P20: Germany "printed" money in the 1920s.
P30: And it is said that the U.S. "printed" money in the 1930s.
But isn't there a big difference between P20 and P30?
Right, so when government "prints" money it is not the same as debt. Whereas when it creates debt by issuing bonds, it is borrowing money which it then owes to the lenders. By creating debt it becomes a debtor, i.e., it then OWES the money it borrowed, but not when it "prints" money (like Germany did), because it does not OWE this money to anyone.
No one is in debt to someone simply because a person has money or currency. With a debt, there is an amount of money owed to someone by a certain date, which has to be paid by the borrower to the lender. If that entity who borrowed it does not make that payment, it's called "default" and it's the same as a breach of contract (even if it's not enforceable in some cases). But with "printing" money, there is no payment owed to anyone by the borrower (government).
Goods and services are owed.
Owed by whom? No one is obligated to provide goods and services. Rather, anyone who is selling anything is required to accept the currency as payment, which doesn't mean they "owe" it, anymore than if there were no currency but only barter. Just because you're a seller it doesn't follow that you're in debt to someone with money to spend. Nor does the government owe anything to anyone just because it issued that currency. The government did not borrow anything when it printed that money, and it doesn't have to pay anything back to anyone.
Money is debt, not credit.
No, it's neither. If we mean currency, it's paper which citizens are required to accept in payment if they're selling anything.
If a seller is required to accept the currency for payment, that doesn't mean the seller is borrowing or lending anything by accepting the money, or that he's being paid back a debt by accepting it as payment. Neither before or after the transaction is either the buyer or seller in debt to the other, or to anyone.
It's a signal that says 'the economy owes the bearer $1 worth of stuff'.
No, an inanimate object or an abstraction cannot "owe" anything, or be in debt. Who's "the economy"? Not the government. Not any buyer or seller, or any collection of buyers or sellers. No one owes anything to anyone. Rather, everyone selling anything has to accept this money as payment.
That's different than debt, where a particular entity is required to make a payment to another particular entity by a certain date.
How does the government pay them back, like it does the bondholders when it repays principle to them?
The government doesn't. The entire economy does.
No it doesn't. Not if you mean when they buy something with the money. It's not "the economy" which pays them, but rather a particular seller who provides a product/service. This isn't a debt being repaid, which that seller owes to this buyer. Rather, this is just the law requiring the seller to accept this currency as payment. The seller owes nothing to this buyer, and this buyer owes nothing to this seller.
The buyer and seller are just both following the law which says all buyers and sellers must accept this currency for payment. Or rather, the seller must accept it, and the buyer is entitled to use this currency to pay for any purchase, or as payment for anything being offered for sale.
That's not the same as a debt, where one party is owed a particular payment, or sum, of a certain amount agreed on earlier when they agreed to the loan, and where terms of repayment were agreed to, such as a due date, and interest added to the principle.
How does a government DEFAULT on its debt it owes from having "printed" money, like Germany printed currency in the 1920s?
By ceasing to use the currency in favour of a new one - like Germany did in the 1920s.
Is that what Germany did? To avoid getting bogged down unnecessarily in the war debt, the reparations, etc., and losing the forest for the trees, let's assume we're considering only the German consumers who had to accumulate large quantities of Marks in order to cope with the extreme inflation. If we just focus on that, and nothing else, how is that the same as "default" on a debt?
Did Germany OWE the consumers something and then default on paying them back? Did Germans in effect loan billions of Marks to the government which it reneged on? What makes this a debt, or loan by Germans to the government?
Just because there was a financial or banking disaster at this time does not mean there was a loan, or money borrowed from someone, who then got shafted when the borrower failed to meet the terms.
Where was the agreement by the lenders to extend this loan to the German government? What was the principle borrowed, and at what interest rate? What was the deadline missed, when Germany defaulted on this loan?
Your definition of "default" seems to just be that there was a financial disaster, and any financial disaster is automatically a default on a loan by whoever was in charge, or by whoever screwed up.
But real "default" and debt is something different than that. It doesn't just mean any big screw-up by someone, or by a government.
The United States today could default on the national debt, by failing to pay the lenders. Those are particular persons, not everyone holding U.S. currency, but only those holding the bonds and getting cheated of the interest or principle that's due. They took a risk with this investment in bonds, and if the U.S. should default for some reason, then those particular individuals, or parties, would get screwed. If it's a debt, it means only certain parties who loaned the money are the creditors, not everyone. It could even mean some do get their payback and others do not. "Default" means that certain persons owed the money don't get paid on schedule.
That's not what happens if something goes wrong with the money "printed" and circulated, where everyone holding that currency suddenly experiences an inflation disaster. Having that currency does not mean they are creditors owed anything by the government. They did not invest in anything, but were legally required to accept that currency in payment for anything they sold. It's not a debt, but a convention agreed to politically by everyone, with no one being the lender or the borrower.
Just because the government screws up, or cancels some currency it issued, or makes other disastrous decisions, does not mean there was a debt and the government "defaulted" on that debt.
Holders of the notes are not owed anything because they have this paper. The paper is not a loan from the holders of the notes, who are owed repayment by a certain date, or based on certain terms of repayment.
You can call this "debt" if you want -- you can create artificial jargon and give artificial names to anything -- but this "printed" money is significantly different than a loan, where particular persons choose to invest in something which repays the principle and interest by a certain due date.
So there is a difference between paying the deficit by borrowing and paying it (or part of it) by "printing" money without debt.
