Thursday, 31 July 2014

Why do governmnts borrow money when they can print the stuff?

The above is a pretty fundamental question. But don’t expect many economists to examine it. Reason is that entire careers, books and a thousand papers have been written in connection with government debt, and if it turned out that government debt was as big a farce as astrology or tea leaf reading, many economists would have egg on their faces.
And economists don’t want egg on their faces. Ergo most of them are reluctant to examine the above question.
And don’t answer the above question by suggesting that printing money is inflationary. It’s pretty obvious that printing too much money is inflationary. But the fact that taking X or Y to excess is harmfull is not an argument against X or Y. 
I examined the question as to whether government borrowing made any sense here, and concluded that it didn’t. Plus Milton Friedman and Warren Mosler opposed any sort of government borrowing.

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