Question for economists
Discussion
Ok so the Gov borrows money to finance deficit spending over one half of the cycle.
Why does it not just print that money, spend it during the bust, then during the boom destroy an equivalent amount of money?
Seems like all deficit borrowing does is ultimately transfer wealth to the banks and bankers as you have to pay interest later? Plus you have to borrow more and more to pay interest so is it surely not sustainable as the portion of GDP transfered to the banks just keeps going up?
Why does it not just print that money, spend it during the bust, then during the boom destroy an equivalent amount of money?
Seems like all deficit borrowing does is ultimately transfer wealth to the banks and bankers as you have to pay interest later? Plus you have to borrow more and more to pay interest so is it surely not sustainable as the portion of GDP transfered to the banks just keeps going up?
MX7 said:
SmoothRB said:
Ok so the Gov borrows money to finance deficit spending over one half of the cycle.
Why does it not just print that money, spend it during the bust, then during the boom destroy an equivalent amount of money?
Like they did in Zimbabwe?Why does it not just print that money, spend it during the bust, then during the boom destroy an equivalent amount of money?
Why not just print what you need instead of borrowing.
Obviously some discipline is required.
You don't need to pay interest on printed money.
SmoothRB said:
MX7 said:
SmoothRB said:
Ok so the Gov borrows money to finance deficit spending over one half of the cycle.
Why does it not just print that money, spend it during the bust, then during the boom destroy an equivalent amount of money?
Like they did in Zimbabwe?Why does it not just print that money, spend it during the bust, then during the boom destroy an equivalent amount of money?
Why not just print what you need instead of borrowing.
Obviously some discipline is required.
You don't need to pay interest on printed money.
MX7 said:
SmoothRB said:
MX7 said:
SmoothRB said:
Ok so the Gov borrows money to finance deficit spending over one half of the cycle.
Why does it not just print that money, spend it during the bust, then during the boom destroy an equivalent amount of money?
Like they did in Zimbabwe?Why does it not just print that money, spend it during the bust, then during the boom destroy an equivalent amount of money?
Why not just print what you need instead of borrowing.
Obviously some discipline is required.
You don't need to pay interest on printed money.
I don't see how adding £100 bn of printed money to the economy is more inflationary than £100 bn of debt money?
It might work if we were completely shut off from the rest of the world, but given the way the global economy works I would imagine it would just result in the £ being massively devalued.
Effectively you would have a Government saying to the rest of the world "Trust us, we'll remove this extra money from the system later". That's a tough sell for anyone.
Effectively you would have a Government saying to the rest of the world "Trust us, we'll remove this extra money from the system later". That's a tough sell for anyone.
SmoothRB said:
Seems like all deficit borrowing does is ultimately transfer wealth to the banks and bankers as you have to pay interest later?
zzzkeep banging that drum. by transfer wealth i assume you're refering to interest payments? good idea lets ban interest, that'll stop those evil bankers
Edited by fbrs on Monday 3rd May 16:54
fbrs said:
SmoothRB said:
Seems like all deficit borrowing does is ultimately transfer wealth to the banks and bankers as you have to pay interest later?
zzzkeep banging that drum. by transfer wealth i assume you're refering to interest payments? good idea lets ban interest, that'll stop those evil bankers
Edited by fbrs on Monday 3rd May 16:54
Andy Zarse said:
fbrs said:
SmoothRB said:
Seems like all deficit borrowing does is ultimately transfer wealth to the banks and bankers as you have to pay interest later?
zzzkeep banging that drum. by transfer wealth i assume you're refering to interest payments? good idea lets ban interest, that'll stop those evil bankers
Edited by fbrs on Monday 3rd May 16:54
SmoothRB said:
Andy Zarse said:
fbrs said:
SmoothRB said:
Seems like all deficit borrowing does is ultimately transfer wealth to the banks and bankers as you have to pay interest later?
zzzkeep banging that drum. by transfer wealth i assume you're refering to interest payments? good idea lets ban interest, that'll stop those evil bankers
Edited by fbrs on Monday 3rd May 16:54
Dare2Fail said:
It might work if we were completely shut off from the rest of the world, but given the way the global economy works I would imagine it would just result in the £ being massively devalued.
Effectively you would have a Government saying to the rest of the world "Trust us, we'll remove this extra money from the system later". That's a tough sell for anyone.
Why?Effectively you would have a Government saying to the rest of the world "Trust us, we'll remove this extra money from the system later". That's a tough sell for anyone.
SmoothRB said:
Dare2Fail said:
It might work if we were completely shut off from the rest of the world, but given the way the global economy works I would imagine it would just result in the £ being massively devalued.
Effectively you would have a Government saying to the rest of the world "Trust us, we'll remove this extra money from the system later". That's a tough sell for anyone.
Why?Effectively you would have a Government saying to the rest of the world "Trust us, we'll remove this extra money from the system later". That's a tough sell for anyone.
s2art said:
SmoothRB said:
Dare2Fail said:
It might work if we were completely shut off from the rest of the world, but given the way the global economy works I would imagine it would just result in the £ being massively devalued.
Effectively you would have a Government saying to the rest of the world "Trust us, we'll remove this extra money from the system later". That's a tough sell for anyone.
Why?Effectively you would have a Government saying to the rest of the world "Trust us, we'll remove this extra money from the system later". That's a tough sell for anyone.
anonymous said:
[redacted]
Hmm no if we borrow foreign currency (which we do in effect by selling guilts) that just means we can augment our GDP by buying extra goods and services from abroad right?As you say domestic GDP is a zero sum game (to an extent anyway).
It's clearly unsustainable though 'cos of the interest payments. If you borrow the same as your surplus to balance the economic cycle you will just accumulate debt (due to the interest servicing) ad infinitum.
SmoothRB said:
Well I haven't got a good answer.
these are the owners of uk gilts. i'm sure the dmo could give you a more detailed breakdown. the government pays them interest to borrow money. notice that privately owned banks hardly hold any uk debt at all. is it to much to ask you figure out how google works?
Edited by fbrs on Monday 3rd May 18:06
SmoothRB said:
Ok so the Gov borrows money to finance deficit spending over one half of the cycle.
Why does it not just print that money, spend it during the bust, then during the boom destroy an equivalent amount of money?
The problems with devaluation are:Why does it not just print that money, spend it during the bust, then during the boom destroy an equivalent amount of money?
1. If you use it people stop lending you money in your currency. This makes you depending your own domestic savings rate and worse means that you have to constantly worry about your foreign currency reserves to pay your debt. There is a reason much of the worlds debt is in dollars.
2. If you devalue you undercut your own savings. Every piece of your currency that exists suddenly is worth less. Meaning everyone of your own population with any savings just lost value. Worse this undercuts peoples willingness to exchange their currency to yours and this undercuts trade and investment.
Any rapid change in currency is economically detrimental.
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