It has been doing so, but allowing new dollars to flow into the system has been a policy to avoid deflation that would have occurred without the policy (that is, to reduce the value of the currency in a controlled way), not a monetization of government obligations.
You collapse confidence in the currency not by allowing new dollars to flow into the system in general, but by violating the confidence-building implicit commitment inherent in having an independent central bank, that is, the commitment that monetary policy will not be driven by fiscal concerns.
Currency collapse is extreme inflation; and that goes to the central point - there are a very wide range of numbers between 0% inflation and hyperinflation (20+% numbers).
Government monatisation isn't that much different from any other tax, except for the rather critical fact that nobody knows who is paying it. That makes it the least intellectually honest type of revenue raising, and the most likely to spiral out of control. Bringing it in is a pretty telling indicator that a country is unable to govern itself. It is a terrible idea. But it is unlikely to cause a currency collapse if they print and bail out the pensions. It'll just destroy some wealth.
What numbers are you referring to, exactly?
The Middle Class holds the majority of their wealth in their housing[1]. If they're public sector or over a certain age they have a pension and that's all. You're advocating that we take no action to prevent the collapse of the latter.
>The incentive structures created by bailing people out are atrocious.
We aren't talking about bailing people out, we are talking about bailing pensions out.
>The banks did not meaningfully reform in '08. Cities will not meaningfully reform pensions if they are bailed out way.
After the bailout, the banks swallowed new regulatory burdens, new capitalization requirements, effective caps on their size and interdependence. The Trump administration is unwinding these, not the banks.
Your bet is that the economy will fare better if we let the pensions collapse. My bet is that because the velocity of money at the bottom (where people are dependent on their pensions) is so much higher then that at the top, that the collapse of the pension system will cascade negative effects into the rest of the economy that outweigh the cost of bailing them out.
1. https://seekingalpha.com/article/4116647-stagnation-nation-m...
I am? When did I do that? It is none of my business what happens. I'm not advocating anything to do with pensions.
I'm just pointing out that printing money is a tax, not an immediate death sentence to the currency.
> After the bailout, the banks swallowed new regulatory burdens, new capitalization requirements, effective caps on their size and interdependence.
So we've got a class of people who were trusted with vast amounts of power, and they mucked it up and destroyed a bunch of wealth.
The solution is to keep those people in the hot seat, and put in a couple of new rules?
That isn't a sensible response. When people muck up at that magnitude, they should go broke and be ejected from positions of financial power. Let someone else step up and try being in charge. Cushion the blow on households, sure, but the institutions should not be propped up. Change the rules too if that makes sense, but the important thing is to try out new people.
Absolutely not. I believe that executives at some of these institutions should have been held criminally liable for fraud. I also believe that people with the least amount of power shouldn't be the ones to take a haircut.
You're focused on the moral hazard of bailing out the pension system, but what about the moral hazard of promising a stable retirement income to working class people, signing a contract to that effect, and just having it disappear.
What does that say about the social contract between businesses and their employees, that a corporation or government be able to make a promise and not keep it?
Who faces the consequences then?
The issues are threefold:
1) Printing money reallocates wealth to government-chosen winners instead of consumer-chosen winners. This will destroy some wealth. Although, as long as it does not destroy most of the wealth in the country the currency will likely hold. This issue is made complex because the pensioners were promised wealth way back when, but now the question becomes why are today's taxpayers paying rather than the people who made those promises.
2) We don't know who's wealth is being destroyed (although the numbers suggest it is the Middle Class, imo).
3) The incentive structures created by bailing people out are atrocious. There is no way anyone will make hard decisions and change if they are bailed out. The banks did not meaningfully reform in '08. Cities will not meaningfully reform pensions if they are bailed out way. The rot will accrete as resources continue to be directed to people and institutions who have demonstrated that they do not know how to manage them.