-2
$\begingroup$

I know that a country can't simply print money to pay debt, since it would only lower the value of the money, i. e. cause inflation.

But what about the U.S? Since their new printed money is very likely to end up somewhere else, it wouldn't increase local inflation, thus giving the U.S. infinite money.

Thoughts on possible implications of U.S printing large amounts of money:

  • Since most countries keep a US dollar reserve, but only the U.S can print them, by doing so the U.S is deliberately making everyone else poorer, since the dollar value would drop down.

  • Internal inflation in the US increases as the amount of dollars inside the border increases. But if most of the overprinted dollars stay abroad, it wouldn't affect internal inflation.

What's wrong about those ideas?

| improve this question | |
$\endgroup$
  • $\begingroup$ Problem here is twofold. 1. Countries keep dollar reserves only because they believe dollar has stable value, they are not doing that for fun or because of some numismatic reasons as a collections. 2. Generally speaking the only place where you are guaranteed that your dollars are accepted is USA. In Germany if you go to store with bunch of dollars store clerk can decide to not accept them. Hence, the main point of holding dollars is to buy stuff from USA at some point. This would work only if you can convince those other countries to bury the dollars and never use them $\endgroup$ – 1muflon1 Aug 13 at 13:34
  • $\begingroup$ @1muflon1 international companies trade with each other in US dollars, even when none of them is american. $\endgroup$ – Charley R. Aug 13 at 14:55
  • $\begingroup$ And so? The same as above applies except substitute company for country $\endgroup$ – 1muflon1 Aug 13 at 14:58
  • $\begingroup$ My point is: U.S prints money and uses it to import goods; That money never comes back into U.S, instead it goes to other countries reserve or is used by companies to trade with each other (not necessarily with american companies). Result: the U.S bought goods with printed money without consequences. $\endgroup$ – Charley R. Aug 13 at 15:02
  • $\begingroup$ Except your point is wrong. US prints dollars then it has to take those dollars to forex market to convert it to foreign currency let’s say euros then it can use those euros to buy EU products as an imports. If some EU company allow US to buy products for dollars directly it’s only if they actually need those dollars to purchase some US goods or services- what do you think that people outside US are addicted to collecting dollars? Hence in the end always dollars find their way home as long as people actually use them and not just keep them as collectibles $\endgroup$ – 1muflon1 Aug 13 at 15:06
1
$\begingroup$

I am going to answer what I think is the true question:

“What are the effects of the US government mis-representing the amount of currency it prints?” (The actual wording uses imprecise terms that people mis-use.)

The first thing to note is that the US Treasury Bureau of Engraving and Printing is in charge of printing banknotes in the United States (the Mint produces coins. Link to website.

I am no legal expert, but I think the following summary is close enough to the truth. The Treasury (and printing bureau) reports to the President, while the Fed is an independent body created by Congress. All are expected to follow laws set by Congress. The US Constitution says that Congress regulates coinage. As such, any monkeying around and not following legal procedures would be a really big issue.

But let’s pretend that they want to get around rules, and somehow get the hundreds of people who would see what is happening to remain quiet. What would happen if they print more banknotes than they say they are?

You immediately run into the problem that the Federal government - nor any legitimate business - pays for things using large amounts of banknotes. Any attempt to do so within the United States would just end up being returned to banks, and so the money would be “un-printed” as the banks ship it straight back to the Fed.

Dumping it overseas (as suggested) will not work, since foreigners already have too many US banknotes floating around. “Money laundering” - the conversion of banknotes to more useful bank deposts - is already a weak link for organised crime. New inflows makes the problems more difficult.

Furthermore, the obvious question remains: what is the U.S. government going to buy with suitcases full of \$100 bills in foreign countries?

| improve this answer | |
$\endgroup$
  • $\begingroup$ I'm sorry, but this answer is pointless. If we assume the U.S overprinting money to get financial leverage over other countries, of course that would happen secretly and not involve standard operations like you pointed. $\endgroup$ – Charley R. Aug 13 at 16:10
  • $\begingroup$ You are asking whether the US government could run a counterfeiting operation? If so, I suggest you look at your question title, and ask how “counterfeiting” turned into “printing infinite money”? $\endgroup$ – Brian Romanchuk Aug 13 at 16:18
  • $\begingroup$ The definition of "counterfeit" is to make something fake look like the original. If the government itself is doing it, the money is original, no counterfeit needed. $\endgroup$ – Charley R. Aug 13 at 16:40
  • $\begingroup$ It would be money created using an illegal process. Yes, “counterfeiting” would not be the legal charge. I’m not a U,S. legal expert, but Congress is given the power to regulate the currency. Having a Department violate the law would be a violation of the Constitutional separation of powers, and would be prosecuted as such. Nevertheless, your question text still makes no sense. $\endgroup$ – Brian Romanchuk Aug 13 at 16:50
  • 1
    $\begingroup$ Actually, they would most likely count as counterfeit. Valid US banknotes have serial numbers. If the “extra money” was included in the list of valid serial numbers, people would be able to tell that the published totals are incorrect. If the serial numbers are invalid, they are treated as counterfeit. $\endgroup$ – Brian Romanchuk Aug 13 at 17:07

Not the answer you're looking for? Browse other questions tagged or ask your own question.