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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43 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 ...
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  • 1,756
40 votes
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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 ...
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39 votes
Accepted

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 ...
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34 votes
Accepted

Is zero inflation desirable?

The optimal level of inflation is very debated with unclear answers. There are many reasons, and a great answer would be very long. It should also distinguish between expected inflation and surprises. ...
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  • 10.4k
34 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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  • 42.2k
30 votes

Why aren't house prices included in CPI?

The CPI stands for a Consumer Price Index. As in the price of things that are consumed (at a particular moment in time). Real estate prices are not the price of something consumed because they contain ...
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  • 15.8k
29 votes

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 ...
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  • 1,101
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 ...
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  • 567
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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  • 8,002
22 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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  • 321
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 ...
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  • 42.2k
18 votes
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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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  • 42.2k
17 votes

Why is the rouble collapsing?

The primary source of the recent ruble collapse has almost certainly been the falling international oil price, aggravated by some other features of Russian politics and its economy. Petroleum ...
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15 votes
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From an economics perspective, what are the ramifications of a currency with fixed money supply?

FooBar is quite right that unless you expect GDP growth to stop, fixed nominal supply currencies will lead to deflation. A moderate degree of currency inflation serves a number of useful functions in ...
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  • 16.6k
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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14 votes

Is zero inflation desirable?

Money is produced at zero social cost but held at a positive private cost (because to hold money you must forgo holding other assets). Therefore there is a positive externality from holding money, ...
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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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  • 249
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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  • 42.2k
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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  • 26.2k
12 votes
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Does Inflation Make Money Eventually Worthless?

"Worth less" than before - yes, that's exactly what inflation does. "Worthless" - not quite. No percentage-based reduction in value can make something worth 0, but there are extreme examples from ...
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12 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 ...
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  • 8,002
11 votes

From an economics perspective, what are the ramifications of a currency with fixed money supply?

It is a fallacy to conclude that a steady number of coins will give you no change on the monetary value (inflation/deflation). The classical quantity theory of money can be used as a first-order ...
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  • 10.4k
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 ...
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  • 10.4k
11 votes
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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 ...
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  • 8,002
11 votes
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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 ...
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  • 1,678
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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  • 894
10 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 ...
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