Inflation as caused by the increase in the quantity of a currency ('money printing') is a form of devaluation or debasement of currency. It's quite literally a hidden tax.
So there's not much difference, really. That may have been your point. — Tzeentch
If you understand two things:I need to read more. — Agent Smith
There are a few reasons inflation makes it easier for a government to pay its debt, especially when inflation is higher than expected. In summary:
Higher inflation increases nominal tax revenues (if prices are higher, the government will collect more VAT, workers pay more income tax)
Higher inflation reduces the real value of debt, bondholders on fixed interest rates will see a fall in the real value of their bonds and it becomes easier for the government to pay back these bonds.
Higher inflation can enable the government to freeze income tax thresholds so more workers pay higher tax rates – it becomes a way to increase tax revenues without increasing tax rates.
get the general idea, printing money →
→
inflation, but I don't understand the actual mechanism so to speak - — Agent Smith
So you've just made Friedman's case that printing money causes inflation. It indirectly funds government expenditure (increased demand) because banks always have a buyer for bonds which governmental demand cannot be answered in a near full production environment. — Benkei
That's not just "some" inflation, that's a huge chunk of people's disposable income and should figure strongly in any inflation figures but usually doesn't — Benkei
That has nothing to do with covid and Ukraine — Benkei
Energy price and food inflation, that's Ukraine. Broken supply chains, that's covid. — Benkei
They buy some bonds. — Xtrix
About 30% of most issues is not "some". — Benkei
The whole point is that CPI is not an adequate measure when asset inflation has real life consequences for consumers with regards to housing and pensions. That inflation existed well before covid and Ukraine so really had nothing to do with either of them. — Benkei
Thus housing prices aren't counted when talking about inflation. Rents don't change as much, hence they are usually preferred.That's not just "some" inflation, that's a huge chunk of people's disposable income — Benkei
For one, central governments and banks have no reason to admit being at fault. Economies are complex enough that it's always possible to find another patsy - financial markets, covid, the Ukraine war, etc. — Tzeentch
The Fed was printing plenty of money in 2009 too. No inflation. — Xtrix
The 700 billion loaned to banks was eventually paid back in full. — Tate
The pandemic response was specifically meant to stimulate the economy, where the Great Recession payouts were meant to shore up confidence and unfreeze credit. — Tate
But you're right that there are multiple causes of inflation, one being the sluggishness of the Fed to respond before inflation had set into the American psyche. — Tate
The 700 billion loaned to banks was eventually paid back in full.
— Tate
So what? — Xtrix
The pandemic response was specifically meant to stimulate the economy, where the Great Recession payouts were meant to shore up confidence and unfreeze credit.
— Tate
Both were meant to stimulate the economy. — Xtrix
So it didn't inflate the money supply. — Tate
Actually, no. — Tate
It did increase the money supply. For years the supply has increased, in fact. — Xtrix
Actually, yes. The fact that the financial sector was the primary target is irrelevant. The entire global economy was on the brink of depression then -- it was on the brink of depression during COVID, as well. The Fed has a few tools to fight recessions. All of the tools used thus far has increased the money supply, and has done so for years. — Xtrix
Not exactly. It was responding to catastrophe in the financial sector. Since that sector has become central to the US economy, the government had no choice but to respond. — Tate
I meant that TARP didn't make a significant impact, and it wasn't intended to. — Tate
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