General Discussion
In reply to the discussion: If You Have The Ability to Create Your Own Currency, How Can You Ever Be Broke? [View all]frostfern
(67 posts)The Weimar Republic was burdened with a butt load of foreign debt after WWI. This debt sure as hell wasn't in their own currency. It was the external shock of the punishing "war reparation" treaties that really drove the Weimar Republic bankrupt. In addition their productivity went way down in the aftermath of WWI.
If you want a better analogy for what could happen to the US look at Japan. Their federal debt-to-GDP ratio is 200%. Ours is still under 100%.
Printing money will eventually cause inflation, but actual hyperinflation is extremely unlikely. Of course it all depends on how much you print and more importantly who's hands it falls into. The problem right now is most of the money the Fed prints does not go to consumers. It goes to private banks. Normally banks will lend to businesses, giving them a source of capital so they can expand in hopes of future profits. The problem is there is not enough demand so the money is just sitting there useless. During the Bush years a bunch of that printed money was going to the giant Ponzi-scheme financial clusterfuck housing bubble.
What has to happen is the money going to those who will spend it. Printing money is really just another form of taxation. In a relative sense it's devaluing the money already in circulation and putting it somewhere else. Of course the currency doesn't actually devalue if the demand for dollars is increasing at the same time, compensating the inflation. Of course a better policy would be to just tax the damn rich as printing money is a less-than-ideal roundabout method of redistribution. For one thing it isn't progressive at all because, all else held equal, it subtracts from the potential value of everyone's money equally.