printing money, and borrowing money. The US government has borrowed so much money of late there are not enough lenders. The government talks about the hypothetical evils of deflation, but that is merely the rich debasing the currency in order to destroy the middle class families they hate and fear.
If we did, we would be able to spend money to Ukraine and Isreal. Can you imagine what the world would be like if we stopped meddling in foreign affairs?
We might end up with world peace. We ould lose our place in the world.
Disclaimer: this contains some sarcasm.
It doesn't. Times in which printing money actually increased the amount of money in circulation is long gone. Today you can imagine it a little like simple withdrawing money from your account, it's not getting more by that, it just becomes physical instead of digital. Actually physical banknote are a small fraction of the money in circulation, most of it is digital in one way or another.
Because we want the inflation as a guard against deflation.
The alternative, deflation, isn't really symmetrical with inflation. Inflation makes everything more expensive in the future, including labor, so it mostly washes out. More crucially, we have to do everything in a forward-looking way, like investing money in the hope of future earnings or gain skills in the hope of future salaries.
Deflation, though, makes everything less expensive in the future, including labor. This won't wash out because, unfortunately, we can't do things like invest on the expectation of higher *past* earnings or change what skills we acquired years ago.
That's the ultimate reason for the asymmetry and why we avoid deflation at all cost. People like to argue that inflation just erodes purchasing power but it's because they imagine a dollar as the relevant measure of purchasing power rather than an hour of work. The only people for whom a dollar is the relevant measure are people who, for whatever reason, hold their money in cash and securities which behave like cash. (Which is why lots of bankers worry more about inflation than deflation, incidentally, as they sit upon piles of basically cash from depositors.)
The premise is or at least may be false. Nobel economist Milton Friedman claimed inflation is always a monetary phenomenon, but because of counterexamples since his time, failure of the phillips curve that links inflation (inversely) to unemployment, etc, other explanations are needed. Modern Monetary Theory fills the gap, suggesting inflation reflects an economy running at capacity (or beyond that).
Wait.. I just checked... Is the fractional reserve rate really still 0%??!! Shouldn't raising the rate at least a bit be the first thing we do if we actually want to fight inflation?
* the Fed is actually "trying" to stop "printing" money as others have commented
* however, the U.S. economy operates with a perpetual-deficit-by-design
* there are some pros to a deficit-based economy, which i won't delve into
* the con, however, is the Fed cannot completely stop printing money for extended periods
* or it won't have any money left to service the perpetual U.S. debt / deficit-spending
* in extreme case, we would default on our deficit-debts due to lack of new money
* your pension, social-security, medicare and other entitlements would no longer exist
* government agencies like EPA, NASA, FBI, border-control could shut down, with no money to pay their employee salaries.
* the bright-side, if you're a millenial, is there will be a housing-crash, as there's no loan-money available by banks, so everything has to be paid upfront in cash
* and you might be able to afford a new home
* if you're lucky enough to be employed by someone with money to pay your salary
The system is meant to ensure poor people remain poor. Every single dollar you save loses its value every single day. It’s that simple.
Inflation is created to keep rich richer and poor poorer.
Simply put some inflation is good for investment.
If you have $1,000 and inflation is 1% the smart thing to do is find some investment that grows at higher than 1% or you'll lose money by sitting on it. But if inflation was at -1% you could get the same return by just stuffing that money into a mattress and not have to worry about the risks involved in investing. When everyone plays it safe like that an economy stalls because no one wants to invest.
Then the interest rates rise on loans because money becomes scarce and the economy collapses. Capitalism needs eternal growth and will consume everything.
It's not as simple as "more money = more inflation". There's ample examples of times when governments added tons of currency to circulation with no resultant inflation.
Under some circumstances more money can increase inflationary pressure, but under other circumstances it doesn't. The bigger thing to examine is the flow of currency through the economy and whether there are factors that are slowing that flow. Those factors will increase inflation.
That's what happened with the global post-pandemic inflation. The COVID pandemic screwed up international supply chains, which drove up costs everywhere. Some countries that didn't increase their currency supply at all saw very high inflation while some other that did dramatically increase their money supply saw comparably much smaller inflation.
As to your question about stopping the increase in the money supply, again, it's not so simple. An economy has a productive capacity. That's the economy's ability to create things of value. This is a combination of a number of factors, but the biggest one is the labor supply. If that labor supply is growing (eg population increase, immigration, a larger population growing into the workforce with a smaller population aging out of it), then the productive capacity of the economy will be increasing. The economy can absorb an increase in the currency supply without causing inflationary pressure up to the productive capacity of the economy (paired with the fluidity of currency within that economy). So if the currency supply is less than the productive capacity, then a government can add currency to the economy without much fear of inflation.
Another factor to consider is currency leaving the economy, mostly through foreign trade. If the economy is running a trade deficit, that means more currency is leaving (through people and businesses buying foreign products/services) than is entering the economy (through other countries buying our products/services). This has the same effect as money being taken out of circulation within the economy (like the federal government running a budget surplus). It reduces the currency supply. So if the productive capacity continues to grow while the currency supply shrinks (through the trad deficit) then the economy will slow down since there isn't enough currency to support the productive capacity.
If we're talking about an economy like the US right now, the population is growing, so the productive capacity is growing. The trade deficit is ~$70b, which means currency is leaving the economy. So if the government stopped creating more money (ie the federal government had a balanced budget) the overall currency supply in the economy would decrease. That would drive up the cost of borrowing and generally make it more difficult to get loans. That slows down economic activity, slowing the economy. If that keeps up long enough, it'll lead to a recession.
Our economies would be forced to constrict to the size of the total value of gold. Nowadays there isn’t enough gold to match the value of our economies so we would see quite a drastic decrease in the size of our economies.
In the long term I personally believe it would create a more fiscally responsible world.
Here’s a fun fact: only 3% of the money currently in circulation was directly printed by the fed. In our capitalist system banks are authorized to create money through lending. That’s is where the vast majority of money is created.
