Unprinting money

I am wondering what MMTers here think about this article on removing money from the economy, and what it means for our previous notions of debt, and the role of government.

Can the Fed Unprint Money? - US News

Ganesh said:

I am wondering what MMTers here think about this article on removing money from the economy, and what it means for our previous notions of debt, and the role of government.

Can the Fed Unprint Money? - US News

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We can print our own money when the time comes. we just cant legally mint coins, although we can coin mints.

Ganesh said:

I am wondering what MMTers here think about this article on removing money from the economy, and what it means for our previous notions of debt, and the role of government.

Can the Fed Unprint Money? - US News

Click to expand...

The fact that money is created "ex nihilo" by the fed is a vulnerability. Money has no tangible value, and it can be created and destroyed by the will of a few central bankers.

"Good Faith" is now the only backing for the dollar

Of course, if the US still managed its currency using the gold standard, stimulating the economy would be left to the market and not the government or bankers. War could not be used by companies for profiteering. Rights could not be taken from citizens in the name of security. ...

Quantitative easing makes the economy much easier to manipulate, as well. No need for those pesky Bear Markets. Every year is feast and never famine. We have now conquered nature.

Cally said:

The fact that money is created "ex nihilo" by the fed is a vulnerability. Money has no tangible value, and it can be created and destroyed by the will of a few central bankers.

"Good Faith" is now the only backing for the dollar

Of course, if the US still managed its currency using the gold standard, stimulating the economy would be left to the market and not the government or bankers. War could not be used by companies for profiteering. Rights could not be taken from citizens in the name of security. ...

Quantitative easing makes the economy much easier to manipulate, as well. No need for those pesky Bear Markets. Every year is feast and never famine. We have now conquered nature.

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Are you really claiming there was no war or rights abuse or profiteering before 1933? Are you serious?

What do you think the Civil War was about? It was the use of war to defend slavery for economic profit, during which Lincoln suspended Habeas Corpus for security reasons.

John Adams, our second president, passed the Alien and Sedition Act, which basically banned free speech against the government.

The Great Depression started in 1929 and was the biggest economic collapse we've ever seen, caused by the same kind of irresponsible behaviour by bankers that affects the economy post-gold. A lot of economists even think the gold standard made the Great Depression even worse than it had to be.

What kind of school did you go to that doesn't mention the Civil War, John Adams, or the Depression? Or any other war, or slavery, or suffrage, or child labor, or massacring Natives...? Do you seriously think America was utopia before 1933?

If you want to get technical, the dollar was actually still backed by gold until 1971, even if it couldn't be converted for gold. So then you also have to explain to me what the hell happened with Japanese interment.

That is absurd.

SmokeAndMirrors said:

Are you really claiming there was no war or rights abuse or profiteering before 1933?

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No. But war is used to stimulate the economy. That is a fact that many people prefer to ignore or deny. If the US was on the gold standard, this would be significantly more difficult since the budget would be more of a problem for the war machine.

What do you think the Civil War was about? It was the use of war to defend slavery for economic profit, during which Lincoln suspended Habeas Corpus for security reasons.

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The civil war was mostly about state’s rights.

John Adams, our second president, passed the Alien and Sedition Act, which basically banned free speech against the government.

The Great Depression started in 1929 and was the biggest economic collapse we've ever seen, caused by the same kind of irresponsible behaviour by bankers that affects the economy post-gold. A lot of economists even think the gold standard made the Great Depression even worse than it had to be.

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A sudden reduction of investment spending is largely what led to the crash. People naturally avoided investment and further exacerbated the problem by removing their assets from banks.

What kind of school did you go to that doesn't mention the Civil War, John Adams, or the Depression? Or any other war, or slavery, or suffrage, or child labor, or massacring Natives...? Do you seriously think America was utopia before 1933?

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Lol There is no need for hysterics. Certainly no one I know of would make such a claim.

