A certain EU country exports it’s supposed tax revenue to Greece so they can use 90% of it to pay their multinational banks. They have to do it in a currency they don’t own and is overvalued relative to their economy. The country mostly pressing for this is meanwhile running an export surplus and apparently asking the same for every economy in the region. This is not sensible economics any way you slice it.
It’s happened before in history and even has a name: debt bondage.
Private sector debt is at the highest level in recorded history. This is why the post 2008 recovery was so sluggish, since on average every unit of currency circulated has to pay for a fraction of the debt servicing cost. If it stops doing this a crisis will occur, which will either be contractionary or bubble financed by creating new debt to finance old debt. The national authority, with it’s monopoly on coercion can use it’s power to declare debts null and void (this happens all throughout history), create new currency free of debt (pure credit) and spend it into the economy. It can also create an artificial hyperinflation to reduce debt burdens, instate a new currency region altogether (money is simply legal tender subject to the laws the state dictates for it), etc
> You're drawing a false equivalence. A dollar (or a gold bar) does not represent a specific amount of goods or services that any specific counterparty is bound to deliver. So in general no, money is not inherently debt.
This is confused. A dollar is a debt/credit dual created by central bank and private finance operations.
A dollar is a unit of monetary accounting, a physical dollar is a token representation of a debt/credit entry inside an accounting ledger.
A bar of gold is a commodity denominated in a monetary value. It is not a token representation of a state enforced contract.
Yes, a dollar does represent a coupled obligation of someone out there to collect it (or another dollar) in order to satisfy their debt. I do agree that a dollar is therefore debt-based money.
What I was refuting was OP calling all currency in general "debt" based on it having little "intrinsic use", and therefore only useful for what it can be traded for.
The government should just run deficits for financing projects and use tax for redistribution and inflation control, like it does today. The issue today is excessive private sector money creation and lack of federal deficits to offset the debt overhang created by private finance.
That’s only true of external debt. I.e. debts owed to other currency areas. Government debt is just the number of funds from the currency originator (central bank) to it’s distributor (treasury). Both institutions are a subject of the nation state, which is controlled by the government. So it’s not a “debt” in any colloquial sense of the term, neither is it an intergenerational transfer, since the souvereign nation state is an institution that both creates and enforces it’s own currency... which by definition implies it can create as much money (“debt”/“credit”) as it seems fit.
Government debt isn’t “debt” in the classical sense. Let me suggest an analogy: a bank lends you a loan at intrest, but no expiry date. You can pay back the loan at any point in the future. Not only that, the bank has no ways of enforcing you to pay it back through legal action. On top of that, you are infinitely credit worthy, you can get as much loans as you want, including loans to cover existing loans. Would you consider this a “debt”. The answer is that it’s nothing like a debt in any meaningful sense of the term, it is merely a label used because of accounting convention.
Could you “print”* an amount of money several times the world GDP and get inflation?
That depends whether te money is circulated at all. Inflation is not a function of the money stock, it happens when sellers collectively mark up their price above current market rate. This is easier to do with rising expectations of higher return. The money stock is not some magical denominator on top of a real goods numerator.
*(it’s really just incrementing a number in a database, zero production cost, so print is another misnomer)
Forget the currency aspect, which is nothing but a distraction. What matters is the balance between production and consumption. Without debt one must first produce goods before one can consume. Individuals can get around this by taking out loans, borrowing the opportunity for consumption in the present from someone else with a positive balance. For society as a whole, however, there is no avoiding it: goods which have not yet been produced by someone are not available to be consumed. Introducing new currency in order to fund consumption disrupts the balance, since there is no production to offset the consumption. The result is that society becomes poorer; capital is consumed without replacement, productivity falls, and goods become less affordable. (By this I refer not not only to rising prices, but to prices rising faster than wages, a increase in the cost of goods even after adjusting for the change in money supply.)
> Inflation is not a function of the money stock, it happens when sellers collectively mark up their price above current market rate.
The term "inflation" has multiple definitions. Yours is popular in political circles but is not very useful as an economic indicator because it conflates ordinary changes in prices due to supply and demand of goods and available production capacity with changes due to shifts in the money supply. The general increase in prices which results from consumption of capital is nothing like the change in prices which accompanies a deliberate increase in the supply of money. The former is a useful economic indicator which suggests a need for more saving and prudent investment, while the latter offers nothing but noise and tends to encourage malinvestment and waste.