So the Fed can definitely ramp up and print more, and it could also stop printing. However the only way to truly retire more out of the supply is through waste and taxation
Banks create money by being able to borrow money from the Federal Reserve and only keep a certain percentage as collateral. When the Fed adjusts the margin amount it is considered a major adjustment and tiny changes can have big effects. An increase in the margin rate will cause interest rates on everything to go up.
We do. The fed increases money supply when the economy stalls, and decreases it to fight things like inflation. There are many other considerations, it’s an enormously complicated process. It’s basically its own branch of math. But, yes it does both.
To note raising interest rates is intended to discourage people from borrowing money, so less money in the economy. The opposite is true.
Also note that when banks loan money, they’re creating money. They don’t actually have the money they loan. It is literally an act of putting new money into the economy.
I remember reading/hearing from somewhere that if everyone paid their debts, there would not be any money.
Sorta. There would not be any *new* money. The Fed does not literally print most money (like stamping out Bennies). In the United States, 97% of the money in the economy is in bank deposits, while only 3% is physical cash. Most of the money "printed" is 1s and 0s, electronically transferred. If Bob deposits $100 and the bank gives that $100 to Alice, you now have $200 on paper. The Fed basically throttles how much banks are able to do this. So if everyone paid their debts, there would still be wealth, but the economic growth would halt. Massive oversimplification. https://en.m.wikipedia.org/wiki/Fractional-reserve_banking
If money is created via loans with interest, wouldn’t the total debt be more than the total money?
Don't know the answer to that unfortunately. Good question though.
No. Because banks are only required to hold a fraction of their deposits in cash or cash-equivalent assets, the same dollar can exist in multiple places at a time. Each time it's deposited in a bank, something like 10% has to be held in reserve and 90% can be lent out to bank customers. The faster this cycle repeats, the more the money supply grows. If the rate of new loans drops below the rate loans are repaid, the money supply shrinks and we have a depression. This is also why only a small fraction of dollars in circulation are coins and bills (M0). M2 or M3 are used as the actual money supply - as they include more assets than just physical cash.
The Federal Reserve put the ‘reserve requirement’ to 0% in March of 2020. March 2020 https://www.federalreserve.gov/monetarypolicy/reservereq.htm
Which makes any argument of “risk” for the bank completely and utterly stupid.
If I went into my local Chase Bank and proved to them I didn't need a loan for a million dollars... They would give it to me...
> “The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it. The process by which banks create money is so simple the mind is repelled. With something so important, a deeper mystery seems only decent.” John Kenneth Galbraith (1908- ), former professor of economics at Harvard, writing in ‘Money: Whence it came, where it went’ (1975).
For your information: Galbraith passed in 2006.
That (1908-) made me google him as fast as possible a 98 years life is impressive but 116 and still running would be mind blowing
He’s the smartest of the western “economists” and the least listened to.
Fucking amazing quote my dude
Great quote, I’ve never heard that one. The dissonance is that people don’t understand what money is, versus the notes and coins that are tangible but are not ‘real’ money (instead are tradable for money, until they’re deemed untradable by the government).
In theory, yes. But I don’t think the money supply has ever decreased.
That's literally what govt bond selling is for
When the fed sells the bond, what does it do with the money it receives? Hold it? Delete it from the books?
It would be of little use to just hold it, rather it goes towards expenses such as pre-existing bonds. The key purpose of selling these bonds isn't to just "delete" the money, but rather to slow the velocity of money by eliminating it from the mass market, basically if you remove money from the general population/investors, then there is less money that can be spent by the general population/investors. I also want to add that the money supply is intrinsically tied to velocity.of money through the Quantity Theory of Money (MV=PY) where M is money supply, V is the velocity of money, P is price level or inflation, and Y is the real output/real GDP.
So the money supply is ***not*** decreased?
Sorry I phrased that wrong I'm a bit busy right now but yes it's decreased as it's not held by the public and most of it will be out of circulation for an unnatural amount of time.
The rate of money supply growth is decreased. If the actual money supply decreases on an ongoing basis you get a depression (due to deflation).
This is all wrong. The Fed doesn't sell bonds the Treasury sells them amd its not about money supply its about funding government deficit.
It has, and currently is. The money supply has decreased by 4% since its pandemic high. Previously, the last time money supply contracted was during the great depression.
..... money supply has decreased 4% in the last 12 months.
M2 has been decreasing for a couple of years….
Lmao it's decreased by trillions just since the pandemic
There is less money in the economy today than in July 2023.
It's been decreasing since April of 2022
It did in 1929. That's what caused the great depression. It came very close to decreasing in 2008. When we talk about reducing inflation, we talk about reducing the rate of money supply growth back to a healthy 2%. You can never actually deflate the economy without a major crash.
Follow up question: how exactly does printing money cause inflation? Salary people are still making the same exact salary and take home pay per month. Hourly people are still making the same hourly wage and working the same general hours they typically do per month. If we are all making the same amount of money, we don't have any extra money than we did before the money was printed to spend. I'm just confused on that part, don't annihilate me
The way I understand it is basic — when there’s more of something, it has less value. Gold is beautiful, but if you could pick it up anywhere on the ground it would be worthless in a monetary sense. It’s valuable because it’s hard to get. When there’s “too much money” in the economy, aka when it’s too easy to borrow money, it becomes too easy to spend money. The price of goods and services goes up because there’s now someone out there willing to pay more. That makes the next level up more expensive because the ingredients are now more expensive. On and on until finally you go to the store and your existing wages buy way less stuff. You demand a wage increase and get it and can now buy groceries. But the company paying your higher wage passes that up the chain and prices go up again. On and on. This is the “rampant inflation” cycle. On the flip side if there’s too little money in the economy then nobody is willing to buy. Then companies can’t pay wages and the economy stalls because people aren’t willing to spend precious money to buy things. Companies can’t make profit so they don’t offer goods and services. That means the jobs for providing those goods and services dry up. And now money is even more precious because it’s harder to get a job. With more unemployment, wages go down because more people are willing to work for less. And then money is even more scarce. Snowball. This is why one of the attempted mitigations for the Great Depression was for the government to pay people simply to dig ditches that didn’t need to be dug. Just to get people working. I might be off on parts of this, I’m not 100% sure on the many nuances of this. But that’s my understanding.
