Print more money

migemo · 22-08-2011 10:22pm #1

Prob done here before but what's the problem with the banks or the governments just printing more money? When they print out e.g 50 euro notes, why not keep printing and put it into circulation? Prob obvious answer.

Tigger · 22-08-2011 10:33pm

10 if you do understand the implication the answer is the germans would go mad

20 if you don't the answer is MASSIVE INFLATION

30 GOTO 10

migemo · 22-08-2011 10:46pm

Surely the Germans would benefit too. And isn't inflation higher now than during the boom? I can understand that it would devalue commodities but isn't that happening anyway?

Manach · 22-08-2011 10:48pm

The Germans remember the Weimar Republic.

exaisle · 22-08-2011 10:50pm

@Tigger - that's an oversimplification...may I clarify?..the answer is not always massive inflation....especially during a recession when the aim is to speed up the velocity of circulation (the number of times the money actually changes hands).

Here's an interesting link for anybody interested in quantitative easing....

http://www.economicshelp.org/blog/inflation/money-supply-inflation/

coffee_cake · 22-08-2011 10:50pm

time to get out the wheelbarrows

BOHSBOHS · 22-08-2011 10:50pm

google "hyperinflation" midgemo

its not a good thing ...can even give rise to worldwars :-)

RichardAnd · 22-08-2011 10:54pm

This article explains quite well why printing money is not much of a solution.

http://www.economicshelp.org/blog/economics/the-problem-with-printing-money/

If you printed a few 50s for yourself, it would probably be no big deal but printing billions...well read the article and you'll see.

nesf · 22-08-2011 11:07pm

You can get away with printing some money, just so long as the economy is relatively depressed. The problem is that you never know how much money is too much money and keeping inflation low is an extremely important goal for Governments and Central Banks.

swampgas · 22-08-2011 11:24pm

Let's see if I understand this:

(1) Normally the money supply should only be increased to match the real economy.
I assume that this is more or less what the ECB is trying to do.
(2) If you print more money than (1), you can get one of the following cases:
(3a) There's a recession - stops deflation, okay for now, but stores up inflation for later
(3b) No recession - instant inflation.

Sounds like printing money is a case of inflation now or inflation later, but there's no avoiding it unless the economy suddenly grows to make up the gap.

Feel free to tell me all the ways I got that wrong :-)

nesf · 22-08-2011 11:42pm

swampgas wrote: »

Let's see if I understand this:

(1) Normally the money supply should only be increased to match the real economy.
I assume that this is more or less what the ECB is trying to do.
(2) If you print more money than (1), you can get one of the following cases:
(3a) There's a recession - stops deflation, okay for now, but stores up inflation for later
(3b) No recession - instant inflation.

Sounds like printing money is a case of inflation now or inflation later, but there's no avoiding it unless the economy suddenly grows to make up the gap.

Feel free to tell me all the ways I got that wrong :-)

You can get around the inflation later by raising interest rates as the economy recovers (i.e. dampen investment and growth to keep things under control).

Suryavarman · 23-08-2011 12:18am

Sadly OP if printing money was the way to resolve problems we could all be rich. The thing is, when you attempt print money on the scale we would require you get rampant inflation. This would wipe out people's savings and make goods more expensive. This would destroy the working and middle classes but the rich would remain unscathed due to owning commodities and stocks. A fine example really of the rich getting richer and the poor poorer. These are things we do not not need in a stagnant economy.

We must also look at the fact that much of our debt is owed to other eurozone countries, I doubt they would be too enthusiastic about turning the money they are owed into dust.

We only need to look at examples of countries trying this method in the past to see what a disaster it is.

View · 23-08-2011 12:35am

Suryavarman wrote: »

We must also look at the fact that much of our debt is owed to other eurozone countries,

Is it?

All we know for sure is that our debt is denominated in Euro. Anyone, anywhere could hold that debt as it is/could have been traded multiple times on the international bond markets (the largest of which are, of course, in London and the US).

Suryavarman · 23-08-2011 12:41am

View wrote: »

Is it?

All we know for sure is that our debt is denominated in Euro. Anyone, anywhere could hold that debt as it is/could have been traded multiple times on the international bond markets (the largest of which are, of course, in London and the US).

