37
votes
Could eliminating all taxes and only creating new money theoretically work?
It would not work.
Historically speaking, governments that try to fund their operations primarily via the printing press experience not just inflation but hyper-inflation. Why? Well, one explanation ...
- 503
18
votes
Could eliminating all taxes and only creating new money theoretically work?
tl;dr this would not work in either closed or open economy unless your proposal would include very large cuts to current social and welfare spending as only arguably small part of those could be ...
- 50.2k
8
votes
Accepted
What's quantitative easing?
Before the edit, you wrote "qualitative easing", but I think you refer to quantitative easing. I'll discuss both.
Quantitative Easing
Quantitative easing corresponds to the central bank (CB) ...
- 10.6k
7
votes
What are taxes for since law forbids printing of money?
"Why I don't hear nobody speaking about such idea?"
Because historical experience says it won't work.
By printing money instead of collecting taxes, what increases is the nominal disposable income....
- 32.9k
7
votes
Accepted
Are state owned enterprises really inefficient?
Because of the large number of roughly comparably sized private and public firms, the petroleum industry provides a laboratory for exploring differences between private and state owned enterprises in ...
- 16.2k
7
votes
Are state owned enterprises really inefficient?
SOE's don't have to perform worse that private enterprises, but they often do. The reasons are manifold:
Some SOE's are not set up for profit motive, but rather to seed strategic industries for a ...
- 558
6
votes
Why are "transfer payments" not part of GDP?
Transfer payments aren't included in GDP to prevent double-counting.
The reason the author's question is troubling you is because the answer externalizes everything that happens after the payment ...
- 196
6
votes
Breaking Up The Big Banks
This is an interesting question. The banks themselves will not naturally divide themselves. There are great returns to scale in banking, and risk can be greatly diversified by being massive and ...
- 3,422
6
votes
Accepted
Is the government putting a 20% tax on dividends equivalent to the government owning 20% of the company?
Is the government putting a 20% tax on dividends equivalent to the government owning 20% of the company?
No, stock ownership entitles owner control over decision making in the company (via voting on ...
- 50.2k
5
votes
What are taxes for since law forbids printing of money?
The current answers correctly point out that financing the government via the printing press would generate inflation. Since inflation is bad, this would be a bad policy.
However, these answers miss ...
- 1,842
5
votes
Why switch from Gold to Fiat
When recession strikes, it's prone to the currency equivalent of "bank runs" where everyone attempts to trade in their paper money for gold at once, causing a drastic reduction in the money supply, ...
- 161
5
votes
Welfare analysis for a military draft
An obligatory draft is a tax collected in kind - productive time. Instead of producing in the private sector, citizens of the economy offer their services to the army.
Now, we should acknowledge ...
- 32.9k
5
votes
Could eliminating all taxes and only creating new money theoretically work?
The Modern Monetary Theory (MMT) literature discusses the historical experience of issuing “new” currencies. (Typically, the introduction of money in colonies that did not have a simple monetary ...
- 9,844
4
votes
Are all country government budgets made up of taxes?
The answer to your first question is no.
For example in Saudi Arabia only foreign residents are taxed. The state can afford to do this because it owns the oil fields and receives a lot revenue from ...
- 28k
4
votes
Why are "transfer payments" not part of GDP?
The question:
How much would GDP change if during a recession the government raises unemployment benefits by $100 million?
can be understood in more than one way. There is the pure accounting ...
- 7,754
4
votes
Why doesn't government work more like a company when it comes to taxes?
Getting the facts straight
First before addressing the question, lets get the facts straight as arguing based on incorrect premises is not good and in this case this is also relevant to the answer.
...
- 50.2k
4
votes
Could eliminating all taxes and only creating new money theoretically work?
Wanted to note, with a digital currency this is exactly equivalent to replacing all forms of taxes except a single (high) Wealth Tax [1] that only applies to currency, rather than net worth.
Under ...
- 141
4
votes
Externality and Output
In principle in both positive and negative externality scenario government could just set price to the socially efficient price.
However, outside of static textbook example this is non-starter. The ...
- 50.2k
4
votes
Externality and Output
For a government to address a positive externality by setting the price of a good to its socially efficient price would raise several difficulties. The diagram below relates to the case of a good ...
- 7,754
3
votes
Is the government a producer, a consumer, or both?
The government is a producer of goods/services that are then usually not subject to market transactions.
Some goods/services that the government produce can be said to increase directly the utility ...
- 32.9k
3
votes
What benefits do governments receive from not eliminating debt?
I am quite surprised that none of the answers above have mentioned the classic Barro article "Are Government Bonds Net Wealth"
The way I understand it is that given that the utility function is ...
- 1,631
3
votes
How government borrowing from central bank increases money supply in economy?
Central banks can create money 'out of nothing'. So for starters there isn't 'less amount' of money left with the central bank. The amount of money at the central bank is 'infinite'.
So it's not ...
- 338
3
votes
Accepted
How does the ban on surge pricing affect the companies, customers and the economy?
It depends.
If customers are currently making informed decisions when they book a surge-priced car, then banning surge pricing punishes customers, drivers, intermediaries, and the wider economy. It ...
- 8,103
3
votes
Accepted
Can government and people spend money foolishly be a main cause of inflation?
No, it cannot cause inflation. Inflation is a general rise in the price level, a decrease in the purchasing power of money. While military spending, for example, could cause inflation if paid for ...
- 6,335
3
votes
How can a country ensure its national currency is used by its citizens?
First of all, please check the properties of money and keep them in mind. Indeed money is a convention, but nobody forces you to use it. For example, prisoners use ciggarettes as a medium of exchange.
...
3
votes
Accepted
How much does a public sector pay rise actually cost the UK government?
Unison (2014) - Net cost
The Public sector trade union did an analysis of lifting the cap in 2014. The report is here. Unlike the IFS analysis presented above, Unison estimates the net cost of an ...
- 8,552
3
votes
Economics PhD graduate?
Your claim that most go into academia is wrong. From the top universities, about half to two-thirds go into academia, but from most universities, most go to non-academic careers. It's simple ...
- 928
3
votes
Accepted
Why don't we count incomes of the government from taxation when calculating GDP using the income approach?
Actually you could use taxes because GDP formula using income approach can be also expressed as value added at basic prices + taxes less subsidies. However, you can’t do it at the same time when using ...
- 50.2k
3
votes
Accepted
Which sanction against Russia creates the least side effects on Western economies: SWIFT disconnect or denying selling of government bonds?
SWIFT is basically a communication network that allows bank transitions to happen. This could potentially hurt EU a lot because EU imports 41.1% of natural gas, 26.9% oil and 46.7% coal from Russia (...
- 50.2k
2
votes
Government spending/borrowing difference/ national debt increase disparity
There are many ways of calculating public sector finances.
One approach is similar to corporate accounting and the UK Treasury publishes Whole of Government Accounts.
Those are different in ...
- 4,717
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