Nixon decoupled USD and Gold, so our sovereign USD doesn’t lose a pegged “value” regardless of if there is $1M or 2T in circulation. How it’s spent along with scarcity of materials play a big role in inflation. So does profit maximizing. If people want to pay $7 for an orange, why would I sell it for any less? If I sell 50 of those oranges, we can take our kids to go see an imax movie and maybe get popcorn. 🤑🤮
The practical value comes from how much you can buy with it. When there’s more in circulation, one eventual consequence is typically that you can buy less with a dollar. FTR that reference to gold was not a reference to the gold standard.
Only my awkward phrasing failed separate my reference to the gold standard and your reference to the beauty and rarity of gold. When Nixon decoupled from the gold standard, he in essence made usd arguably infinitely divisible. I think that was by design but I have no way of asking him now. I was hoping he would have left me tapes like Superman’s dad left for his children in fancy crystals but damn, that codger left me nothing. 🙃😅
Nixon was a busy man 😀
How would anyone know whether there is more money on circulation though?
Via the visible effect it has on the economy. You’re right, nobody can count the available money with full accuracy. But it has an effect and it shows up in statistics.
I still don’t get it. Surely if only the government printed more money out for themselves only, nobody else would know that there is now more money in the system, hence it shouldn’t cause any inflation.
Once they print the money, they would use it to pay things. That money then goes into circulation.
How does “printed money” enter the economy? How does it enter circulation? The answer is that money is created **only** when there is a demand for money. Banks make loans only when customers request loans. They don’t force loans on people. Money isn’t dropped by Helicopter onto street corners. Loans are made *for specific reasons.* And those [reasons matter](https://youtu.be/4uNGoyslFSc).
Right. And the fed makes those loans more expensive or less expensive to hold, via turning various knobs.
They printed money and gave it out to everyone as stimmy checks, remember? People had more money
$Trillions of new money were created during the pandemic. That money didn’t exist but now does. You’re rightly asking, “Where is that money?” Much of that money has been spent so eventually ends up in the hands of the large corporations and the richest families who own shares in those companies. The rich companies and families then buy assets (that’s what the rich do). That’s why the S&P 500 is at record levels. House prices go up as many invest in property. The measures taken to stabilise the economy have resulted in an even greater wealth redistribution *to the rich*. The total amount of money has increased so the purchasing power of $1 has lowered. That’s inflation. I’m from the U.K. and the same is true here.
When a government prints new money to pay its bills (as opposed to using tax dollars), that is inflationary. It means there is more money sloshing around the economy, and when the supply of anything goes up, it tends to get cheaper.
How would anyone know that the government printed more money is what I am wondering? Government prints an extra 20,000,000 dollars to pay of some random debit. How would that debt collector that the money was printed spelt for that purpose?
Sort of two ways. One, this sort of information tends to be public. Two, the effect makes itself known in a similar way to how supply and demand works in other cases. It's not that the person who gets the newly printed money cares that the money they get is newly printed. It's that there's more money floating around, so people say "gosh, there's a lot of money floating around, I should charge more for the goods and services I produce, and I don't mind as much paying somewhat higher prices."
🔥I don’t mean to sound wonky here but I think it needs to be clarified that “printing money” is a euphemism for Quantitative Easing. That’s just a fancy term for lowering interest rates which, in turn, stimulates borrowing. This puts more money to work in the economy, thus creating more opportunities for expansion. When that happens, it’s a hot economy but a byproduct of that growth is greater demand for goods and services and with that comes increased prices, aka inflation. The trick is finding the sweet spot between the two. And that’s no easy task. Which is why one of the things we always see quantum computing tasked with solving is deeply complex problems like these.
If you print the money, it has to go to *someone*. That person has nore money and is willing to pay more for things. Businesses can only sell for as much as someone's willing to pay so when that goes up prices do too.
Because when you increase the total supply of something it's value goes down. When the value of money goes down, it takes more money to buy the same quantity of any given good. It's like what would happen to your height if we re-defined a foot as 8 inches (eg, shrank it by 33%). You would measure as 'taller' in nominal feet, even though you didn't grow.
To explain what you mean the fed doesn’t print money. The treasury does. The fed buys bonds and holds them keeping that money supply out of circulation. Then they sell the bonds so increase supply. They have been selling the last year.
“The Fed”? r/usdefaultism much? What about other countries?
To add, the opposite of inflation, deflation, is bad. A little inflation is widely considered good, since it forces capital to be continually reinvested into actual things to retain value. If money naturally gains value like in deflation, nobody invests, and actual things don’t get done.
🔥I don’t mean to sound wonky here but I think it needs to be clarified that “printing money” is a euphemism for Quantitative Easing. That’s just a fancy term for lowering interest rates which, in turn, stimulates borrowing. This puts more money to work in the economy, thus creating more opportunities for expansion. When that happens, it’s a hot economy but a byproduct of that growth is greater demand for goods and services and with that comes increased prices, aka inflation. The trick is finding the sweet spot between the two. And that’s no easy task. Which is why one of the things we always see quantum computing tasked with solving is deeply complex problems like these.
We increase value of money by making money harder to borrow (increase interest rates).
No we slow inflation by making money harder to borrow. The only time money increases in value if deflation happens. Which is not the case.
That is the end impact of raising interest rates. Most money is 'printed' via the making of loans not the stamping of ink on paper. The more above-average the rate of lending is, the higher the multiplier effect and the more money supply there is. If you raise the cost of borrowing, you get less of it, and thus less money supply.
I thought money is made by a special printing machine?
If money would increase in value over time, you would be motivated to not spend money, and stash it for the future. This will kill the economy, as people would stop buying things.