Surely the ECB bailout is owed back to other eurozone countries in some way? Apologies if I'm wrong, I don't know too much about the fine print

leeroybrown · 23-08-2011 12:44am

I think we're well beyond quantitate easing at this stage. The last thing we need to do is inject more artificial capital directly into bank the banking system when we're already trying to make the comply with more stringent reserve stress tests. I'd suggest that most of this money would just end propping up the balance sheets of bad banks and that which is lent would only inject more risky debt into the economy. Ultimately if it was done I'd expect the financial markets to see it as a sign of weakness further destabilising the system. As it is they're already panicking or rising on various implied meaning of soundbites from politicians. No need to make it worse.

At the end of the day a fiat currency is only as good as the confidence of the payee in the issuer's ability to support it.

View · 23-08-2011 12:54am

Suryavarman wrote: »

Surely the ECB bailout is owed back to other eurozone countries in some way? Apologies if I'm wrong, I don't know too much about the fine print

It depends on which money you are referring to when you use the phrase "ECB bailout".

The "bailout" loans are usually used by people to mean the monies from the IMF, the (EU's) EFSM, the EFSF (a Luxembourg company which has the Eurozone states as the shareholders) and bilateral loans from some non-Eurozone EU member states (e.g. the UK, Sweden, Denmark and possibly more).

In the case of the last three (i.e. the EFSM, EFSF and non-Eurzone EU member states), and I would presume the IMF, the relevant authorities borrow money (by selling bonds on the international bond markets) so they can then loan the monies on to us. The bonds sold were sold to investors worldwide - both EU and non-EU ones.

clintondaly · 23-08-2011 12:34pm

Please find below my suggestion for fixing the Irish economy.

Instead of giving billions of Euro's to banks that will squander the
money on lavish parties and unearned bonuses, use the following plan.

You can call it the Patriotic Retirement Plan:

There are about 400 thousand people over 50 in the work force.

Pay them €1 million each severance for early retirement with the
following stipulations:

1) They MUST retire.
400 thousand job openings - unemployment fixed

2) They MUST buy a new car.
400 thousand cars ordered - Car Industry fixed

3) They MUST either buy a house or pay off their mortgage - Housing
Crisis fixed

4) They MUST send their kids to school/college/university - Crime rate
fixed

5) They MUST buy €100 WORTH of alcohol/tobacco a week .....
And there's your money back in duty/tax etc

It can't get any easier than that!

P.S. If more money is needed, have all members of the Dail pay back
their falsely claimed expenses and second home allowances
Also;
Let's put the pensioners in jail and the criminals in a nursing home.
This way the pensioners would have access to showers, hobbies and walks.

They'd receive unlimited free prescriptions, dental and medical
treatment, wheel chairs etc and they'd receive money instead of paying
it out.
They would have constant video monitoring, so they could be helped
instantly, if they fell, or needed assistance.
Bedding would be washed twice a week, and all clothing would be ironed
and returned to them
A guard would check on them every 20 minutes and bring their meals and
snacks to their cell.
They would have family visits in a suite built for that purpose.
They would have access to a library, weight room, spiritual
counselling, pool and education.

Simple clothing, shoes, slippers, PJ's and legal aid would be free, on
request.
Private, secure rooms for all, with an exercise outdoor yard, with
gardens.
Each senior could have a PC a TV radio and daily phone calls.
There would be a board of directors to hear complaints, and the guards
would have a code of conduct that would be strictly adhered to.
The criminals would get cold food, be left all alone and unsupervised.
Lights off at 8pm, and showers once a week. Live in a tiny room and
pay €600 per week and have no hope of ever getting out.

nesf · 23-08-2011 12:36pm

clintondaly wrote: »

Please find below my suggestion for fixing the Irish economy.

Instead of giving billions of Euro's to banks that will squander the
money on lavish parties and unearned bonuses, use the following plan.

You can call it the Patriotic Retirement Plan:

There are about 400 thousand people over 50 in the work force.

Pay them €1 million each severance for early retirement with the
following stipulations:

1) They MUST retire.
400 thousand job openings - unemployment fixed

2) They MUST buy a new car.
400 thousand cars ordered - Car Industry fixed

3) They MUST either buy a house or pay off their mortgage - Housing
Crisis fixed

4) They MUST send their kids to school/college/university - Crime rate
fixed

5) They MUST buy €100 WORTH of alcohol/tobacco a week .....
And there's your money back in duty/tax etc

It can't get any easier than that!

