> You can't print your way out of a crisis
> without harming savers (retired) and
> young people (lower skilled, less experienced).
As a youngster I am tired of hearing shit like this.
Do you have any historical example to show?
Because from what I've seen, post WWII countries came out of their crises riding protectionist policies rather than sacrificing their last generation or robbing their population. Like Korea.
Here in Brazil, the last attempt to print its way out of a crisis resulted into 2000% inflation.
The government in late 1993 and early 1994 then created a new currency, that would be pegged 1:1 with USD (later the pegging was removed, now it is about 2.2:1 ), and with limited supply. Also a bit time earlier, a president REMOVED money from people savings, literally (ie: he told banks to set the saving accounts to zero, and that is it).
This, along with some new laws about government spending fixed inflation and allowed the economy to run smoothly again.
Then around the 2000s, when the leftist government arose, they decided to solve poverty again by printing money and giving to the poor, at first it seemly worked, with GDP growth peaking at around 8% in a year, and millions of people leaving poverty and entering what here is called "lower middle class" (actually, in US that would still be considered poverty... here "lower middle class" is if you can rent something, and pay your own food, but rely on government services to education, health and transportation).
The popularity of the socialist government soared (it reached around 70% at its peak, that also peaked during the 8% growth year)...
Then we have currently 6.7% of yearly inflation (year to date data), 0.9% of GDP growth (2012 data) and most of the inflation drivers is housing costs and food (exactly the things that the "new middle class" could afford). Now the government approval is 30% and we have already 5 weeks of protests and strikes that never end, totally widespread, even to some crucial sectors (ie: several states have the police threatening to strike, and there are also threats of a military police strike, that is kinda ludicrous, because as military they cannot legally strike, and more than one high ranking officer of the army threatened a coup, with a general writing a anti-government text and all)
Printing your way out of crisis, only result in a sort of roller coaster economy, it booms and suddenly bust, at first, people with the influx of money start to spend a lot, and people build business to attend to them, then all this influx money result in inflation, suddenly the economy start sputtering, as inflation rises faster than GDP growth, and particularly food and housing inflation rises faster than wages and government welfare, and you have a vicious cycle of needing to print more money to save the population that spends this money and generate more inflation, and your real wealth creation sink.
EDIT: Oh, striker truckers are awesome too, because they are just parking their trucks in the middle of the highways and fucking up everything... Never piss off truckers when your economy rely completely on them because your trains are shit or non-existant.
> Printing your way out of crisis, only result in a sort of roller coaster economy
That can happen in similar situations if you don't as well, though. Greece's typical response to financial crises until recently was currency devaluation, i.e. massive but controlled step-function inflation. That certainly has a lot of downsides. But now that Greece is in the Eurozone, it can't do that. Even post-crisis, the inflation is very low; there is even deflation if you look at local baskets of goods. But that has not kept the economy off of the roller-coaster. It's just been a different roller coaster, and likely a worse one (in the previous crises, Greece never had 65% youth unemployment).
No. Money printing on a large scale leads to massive inflation, prompting all sorts of exciting economic effects such as capital flight, effective destruction of cash savings, political instability and so on.
> Money printing on a large scale leads to massive inflation
That depends on how you define "on a large scale". The UK government has printed £375 billion between 2009 and now (that's c. £6,000 per person) without causing inflation.
£6,000 per person over 4-5 years isn't really that much, though, maybe 3% inflation on an average income of £30,000. Recall that in the days of the Weimar Republic, people were carrying bundles of millions of Reichsmarks.
The money printing we see in much of the west is implemented differently to how it was implemented in, for example, Zimbabwe. It's also not what I'd call large scale, but it's certainly larger than normal.
It takes a much longer route to the hands of the ordinary man (and indeed, often never does - it gets printed and the same day locked away again), and on the way seems to get locked inside ridiculous house price inflation, and stock markets doing far better than they should. I complain about this, but should state that I dumped as much as I could into stocks when interest rates went to near zero and the printing presses started up, and I've done very well out of listed companies that really aren't doing much better than they were before.
It all has to go somewhere - it's just not going into bread.
> It all has to go somewhere - it's just not going into bread.
for the time being.