If only a small amount is printed (unlike Germany did), so the value of that currency decreases 1 or 2 percent, who is owed something which has to be paid to them by a certain date?
Money doesn't have an expiry date.
Then how can there be any "default"? If there are no terms to be met by the borrower, then it's not debt which could be defaulted on, i.e., there are no terms such as a payback date and interest payment. It can't be "debt" if there's no possibility of default, no terms which have to be met by the borrower.
The bearer of money is the one who is owed something.
No, when you buy a loaf of bread, that's not the store paying off a debt to you. It's not the same as government paying a bondholder principle and interest on a certain due date.
The bearers of money did not choose to take any risk. There were no terms agreed to. There's no obligation to pay them anything, except that all sellers have to accept this currency. The requirement to accept the currency as payment does not mean the seller owes anything to the buyer. The seller could close up shop and owe nothing to anyone. How can you say the seller OWES something but can cancel that debt instantly by closing the store?
Someone in debt cannot suddenly cancel the debt by closing shop. That's not what "debt" means.
If a billion dollars is created by issuing bonds, then 5 or 10 or 15 years later those bondholders are paid back that billion, plus interest. They have to be paid this, or the issuer is defaulting on the debt.
But what if a billion dollars is created by "printing" currency, or by increasing the dollars in circulation without issuing bonds. Who is owed that billion dollars, and how are they paid back? What is the "default" if something doesn't happen by a certain date, as in the case of bonds which must be repaid by a certain date?
What if only enough is "printed" in order to prevent DEFLATION of the currency, and no more. Who is owed that amount which was printed? I.e., who must be repaid in order to avoid default? If there's no creditor who must be repaid, then how is that the same as "debt"?
If the economy produces more stuff than there are debt tokens to indicate to whom that stuff should be distributed, then the value of the tokens increases, and $1 buys more stuff. If more tokens are issued than there is stuff to swap them for, the value of the tokens decreases, and $1 buys less stuff.
That's obvious. Now, where's the "debt" in any of that? There is none. No one owed anything to anyone.
The total money in circulation has a value equal to the total goods and services in circulation. Wealth is an indication of what proportion of all goods and services are owed to the holders of that wealth.
No, not "owed." It's an indication of their purchasing power, or of how much stuff they can buy, but not what is "owed" to them. For it to be "owed" there has to be a debtor obligated to pay, which there is not. Because you have money to spend does not mean sellers out there are in debt to you, or that they "owe" you something. Rather, all sellers are required to accept the currency for payment, which does not make them borrowers or debtors owing something to buyers. No more than the buyers "owe" something to the sellers. Both are equally free of debt and free to not buy or sell.
The existence of the money does not make people into buyers and sellers, but only makes the buying and selling easier, so it makes the economy expand and function better for everyone. It doesn't put anyone in debt toward someone else.
And the "wealth" is whatever is already owned by someone, not something "owed" to them or a measure of something "owed" to them. If you have "savings" in some form, there is a particular entity, not the whole economy, who holds debt from you and "owes" it back to you based on certain agreed terms. That's the only debt. The wealth is not yours before you buy it, nor is it "owed" to you because you have money to spend on it. If you spend your money to buy it, then it becomes yours, or part of your wealth.
You could own billions in wealth and not be "owed" anything from anyone, if there is no contract between you and a particular borrower. Just because you have money or own wealth per se does not make you a creditor to whom someone is in debt.
Money isn't property; it's a placeholder for future property - aka 'debt'.
That's semantics, not economics. Just because sellers are required to accept it as payment does not mean they are in debt to the buyers. Unless you are saying that any law makes all citizens "in debt" to the society because they must obey this law. Or that ANY duty or obligation or requirement to do something is a "debt" someone owes.
But the "debt" owed to a particular bondholder, or lender, is something more specific than that, being an agreement between 2 particular parties. It's not the same as a requirement on ALL sellers to accept the currency as payment, which is like the requirement to wait for a green light, or the requirement to pay your taxes, or to obey health and safety regulations. That sellers are required to accept the currency for payment does not mean they are in debt to buyers.
Thank you for demonstrating that you have no clue what money is or how it works; Could you please stop commenting on economics until you have made an effort to learn this?
Where do I register for your course on Quackanomics?
It's really not complicated; But you have obviously been so badly wrong for so long that you find the simple truth impossible to believe.
If you have the expertise you claim, you could explain: Why was it not possible in 1930-32 for the government to "print" money (like Germany did, but not as much), not in the form of bonds or other debt, in order to offset the deflation of those years? Why would that not have been preferable to borrowing it from bond investors?
Is it not true that the debt to bondholders had to be repaid, with interest, in the following years? thus driving up future debt in order to repay earlier debt? and that "printing" money would not have required any such repayment? and that the price level could have been maintained with inflation targeted to zero or 1 or 2%? Why could that not be done?
Is there not a difference between "printing money" as Germany did it in the 1920s and "printing money" as the U.S. did it in the 1930s?
Are you not able to understand the difference between
• "printing money" which is circulated without any debt someone has to repay, and
• "printing money" by means of issuing debt?
"Printing money" without debt means no one is to be paid back later, as a creditor is owed payment, and no particular person is in debt to another particular person as a result of "printing" the money. A seller must accept the currency, but that is not a "debt" owed by the seller or buyer, because a "debt" is an individual obligation on a particular borrower and accepted as a risk by those individual parties choosing to do the transaction -- it's not a rule imposed onto all buyers and sellers, like the requirement that all sellers must accept this currency for payment.
What is the problem with recognizing the difference between these two different forms of "printing money"?