If you want to get technical, the dollar was actually still backed by gold until 1971, even if it couldn't be converted for gold. So then you also have to explain to me what the hell happened with Japanese interment.

That is absurd.

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No. The US government allowed foreign governments to exchange dollars for gold until 1971, when the practice was abruptly ended.

Cally said:

No. But war is used to stimulate the economy. That is a fact that many people prefer to ignore or deny. If the US was on the gold standard, this would be significantly more difficult since the budget would be more of a problem for the war machine.

The civil war was mostly about state’s rights.

A sudden reduction of investment spending is largely what led to the crash. People naturally avoided investment and further exacerbated the problem by removing their assets from banks.

Lol There is no need for hysterics. Certainly no one I know of would make such a claim.

No. The US government allowed foreign governments to exchange dollars for gold until 1971, when the practice was abruptly ended.

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Right, war was only a tool of the economy since 1933. :lol: Are you joking?

Ah, so you're one of those people who denies the racism of the Civil War, despite most of the rebel states putting the right of whites to have slaves DIRECTLY in their official letters and government articles. Whatever. I can't even be ****ed to deal with that honestly.

No, it isn't. You seriously need to study history.

There's nothing hysterical about pointing out all the bleeding obvious bits of history you apparently never heard of.

No, they didn't. Again, reading is fun. Come back to me when you've done some. Doubtless, you'll come back before, but I have paint to watch dry...

SmokeAndMirrors said:

Right, war was only a tool of the economy since 1933. :lol: Are you joking?

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No. But more so after the government was free to print fiat currency with no other backing except “good faith.” A large aspect of keeping hyperinflation in check is deficit spending on extremely large expenditures like continuous war.

Ah, so you're one of those people who denies the racism of the Civil War, despite most of the rebel states putting the right of whites to have slaves DIRECTLY in their official letters and government articles. Whatever. I can't even be ****ed to deal with that honestly.

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Are you even reading my posts? Or are you too busy attempting to think of a clever response during that process? Obviously, you don’t multi task. Of course, racism was involved. But state’s rights Was the main issue. Lincoln was, above all else, most concerned about keeping the Union together. He didn’t care about ending slavery and he didn't care about equality. He used it as a means to an end.

"I will say then that I am not, nor ever have been in favor of bringing about in anyway the social and political equality of the white and black races - that I am not nor ever have been in favor of making voters or jurors of negroes, nor of qualifying them to hold office, nor to intermarry with white people; and I will say in addition to this that there is a physical difference between the white and black races which I believed will forever forbid the two races living together on terms of social and political equality." That was Lincoln during his fourth debate with Stephan Douglas. This not-so-mainstream and politically incorrect bit of history demonstrates Lincoln was not the slave-freeing hero that those of a central government supporting mindset believe.

No, it isn't. You seriously need to study history.

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Of course it is. People quit buying stocks and began pulling their money from banks. Granted, Keyensian economics is a short term answer. Inject more money into the economy to reduce deflation. Fiat currency and quantitative easing are not long term solutions. Allowing the market to correct itself is. This also prevents too much power from accumulating within a central government and banking system.

There's nothing hysterical about pointing out all the bleeding obvious bits of history you apparently never heard of.

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Stomping your feet like an obstinate two year old doesn’t count as pointing out bits of history. If you really had something to teach me, you could have approached the topic with professionalism.

No, they didn't. Again, reading is fun. Come back to me when you've done some. Doubtless, you'll come back before, but I have paint to watch dry...

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I prefer something less mainstream. And I don’t take history lessons from someone who is probably still squirting ketchup at people in a school cafeteria.

Ganesh said:

I am wondering what MMTers here think about this article on removing money from the economy, and what it means for our previous notions of debt, and the role of government.

Can the Fed Unprint Money? - US News

Click to expand...

I think too much is made of what the Fed has done since 2008. It was not a straightforward addition of dollars to the economy.

