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If you owe other countries money, and then you print a bunch of money and thus devalue your currency, your creditors will be angry because you will now be paying them less than they expected.

Borrowing money always comes with risk, which is why creditors apply interest rates to their loans. The higher the risk, the higher the interest rate. If potential creditors know that you are willing to devalue your currency to help with monetary problems at home, they will view lending to you as more risky and demand a higher interest rate.

If you need to do business with other countries, and all countries do, you will need to use your currency to do so. At this point it does no good to have printed yourself out of a monetary crisis, as the the goods you're trading for are worth just as much as before your currency was worth less. You have more leeway if the business you're conducting is already in your currency (thus the US has an obvious advantage herethe US has an obvious advantage here), but that's a quick way to get countries to stop doing business in that currency.

Additionally, most economies operate under an assumption of constant economic growth, in the sense that their economy will be larger in X years than it is today. You can make more money, with some amount of risk, if you take on debt to fuel that growth - in the same way that one may take out a loan to buy a house, hoping that the house will be worth more when you aim to sell it than it is today. Governments do this by issuing bonds, allowing others to purchase government debt. The government hopes that the money they gain from selling these bonds will fuel the economy such that the money they lose paying out the bond+interest is less than the money they gained by spending money they didn't have before the bond was purchased.

Therefore, since economies need money to grow, there are three options:

  • Don't go into debt
  • Let others pay for your debt, promising to pay them back (Bonds)
  • PrintPay for your own debt, by printing money until there is no debt

The first option has, to say the least, fallen out of vogue. The third option makes creditors world-wide lose faith in your economy, which leads to adverse effects with trading and funding. This leaves the second option, which is how countries have been addressing this.

It's not quite this black and white of course, the Quantitative Easing program after the 09 financial crisis is a good example of, in essence, large-scale government printing of money to alleviate a crisis. There is no hard and fast rule when it comes to determining what will undermine confidence in your currency, just like attaching an interest rate to a loan, there is a risk/reward ratio for any action. Trust, however, is easy to lose and challenging to regain.

TL;DR

MMT is technically accurate in its premises, but short-sighted concerning the effects of what it proposes. Printing money to solve monetary problems only creates a host of potentially worse problems.

If you owe other countries money, and then you print a bunch of money and thus devalue your currency, your creditors will be angry because you will now be paying them less than they expected.

Borrowing money always comes with risk, which is why creditors apply interest rates to their loans. The higher the risk, the higher the interest rate. If potential creditors know that you are willing to devalue your currency to help with monetary problems at home, they will view lending to you as more risky and demand a higher interest rate.

If you need to do business with other countries, and all countries do, you will need to use your currency to do so. At this point it does no good to have printed yourself out of a monetary crisis, as the the goods you're trading for are worth just as much as before your currency was worth less. You have more leeway if the business you're conducting is already in your currency (thus the US has an obvious advantage here), but that's a quick way to get countries to stop doing business in that currency.

Additionally, most economies operate under an assumption of constant economic growth, in the sense that their economy will be larger in X years than it is today. You can make more money, with some amount of risk, if you take on debt to fuel that growth - in the same way that one may take out a loan to buy a house, hoping that the house will be worth more when you aim to sell it than it is today. Governments do this by issuing bonds, allowing others to purchase government debt. The government hopes that the money they gain from selling these bonds will fuel the economy such that the money they lose paying out the bond+interest is less than the money they gained by spending money they didn't have before the bond was purchased.

Therefore, since economies need money to grow, there are three options:

  • Don't go into debt
  • Let others pay for your debt, promising to pay them back (Bonds)
  • Print money until there is no debt

The first option has, to say the least, fallen out of vogue. The third option makes creditors world-wide lose faith in your economy, which leads to adverse effects with trading and funding. This leaves the second option, which is how countries have been addressing this.

It's not quite this black and white of course, the Quantitative Easing program after the 09 financial crisis is a good example of, in essence, large-scale government printing of money to alleviate a crisis. There is no hard and fast rule when it comes to determining what will undermine confidence in your currency, just like attaching an interest rate to a loan, there is a risk/reward ratio for any action. Trust, however, is easy to lose and challenging to regain.

TL;DR

MMT is technically accurate in its premises, but short-sighted concerning the effects of what it proposes. Printing money to solve monetary problems only creates a host of potentially worse problems.

