Question about "Printing more money"?

Question

Now, I'm not endorsing this idea. I've heard from time to time political debates about "printing more money" and was wondering what could happen here.

The National debt at this point in time is approximately 19.2 trillion.

Let's say that The President, or the next President, were to direct the US Treasury to print the exact amount of money that is the national debt at the time of the action.

Instead of releasing any of this newly minted money for direct circulation, it was used exclusively to pay off the US National debt immediately, down to $0.

What immediate effects would this have on the value of the dollar and the economy as a whole?

What would come of this?

Answer 1

THIS IS WHAT HAPPENS IN YOUR SCENARIO



(1)



Once we instantly pay the $19T it goes to all of our creditors.



Around 52% of them are in America.

The other 48% are foreign lenders/investors.



The $19T is out there and it shall not remain tucked away in bank accounts.

The entities who got that $19T shall start to spread it around in the form of investments everywhere in the world.



So US Dollars are now more available then they were before.

‘So what?’ you may ask.



(2)



If an importer from another country wishes to buy American products he must pay the American manufacturer in US dollars. With more US dollars readily available worldwide importer can obtain the US dollars at a lower exchange rate.



Additionally Americans will be able to get more money in bank loans because banks will want to unload the extra cash that they got (from the $19T pay-out) and put it to use rather than just have it sitting in their vault.



So now there are more US dollars floating around in people’s pockets.

What does this do?



(3)



It causes everybody who sells any product to raise the price of the product (since he knows that you and everybody else) have more money in your pocket to spend. Clothes, rent, cars, everything you can think of, goes up in price because sellers become greedy and they want your money.



(This phenomenon is called inflation.)



But everybody’s salary also went up with it, which would happen more slowly than you would like and you would suffer for a while, then there would be no problem. Well, actually there would be.



Importers from other countries would want to buy American products. If they would be willing to pay more than what the average American resident was willing to pay then manufacturers (and food producers) would cater to the foreign importers and keep prices high. And if you can’t afford it then tough sh\t. It’s a free market and manufacturers and producers don’t have to sell anything to you.



Now you would have difficulty obtaining products because prices are high because foreigners are willing to pay higher prices.



This is what typically happens during hyper-inflation which is the circumstance described above when inflation becomes too far gone because too much money was printed. The country Zimbabwe printed too much money around 20 years ago to pay off their debt and the country went into ruins due to hyper-inflation.



(4)



Another problem is that bonds become less valuable. The explanation is more technical and we’ll leave it for some other time.

Answer 2

Printing over $19 Trillion in US dollars would cause such catastrophic inflation that the USD would be worthless, this would not only cripple the American economy, since everything is backed by the US dollar, but it would even damage economies around the world, especially China and India, who have invested economic interests in the United States.

Answer 3

First requirement to answer the question is to understand what $19.2 trillion dollars in debt means. The debt is iou's written in the form of Treasury notes, bonds, bills. The number 1 purchaser of US Government debt is the US Government. The second is US citizens. The second thing you need to know is that the US Government is actually the people of the United States. US Government debt is your debt. So almost all of it is money you owe to yourself. It isn't the debt that is important but the system around that debt.

Answer 4

it doesn't work like that. say there's 100 billion USD in existence. if the government printed another 100 billion USD and the debt was already 19.2 trillion, the debt would be 38.4 trillion after the printing. the value of the dollar would half. how could you logically think this would work?

Answer 5

.

an academic question of some interest,



but you neednt be overly concerned.



imo, they'r more pressing issues to spend time on.



http://tinyurl.com/l98y6r2 . NyTimes 06/2012

.

Paul Krugman, Noble Laureate in Econ.:

.

“…it’s not about debt and deficits at all…”

.

“it’s about using deficit panic as an excuse to dismantle social programs.”

Answer 6

Because of the Federal Reserve system, printing 19.2 trillion dollars in new money creates 19.2 trillion dollars of debt plus interest. After paying down 19.2 trillion of existing debt you would be left with 19.2 trillion in new debt plus interest.

Answer 7

The dollar would devalue itself by half in relation to other currencies.



It means that in an instant everyone will have half the purchasing power they had, and if they had wages it would be as if their wages just cut by half because you will need the double of money to buy anything

Answer 8

It would cause massive inflation. So everyone's dollar would be worth less.

Answer 9

That's exactly what got us into this mess.

Answer 10

Do you know what a "hyperinflation" is?

Answer 11

value will go down