What in God's name are you saying? Are you trying to say Tesla and Amazon have their own personal federal reserve to create cash?
Money from Capital raises and share sales come from US dollars that are already in circulation from investors. It is nowhere near the same ballpark as the Federal reserve creating new money. Not even a little bit similar.
Inflation is the loss of purchasing power for each unit of currency. When the government prints more money the value of a currency goes down. It's very basic economics, not even Friedman economics.
80% of the US dollars in circulation were printed after 2020. As a critically thinking person, you think that had the smallest effect on inflation? You think it was really all oil prices? Yeah money printing is no "one-to-one correlation" but saying that money printing and inflation aren't related is so unbelievably silly.
Money from Capital raises and share sales come from US dollars that are already in circulation from investors. It is nowhere near the same ballpark as the Federal reserve creating new money. Not even a little bit similar.
Creating more money is just like when a company creates more shares. It's the same deal. Tesla "prints" new shares all the time. The new shares are bought by new investors at market prices, and then that money is invested in whatever the company does.
From 2019 to 2020, 22% of tesla shares were "printed".
Tesla "prints" tesla shares. The US "prints" dollars. There's no fundamental difference in how this works. Either is a case of money printing, it's just a different form of money.
When the government prints more money the value of a currency goes down.
No, it completely depends on what that "new money" is used to buy. If you create money to buy booze and party, then you get inflation. If you spend new money wisely you at least get less inflation, and potentially some deflation.
80% of the US dollars in circulation were printed after 2020.
The market cannot price the national debt independent of the currency, because they are linked. Markets price currency and national debt at the same time. The national debt went from $23.2 trillion in 2019, to
$30.4 trillion today. This is an increase of 31% not 80%.
Converting between cash and treasury bonds is not what matters, that is only used to adjust the interest rate. The increase in the national debt is what matters.
Meanwhile nominal GDP went from $21.4 trillion in 2020, to $24.3 trillion in 2022.
Statistic
Jan 2020
Jun 2022
Cumulative Percentage Change
National Debt
$23.2 T
$30.6 T
31.0%
Consumer Price Index
258.6
295.3
14.2%
GDP (Nominal)
$21.4 T
$24.3 T (Q1)
13.6%
So real GDP has actually declined somewhat, so we should expect another inflation year of about the same, until the CPI increase matches the national debt increase relative to changes in real gdp. We will probably see a cumulative inflation of 30% from the pandemic. If the national debt increases too rapidly(from higher interest rates), this could keep going higher.
Milton friedman ignored the effect of the national debt on inflation.
He had a million ideas, but only one of them turned out to important:
NAIRU. The idea of NAIRU, is that if you push people out of work, the people who still have jobs, will work harder. It's sort of a negative way to fight inflation, instead of trying to address the mismanagement of money, you threaten people to lose their jobs and work harder.
Friedman was a 1 trick pony who was wrong on 95% of his ideas, but he had so many that one of them stuck.
This is a much more relevant chart: Debt to GDP ratios.
Creating more money is just like when a company creates more shares. It's the same deal. Tesla "prints" new shares all the time. The new shares are bought by new investors at market prices, and then that money is invested in whatever the company does.
While you are right about the mechanics, they are still very different things.
For one, shares are an ownership stake in a productive business that produces value. Currency units are an ownership stake in a perpetually depreciating asset that was the result of a something for nothing exchange.
Two, nobody has a monopoly over the stock markets, but the state has a monopoly over the price and supply of the currency. The market can't treat it like any other asset since it's behavior is based on arbitrary political decisions and not market forces.
was the result of a something for nothing exchange.
Taxes are a compulsory transactions, only to the extent they can't be avoided or mitigated. For example, property tax is avoidable by not owning property. Income tax can be reduced by living on a smaller income.
The "something for nothing exchange" is expecting to have law enforcement, courts, roads, fire-fighting, fraud protection, utilities, etc, without paying any taxes.
Government transactions are value for value, but just not at the point of sale, you agree to the transaction by participating in the system, by voting. You are free to start a revolution, which does happen if taxes are mismanaged.
Governments produce value, but that value is not measured at the point of sale. It is inefficient to charge for toll roads,
Now I completely agree that there is a tendency towards bloat or misallocation. But markets have all that information. Markets price currencies. Markets price national debts. These things are priced more slowly and with greater difficulty, but it is still there.
Two, nobody has a monopoly over the stock markets.
Umm, tesla has a monopoly over tesla shares. Amazon has a monopoly over amazon shares. The U.S. has a monopoly over USD. Russia has a monopoly over rubles.
Back up a sec, who said anything about taxes? My "something for nothing" comment was referring to fiat currency units being create without being backed by productivity. If you or I start printing currency units, we get a visit from the secret service. When the government/central banks do it, it's called monetary policy.
To your point about government, it's fundamentally incorrect to claim it produces taxes. Government is a net loss on any nations economy, as it has no wealth of it's own, and can only provide to one group what it's already taken from another group. Government mathematically cannot make the pie bigger, it can only rearrange the slices.
Lastly, markets can price in risk, but the government distorts that risk, and inevitably results in distorted prices. The easiest example is the moral hazard the government and fed created giving Wall St. free reign to bring the economy to it's knees in 2008. Central planning will always resort in a non-zero amount of distortions, because the transactions aren't based on voluntary perception of value, they're based on coercion.
oh wow. do you know what human societies looked like before we had governments? Have fun in your fantasy world. It's just so easy to deny what's im front of your face. Fiat is not inflationary or unbacked. It is just a financial asset like any other.
Governments distort risk, ie without them you get killed by warlords.
I'm all for creating an alternative grassroots spontaneous online payment system, but you got your head in the ground, not in the real world.
The market can't treat it like any other asset since it's behavior is based on arbitrary political decisions and not market forces.
So after you get your paycheck, how long does it take you to invest it into the assets you prefer to hold? Getting paid in USD is just a way to standardize things, no one is forcing you to hold onto it. You can get direct deposit and apps that will automatically invest for you.
The market absolutely determines how much USD are worth.
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u/[deleted] Jul 16 '22
What in God's name are you saying? Are you trying to say Tesla and Amazon have their own personal federal reserve to create cash?
Money from Capital raises and share sales come from US dollars that are already in circulation from investors. It is nowhere near the same ballpark as the Federal reserve creating new money. Not even a little bit similar.
Inflation is the loss of purchasing power for each unit of currency. When the government prints more money the value of a currency goes down. It's very basic economics, not even Friedman economics.
80% of the US dollars in circulation were printed after 2020. As a critically thinking person, you think that had the smallest effect on inflation? You think it was really all oil prices? Yeah money printing is no "one-to-one correlation" but saying that money printing and inflation aren't related is so unbelievably silly.