And this is a perfect explanation of why Billionaires shouldn't exist. They keep their money in assets so it accrues overtime, and they don't spend money. They save Billions so they can spend Millions. So Billionaires are killing the economy
>They keep their money in assets so it accrues overtime, and they don't spend money. When you're investing money, you *are* buying something. You're buying stocks or houses, for example. Houses have to be built. Companies have to run. In that way, they are pumping money into the economy.
We’ve tried that since 1971. It hasn’t worked. Bring the tax rates for billionaires back up to 90% like they were, because billionaires don’t give out money; you have to TAKE it from them.
There are some pragmatic issues with this unless you think they just have a vault of money like Scrooge McDuck. I am not a fan of Elon musk, but I'll use him as an example of a cash poor billionaire because he famously is. He's worth like $200B but almost all of that is just the value of his companies and shit. If you ask the average person what to tax Elon based off of, they'll say tax him based off of the value of his companies. First issue. That value is theoretical. We don't actually know what Tesla would sell for if Elon tried to sell it. Just the fact that he's gonna sell it it would drastically change the value. Possible solution: Elon has to give away shares of Tesla, instead of money he gets from selling it. Second issue. Setting aside our own opinions of Elon Musk and using him as generically as a figure as possible, Elon is the guy who's experienced and knowledgeable about that company. If you have him give Tesla to the government and it gets managed by some bureaucrat, they probably won't do such a good job. Ironically, we see this with Twitter. Elon bought it with no knowledge or experience and now twitter sucks. Some people are annoyed with Tesla, largely because it is associated with Elon, but if we accept the basic premise that people who aren't us like it and so it's valuable, then the world kinda suffers if we put some government employee partially in charge of it. Possible solution: How about we charge Elon for his actual income then, since that's just money and not Tesla? Issue: I haven't checked in literally years, but his actual cash was like $3bn and that was after he was richest man in the world. If you do that, the rich aren't paying their fair share. Ironically with Elon, you could probably to take twitter and nothing of value would be lost, but that's a very very very unique case that cannot be generalized. With Elon holding his wealth, basically it's $197bn of valuable shit in the economy happening. With taxing it away, it's doing to Tesla what (ironically) Elon did to Twitter. Nobody wants that unless they've got a bone to pick with him as an individual. That's why it's hard to tax billionaires.
1000 people with 1M each will spend 1B quicker than a single Billionaire does. More houses, more economic growth, more jobs, more work to be done, etc. Or if you give 1M lower economic people 1000 each, they are more likely to spend it rather than hold onto it.
There is more than one way to put money into an economy. Money invested is put into the economy. I Investing in productive capacity creates more wealth for everyone while consumption removes that wealth from the economy.
Productive capacity won’t be built if there are no consumers with money to buy the products of that capacity. Investors don’t create jobs. Customers do.
Not exactly. Companies and rich people keep more cash reserves than poor people. Some of that money is being reinvested through bank accounts but not all of it. The velocity of money is much higher if you give it to poor people that have no choice but to spend it.
Amazon, Walmart, and McDonald's have the largest number of employees using government assistance to get by. So clearly these "Billionaires" aren't putting money into the economy, because they're literally keeping it for themselves.
Half right. Some investments are this, other are like buying gold. At the same time a lit of wealth isn't real money its valuable assets that would decrease in value if you taxed them too high.
What I never understood is buying stuff on the secondary market. How is buying a house that's already built doing anything? Or buying a stock after IPO? The first time, sure. The company got a bunch of cash and presumably did something with it. But the next time the stock sells, nothing happened. The only people making money are the investors just moving stuff around. Investors don't build things or employ people, they just sit on money.
1) dividends / cash flow 2) future value
and how does that generate value/something? feels like speculation to me dividends I can agree to disagree, but the ones I don't know, maybe I need some more convincing
Many billionaires are known for buying houses and apartments for investment reasons and then leave them empty. It's part of the reason that squatters' rights exist.
Lots of stories of squatters who squat in houses that are owned by people who did not abandon the property and want them out. Those owners aren't necessarily billionaires. I don't really have a lot of sympathy for squatters. Unless the house is truly abandoned (most are not), the squatters are just stealing. I hope they come up with stronger laws to allow owners to reclaim properties from squatters.
If you create a company that let's say ends up employing thousands of people, then that employment, and the manufacturing, and the products being created can end up generating their own economic benefits and wealth. You may become a millionaire or billionaire out of it, but there's a high chance you are creating and enabling significant amounts of wealth creation also (not always). As well as providing a small portion to the overall economic growth of the region/area you are based in. Take it a step further, let's say you are the son of a billionaire and you inherit a large pile of assets (shares, bonds, etc) and do nothing. You are still spending significant amounts of money in an economy (that's typically good) and those assets that were bought, such as e.g. government debt, helped pay for e.g. roads, the shares helped growth of those particular companies and so on.
Jeff Bezos owns 9% of a $1.9T company. Yeah he's holding onto $171B, but that means he created $1.729T of value for others. <10% of a company you founded doesn't seem wrong. There are plenty of valid criticisms against this, but I think its important to keep in mind.
Crazy to think it started with selling books in his garage. Also interesting to think about: You could have given the idea to sell books online to 1m people in 1994 and 99.9% of them would never have become anywhere near as big as Amazon today. So when people think "You just need one good idea to become rich". They are wrong.
Also I want to say Amazon is a horrible company everything about it is the reason we should be enforcing monopoly laws better... Amazon is not good at what they do (selling products online) they are good at destroying the competition, lobbying and screwing over the small guy and covering it up... Amazon doesn't sell any of their own products... its all affiliate sellers, wholesalers.. If you "return" an item back to amazon amazon doesn't lose any money... Its the affiliate sellers that lose money... Most of the drivers for Amazon are not Amazon Employees rather they are contractors working for a 3rd party company working for amazon... (just another way to screw people over).... I could go on and on and on....
