The simple answer is we are debasing our currency in a very complex way, that we cannot measure how much we debased it. In the past kings printed new coins to fund their wars or whatever and it was easier to track how much the currency lost value. In the present because economies have gotten complex + tools to debase have gotten complex we cannot estimate how much we have actually debased our currency by. If it’s 100% then there’s going to be a lot of inflationary pain, if it’s 10% we can probably handle it but I wouldn’t hold my breadth on getting any good estimate

>it was easier to track how much the currency lost value.

I think this is a glamorization of the past. I'll bet most exchange throughout history was being done with some level of fraud baked into the system highly up the chain. Our modern fiscal institutions haven't even been cooking for 100 years and look at all the shit the weird sages in the crown city keep pulling with our green coinage.

>that we cannot measure how much we debased it.

"it's a feature not a bug."

You don't debase fiat currency, since there isn't a limited supply. Markets are distorted because of a poor distribution of money (too much where demand is low, too little where demand is high), because the Fed handed out money to the wealthy (who hoard it in the form of assets) and Congress refuses to tax it back and redistribute it to the working class who can't currently pay their rent.

> You don't debase fiat currency, since there isn't a limited supply.

That doesn't sound correct. There isn't a limited supply, but introducing more currency into circulation can reduce the value of it, which is a proper use of debasing.

As a contrived example, if the treasury printed 100 trillion dollars and handed it out to everyone, I'm doubtful that bread would still be $1 a loaf.

It doesn't reduce the value of the currency, it increases the supply of available money. This can drive additional demand and drive inflation that way.

That's different than (e.g.) Roman-era debasement where they were using less valuable metals to mint coins and the value of the coin was based on the perceived metal content of the coin, rather than being fiat currency that follows supply and demand trends.

If the currency was debased, inflation would have occurred fairly evenly across the economy, since the currency would be literally worth less. Instead we saw inflated prices chase sectors of the economy where there was either an over supply of money (e.g. PE buying up housing, driving up the price) or an undersupply of product (e.g. cheap eggs).

> If the currency was debased, inflation would have occurred fairly evenly across the economy

Nothing makes this necessarily true. As an example, if the government printed everyone in the world 100 trillion dollars, and everyone used it to buy as much house they could, and nothing else, then houses would skyrocket in price as this money spurred demand for houses causing a shortage of housing stock (as prices are a matter of supply vs demand). Bread wouldn't change a dime in this scenario, because no one used the new money to buy more bread than normal, causing a supply shortage of bread. Ergo, nothing necessitates that inflation occurs evenly across the economy. Not even in Roman times. Inflation only occurs where demand happens. If demand, demands it be stored in bank accounts, then bank accounts inflate.

Wrong. If you debase your currency, by definition the cost goes up on goods even where demand is static. That's what it literally means - coins are now worth half because they have half the silver they used to.

We saw some inflation on food and gas prices in 2022 (for reason not directly related to monetary policy), but not in 2020 or 2021 when the cash was added to the economy - we saw inflation in assets because the Fed handed out cash to investors who deployed it on a limited pool of assets.

I'm not wrong at all. You can make a coin with 1/4 the silver it use to, but if merchants don't demand more coins to make up for the debasement, there is no inflation. There's nothing necessarily stopping them accepting the 1/4 silver coin as equivalent as the 100% silver coin for the same good. Like I said, inflation only happens where demand happens. Demand can be broad based, but nothing necessitates it so.

That assumes people are unaware suckers and would still only be true for a short time under metallist economies (until word gets out). My entire point was that it doesn’t work that way with fiat currency. Demand is driving inflated prices, but the money isn't being debased, the supply is increasing. Congress could remove the extra cash with taxes, which you cant do with debased coins, they have to be reminted entirely.

I wonder how the first camp reconcile their views with the current struggle Italy has with their debt caused by excessive deficit spending in the past.

Mostly by saying this is Italy's fault for being in the Eurozone and thus not being able to print its own money.

Also the USA is in a unique situation in the world due to the status of the dollar, so comparison with other countries have very little validity. If argentina prints money it just loses value immediately and triggers crazy inflation. If the US prints money it is still not that big of a deal compared to all the dollars used everywhere in the world so the negative effects are much lower.

> Also the USA is in a unique situation in the world due to the status of the dollar

I hope this remains true. I fear for the USD's status as the world's reserve currency due to our abusing it to print, our oil producing Arab allies starting to accept other currencies, our disconnecting Russia from our financial system motivating countries to try to be independent of us etc.