If you owe other countries money, and then you print a bunch of money and thus devalue your currency, your creditors will be angry because you will now be paying them less than they expected.

Borrowing money always comes with risk, which is why creditors apply interest rates to their loans. The higher the risk, the higher the interest rate. If potential creditors know that you are willing to devalue your currency to help with monetary problems at home, they will view lending to you as more risky and demand a higher interest rate.

If you need to do business with other countries, and all countries do, you will need to use your currency to do so. At this point it does no good to have printed yourself out of a monetary crisis, as the the goods you're trading for are worth just as much as before your currency was worth less. You have more leeway if the business you're conducting is already in your currency (thus the US has an obvious advantage here), but that's a quick way to get countries to stop doing business in that currency.

Additionally, most economies operate under an assumption of constant economic growth, in the sense that their economy will be larger in X years than it is today. You can make more money, with some amount of risk, if you take on debt to fuel that growth - in the same way that one may take out a loan to buy a house, hoping that the house will be worth more when you aim to sell it than it is today. Governments do this by issuing bonds, allowing others to purchase government debt. The government hopes that the money they gain from selling these bonds will fuel the economy such that the money they lose paying out the bond+interest is less than the money they gained by spending money they didn't have before the bond was purchased.

Therefore, since economies need money to grow, there are three options:

  • Don't go into debt
  • Let others pay for your debt, promising to pay them back (Bonds)
  • Pay for your own debt, by printing money until there is no debt

The first option has, to say the least, fallen out of vogue. The third option makes creditors world-wide lose faith in your economy, which leads to adverse effects with trading and funding. This leaves the second option, which is how countries have been addressing this.

It's not quite this black and white of course, the Quantitative Easing program after the 09 financial crisis is a good example of, in essence, large-scale government printing of money to alleviate a crisis. There is no hard and fast rule when it comes to determining what will undermine confidence in your currency, just like attaching an interest rate to a loan, there is a risk/reward ratio for any action. Trust, however, is easy to lose and challenging to regain.

TL;DR

MMT is technically accurate in its premises, but short-sighted concerning the effects of what it proposes. Printing money to solve monetary problems only creates a host of potentially worse problems.

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If you owe other countries money, and then you print a bunch of money and thus devalue your currency, your creditors will be angry because you will now be paying them less than they expected.

Borrowing money always comes with risk, which is why creditors apply interest rates to their loans. The higher the risk, the higher the interest rate. If potential creditors know that you are willing to devalue your currency to help with monetary problems at home, they will view lending to you as more risky and demand a higher interest rate.

If you need to do business with other countries, and all countries do, you will need to use your currency to do so. At this point it does no good to have printed yourself out of a monetary crisis, as the the goods you're trading for are worth just as much as before your currency was worth less. You have more leeway if the business you're conducting is already in your currency (thus the US has an obvious advantage here), but that's a quick way to get countries to stop doing business in that currency.

Additionally, most economies operate under an assumption of constant economic growth, in the sense that their economy will be larger in X years than it is today. You can make more money, with some amount of risk, if you take on debt to fuel that growth - in the same way that one may take out a loan to buy a house, hoping that the house will be worth more when you aim to sell it than it is today. Governments do this by issuing bonds, allowing others to purchase government debt. The government hopes that the money they gain from selling these bonds will fuel the economy such that the money they lose paying out the bond+interest is less than the money they gained by spending money they didn't have before the bond was purchased.

Therefore, since economies need money to grow, there are three options:

  • Don't go into debt
  • Let others pay for your debt, promising to pay them back (Bonds)
  • Print money until there is no debt

The first option has, to say the least, fallen out of vogue. The third option makes creditors world-wide lose faith in your economy, which leads to adverse effects with trading and funding. This leaves the second option, which is how countries have been addressing this.

It's not quite this black and white of course, the Quantitative Easing program after the 09 financial crisis is a good example of, in essence, large-scale government printing of money to alleviate a crisis. There is no hard and fast rule when it comes to determining what will undermine confidence in your currency, just like attaching an interest rate to a loan, there is a risk/reward ratio for any action. Trust, however, is easy to lose and challenging to regain.

TL;DR

MMT is technically accurate in its premises, but short-sighted concerning the effects of what it proposes. Printing money to solve monetary problems only creates a host of potentially worse problems.