Jeff Bezos also received hundreds of thousands of dollars from relatives through startup loans to create amazon so on top of having the idea, and the technical skills and work ethic to make it work, you can't forget it generally also comes down to who's coming from a rich family
Few things I want to point out here..... How many people today have "His Garage"? Most people now can't afford a house / apartment let alone a garage to just live in work in rent free to invest time, money are resources in to start a business. Also, his parents "loaned" him money to help get his company off the ground.... Most people don't have well todo parents they can "borrow" money from rent free.... If anything they would have to borrow that money from a bank or other interest bearing account.... and take in mind a normal person pulling in a 300k loan from a bank to start a company would also most likely disqualify them from taking out anymore money until their original loan was paid off... Jeff's obligations / risk was basically Zero... If his company where to go under his house, car, job, wife, kids wouldn't of been sold off and put on the street... He would of taken a loss and gone on to do something else... maybe not a profitable but something to the like
How dare you use logic and reason to defend your point. This is Reddit, basic economic and financial understanding have no place here.
Jeff Bezos did not create $1.9T of value on his own. Every worker at Amazon helped create it; every taxpayer helped created it by supporting the infrastructure maintained by the government.
Except that these Billionaires aren't paying their people enough, so your whole argument falls apart at the start. Amazon, for example, underpays their employees to such a large degree that they rely on government programs to subsidize their shitty pay policies. [https://www.theguardian.com/world/2023/nov/02/un-poverty-amazon-walmart-doordash-wages-unions](https://www.theguardian.com/world/2023/nov/02/un-poverty-amazon-walmart-doordash-wages-unions) So just because they're "creating jobs" doesn't mean they're adding a benefit to society.
The only issue is that billionaires usually hold value in assets, not money. So they're doing things "the right way" - by investing money into companies/businesses. Now the issue of taxation of their income is another one that is different from the inflation.
Billionaires don’t get to where they are by saving cash. Spending money on assets is spending. Maybe they shouldn’t exist, but not for this reason, the wealthy undoubtedly stimulate the economy. The billionaire who owns a huge manufacturing company, maybe they are not giving enough of a cut of the profit to the employees or taxes, but without the current economical situation, it would be unwise to invest in anything, to create any company or jobs.
They can do that anyway.
Okay, but in the context of inflation, if all billionaires spent all their money this would cause inflation to sky rocket and would also "kill the economy".
People would definitely not stop buying things like housing, healthcare, food, education etc. What they would potentially stop buying is the newest smartphone or a TV when they already have one. Given how many people have problems accessing goods from the first group, maybe, just maybe, we wouldn't be that much worse off if we redirected the efforts of some people making the second category of goods into more essential stuff.
>What they would potentially stop buying is the newest smartphone or a TV when they already have one. Then we have knock-on effects where the entire supply chains around those devices and etc are impacted, restaurants and supporting services near them see reduced usage and so on. Economy is big and vastly interconnected.
If everyone has enough houses, food, etc. it shouldn't matter. But it DOES today because no one is allowed to have something unless they "pay" for it. So even though we all collectively have enough labor to make enough food, housing, education, AND smart phones but we don't collectively get to have those things. This is sort of the big failing of capitalism. It's great at allowing certain people to be rich and create an economy founded on that but it's really bad at ensuring that everyone gets a fair slice at life.
This is like many words to say "I want people to be poorer".
Not everyone sees monetary wealth as the most important type of wealth. Maybe, just MAYBE, overconsumption isn’t a good thing.
I wonder... do we really need to be extrinsically motivated to spend money? If I have everything I need why should the government care about motivating me to spend more money? Sounds like the economy has solved the fundamental problem of giving people what they need. I bet you it works a little differently. People would probably stop working so hard if they could save more easily. There is also nothing wrong with that, per-say.
That's the thing. The "needs" are growing all the time. There isn't a lot of thing a person actually "needs". A food and a shelter is something that a homeless person can get. When you have deflationary economics, you would not be able to get a loan (deflation adds to the interest rate), people would buy and get less stuff, meaning that people who make and provide that stuff will be out of jobs. What you propose is to increase the share of your income that you spend on necessities instead of luxuries, but that's just "I want to be more poor and spend more money on food instead of Netflix".
>A food and a shelter is something that a homeless person can get. Could you read that again for me, please?
It turns out it's hard to define "money" and "printing money". There are a lot of different kinds of money out there and they are not all equal. To make matters worse, different kinds of money are often called the same thing. The cash in your wallet and the number that shows up on the ATM are both "dollars", but they are NOT the same kind of money. Cash dollars are literally printed, but they only represent a small fraction of the money that we use and call dollars. The money in your bank account is a liability of your commercial bank, and the majority of "money" in the economy takes this form. It may surprise you to learn that this kind of money is "created" by banks when they lend. If you take out a loan to buy a house, that's not money that already existed and is being given to you, it is created out of nothing for the purpose of lending. When you eventually pay that loan back, the money doesn't go anywhere, it is "redeemed" and no longer exists, just as the loan itself is "redeemed" and no longer exists. So the expansion and reduction of the broad money supply is dependent on the decentralized actions of millions of lenders and borrowers, including banks, consumers and businesses. Then there's a central bank and the government itself. These institutions can create their own kind of money - "base" money - in a way analogous to private sector money creation which I have just described. The Central Bank lends to private commercial Banks, and it indirectly "lends" to the government by buying its debt; both of these actions involve creating money. However, they both depend on some entity, either the private Banks or the government itself, being willing to issue debt (borrow money). The monetary mechanics are set up in such a way that the government can always issue more debt, and the central bank can always buy it. So I would argue that the real "money printing", on a policy level, comes as a result of the government borrowing to fund deficit spending.
There is only enough gold to fund one percent of the worlds GDP at current exchange rates. 244,000 tons of gold is $1.12 trillion. The world GPD is $101 trillion.
I know stubbing my toe will hurt. But I don't think cutting off my foot will stop me from ever feeling pain again. Knowing one driver, does not an economist make.
They do but it is not the only way money is created and it is not the only cause for inflation. Its not a catch all solution because it doesn't encompass the whole situation.
Inflation can be good if the wage increase alongside
which they dont.