Must be sad for other countries to have an independent financial system, right?

There is no right, because a lot of people pull in all sorts of directions, which means there are simultaneously multiple perceptions of what is "right". It may not be apparent until you realize that 1) not everyone wants US to continue being a superpower 2) not everyone thinks expensive dollar is a good thing.. by which I mean, lots of people have different idea of what right actually is.

And since I am looking at it all through a lens of an individual of US, to me it is clear that making US drown in debt is bad for USD price against, well, everything. For the longest time, US had been the place to park your cash due to stability alone ( and the fact that dollar was worth something ).

That stability is currently not assured. That said, any analysis on the matter I heard was oddly optimistic ( and I will admit that I don't get the optimism ). Not sure if it is the lack of alternatives or something else, but it does not seem US treasury has problems selling bonds.

80% of currency printed very recently, plus effectively never existing in a surplus status, doesn't invoke huge confidence.

It is not as bad as the headline would suggest. The economy presumably is growing at the same time that the $19 trillion debt is being added. US GDP has grown a lot since 2012. Debt to GDP the highest since ww2, which seems bad, but the economy still boomed after ww2 anyway, so it's not saying much.

Grown on paper only. I don't think most people's lives are any better than 2012. Stock and house prices have skyrocketed is all.

My intuition is that it's obviously right that borrowing money could be a neutral or positive thing - but that depends on the borrowed money being spent in ways that will have a positive return. If you borrow money, when borrowing is cheap, to buy a car so you can go to work, smart! If you borrow money to spend it on booze and concert tickets - not smart!

I think the issue is that one side is saying "Borrowing is terrible!" And the other side is saying "No, borrowing cheap money is somewhere between fine and great!" And the real answer is "Borrowing can be smart if you use it well, but we are using it poorly."

If the US was borrowing money to build and renovate roads, bridges, ports, update the electrical grid, build new nuclear power plants, engage in basic science research and similar projects likely to yield good return on investment - that was be amazing financial planning. My limited understanding of what the government actually spends its money on - wasteful healthcare, social security, the military, and intelligence agencies - is that the money is actually just being squandered.

As long as they can continue making interest payments on the debt then what's the problem? It's all relative.

The problem is the fundamentals. The US will "never default on its debt" because it issues debt in its own currency, which it can control the creation of necessary to service that debt (money printer go brrrr).

So nobody is ever concerned about debt; you just say screw it let someone else worry about it, usually future generations. The value has to come from somewhere, and in this case its from the debasement of the dollar.

They defaulted when they stopped honoring gold backing, which was the debt against the legal tender.

Which the feds can always do since they can issue money.

The relevant question is can the US continue producing goods and services that are desirable on a global scale, one of which is a trustworthy society where you can mostly depend on the judicial system keeping things in order, for better or for worse.

And more importantly will others keep accepting USD. Or will they expect to be settled in something else be it other currency or some commodity. If others start to want something else than USD things can go sideways.

A budget surplus would be pretty irrelevant target in the grand scheme of things.

There are foreign policy implications (other countries waiting for us to pay them back is a good thing).

But also, just like corporate finance, if the government can get good rates on debt, it almost always makes sense to just take the money and make the payments.

So some small and sustainable amount of budget deficit is probably a good thing. But we are clearly on the wrong side of that equation.

Go with the camp that doesn't immediately change their tune when a Republican is elected president.

There's a lot of scary numbers, but here's a graph of the US budget deficit as a percentage of GDP[1] according to the CBO. Yes, the US has a deficit most years, and yes both the financial crisis and COVID lead to very large dficits. But between 1992 and 2000 a deficit of 4.5% became a surplus of 2.3%. So it's well within the possible to decrease the deficit by 7% of GDP over a relatively short period of time. If we started that process today we'd be back to the long term average deficit within 8 years - and we're starting from a crazy base because of all the hangovers of COVID.

So whilst it's obviously a policy choice whether that happens, it's definitely well within the possible.

[1]: https://www.cbo.gov/publication/58268

> If we started that process today

But we're not, right? Not only are we not doing that, we're nowhere close to that? We're still on tracking to collect roughly the same in taxation (leaving loopholes open for corporations on purpose) and spending more than ever (growing every year).

Even worse, $19T added to the debt is an extreme lowball imo. Many estimates put the US national debt closer to $90T by the end of the decade.

The country is right on the edge of walking into one of the most expensive wars in its history as well as a few unexpected disasters that would kick the money printer into much higher gear.