Oh really now?
It is nearly a law of modern economics that if the government prints money, this automatically causes inflation. It rests on some dubious assumptions, mostly that there is now more money in the marketplace chasing the same amount of good, and that therefore, the new money must cause some sort of demand inflation.
But I reiterate, there is absolutely no ipso facto law of economics that states that printing money automatically causes inflation, lowers the value of one’s currency, or raises interest rates.
Why would printing money lower the value of one’s currrency? It doesn’t. If your currency is backed up by something of real worth, such as gold, I suppose that printing more money would reduce the value of one’s currency. After all, you now have more dollars for the same amount of gold, so the dollar automatically declines in value.
But if your currency is not backed up by anything of any value, it simply has no real and true value whatsoever. It’s worth anything, or nothing, or whatever anyone says it is worth. Therefore, as US currency has absolutely no ipso facto value whatsoever (as it is no longer backed by gold) printing more of it can’t possibly lower its value in the same way as printing more gold-backed currency does.
How might printing money lower the value of US currency? Only in the sense that the value of US currency is determined by speculators on the international currency market. If the US prints more money, this might make speculators feel that US currency is not worth so much in their purely subjective opinion. Hence they may bid down the price of US currency.
But US currency has no real hard and pure value the same way a stock price has no real and pure value. A company’s stock price is worth whatever anyone thinks it is worth. It’s worth 100’s of dollars, or it’s worth pennies, or nothing at all. It’s worth whatever people think it is worth.
Supposedly, printing money automatically causes inflation via demand-push inflation. More dollars chasing the same supply pushes up prices by the supply and demand model. However, in the US economy, consumer demand is absolutely dead in the water. Dead, dead, dead, dead. Dead as a dead fish, rotting on the beach.
If the government prints some money and uses it to pay down the US debt or to pay for government spending already allocated instead of borrowing the money for such things, do you really think that there will be some huge demand-push inflation in the US? Is that new money really going to revive the dead US consumer demand, lying on the beach and stinking? No way. Demand will be as dead as ever.
This is particularly true if we print money to pay down US debt. This debt is all owed to very rich Americans or especially to banks. Giving very rich Americans and bankers some more money to play with is hardly going to revive the dead demand side of the US economy. Even more intelligently, we could print money to pay down US debt that is held by foreigners. Since their money is held overseas, giving them more money can’t possibly cause demand-push inflation in the US, since foreigners don’t spend their money here. They spend it in their own countries instead.
There is also an argument that printing money increases interest rates. US interest rates are currently near zero. Think they are going up soon?
You might be interested to learn that the US government just printed $15.2 trillion in the past two years. Yes, it is true. What did they do with that money? They used it to buy up the junk loans that were sitting on the books of US banks and financial corporations. They printed up the money and traded it for the crap loans. The government now owns the crap loans.
Did printing $15.2 trillion cause any inflation? It caused none whatsoever. Inflation is dead in the US, near zero. The big worry is deflation, not inflation.
Did printing $15.2 trillion lower the value of the US dollar? There is no evidence that it did.
Did printing $15.2 trillion cause a rise of interest rates? US interest rates are at about
Nevertheless, for rightwingers, all of these things are right around the corner. The inflation is always right around the bend, as is the plunging dollar and the skyrocketing interest rates. All of these things must happen because they believe in some scientific law that states that printing money causes all of these things.
This is what is behind Rick Perry’s crazy ranting at Bernanke and Geithner, calling them traitors for printing money. The Right hates the idea of printing money because they want to starve the state. Printing money is one way that a state can pay its bills and debts. It’s a weapon in the government’s spending arsenal. The Right opposes government spending in and of itself, hence they oppose printing money.