First, banks needed to recapitalize when their assets went down in value. So the Fed came in and bought up a bunch of weak assets at face value, exchanging dollars for MBSs and other such assets, a fairly even exchange of value. (In the Fed's hands, because they were able to hold them, those assets have been paying off.) Banks were then able to meet their capital requirements and keep on operating. It was an even exchange of value, but now the Fed held securities and the banks held dollars. Those transactions also increased the level of total reserves in the system; any net government spending increases total reserves.

As these securities mature, dollars flow back to the Fed, which not only takes dollars out of the economy, it also lowers total reserves. So some of this is already undoing itself. When the Fed sells those securities back in exchange for dollars, the same things happen; fewer dollars, and fewer reserves. If the Fed held all of these securities to maturity, all the dollars they spent (and a few more) would come back to them, extinguishing all of those liabilities. The net effect would be zero.

The increased deficit spending did put net dollars into the economy, and of course it increased reserves, too. But, you (hopefully) get increased economic activity, which means taxes (and reserves) are going to flow back to the government.

Any flow of dollars back to the government "unprints" money. Most of this is taxation, and some of it is coming from securities held by the Fed. Nothing is permanent, but it's hard to claw back dollars once they get saved. You can't really tax China and Japan to claw back all of the dollars (bonds) they hold. On the other hand, they aren't doing any harm, sitting around unspent.

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We used to worry about the level of reserves in the system, drawing out the excess by exchanging reserves for interest-bearing bonds. QE showed that excess reserves weren't really a problem. They don't lead to more bank loans, so the money supply didn't "explode" like some economists worried about. MB grew a ton; M1 didn't follow. So really, not a heck of a lot happened. We bailed out the banks by moving some things around, we had some too-small stimulus spending, and that's it. Much of the "money printing" that everybody was worried about is sitting around as excess reserves, which are pretty harmless.

JohnfrmClevelan said:

First, banks needed to recapitalize when their assets went down in value. So the Fed came in and bought up a bunch of weak assets at face value, exchanging dollars for MBSs and other such assets, a fairly even exchange of value. (In the Fed's hands, because they were able to hold them, those assets have been paying off.) Banks were then able to meet their capital requirements and keep on operating. It was an even exchange of value, but now the Fed held securities and the banks held dollars. Those transactions also increased the level of total reserves in the system; any net government spending increases total reserves.

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The Fed bought quality assets, not the most toxic. This increased reserves rather dramatically, and coupled with an increase in supply from the Treasury, helped build the size of the Feds balance sheet. However, this didn't recapitalize the banking system because bad loans had to written down as losses, which is where TARP came in.

What the Fed did was stabilize the payment system so bank liabilities could trade at par, while the Treasury (through TARP) recapitalized the banks.

As these securities mature, dollars flow back to the Fed, which not only takes dollars out of the economy, it also lowers total reserves. So some of this is already undoing itself. When the Fed sells those securities back in exchange for dollars, the same things happen; fewer dollars, and fewer reserves. If the Fed held all of these securities to maturity, all the dollars they spent (and a few more) would come back to them, extinguishing all of those liabilities. The net effect would be zero.

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While this is true in a mechanical view, it is not a reflection of what has been occurring. The Fed has various reverse-repurchase agreements in place that re-introduce reserves that have been soaked up from maturity. As stated in their normalization press release, the use of this facility will be based on its need to support their monetary policy objectives. A maturity driven reduction in the Fed's balance sheet would be an instance of tightening.

We used to worry about the level of reserves in the system, drawing out the excess by exchanging reserves for interest-bearing bonds. QE showed that excess reserves weren't really a problem.

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In a post-crisis period where inflation is hinged well below expectations? Sure. However, you must remember that these are emergency measures, and are not intended to be perpetual.

They don't lead to more bank loans, so the money supply didn't "explode" like some economists worried about.

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In this current economic environment, no. Things can change.

My personal opinion is that our whole monetary system being a sham spells trouble for our economic future.

It is based almost entirely on debt. The government owes banks, we owe banks, the banks owe the Federal Reserve, and the Federal Reserve "creates" money out of nothing.

