44
votes
Why can't a country print its own money to spend it only abroad?
This wouldn't work - for the money to have any value abroad, it has to find its way back to the source country.
Consider an example; the President of Ruritania wants a Swiss watch. He prints a ...
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44
votes
Accepted
If no one knew about inflation, would inflation take place?
In this case, I think it is best explained without any economics jargon.
If your thought experiment is taken to the extreme and no one knows about the money, it would literally imply that the money ...
- 3,858
40
votes
Accepted
Why can't a country print its own money to spend it only abroad?
In order for one country to spend in another, it needs to exchange its currency for the currency of the other nation. This is done through something called the foreign exchange market. Like most ...
- 516
40
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Are there historical cases of country A printing the currency of country B for the main purpose of economic warfare?
Very obscure historical example:
From 1287 to 1295, the Danish nobleman Stig Andersen Hvide was leading a band of outlaws from the island of Hjelm supported by the king of Norway against the king of ...
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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
33
votes
Did real incomes drop significantly since the 1950s?
Most of the US real earnings data which go only as far as mid 60s. According to the statista data presented in this article by world economic forum the evolution of real hourly earnings in the US for ...
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29
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Are there historical cases of country A printing the currency of country B for the main purpose of economic warfare?
https://en.wikipedia.org/wiki/Operation_Bernhard (an exercise by Nazi Germany to forge British bank notes. The initial plan was to drop the notes over Britain to bring about a collapse of the British ...
- 1,143
23
votes
Did real incomes drop significantly since the 1950s?
Average standard of living is massively higher today compared to the 1950s, primarly due to technological progress.
Even a cheap low end car today is much better than the big cars of the 1950s, it is ...
- 567
23
votes
If no one knew about inflation, would inflation take place?
Yes and there is a real-world historical example.
Inflation is the term given to a natural phenomena where an overabundance of resources in human societies leads to the devaluation of such a resource ...
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22
votes
Car prices haven't changed in 20 years, no inflation?
Inflation is measured against a basket of goods. It's a symptom of what's going on in markets. Some products go up in price over time. Some go down in time. Some stay the same price, but change their ...
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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 ...
- 52.9k
18
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Is there a “runaway” threshold for Debt-to-GDP Ratio in the U.S.?
Is there a threshold we can pass in terms of debt-to-GDP that will cause a runaway sort of effect?
No there is no threshold or magic number (at least not one we know of). Few years ago there was an ...
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15
votes
Did real incomes drop significantly since the 1950s?
The book “The Two Income Trap” (2003) by Elizabeth Warren (recent Democratic presidential candidate) and Amelia Warren Tyagi discussed this. They looked at spending breakdowns in the 1970s and when ...
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15
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What happens to the economy if a country simply ban inflation?
That would lead to shortages, loss of output and deadweight loss as people would waste time in getting ahead in zero-sum rationing game so it would lead to deadweight loss. When inflation occurs all ...
- 52.9k
14
votes
Car prices haven't changed in 20 years, no inflation?
You also didn't look at car prices in general but rather just the Toyota Camry. For example a 2001 BMW M3 was ~\$46,000 while a 2018 BMW M3 is ~\$66,000.
Most cars have increased in price over the ...
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14
votes
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Will printing more money during COVID cause hyperinflation?
Will printing more money during COVID cause hyperinflation?
Likely not for several reasons. First, the article from economicshelp.org you mention is oversimplifying the economics, which is ...
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13
votes
Why doesn't the government create money, spend it for free without interest, and recollect it with taxes?
Why doesn't the government create money, spend it for free without interest, and recollect it with taxes, you ask. Well, it does. That's exactly what public investment & spending, and the taxation ...
- 8,103
13
votes
Are there historical cases of country A printing the currency of country B for the main purpose of economic warfare?
David Petruccelli writes in "Banknotes from the Underground: Counterfeiting and the International Order in Interwar Europe"
In December 1925, a group of Hungarian nationalists were caught ...
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11
votes
Does Dogecoin or Bitcoin have a more appropriate rate of monetary inflation?
Your coins do not have 0 inflation in the long run
First, we need to set straight that you have a critical error in your supposition: The rate of creation of money is not the only determinant of the ...
- 10.7k
11
votes
How interest rate affects currency
Its important to keep in mind that the exchange rate is a "price for currency" and just like any other price it is determined by supply and demand. The main question now is what determines ...
- 6,108
11
votes
Accepted
Inflation without Increase in Money Supply?
It all depends on what you mean by inflation and by money supply. Technical questions and answers need specific definitions, otherwise everyone ends up talking at cross-purposes.
Is it possible to ...
- 8,103
11
votes
Accepted
Does a strong US Dollar hurt American Manufacturing?
Most manufactured products are sold domestically, but even so a strong dollar will (usually) cause a decline in sales and profitability of US manufacturers. The reason for this is that a strong dollar ...
- 1,728
10
votes
Accepted
Taylor Rule: Relationship between interest rate and inflation
It's true that in response to an oil shock, the Taylor rule could recommend increasing the interest rate to reduce inflation. In practice it would mean that as interest increases, consumption falls. ...
- 6,108
10
votes
Is zero inflation desirable?
In the ECB's press conference of October 22, Draghi and his vice-president responded to the question of why the ECB is fighting low inflation so fiercely. Their answer provides a nice overview of why ...
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10
votes
What are the causes of negative real interest rates?
If there is inflation, what is your alternative? If you do not lend, your money loses even more of its value.
A numerical example:
If inflation is 5% and you can lend at 2% nominal interest rate, you ...
- 28.4k
9
votes
Accepted
The Printing of Money for Paying Debt
Printing money causes inflation because someone (or some institution) will get the money and will spend it somehow. This increases demand for goods, but the number of goods, the supply was not ...
- 28.4k
9
votes
Can inflation occur in a positive-sum game currency system such as the Stack Exchange reputation system?
No, there is no inflation.
Inflation is caused by a relative increase in the amount of currency, relative to the amount of scarce goods and services available.
As you note, there is a continuous ...
- 8,103
9
votes
Can inflation occur in a positive-sum game currency system such as the Stack Exchange reputation system?
Yes, there is inflation.
StackExchange was created in 2008. Anybody who had 5,000 (arbitrary value) reputation points in 2009 would have been perceived as an outstanding member. Now, having ...
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