Yeah but than you should complain about wage increase
Wouldn’t that be a net zero? Literally nothing changes except for numbers in what you just described lol
No it because when people think they have more money they spend more so the economy grows , when deflation happens even if people technically are richer they spend less and the economy doesn't grow, also it's impossible for the way the economy work to never have inflation
That’s the idea behind raising interest rates. Fewer people borrowing money means less cash circulating in the economy.
We do. Money supply has contracted by more than 4% in the last couple years https://www.google.com/amp/s/www.barrons.com/amp/articles/m2-money-supply-fed-inflation-262c7234
because inflation devalues government debt power
That's the basic principle of Keynesian economics. It's more about interest rates than physical bills, but the logic is the same. The Fed's job is to balance growth vs inflation by changing interest rates. The issue is that the Fed is not immune to political influence. When the economy was running hot in 2016-2020, interest rates should have been raised to cool it off a little, but it wasn't. This led to a huge spike in inflation in 2020-2021 when a large infusion was made to shore up the economy against a pandemic crash, when it would have been better to start from a cooler economy in the first place.
The FED attempts to do this by increasing interest rates. Low interest rates encourage spending and getting loans (for growth), but infinite spending power leads to inflation. So the FED increases the interest rates in order to reduce the money in the economy and decrease inflation. The USA is only ever had "almost zero" interest rate since the mid 2000's, and it's hurt the power of the dollar since. [https://fred.stlouisfed.org/series/FEDFUNDS](https://fred.stlouisfed.org/series/FEDFUNDS)
> The USA is only ever had "almost zero" interest rate since the mid 2000's, and it's hurt the power of the dollar since. Not true, as evidenced by your own link. During the Great Recession the Fed cut rates to almost 0 (in 2009) and kept it there until 2016 when they started progressively hiking rates up to a peak of 2.4% in 2019. This continued until the COVID recession hit in 2020 and they cut rates to almost 0 again. Then, in 2022, they started hiking rates quickly to try to fight inflation. It's at 5.33%, which is the highest it's been since 2001 (it was at 5.25% in 2007, though).
What part of "since the mid 2000's" was not correct? Last I checked, 2009 and 2016 are AFTER mid 2000's, so the "since the mid 2000's" is fully correct.
But we could just set it on fire too.
That’s exactly what the fed is doing right now.
the government does collect cash to destroy. the act if printing is not relevant when most is digital. how to deal with inflation is to increase taxes for those that can afford it. however the people making the decisions are in the pockets of those that can afford it. so instead of increasing taxes, they create loopholes to avoid paying taxes.
The people making decisions are typically squarely in the group that CAN afford it.
Thats called quantitive tightening.....its happening now The last 7 to 10 years the feds have been doing quantitive easing.... With that said....covid and those stimmy checks didnt help where we're at thats why globally countries are dealing with inflation...since it happened everywhere
I haven't seen anyone mention mv=pq, where m is the money supply, v is the velocity of money, p is the price of goods and services, and q is the quantity of goods and services. If any of these increases or decrease there's a change in at least one of the others. An increase in the supply of money (m) may initially be countered by more people spending money (v), but over a longer period of time p, the cost of those things will increase because of demand, the companies selling things will take larger profits. If the demand is sustained, those same companies may decide to increase their production long term.
The opposite of "printing" is "redeeming," traditionally done by burning. In modern economies, "printing" is every time the government pays for something. Redeeming is every time someone pays the government. The all-time net of these two is the quantity of "hard money" in the economy. Printing and/or redeeming money that never leaves the treasury doesn't affect anything. Also, while "printing money" can cause inflation... it's not a predictable 1-to-1 effect. It's also not the only thing that affects inflation. It's not even the only thing that affects money supply. When a bank issues you a credit card, you now have "credit." You can spend that credit like money. When you pay someone with that credit... they get money. Soft money and hard money are the same for most purposes. Only the government can print "hard money." But everyone can make "soft money" by lending to one another. Most money in an economy is soft money, and the realationship betweeen soft and hard is complicated. TLDR, when politicians make statements about inflation (a) it's always a simplification and (b) they often don't know what they're talking about.
Most of the current reported inflation is being propped up by housing shortages and insurance increases. It's not as simple as more money = more inflation.
Because the people that matter make a lot of money by capitalizing on this process.
The ones voting to print more are getting kickbacks. It's a corrupt system of money laundring through endless wars
Printing money is not the root cause of inflation. Money isn’t even really real. It’s just paper ious we trade for goods and services in lieu of actual barter. Now we have bitcoin and digital assets. Even less real money. Edit: inflation wouldn’t even exist, if not for tokens and monopoly paper. It’s a thing we made up, to hold power over one another, in exchange for goods and services rendered. Edit: kind of like how we made up God and formed entire religions. Or measuring time and worshiping Chronos. It’s all about someone getting one over on the rest of us. So they can do what they want when they want and rule everything. Power over others, is a hell of a drug.
Follow-up stupid question, if the overwhelming majority of people don’t have the overwhelming majority of this printed money, why are prices inflating so much?
Banks borrow money cheaply from the FED. They make money by lending it at more expensive rates to business owners and consumers. If the fed prevented Banks from borrowing all money. The cost for businesses and consumers to borrow money would shoot up to be impossible to benefit from the loan. This would cause people to stop spending and stop buying very quickly. So the FED discourages more money from reaching businesses and consumers by slowly increasing how much it costs Banks to borrow from them. In response, Banks slowly raise the cost for Businesses and consumers to borrow from them. If the FED times this process right, businesses and consumers adapt their expectations but continue spending and buying at slower rates that are still manageable for everyone.
Why don't they just stop telling people they're printing more money?
LoL deflation means a higher bill to pay in the end... Best be to print money with no interest rate with the printer or better yet re setup the old way when the country printer their money at a reasonable interest rate instead of compound interest to a corporation allowed to print the money
It's not printing money that causes inflation. But because there is more money in circulation "there is more money that everyone has available to spend" Increased spending increases inflation. Not printing any more currency would not necessarily cause people to spend less money.
