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@DrALJONES In fact, government spending is constrained by people's attitudes toward money, not by finances or resources. If the government creates huge amounts of money to cover its huge spending, people will simply reject this kind of plunder, they will reject money. MMTers are wrong when they try to convince people that there are no pitfalls to government spending. #mmt #economics #mmtfallacy
That sounds quite academic. Can you give a historical example where this scenario has occurred? In all examples of hyperinflation (that I know of), money printing was a reaction to an economy that was out of balance for other reasons, such as impoverishment due to a shortage of goods
@heinrichsgeist All hyperinflationary events have resulted from a massive increase in the money supply. Governments are always desperate for money. Fiat money helps them get around the limitations of a metallic standard and/or taxation. In Stage 1 of the inflationary process, which can last for many years or even longer, the money supply are constantly increasing and the population's demand for money is high. As a result, prices grow less than the money supply.
@heinrichsgeist In Stage 2, the population's attitude toward money changes: the money supply continues to grow but the population's demand for money falls sharply. As a result, the purchasing power of money falls dramatically, prices skyrocket, and the monetary system collapses. For more details, please read Rothbard. For example, his Mystery of Banking https://mises.org/library/book/mystery-banking #rothbard
@praustrian That's still very hypothetical. Prices can also skyrocket if the supply of goods is severely curtailed. When this affects basic goods, confidence in the system as a whole can be lost and an an ugly dynamic being triggered. Can you give a real-life example where an oversupply of money led to the dynamic you describe?
@heinrichsgeist That is not hypothetical. That is theoretical. An overall rise in prices is always the result of an increase in the money supply. If there is no increase in the amount of money, an increase in prices for some goods and services inevitably leads to a decrease in prices for other goods and services. #inflation #moneysupply #hyperinflation #demandformoney #economics
We are talking here about whether or not an oversupply of money is the cause of a systemic collapse. Not all prices have to rise for a system collapse, it is enough if the economy is not able to satisfy people's basic needs. This can obviously be caused by war, economic war, crop failure or food speculation. Oversupply of money as the ultimate cause is not so obvious but theoretical (or academic, or hypothetical), so I am asking for real evidence.
@DrALJONES
#inflation #moneysupply #hyperinflation #demandformoney #economics #MMT