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Comment by Torai | Hacker News Reader

Economists don't want to address the elephant in the room: whenever money is created, by private interests, is given to governments and society as debt. So, the way economy is structured now, it's by design a transfer of wealth => resources => power from the public to the powerful.

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The last phrase is the key. The economists in the Austrian school explain: Money is simply a proxy for goods and services. It solves the "coincidence of wants" problem. When the Fed and other similar agencies print money unbacked by goods and services, they immediately devalue the currency because now each unit (dollar) represents a smaller amount of goods and services. But when this "infusion" hits the big banks, the effect has not been felt by the full market so the rich and powerful benefit before the devaluation has been felt by the market. And the general public pays for the fraud.

I've long thought economics is the art of controlling an unstable feedback mechanism into spiraling out of control slow enough that generational amnesia prevents greater society from noticing.

Not a bad take.

Sounds like you would find Steve Keen's work interesting then.

https://en.wikipedia.org/wiki/Steve_Keen

> whenever money is created, by private interests, [it] is given to governments and society as debt

The U.S. government, in 2016, issued $1.4 trillion of debt [1] and took in almost $3 trillion in taxes [2]. I'm not sure I see your point.

[1] https://www.treasurydirect.gov/govt/reports/pd/feddebt/fedde...

[2] http://federal-budget.insidegov.com/l/119/2016

But that $3 trillion is all spent. Is it not?

> But that $3 trillion is all spent. Is it not?

And the $1.9 trillion isn't? At the micro level, economies are just transactions. People (e.g. natural persons, companies and governments) buy goods and services with money or credit. Credit creates debt.

"Money" would still exist if we zeroed out debt, e.g. gold-based economies of yore, but that destroys the double-entry ledger system [1] that serves as a a distributed error-correcting mechanism. It also decouples the currency from economic growth, which produces all kinds of nasty side effects.

[1] https://en.wikipedia.org/wiki/Double-entry_bookkeeping_syste...

It want to capital infusions for major banks and QE-related asset swaps. It's not like money was printed and given to people.

> It want to capital infusions for major banks and QE-related asset swaps

The $3 trillion figure is from the 2016 budget. I don't believe any capital was infused into banks à la TARP [1] last year. Also, QE refers to the Federal Reserve, instead of just buying Treasury bonds from banks, buying a broader portfolio of assets. This is done off the Fed's balance sheet and does not come out of tax proceeds.

[1] https://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program

The argument boils down to this:

1) The economy is a system with some amount of money in it.

2) The money is measured (see; M2 [1]).

3) The amount of money appears to be increasing extremely quickly (exponentially, in fact).

4) The new money is not being expressed in wages. The government doesn't appear to be pushing it into the economy directly because they are taking on debt instead of printing money.

If you accept this frame, then the follow up is that someone is being given a lot of money, and the question is why not change the rules so that the newly created money is given no-strings-attached to the government?

[1] https://www.federalreserve.gov/RELEASES/h6/Current/default.h...

> why not change the rules so that the newly created money is given no-strings-attached to the government?

Argentina, Brazil and various countries tried this. TL; DR Politicians like to print money to hand out favors [1]. An independent central bank, governed by and reportable to elected officials at an arm's length, turns out to be a better solution.

Note that flat wages with job growth doesn't comport with your fourth observation. More wages were paid in June than in May [2], and in May than in April [3], et cetera. There were just more people earning them.

(I'm not suggesting stalled wage growth, especially relative to upward-marching productivity, isn't an area of concern. It's just that history shows it's better to address these issues through fiscal, versus monetary, policy.)

[1] https://people.ucsc.edu/~walshc/MyPapers/cbi_newpalgrave.pdf

[2] http://www.reuters.com/article/us-usa-economy-idUSKBN18T0BT

[3] http://www.reuters.com/article/us-usa-economy-idUSKBN1810BZ

I'll offer a point of clarification - and I do agree that the situation is a lot more complex than 4 dot points.

That said; point 4 can stand if (wages growth + unemployment drop) < (increase in the M2).

I haven't checked it in America, but in Australia the M2 is growing at about 8% p.a. I'm confident assuming total wages aren't growing that fast, because it would be very visible on the ground (people getting jobs left right and centre). The new money being created is mostly going elsewhere vs wages.

From 27 June 2016 to 12 June 2017, U.S. M2 grew about 5.2% [1]. From June 2016 to June 2017, total U.S. non-farm payrolls grew by about 3.3% [2]. Finally, from June 2016 to June 2017, total U.S. average hourly earnings for private employees rose by 2.5% [3].

(In case you're curious, median usual real wages and salaries for full-time employees in the United States, 16 and over, rose about 1.2% from Q1 2016 to Q1 2017 [4].)

Side note: these statistics were collected by economists.

[1] https://fred.stlouisfed.org/series/M2 13514.5 / 12844.8

[2] https://fred.stlouisfed.org/series/PAYEMS 146404 thousand / 141742 thousand

[3] https://fred.stlouisfed.org/series/CES0500000003 26.25 / 25.62

[4] https://fred.stlouisfed.org/series/LES1252881600Q 350 / 346

> The amount of money appears to be increasing extremely quickly (exponentially, in fact).

Yes and it has been pretty consistent in this since the beginning of our country. Nothing really new here.

Additionally GDP has been increasing exponentially along with it.

Population has also been doing the same.

I often see the phrase "exponential increase" as a scare tactic. In tons if situations it's expected and would be odd if it werent.

Agree... most of the concern over money printing are overblown. The M2 money supply growth is in-line with historical trends. The hyperinflation many in 2008-2010 predicted failed to happen. Look at it this way: someone who shorted the treasury bond market in 2000 anticipating debt-related inflation would have lost substantial money despite the national debt rising considerably since then. That's not an invitation for wasteful spending, but it means that concerns over the debt are almost always overblown.

Public debt, yes. Private debt on the other hand...

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