Stewart Gault


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Why can't we all just print money to solve world debt?

My knowledge of economics is not great so could someone shed some light onto this.
Surely if every country in the world agrees to print enough money to pay off their debts then once they're all payed nothing has actually changed. All of a sudden those who are owed money would have it, and the countries who had borrowed the money wouldn't be any worse off as they'd just printed all the money.?

  • Jun 22 2012: Germany, Zimbabwe, etc, etc...
    People do not simply print money to pay off debt because it devalues the currency so no debt between Countries could be paid simultaneously, while those with a lot of money would like to keep it.

    And they are the one's that make these decisions.

    Though if you would like to devalue a currency then stop using it.
    Join a LETS.

    That is why the USA is/was pissed off at every Country that bypasses USD reserve currency trading.
    (iran, iraq, russia, china, etc...)

    Money is merely any abstract concept that people agree to use for tangible exchange.

    It really has little to do with economics...
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    Jun 23 2012: From Zimbabwe we can learn a valuable lesson that most things of economic value, have such value because of their scarcity.
    Money is valuable because so many people are trying to get a piece of the limited amount in circulation. If there is too much in circulation, and if it is easy to get, then it loses its value.
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    Jun 22 2012: henry hazlitt taught us well. he said we need to look at not only what is seen, but what is unseen.

    a government can create X amount of new money, and repay its debt with it. whoever receives that money, can spend it, and be happy. that is seen.

    however, as he does this, he raise prices all around the place, as he raised the demand curve. not much, but some. so everyone else suffers a little higher price level. those that have government bonds, and those bonds of course have a maturation value in dollars, start to worry. no doubt, they will get their money on time. but what that money will worth at that time if prices rise? maybe the guy bought 7000 bottles of beer worth of T-bond, and when it matures, he can only buy 6800 bottles of beer, despite getting full repay + interest.

    what happens next is that people lose faith in the money. nobody will take the government seriously if it offers money in dollars one or two years later. they will ask for compensation for inflation. this is not theory, this is practice. the hungarian government ran 30% inflation for a year, and 20% for many years. they still don't go below 4%. the market learned the lesson, and offers us money at almost 8% interest. some of our bonds have compensation for inflation, and some of them are euro based. this will come to the US. a time will come when the market will not buy US treasuries anymore, and nobody will accept future payments in dollars. the dollar will become an unwanted, untrusted currency. everyone will demand gold or commodity based accounting.

    and at that point, reality suddenly becomes visible. the government will not be able to refinance the debt. it will have to declare bankruptcy, that is, simply refuse paying back. in fact, creating new money is a form of default. just the market keeps its head in the sand as of now. i see a massive wave of defaults among the governments of the world.
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    Jun 22 2012: Please indulge an anecdote to illustrate:A man puts a $100 bill on the hotel desk and goes to confirm the suitability of the room.The hotel clerk takes the bill to the coffee shop next door and gives it to the propietor as payment of a debt.The coffee shop guy takes the bill across the street and gives it to the laundry owner as payment on his bill.The laundry man steps next door and gives the bartender the C-note toward his bar tab.The bartender runs across to the hotel where he gives the hotel clerk the $100 for payment on an outstanding loan.The guest returns to the desk from examining the room and says, "I'll take it." The clerk puts the $100 in the register and, gives the man his change. One, single $100 bill paid off $300 in debts and purchased a room for the night.
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      Jun 22 2012: except your story does not make sense, only if the people were idiots.

      sane people would do this: hotel clerk says to laundry man: listen, man, i don't have 100 bucks to pay, but i have this receipt for 100 bucks from the bartender, so you could take it, and we are even. then the laundry man approaches the bartender, and says: we all owe 100 to each other, so just call it even. story ends without anyone interfering from the outside world.
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        Jun 22 2012: Your comment appears to be unfounded. Please explain how it does not make sense for me to accept a $100 bill from you as repayment of a loan and then give that same bill to my creditor as payment-in-full for my debt to him? Why are we idiots for doing that?
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          Jun 22 2012: only idiots would wait for that to happen. sane people would solve the circular debt themselves. i explained how.
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        Jun 22 2012: Idiots (people who pay debts with currency) are not insane and you do us a disservice by juxtaposing us with "sane" people (those who pay their debts by negotiated cancellation). Does it weigh heavily upon you to realize that the entire first-world is populated by idiots? Mr. Gault ask why can't we all just print money to solve world debt? Since you are not an idiot can you explain the answer to his question?
    • Jun 29 2012: After thinking briefly about the anecdote, I was about to say much the same thing as Krisztián. The only possible way to make it simpler would be to have an innskeeper pay off his laundry man - who pays off his hotel bill. Utter simplicity is sometimes confusing; this is when you know your paradigm is flawed.
      The more efficient way is to communicate & trust, as in such circles. An IUO can be just as efficient when multiple users trust the signature of the original signer.
      This is essentially how our own money workd. And when people no longer trust the signature of The Secretary of Treasury, we'll have to find something else. Here in America, printing your own money is okay, as long as it doesn't look like the federal dollar. (See local currency, or regional currency)

      (Yes, I do believe "the entire first-world is populated by idiots," but they have been corralled into this with ill-borne schooling, compromised food, etc, etc. etc. But I have hope this can be changed.)

      While maybe it does not meet Stewart's question head-on, the film "The Story of Stuff" might be enlightening.
      The book, The Creature from Jeckyl Island probably does address his question.
      Seems to me the Fractional Reserve System is a main problem of this world monetary system. It's falling essentially into the same trap as would a world of money-printers: "Do you intend to work fairly & equally for the implied value on those printed dollars?!" -If so, fine; if not, then you're removing energy & efficiency from the system.

      (P.S. Good luck over there with that Olympic-thing, Stewart!! Sounds like they're gonna come down with some awefully-big hammers!!! What is that horrid-looking Olympic logo?! There's gotta be some "reason" for that.)
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        Jun 29 2012: So, Steve, why can't we just print money to solve world debt? Quick- only 7 minutes remain!!
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    Jun 22 2012: Well, it has got something to do with the disappearance of the usage of gold coins.Instead of the amount of gold to pay for goods services ect.
    We use a unit that corresponds to a certain ammount of gold.
    All the gold of a country is kept save and the country makes just enough money to let the currency represent a reasonable amount of that gold.
    The consequence of making more money without an increase in a nations gold causes inflation, because there is a bigger number of currency units to devide that nations gold.
    My guess is that the world bank and countries use gold as a currency, but this I don't know.
    If my guess is correct, paying off a national debt reduces the countries gold, resulting in inflation, for the same amount of monney represents less gold.
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      Jun 22 2012: gold is only a measuring stick. the same argument is true with every goods, like a barrel of oil, a loaf of bread, a tool or a car. as new money is created, the price of a car in terms of money goes up. the price of everything goes up, since the value of money goes down. as there is more money, it worth less in terms of anything.

      if only money lost its value only to gold, it would bother no one. but since it loses value to everything, it has a great effect on the economy. and that is the problem.
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    Jun 22 2012: Yup they have tried this in Argentina, Zimbabwe, and the Wiemar Republic. Google them and see how it worked out.
  • Jun 22 2012: Because that would cause inflation, making money invalid so technically money would become worthless meaning the work force would be paid fake money to produce goods with no value what so ever. It's a beautifully and utopian idea however it can never happen sadly.