There is a push to go to a pure system of electronic credits (imaginary money), and we already see this in the private sector "Bitcoin."

IMO this is all a mountainous Ponzi-scheme, a house of cards that is wholly based on "faith." The problem is that "faith" is a shaky foundation, like building a castle on sand. A good tide continually erodes, while a strong storm can completely undermine it.

Captain Adverse said:

My personal opinion is that our whole monetary system being a sham spells trouble for our economic future.

It is based almost entirely on debt. The government owes banks, we owe banks, the banks owe the Federal Reserve, and the Federal Reserve "creates" money out of nothing.

There is a push to go to a pure system of electronic credits (imaginary money), and we already see this in the private sector "Bitcoin."

IMO this is all a mountainous Ponzi-scheme, a house of cards that is wholly based on "faith." The problem is that "faith" is a shaky foundation, like building a castle on sand. A good tide continually erodes, while a strong storm can completely undermine it.

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All money is debt-based. That doesn't make it a sham system.

And electronic credits are not "imaginary." The dollars in your account exist the same way they did when banks kept track of them on paper ledgers. Which means, they exist as a record of liabilities that the bank owes you, not as a pile of dollar bills that the bank holds in the back of the building.

Bitcoin, on the other hand, is better thought of as a commodity.

JohnfrmClevelan said:

Bitcoin, on the other hand, is better thought of as a commodity.

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Why? Commodities can be consumed. BTC is just another medium of exchange that is naturally contracting.

Kushinator said:

Why? Commodities can be consumed. BTC is just another medium of exchange that is naturally contracting.

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because bitcoins like gold are not official currencies.
they have to be exchanged for official currencies before they can be used.

they are also subject to market fluctuations.

Ganesh said:

I am wondering what MMTers here think about this article on removing money from the economy, and what it means for our previous notions of debt, and the role of government.

Can the Fed Unprint Money? - US News

Click to expand...

We don't need to "unprint" money, as there isn't that much really in existence. Most is on computer file rather than being tangible.

I like the idea of printing more, and more, and more. I want to see our currency devalued compared to the rest of the world. If imports slowly start costing double, triple, or more than what we pay today, then US factories and jobs will return.

ludin said:

because bitcoins like gold are not official currencies.

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You can make payments using BTC.

they have to be exchanged for official currencies before they can be used.

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No.

Secondly, gold has productive uses other than chicken little's nest egg.

Gold is real. I can store it, use it in electronics, use it for it's anti-corrosion properties in dentistry, etc....

Gold is a commodity. BTC is just an alternative means of exchange.

JohnfrmClevelan said:

All money is debt-based. That doesn't make it a sham system.

And electronic credits are not "imaginary." The dollars in your account exist the same way they did when banks kept track of them on paper ledgers. Which means, they exist as a record of liabilities that the bank owes you, not as a pile of dollar bills that the bank holds in the back of the building.

Bitcoin, on the other hand, is better thought of as a commodity.

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Correction, all current money is fiat currency. Once upon a time it was either backed by, or made up of, a tradable commodity.

You already know that exchange started with barter. Durable commodities had intrinsic value which was accepted because there was always someone somewhere willing to trade their goods for some value of the offered durable commodity.

If our world economy based "faith" in fiat currency ever fails...don't you think people would still see value in such durable commodities?

Lord of Planar said:

We don't need to "unprint" money, as there isn't that much really in existence. Most is on computer file rather than being tangible.

I like the idea of printing more, and more, and more. I want to see our currency devalued compared to the rest of the world. If imports slowly start costing double, triple, or more than what we pay today, then US factories and jobs will return.

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Printing is used in the metaphorical sense here. I think we are all aware that money takes on mostly digital form these days.

