Let's face it in most democracies politicians who gin it all up to let the good times roll generally get elected. The guys that tell the public about moderation have a tougher time particularly when it looks like everything will go well forever. It is a fatal flaw of Western democracies and I suspect will sink us either this cycle or, if they can inflate again without it going over the top, the next cycle. I'm just old enough that one more go around might carry me through ... lol.
So Homely, whose money do you want to use to pay Greece's pension promises...or those paid to your imaginary biker. What happened to the money that the biker paid into his pension?
It is an obligation and IF/When the gummint has no money because it STOLE (borrowed) it - it needs to print more. No alternative! Which WILL incidentally happen in the USA. The problem with the Greek pensioners is that the printing press for EUR is in Frankfurt. :eek: The tea party talk for reneging on Social Security WILL NEVER happen, it is crazy talk from a fringe element of lunatics.
Feeding the squirrels who run the printing press is another one of those fundamental bits of economics that most of ET seems to have slept through in Econ 101... Just need to get peanuts or almonds or acorns. Fortunately the latter two grow on trees.
No sense of humor, eh? Actually, as we all should know, both the WWII massive spending bulge here in the US, and the Marshall Plan, which Winston Churchill called the most "unselfish act by any great power in history" were pure money printing exercises. They worked because in the first case it jumpstarted the US economy, which had already long since proven itself to be the most dynamic economy in the world at the time, and it jumpstarted the dynamic portions of the European free world: Germany, southern England, Belgium, northern Italy, Paris. Money printing does work, if you throw the money at places that will use it correctly: the payback comes through the growth you get. That the current generation of Internet Libertarian geniuses-in-their-own-minds are ignorant of history doesn't disprove this.
The way money is 'printed', is that the sovereign buys longer term debt from its banks with demand debt currency. The sovereign can only do that so long as there is a private market for its long term debt. The CB books a cash liabilty on its balance sheet then tranfers the cash liabilty to the Banks in exchange for longer term debt assets of an equal amount. The banks swap the longer term debt assets on their balance sheet for the cash asset from the CB. Rather than printing a digital ledger entry is made at the accounts of the CB and in Banks accounts at the CB where assets are swapped. Income shifts from the Banks to the CB and the Banks must place the new cash into investments. Where there is no demand for debt and the CB is buying all the longer term gov't debt the banks are faced with excess reserves, which of course they leave on deposit at the CB. So, without private loan demand the money printing is simply a shift of longer interest bearing assets from the Banks to the CB in exchange for lower interest or no interest bearing demand debt that remains on deposit with the CB. The change then is that banks loose earnings and the CB increases earnings. No money supply is expanded in the real economy as the cash never leaves the governmetn banking system...becasue there is no private loan demand. Trefoil, as for history, the U.S. created the Marshall plan after we saw China lost to the Communists. We pledged $13B to the reconstruction of Europe. Most people don't learn much beyond that. There are corollary facts; the details. As a condition for Marshall plan funding the recipient nation had to forego any IMF stabilization funding and they had to commit to a fixed exchange of their currency with the dollar. If they varied from the fixed exchange agreement they would be cut loose with no recourse to IMF help. Rather then the misapprehended superficial historical understanding of a 'capital infulsion,' the Marshall Plan actually enforced a currency union. Rather than 'printing' money it created currecy stabilization and fixed exchange rates for trade with the dollar. Germany grew at 8% per year to 1960; France grew at 6%, Italy near that and UK with its welfare policies and reticence toward Bretton Woods and U.S ascendency had the slowest growth at 2.6%. Nice Churchill quote, but they were not listening to him in the UK. Does come back to what you spend the money on. In the end if there are no private lenders you cannot demand or create the money by 'printing.' If you try to print money with no private backing of your sovereign debt then you don't debase you currency in an inflation you destroy it in a couple of years. The difference between inflation and currency collapse is the ability to attract outside investment. That is why Greece can not just walk away from the Euro and devalue to a drachma at 50% hair cut, they still will not be able attract private or foreign investment so the Drachma will quickly collapse to Zero. If the EU tries address the crises with measures to nationalize the Spanish banks or paper bad Greek debt with more 'cross dress' debt then they just grab a tar baby, in the way that Ireland did. Inevitably, when you do not have the income to pay your debts you simply do not pay your debts. The creditors have to write them off and you have to proceed without access to credit.
That's a big IF. There's a difference between financing consumer and Government debt, and the investment in goods producing assets. One stimulates growth. The other consumes it. If prosperity were as easy as adding ones and zeros on the accounting ledger, Zimbabwe ought to be a Super Power by now. They print a shitload! Heck, we could handout million dollar checks to every American, and be 30 times richer, overnight! You really are a genius, Trefoil.. Argentina, Russia, Mexico, the entire African continent. History is littered with examples where debasement heralded prosperity.
Makes sense. So they basically abandoned their national currency and used something else. Pretty common in Africa where debauchment is a way of life, for Government.