1) When people say the US/UK won't be able to "pay off" debt, what do they think those debts have to be paid off WITH? Gold bars?
Govts stopped hoarding and borrowing gold long go - economics textbooks haven't figured that out.
2) When people say govts need "revenue" before they can build roads, provide health care or bombs etc, ask them where they think banks get the money they loan out?
Hint: banks get the money out of thin air. That's what "modern money" is.
@dcjohnson True. However, governments creating too much money and creating hyperinflation has been a recurring problem in history and still is in some countries right now. If we give our governments back the ability to create money at will, how do we prevent this from happening again?
I think @schrotie has a point, banks can get money from thin air because governments explicitly allow banks to do that. (One can certainly argue it is a bad idea to allow that, but anyway.) The fact that banks are allowed to do it does not mean it is a good idea for governments themselves to do it. It is governments who need to act responsibly and avoid crashes or other craziness. Banks will only ever care about their own profits, we cannot expect banks to act responsibly. @dcjohnson
@dcjohnson @eliasr True. However, currently that source of money is not accessible to most goverments because central banks, which have the power to create money from thin air, are mostly completely independent institutions that follow their own guidelines.
If you imply governments could pay debt by tapping that money source, then you propose ending that independence. The main reason for the independence is ensuring price stability. So how do you ensure that instead?
> ensuring price stability
Yes, but do we really need price stability that badly? To an extent, sure, but everyone is already used to inflation at a few percent, perhaps it would be okay to have a few percent more yearly price increases because the government is creating more money?
Hm, but a few percent is far from enough to cover all government spending.
Matbe issue a new currency every year to restore prices? 🙃
@eliasr @dcjohnson
A few points here:
We just had a period of slightly higher inflation and that already starts eating into people's savings. Also above pretty benign %ages inflation seems to have a tendency to quickly spiral out of control.
Restoring prices is rather cosmetic. But resetting debts may actually be a good idea (see Graeber).
Look, I'm not endorsing austerity. My German government is causing major harm to Germany and Europe with this BS. I'm just claiming it's complicated ...
@eliasr @schrotie
It is not a good or bad idea for governments to create money. That is what money -IS-.
We are not governed by kings who have to round up gold anymore.