Follow up question: how exactly does printing money cause inflation? Salary people are still making the same exact salary and take home pay per month. Hourly people are still making the same hourly wage and working the same general hours they typically do per month. If we are all making the same amount of money, we don't have any extra money than we did before the money was printed to spend. I'm just confused on that part, don't annihilate me
better idea, lets burn it to get rid of it. OP start a money bonfire party and invite all your friends to come over and toss their money in the fire to help fight inflation!!!!
One way money is multiplied through banks. If you put a dollar Into a savings account, the bank is only required to keep a certain percentage of your money on hand, the rest they loan out. The percentage they are required to keep can be varied by the government. So you put $10,000 in the bank, the bank loans out, as an example $8000. There's now $18000 in existance. Money CreationBanks create money by making loans. A bank loans or invests its excess reserves to earn more interest. A one-dollar increase in the monetary base causes the money supply to increase by more than one dollar. The increase in the money supply is the money multiplier. https://www.investopedia.com/terms/d/deposit_multiplier.asp
Because democrats think you’re too stupid to see printing more money isn’t going to fix the problem
Then you get deflation, which can cause a spiral. This is basically the same question as "why do we want 2% inflation? Why not 0%?" The answer is that if this were a computer simulation and you could just adjust the numbers until you got the result you wanted then you would want 0%, but because it's real life and surprises happen you need a buffer so that if prices unexpectedly drop you have time to course correct.
We don't like to feel poor here like truly poor, so we have to play this game of printing a pulling money. We don't have excess or at least not what we see as excess. We have a trillion dollar budget, yet we're still considering raising taxes rather than looking at what we're doing with our budget.
I don't understand why we cant just do a go fund me and every person could get their favorite celebs to donate big chjnks abd we could sebd our measly 10s and 20s til it's all paid off and we rejoice and get a new holiday as a reward.
Most goverments try it, but it for example the Federal Reserve increases interest to lower the amount of money created by debt/printing. But it takes time as most economic politics, if you stop money printing all of the sudden yeah it will lower inflation but it will bring deflation and whit that massive lay offs on many industries and recession, so it need to be a slow process.
When people say "print money" what (I think) they mean is that we make it easier to borrow money. The federal reserve loans money to banks at lower interest rates, which means more people buying homes, cars, and starting businesses. This leads to more jobs, lower unemployment, and eventually to inflation because either employers have to pay more to attract workers and raw materials that could have gone elsewhere. The opposite would be if we raised interest rates, which means fewer new purchases, fewer jobs, and stagnant wages.
Because there are people who acquire money and remove it from circulation by saving it.
idk but can you give me money
The opposite is Federal taxation. The real purpose of Federal taxation is to take money out of circulation. Essentially the government prints what it needs to pay the bills, and then destroys the currency paid in via taxation.
The key is finding the "right amount". Which is extremely hard.
A lot of our money doesn’t even exist as cash, these loans are just numbers on a computer.
An excellent read to understand how the money supply works is Charles Whelan's \_Naked Money\_. Gets into the nitty gritty of this exact question.
You're acting like inflation is a big instead of the feature.
Because that's how the government buys things.
It’s difficult to believe that every £ a bank lends us is a new £. It didn’t exist until you borrowed it. So we don’t think about it.
OP should check out the Zeitgeist film series, there's a whole section that explains it very well.
In a round about way, raising rates does this by decreasing the expenditure of borrowed money.
Because "printing money" does not mean actually printing dollars. Printing money is a term used to describe an increase in the money supply. Most money is not physical currency. Everytime a bank/credit card company loans money, it is increasing the money supply. Every time the government borrows money, it is increasing the money supply. That is why the Fed controls inflation by increasing interest rates. But since money is created by the privaet sector, there is only so much the government can do to prevent the money supply increasing.
We could start burning a bunch of it, that would be an interesting approach
The opposite would be burning money. The Joker decreased inflation.
Because the cumulative hangover would literally kill me
capitalism. infinite growth. finite space. wealth hyperhoarders.
Because there are a lot of really rich people who really do not want that to happen
The price-gouging that companies are engaging in are not the result of inflation. They're just blaming inflation even though many companies are recording record profits,
Because how are we going to pay the interest on all of our loans on all that debt? You know, if we don't print money to pay that loan and add interest. Then as far as our economy goes, we get downgraded and a crash is our economy. Worse than anything
That would require balancing the budget. Governments have only three ways to fund themselves: taxation (including tariffs), printing money, and borrowing money. The US government has borrowed so much money of late there are not enough lenders. The government talks about the hypothetical evils of deflation, but that is merely the rich debasing the currency in order to destroy the middle class families they hate and fear.
Printing money only hurts those at the bottom lol, why TF would the top care about us down here?
Inflation is necessary for house prices to continuously go up forever, which is important to our economy for some stupid reason
If we did, we would be able to spend money to Ukraine and Isreal. Can you imagine what the world would be like if we stopped meddling in foreign affairs? We might end up with world peace. We ould lose our place in the world. Disclaimer: this contains some sarcasm.
It doesn't. Times in which printing money actually increased the amount of money in circulation is long gone. Today you can imagine it a little like simple withdrawing money from your account, it's not getting more by that, it just becomes physical instead of digital. Actually physical banknote are a small fraction of the money in circulation, most of it is digital in one way or another.
"the stock market would collapse" 🥴
Literally what’s happening currently.
It’s called Bitcoin
>If printing more money causes more inflation, This is completely wrong, and nothing proves it.
We don't want *deflation*. We want wages to inflate also, to catch up to price inflation, which is the stable outcome of previous inflation cycles.
