Legal Process of Printing USDs

Discussion in 'Economics' started by thesharpone, Jan 17, 2008.

  1. Say you borrow $1B from the gov, hand it out to friends and family, as if you are lending it, knowing they won't ever pay it back, later claiming a loss, asking the gov to lend you another billion or else the US economy will go into a recession

    how is that different from what banks have done in the recent years? they know the gov will print more money to save the economy from going into a recession so they lend without thinking about the consequences
  2. ssblack


    Your handle is misleading.
  3. kinda what I was thinking...
  4. Not really if you think about it.

    Banks aren't printing the USD directly but indirectly, what difference?

    They do it indirectly to make it look legal.
  5. what do you mean indirectly?

    Money supply works like stock shares. There is no finite tangible supply limit -- it is all arbitrarily determined, thus if more money is needed, the total 'net float' becomes larger and the resulting US dollar is worth slightly fractionally less as a percentage of total supply.

    The US govt can reign it in, or provide excess when needed, just like a company can buyback shares or do secondary offerings depending on the situation.
  6. too bad it doesn't work like a split. cash users only get dilution
  7. Well it could work like a split ... Everything would double in price every time that happened, but you'd have twice as much cash.
  8. for the same amount of money supply increase in your example... the other option would be everything doubling in price but you having the same amount of cash as before

    which would you choose?
  9. All things being equal, doubling the amount of cash outstanding and equally doubling the prices would be equivilent to doing nothing.

    Doubling the money supply is very different.
  10. you said doubling cash would be accompanied by doubling prices. what difference do you have in mind wrt to money supply vs cash?

    i was using them interchangeably for the purposes of this conv, though of course they're definitely not the same thing. the point i was getting in your stock analogy was that splitting is preferable to dilution, (in the context of ever declining purchasing power)
    #10     Jan 17, 2008