@seanl @shadowfirebird @kara lol watch the video

@Laurelai @shadowfirebird @kara This is how all major central banks work. No developed economy I'm aware of has the government directly printing money to put into circulation without accompanying debt because the electorate always want low taxes and high spending so hyperinflation pretty much always ensues. So instead they have "independent" central banks whose job is supposed to be price stability.

@seanl @shadowfirebird @kara Thats what im trying to say, the government controls the central bank, the government cant owe the government money, the money isnt real, its just a numbers game meant to keep the economy running lol theres nobody to default to

@Laurelai @seanl @shadowfirebird @kara True - but eventually people will stop lending you-the-state money if it's going to be worthless by the time they get it back. (on account of you-the-state being able to monetize debt only up to a point before inflation gets to a level that it impacts people on a daily basis: if the stores need to raise prices intraday inflation is probably too high)

@Laurelai @seanl @shadowfirebird @kara That said, USD nowhere near the regime of hyperinflation. Inflation is a nice wealth tax on the bourgeoisie - the really wealthy of course directly own land and capital so they're pretty well hedged. But the upper middle class's dollar denominated assets mostly end up being tied to debt further down the ladder, so in that regime inflation tends to redistribute wealth downward.

@Laurelai @seanl @shadowfirebird @kara (yet another problem is that in practice the Fed doesn't have a 2% target - they have a 2% ceiling and a 1% floor. So they err always to the downside of their own chosen target, which is too low to start.)

@chi505 argh, untag me pls

@chi505 @Laurelai @seanl @shadowfirebird
(Back from work.)
Much of this whizzes charmingly above my head, but I will say this about interest: I well remember when the UK government, through planning or stupidity, allowed the bank lending rate to get to 18% (at the same time as inflation was 20%, and that *was* deliberate). Maybe giving the state control of the single currency available is …too much power?

@shadowfirebird @Laurelai @seanl @shadowfirebird ... Surely if inflation is 20% a loan at 18% is pretty great: -2% real interest rate.

To the centralization point: we tried private money, most applicably for comparison in the 19th century, and it led to huge economic and political instabilities. You need a lender of last resort to prevent bank runs, and that entity has to be able to print money. It's all in Bagehot

@chi505 @shadowfirebird @Laurelai @seanl
I don't think anyone is suggesting scrip should *replace* fiat? (Getting those terms the right way round now!) But local currency continues to be a thing, and I for one think that some diversity here has serious benefits (to the people, not the state…)
We keep hearing that cash is on the way out. For my money (sic) that's a serious privacy issue. We'll need something to replace it…

@chi505 @shadowfirebird @Laurelai @seanl
IIRC inflation at 20% meant working class folk became destitute. Wages failed to rise. Banks wouldn't lend. That was the *plan* -- it was designed to break the unions and the working class, and it worked.

@shadowfirebird @shadowfirebird @Laurelai @seanl 2 things: 1) 70s is as much increase in cost of inputs as inflation. If everything needs oil and oil costs more in real terms, so will everything else. Fall in the standard of living needs to be understood distinct from inflation. If all the world's factories vanished overnight prices would almost certainly go up - but we don't usually call that inflation. We're just poorer.

@shadowfirebird @Laurelai @seanl 2) If a state's government wants to hurt wage laborers in an effort to distribute wealth upwards, I promise you they will find a way even if you take the currency lever away.

@chi505 @shadowfirebird @Laurelai Gosh, so much good stuff here. I agree with most of what's been said since my last post on this thread. I'd like to add a couple things:

1. Unanticipated inflation would redistribute wealth from savers to debters, but lenders' entire business is properly anticipating inflation, and this redistribution is usually swamped by wages not keeping up with prices and the impact on people who are for example saving up to buy a house.

...

@chi505 @shadowfirebird @Laurelai 2. Agree about the 70s but a "pet theory" I have is that since the "Volcker shock" that ended the 1970s "stagflation" in the US the Powers That Be have put a huge amount of work into splitting the economy into two tiers so that they could print as much as they wanted without causing consumer prices (or working-class wages) to rise. I believe this is largely responsible for the increase in inequality we've seen since then.

@chi505 @shadowfirebird @Laurelai I'm using "printing money" as shorthand for "holding interest rates at historic low levels".

@chi505 @shadowfirebird @Laurelai Also there was once a time when most people didn't have net debt. Our artificially low interest rates encourage debt, not just by making loans more attractive but by discouraging savings because you can't make returns, and by driving up house prices since not only are more regular folks buying houses but more *investors* are buying houses in search of returns that they can't get on government or corporate bonds.

@seanl @shadowfirebird @Laurelai also housing shortages in the highest productivity areas (Chicago, NYC, London, CA) makes shit weird on its own, let alone in combination with near-zero real rates

@Laurelai @shadowfirebird @kara I'm on my phone and about to go to bed. I know how money creation works; I've been studying it for years. I urge you to read up on it, for example on the Federal Open Market Committee's wikipedia page. This is not theory or opinion; it's basic fact about how money creation works in modern economies.

@Laurelai @shadowfirebird @kara Oh I get what you're saying now. Yeah the question of what it means for the government to owe money to the central bank is an interesting one. But for the government to declare that a fiction and declare that internal debt would likely cause chaos. And even if it didn't they'd then have direct political control of the money supply which always leads to hyperinflation.

@Laurelai @shadowfirebird @kara Faith in paper money is ultimately based on belief that the supply is controlled by an independent organization whose mission is to maintain price stability, because the history of government control of the supply of paper money is very very bad.

@Laurelai @shadowfirebird @kara Some people say money is backed by the government's ability to tax, but that's not really true, because if people think the government might just print a bunch more of it to weasel out of its debts as has happened over and over in history, they won't accept it or will want more of it for the same goods or whatever, and they'll exchange it for assets they think are safer as fast as they can.

@seanl @Laurelai @shadowfirebird may I be untagged from this dreary argument

@kara @seanl @shadowfirebird Sorry Kara

@Laurelai no prob, just, eh, not something I wanna get bombarded with notifications about at work XD

I really wish you could subscribe to and unsubscribe from conversations more smoothly

@kara @Laurelai @shadowfirebird Sorry, Kara. I'm going to bed now anyway.

@seanl @Laurelai @shadowfirebird it's not a big deal, just makes me think of how to make a social medium that can handle this stuff better xD

@Laurelai @shadowfirebird @kara But who knows? Maybe investors just don't care about that stuff and Krugman's "trillion dollar coin" idea would have worked just fine. I'm guessing not, though, because as you said all that internal debt is fiction so paying it down would also be fiction, so all you'd get out of it was a clear statement that the government is willing to override the Fed for its convenience.

@seanl @Laurelai @shadowfirebird I will add the one comment that the hyperfocus on government rather amuses me

currencies exist apart from governments, after all