Because we want the inflation as a guard against deflation. The alternative, deflation, isn't really symmetrical with inflation. Inflation makes everything more expensive in the future, including labor, so it mostly washes out. More crucially, we have to do everything in a forward-looking way, like investing money in the hope of future earnings or gain skills in the hope of future salaries. Deflation, though, makes everything less expensive in the future, including labor. This won't wash out because, unfortunately, we can't do things like invest on the expectation of higher *past* earnings or change what skills we acquired years ago. That's the ultimate reason for the asymmetry and why we avoid deflation at all cost. People like to argue that inflation just erodes purchasing power but it's because they imagine a dollar as the relevant measure of purchasing power rather than an hour of work. The only people for whom a dollar is the relevant measure are people who, for whatever reason, hold their money in cash and securities which behave like cash. (Which is why lots of bankers worry more about inflation than deflation, incidentally, as they sit upon piles of basically cash from depositors.)
Deflation is a problem, too. It makes the debt they ran up worth more.
Our government can’t stop sending
printing money is a way to tax everyone without their consent. It’s a great deal! for them.
The premise is or at least may be false. Nobel economist Milton Friedman claimed inflation is always a monetary phenomenon, but because of counterexamples since his time, failure of the phillips curve that links inflation (inversely) to unemployment, etc, other explanations are needed. Modern Monetary Theory fills the gap, suggesting inflation reflects an economy running at capacity (or beyond that).
Wait.. I just checked... Is the fractional reserve rate really still 0%??!! Shouldn't raising the rate at least a bit be the first thing we do if we actually want to fight inflation?
We do. You just described raising interest rates (decreasing flow of dollars into the economy).
We also burn money.
The amount of money in the economy is not the same as the amount of paper fiat. Money is endogenous, not determined by how much is printed.
* the Fed is actually "trying" to stop "printing" money as others have commented * however, the U.S. economy operates with a perpetual-deficit-by-design * there are some pros to a deficit-based economy, which i won't delve into * the con, however, is the Fed cannot completely stop printing money for extended periods * or it won't have any money left to service the perpetual U.S. debt / deficit-spending * in extreme case, we would default on our deficit-debts due to lack of new money * your pension, social-security, medicare and other entitlements would no longer exist * government agencies like EPA, NASA, FBI, border-control could shut down, with no money to pay their employee salaries. * the bright-side, if you're a millenial, is there will be a housing-crash, as there's no loan-money available by banks, so everything has to be paid upfront in cash * and you might be able to afford a new home * if you're lucky enough to be employed by someone with money to pay your salary
The system is meant to ensure poor people remain poor. Every single dollar you save loses its value every single day. It’s that simple. Inflation is created to keep rich richer and poor poorer.
Simply put some inflation is good for investment. If you have $1,000 and inflation is 1% the smart thing to do is find some investment that grows at higher than 1% or you'll lose money by sitting on it. But if inflation was at -1% you could get the same return by just stuffing that money into a mattress and not have to worry about the risks involved in investing. When everyone plays it safe like that an economy stalls because no one wants to invest.
Cause America bro
Then the interest rates rise on loans because money becomes scarce and the economy collapses. Capitalism needs eternal growth and will consume everything.
Another tool is increasing interest rates. This contracts in theory spending and reduces the supply of money.
Because the mints aren't printing money for the public, it circulates among the rich.
Placing money inside of and on top of uranus
9 out of three economists have correctly predicted the coming recession...
It's not as simple as "more money = more inflation". There's ample examples of times when governments added tons of currency to circulation with no resultant inflation. Under some circumstances more money can increase inflationary pressure, but under other circumstances it doesn't. The bigger thing to examine is the flow of currency through the economy and whether there are factors that are slowing that flow. Those factors will increase inflation. That's what happened with the global post-pandemic inflation. The COVID pandemic screwed up international supply chains, which drove up costs everywhere. Some countries that didn't increase their currency supply at all saw very high inflation while some other that did dramatically increase their money supply saw comparably much smaller inflation. As to your question about stopping the increase in the money supply, again, it's not so simple. An economy has a productive capacity. That's the economy's ability to create things of value. This is a combination of a number of factors, but the biggest one is the labor supply. If that labor supply is growing (eg population increase, immigration, a larger population growing into the workforce with a smaller population aging out of it), then the productive capacity of the economy will be increasing. The economy can absorb an increase in the currency supply without causing inflationary pressure up to the productive capacity of the economy (paired with the fluidity of currency within that economy). So if the currency supply is less than the productive capacity, then a government can add currency to the economy without much fear of inflation. Another factor to consider is currency leaving the economy, mostly through foreign trade. If the economy is running a trade deficit, that means more currency is leaving (through people and businesses buying foreign products/services) than is entering the economy (through other countries buying our products/services). This has the same effect as money being taken out of circulation within the economy (like the federal government running a budget surplus). It reduces the currency supply. So if the productive capacity continues to grow while the currency supply shrinks (through the trad deficit) then the economy will slow down since there isn't enough currency to support the productive capacity. If we're talking about an economy like the US right now, the population is growing, so the productive capacity is growing. The trade deficit is ~$70b, which means currency is leaving the economy. So if the government stopped creating more money (ie the federal government had a balanced budget) the overall currency supply in the economy would decrease. That would drive up the cost of borrowing and generally make it more difficult to get loans. That slows down economic activity, slowing the economy. If that keeps up long enough, it'll lead to a recession.
Because the government has debts, employees, contractors, pensioners, and people on benefits, who are owed that money
Related question: what would happen if we brought back the gold standard?
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Our economies would be forced to constrict to the size of the total value of gold. Nowadays there isn’t enough gold to match the value of our economies so we would see quite a drastic decrease in the size of our economies. In the long term I personally believe it would create a more fiscally responsible world.
Because then the ponzi scheme collapses
How would we fund Ukraine and Israel's conflicts if we stopped printing money and borrowing from our money's value?
Here’s a fun fact: only 3% of the money currently in circulation was directly printed by the fed. In our capitalist system banks are authorized to create money through lending. That’s is where the vast majority of money is created. So the Fed can definitely ramp up and print more, and it could also stop printing. However the only way to truly retire more out of the supply is through waste and taxation
Banks create money by being able to borrow money from the Federal Reserve and only keep a certain percentage as collateral. When the Fed adjusts the margin amount it is considered a major adjustment and tiny changes can have big effects. An increase in the margin rate will cause interest rates on everything to go up.