zlacker

One approach is reductio ad absurdum:

If Central Banks can create money without negative effects, then

- why tax people?

- why even work? Can't we just print enough money for everyone and live happily ever after?

I realize these questions are quite provocative and their answering only explains if it will work but not how or when it will fail.

>>dmichu+(OP)
It's possible that they can create money up to a point with positive effects and beyond that point the effects are negative.

>>dmichu+(OP)
I agree this is a good starting point for understanding the financial system! For anyone with a programming background I recommend thinking of the whole financial/economic/political system as an algorithm for distributed decision making: who does what, what physical resources get committed to what projects, etc. You can then start to figure out how each component (money, banks, central banks, government, stock market, derivatives market, limited liability, interest, inflation, etc) serves to guide decisions.

The main purpose of a central bank imo is to keep money creation at arms length from government, so a rubbish government can't fiddle with the financial system too much.

>>dmichu+(OP)
Another thing to realise, along these lines, is that economic theories try to explain the world's economy, not dictate it.

I would say that some mathematicians went into economics to win Nobel prizes (which they did win) and I guess they would probably be quick to point this out at well.

>>dmichu+(OP)
- why tax people?

So that common services (eg. healthcare in Canada, education everywhere, roads) can be collectively paid for.

- why even work? Can't we just print enough money for everyone and live happily ever after?

Because there wouldn't be enough resources. (Fiat) currency is just a medium of exchange for real stuff. Instead of growing wheat and trading it for your wooden furniture, the state provides a medium of exchange so we can both just transact in money. eg. when I don't need more furniture but you still need wheat.

Money =/= wealth

>>dmichu+(OP)
> - why tax people?

Printing money is actually more or less equivalent to a tax, because it reduces the value of the existing money supply.

> - Can't we just print enough money for everyone and live happily ever after?

No, because printing money redistributes wealth, it doesn't create it.

>>mikory+l4
Economics is a branch of moral philosophy and very consciously uses persuasive rhetoric to dictate policy. One of the tools used is hand-waving hidden inside differential equations to produce models that would be useless in any other discipline.

I don't think I've ever seen a mainstream economic prediction that was actually correct.

It's not hard to understand why. Reducing all the sectors of a complex economy to crayon-drawn measures like "inflation" and "unemployment" - which aren't even measured with any consistency - is like trying to predict the weather in the Bay Area using a single weather station for the entire continental US, which is conveniently located on the wall of a cow shed in Kansas.

>>dmichu+(OP)
The gold standard ended in 1975. Since then, we have "virtual money", which are effectively made out of thin air at the time a bank borrows them to someone. Once they started this system there is probably no way back. But what effects has that done, are them all positive? I don't know. Some say it helps prevent the situation when rich would buy all the gold supply - banks can make more money for others. But - rich people can use stock markets and funds too. And look at one thing - the Appollo program started 1961 and completed 1975. I was quite shocked to see from the documentaries what technology they developed and had during the Apollo era. What US built during cold war. UNIX development started in 1970, right? So many awesome airplanes and technology around. It looks like what we have today is mosty (a great) improvement of many inventions developed before or around the end of Apollo and the end of gold standard. Now, that money is virtual, it looks like there won't be any major stock market crashes as they can intervene relatively easily. But why the space program basically died? NASA has just been talking about SLS for many years... Is it because politicians or bankers don't want that to continue? They could print money for it in minutes, couldn't they? Or would it be far more expensive than we think? Would printing so much money skyrocket the inflaction and bring the whole economy to its knees? Isn't by chance the "real value of work" now much higher than what inflation suggests? I read here about a year ago that some smart people are not working in scientific R&D but instead making AI to improve marketing for online e-shops selling products people don't really need. Despite many startups claiming breakthroughs daily in the news, I don't feel it that way. Those are small pieces one by one. It looks to me big human progress has stagnated somehow. Maybe the smart people are not motivated enough to do the real big things, or maybe it is because there is no need to compete with Russia anymore. But hey, there have been talks about helicopter money recently - giving people money for no reason. Does that look like a great way to improve things? We live in peace - thanks for that - but it seems to me that somehow there is no motivation to do big things anymore. It seems better to just pour the money in the stock market, consume goods and services, watch Netflix and play games. Consume gas and limited Earth resources with virtual unlimited paper money. Taxation probably doesn't make sense anymore, it is there just for historical reasons, from the time bank notes were backed by gold.

>>nicobu+F5
Yes! Exactly. This is what I tried to explain in another comment.

>>TheOth+s8
There are two branches of economics. One of them is a science, the other is (politically, economically, and culturally) successful.

>>nicobu+F5
Not just any tax, but a wealth tax affecting anybody who has US dollars, regardless of their citizenship or location.

>>odysse+gu1
That's a really good point and I never thought about it this way. It just makes me think how powerful is for US the world relying on dollars as an international currency.