P.S. If more money is needed, have all members of the Dail pay back
their falsely claimed expenses and second home allowances
Also;
Let's put the pensioners in jail and the criminals in a nursing home.
This way the pensioners would have access to showers, hobbies and walks.

They'd receive unlimited free prescriptions, dental and medical
treatment, wheel chairs etc and they'd receive money instead of paying
it out.
They would have constant video monitoring, so they could be helped
instantly, if they fell, or needed assistance.
Bedding would be washed twice a week, and all clothing would be ironed
and returned to them
A guard would check on them every 20 minutes and bring their meals and
snacks to their cell.
They would have family visits in a suite built for that purpose.
They would have access to a library, weight room, spiritual
counselling, pool and education.

Simple clothing, shoes, slippers, PJ's and legal aid would be free, on
request.
Private, secure rooms for all, with an exercise outdoor yard, with
gardens.
Each senior could have a PC a TV radio and daily phone calls.
There would be a board of directors to hear complaints, and the guards
would have a code of conduct that would be strictly adhered to.
The criminals would get cold food, be left all alone and unsupervised.
Lights off at 8pm, and showers once a week. Live in a tiny room and
pay €600 per week and have no hope of ever getting out.

Please don't go wildly off-topic in threads, the above has nothing to do with printing money or quantative easing.

dsmythy · 23-08-2011 12:41pm

If they start doing that I think my first reaction would be to quickly get hold of dollars!

clintondaly · 23-08-2011 12:42pm

Sorry

irishh_bob · 23-08-2011 12:52pm

dsmythy wrote: »

If they start doing that I think my first reaction would be to quickly get hold of dollars!

what kind of dollars , american kind are fast becoming toilet paper

Debtocracy · 23-08-2011 3:36pm

The question is not whether to print but how much. Money printing is completely necessary because there is never enough money in circulation to meet the expanding interest payments of debts. It is the only solution to avoid widespread defaults. The problem is that money printing needs to increase exponentially to keep up with the growing debt (have a look at the exponential curve of a money supply graph). Eventually however, the rate of money printing becomes so large that people abandon the currency for hard assets. So we’re left with one of two options – 1) keep the money supply constant and experience an immediate depression, 2) exponentially increase the money supply and experience future hyperinflation.

Suryavarman · 23-08-2011 6:36pm

View wrote: »

It depends on which money you are referring to when you use the phrase "ECB bailout".

The "bailout" loans are usually used by people to mean the monies from the IMF, the (EU's) EFSM, the EFSF (a Luxembourg company which has the Eurozone states as the shareholders) and bilateral loans from some non-Eurozone EU member states (e.g. the UK, Sweden, Denmark and possibly more).

In the case of the last three (i.e. the EFSM, EFSF and non-Eurzone EU member states), and I would presume the IMF, the relevant authorities borrow money (by selling bonds on the international bond markets) so they can then loan the monies on to us. The bonds sold were sold to investors worldwide - both EU and non-EU ones.

I was referring to the EFSM & EFSF loans.

If they did raise the funds through selling bonds, then printing more Euro is surely going to affect their ability to pay back the bonds.

On the point of the bilateral loans, they are surely denominated in currencies other than the euro? If they are denominated in Euros then there will surely be political pressure to stop us devaluing the Euro?

migemo · 23-08-2011 8:45pm

Suryavarman wrote: »

Sadly OP if printing money was the way to resolve problems we could all be rich.

O.P here. I would never suggest that they(whoever 'they' are) print an endless supply of money, just enough to keep things ticking along. Anyway where did all the billions go? 10 yrs ago the banks and most of the governments of the world, well USA and Eurozone anyway, had their coffers bulging with cash. Now, not only has that gone but billions, and in America's case, trillions gone with it. Gone where? Most of the world is in debt. To who?

Suryavarman · 23-08-2011 8:58pm

migemo wrote: »

O.P here. I would never suggest that they(whoever 'they' are) print an endless supply of money, just enough to keep things ticking along. Anyway where did all the billions go? 10 yrs ago the banks and most of the governments of the world, well USA and Eurozone anyway, had their coffers bulging with cash. Now, not only has that gone but billions, and in America's case, trillions gone with it. Gone where? Most of the world is in debt. To who?