On a related note, a globally deployed national currency used for savings, trade and reserves on a world-wide scale for about half a century now is historically kind of a first. "Price inflation resulting from quantity inflation" might well take a lot longer in the case of USD than any other national currency ever before took. What ultimately leads to the massive "wheel-barrow hyperinflations" is an exponentially exploding collective loss of confidence, as in "dropping by the minute". In fact, at this point the "famous" (as in Zimbabwe, Weimar etc.) absolutely massive printing at the late stages is no longer the cause but the result of that utter confidence loss.
This is probably more likely to happen earlier/faster in a national-currency-setting when exchange rates from trade with say your neighboring countries and their "stabler" currencies indicate a gradual loss of confidence first on their part, before that spreads to the locals?
But the USD has been / used to be / still to a great deal is "the yardstick" for all other currencies. "The US (Treasury / Fed) does not hold reserves against its currency" (apart from some Forex playmoney, those aren't reserves as such) -- whereas every other Central Bank does hold such "reserves against their currency", and those reserves are to a great degree USD (or USD-denominated debt "assets" aka treasuries etc.) as far as non-metallic reserve "assets" are concerned. Not exclusively USD but overwhelmingly so.
So that "absolutely massive, all-engulfing" chain-reaction-like global total loss of confidence should require a LOT more damage by USD managers than a couple quantitative easings and some fresh Fed cash for the ever-expanding USG and to bail out TBTF banks (aka ensure nominal performance of the financial system and hence all savings/pensions/deposits/insurances etc. regardless of "eventual real" performance).
Sorry if this sounds stupid. But my thinking was, if you print some limited amount of money and give all of it to the poor, the poor become richer, but the rich become poorer in a way because their money is devalued. And the same is true if you tax the rich more and give that money to the poor?
I think what you're saying is correct, but one of them is inflation and one of them is just moving money around without making any more of it; if you print more paper money, and give it out, there is now more paper money chasing the same amount of stuff. Prices rise - inflation. The people who had no money do now have some, so they can buy more stuff - they are richer. The people who had paper money now find that they can't buy quite as much stuff with it - they are poorer.
I'm using a very simple (but I often find quite effective) definition of inflation - more money chasing the same amount of stuff. Note that this definition means that if the government prints a shedload of money but it goes straight into some kind of scheme where it's locked away and not dumped into the general economy, it's not inflation.
If you take money from rich and give it to the poor, there is now the same amount of money chasing the same amount of stuff. Prices do not rise (well, actually, I suspect they will, because rich people were not spending their money and poor people do spend money, so the marketplace does see more money chasing the goods at that level, but this is prices rising because more people want to buy the stuff, not because there is more money chasing the same amount of stuff). The people who had no money do now have some, so they can buy more stuff - they are richer. The people who had paper money now find that they can't buy quite as much stuff with it - they are poorer.
So in both cases the rich become a bit poorer, the poor become a bit richer. If you do this by printing money on a massive scale (Zimbabwe, Weimar Germany, etc.) people spot it happening (not least because they use wheelbarrow to carry the bus fare), inflation becomes entrenched, people stop trusting their own money, all sorts of fun stuff. Argentina's inflation rate is something around 20% to 30% depending on who you ask (don't ask the government - they have a history of not being very honest about it!) and they've seen capital flight, illegal currency trading (mostly illegal as the government has declared illegal currency trading activities that are completely legal in most of the rest of the world - for example, if you're going abroad, you need approval by the government to get some foreign currency and you must get an amount they approve), all that sort of thing, and Argentinian citizens do not trust their own currency to hold value.
It's actually a shift from mass accumulation and "tax havens" (i.e taking the money outside the economy) to consumption which ignites the productive economy bottom-up.
>Don't you see? These type of thinking is what has gotten western countries (including Japan) into this crisis in the first place.
Huh? If anything it was the exact opposite: giving in to the greed of an uncontrolled financial sector, BS credit products, rampant privatisation, corporate interests and the like.
Don't you see? These type of thinking is what has gotten western countries (including Japan) into this crisis in the first place.
You can't print your way out of a crisis without harming savers (retired) and young people (lower skilled, less experienced).