Your fears of inflation relate to the central point of the thread though. Vast amounts of money can be pumped in to the economy- they have recently- and apparently pumped out again. We have seen little to no inflation, less than is actually healthy. So does any amount of QE, money creation, printing if you will, make any difference, as long as there is a viable game plan to remove it from the economy again, and of course its creation works in pro-social and beneficial ways- no small juggling act, but, do numbers really matter? Or are the physical and human resources available, and the supply of real goods and services, the focus to be concerned about?

Ganesh said:

Printing is used in the metaphorical sense here. I think we are all aware that money takes on mostly digital form these days.

Your fears of inflation relate to the central point of the thread though. Vast amounts of money can be pumped in to the economy- they have recently- and apparently pumped out again. We have seen little to no inflation, less than is actually healthy. So does any amount of QE, money creation, printing if you will, make any difference, as long as there is a viable game plan to remove it from the economy again, and of course its creation works in pro-social and beneficial ways- no small juggling act, but, do numbers really matter? Or are the physical and human resources available, and the supply of real goods and services, the focus to be concerned about?

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I don't know if it matters, but I will assume if we printed it without going in debt in the process, and not removing it, it would be a game-changer.

What might happen if the US government just put $50,000, each, in an account for all Americans? Would that be an economic boost, followed by a changing currency exchange, requiring us to build factories for cheaper goods?

What would $15+ trillion do?

I don't know how all that is handled, but... what if?

Lord of Planar said:

I don't know if it matters, but I will assume if we printed it without going in debt in the process, and not removing it, it would be a game-changer.

What might happen if the US government just put $50,000, each, in an account for all Americans? Would that be an economic boost, followed by a changing currency exchange, requiring us to build factories for cheaper goods?

What would $15+ trillion do?

I don't know how all that is handled, but... what if?

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Oh no! You can't just "give" people money. While some people would think "Wow, this is great!", others would think "How much value does it really have if the government just gives it away?". Both groups would think, if the government did it once why can't we make them do it again and again? There would be a rush to spend it before it inflates.

Business owners would immediately inflate prices as they see all this "new money" suddenly appearing in the economy. They'd want more to balance the idea that it is no longer worth what it used to be. Foreign governments would lose faith in the value too and take typical economic steps.

IMO it would clearly show that money is a sham, and serve to undermine the current B/S "faith" we have in our monetary system.

Captain Adverse said:

Oh no! You can't just "give" people money. (still typing)

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I agree, but "what if?"

Lord of Planar said:

I agree, but "what if?"

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(Still typing) means I want to hold the slot, and if you just WAIT, you may see the answer before you ask the question.

Captain Adverse said:

(Still typing) means I want to hold the slot, and if you just WAIT, you may see the answer before you ask the question.

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LOL...

I figured that, but I couldn't resist.

I must have got you thinking good!

Kushinator said:

You can make payments using BTC.



No.

Secondly, gold has productive uses other than chicken little's nest egg.

Gold is real. I can store it, use it in electronics, use it for it's anti-corrosion properties in dentistry, etc....

Gold is a commodity. BTC is just an alternative means of exchange.

Click to expand...

yea they moved put bitcoins as currency a few years ago as to put it under regulations as a currency.

Kushinator said:

Why? Commodities can be consumed. BTC is just another medium of exchange that is naturally contracting.

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How does it contract? I'm not really up on bitcoin operations.

I think it's like a commodity because it acts like a commodity. There's a limited amount, and the value jumps around for no good reason that I can see. It takes work to make it, like gold. And there is no government behind it.

Kushinator said:

In a post-crisis period where inflation is hinged well below expectations? Sure. However, you must remember that these are emergency measures, and are not intended to be perpetual.

In this current economic environment, no. Things can change.

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But if Fed policy is to accomodate the need for reserves, banks will be free to create loans based on demand, no matter what the level of total reserves is. The Fed isn't going to try to control the money supply. I can't see a scenario where banks would make loans willy-nilly and explode the money supply, not unless the economy was booming along with it.

What do you think the potential problem with excess reserves is? Not being able to raise interest rates in case of inflation?