The amount required to keep things ticking along would have quite a negative affect though all the same.

The thing was the banks weren't flush with cash. What was happening was the banks were able to get low interest rate loans from the central banks and then loan that to whoever wanted it. This as we all know led to a huge housing bubble which popped causing housing prices to crash and cause a lot of banks assets to disappear.

The problem with Ireland is that during the bubble the Government had a huge source of revenue from stamp duty which disappeared when the bubble popped. This combined with higher unemployment creates the large budget deficits we have.

So to summarise the money previously slushing around has disappeared and nobody can pay back their debts.

hmmm · 23-08-2011 9:04pm

migemo wrote: »

Most of the world is in debt. To who?

Most government debt is sold to pension companies, life assurance companies etc. They want to buy investments that are relatively safe, and offer a well defined revenue stream.

When you retire and buy an annuity, the company you are buying the annuity from is putting most of that money into government debt.

View · 23-08-2011 11:56pm

Suryavarman wrote: »

I was referring to the EFSM & EFSF loans.

If they did raise the funds through selling bonds,

They did - (virtually?) all EU member states are borrowing at the moment. No one has spare billions sitting around in their Treasuries on the off-chance they might need to loan it to us or anyone else.

Suryavarman wrote: »

then printing more Euro is surely going to affect their ability to pay back the bonds.

Not directly. Anyone who loaned in Euro gets paid back in Euro. Obviously repaying your loans after going on a massive printing spree is not going to be well received by the (non-Eurozone) lenders although it would be legal to do so. The problem arises when you then need to go back to the lenders and borrow some more from them as they will want a higher interest rate to compensate them for the possibility that you might do the same trick again. It is a bit like ripping off your car insurance company (when they know you are doing so) and then asking them to quote you for next year...

Suryavarman wrote: »

On the point of the bilateral loans, they are surely denominated in currencies other than the euro?

The UK bilateral loan certainly is and I'd imagine the others are also.

View · 23-08-2011 11:58pm

hmmm wrote: »

Most government debt is sold to pension companies, life assurance companies etc. They want to buy investments that are relatively safe, and offer a well defined revenue stream.

When you retire and buy an annuity, the company you are buying the annuity from is putting most of that money into government debt.

"Burn my pension fund" doesn't have quite the same ring to it as "Burn the bond holders", does it?

Plazaman · 24-08-2011 12:32am

Hard to really describe the impact of printing an endless money supply but lets simplify it.

You have 15 Lemon Sherbet Bon Bons and your friend Gerald has only 4 Lemon Sherbet Bon Bons. But Gerald has a chocolate brownie that his mother makes, which you think are the dogs bollíx. Normally you would say "Gerald, I'll give you 2 Lemon Sherbet Bon Bons for the brownie and the transaction would be done straight away due to Gerald hatred of brownies after he saw his Mum and Dad riding in the kitched and Dad was using the wooden spoon that mixes the brownies for more unnatural purposes.

But all of a sudden this weekend Uncle ECB Freeboy floods the place with jars of Lemon Sherbet Bon Bons to which Gerald acquires several jars. Now Geralds chocolate brownies lie on the counter of his kitchen as he laughs at your 2 LSBB offer for it. No one anywhere will sell on their brownies, cakes, biscuits as they all have bon bons.

Sea Sharp · 24-08-2011 5:58am

Have a look at what Japan are doing:

http://www.bbc.co.uk/news/business-14642383

They're intentionally printing money in an effort to devalue their currency to boost exports.
Don't be surprised if your hear of the EU/ECB doing something similar in the coming months.
The negatives of printing money are exaggerated and misunderstood by a lot of people. For the EU, printing money is probably the best way out of this mess.

They should print money and use it to buy oversupply property from European countries such as ourselves.

dissed doc · 24-08-2011 8:59pm

migemo wrote: »

Prob done here before but what's the problem with the banks or the governments just printing more money? When they print out e.g 50 euro notes, why not keep printing and put it into circulation? Prob obvious answer.

Because the same bunch of assholes that gambled the money in the first place are still there, the same thing would happen again, and living standards would continuously be eroded to the sh!t you see in the UK and US.

Then again, many in Ireland want that.

Print more money

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