Crisis Driven Hyperinflation, Fiat Currency, and the Blurred Lines of Monetary & Fiscal Policy
As a preface, u/peruvian_bull wrote a four part due diligence called “Hyperinflation is Coming- The Dollar Endgame.” It’s tremendously in depth & touches on many important topics. I agree with this user’s assessment that the USD is in a debt super cycle & only two possibilities are the outcome: defaulting in Great Depression style or hyperinflation like Venezuela and/or Weimar Republic. Goal of this due diligence being to dig deeper on the blurred lines between monetary & fiscal policy. First, there needs to be a basic understanding of how USD money supply & buying power correlate. If you have this general understanding already, skip down to the section titled: Blurred Lines of Monetary & Fiscal Policy
In Figure 1, the USD money supply is shown from 1960 until 2021. Why was 1960 chosen as the starting point year? FDR removed the gold standard in 1933, not 1960!? Correct. However, the government held the $35/oz price until August 1971. President Richard Nixon abandoned the gold standard by announcing that the United States would not convert dollars to gold at a fixed value anymore (Source). Starting in 1971, the USD officially became a fiat currency backed on good faith & trust.
Figure 1: Money Supply M0 (USD Million) from 1930 until 2021
Figure 1: Money Supply M0 (USD Million) from 1930 until 2021
With increasing money supply, resulting buying power decreases. Figure 2 acts to show the buying power of the USD since the inception of the country. Major drops in buying power pre-20th century were caused by uncertainty events: Revolutionary War, War of 1812, and Civil War. Crisis, wars especially is a driving factor for a given dollar’s buying power volatility. USD money supply stayed rather consistent until the beginning of the 1900s.
Figure 2: Purchasing power of one USD from 1776-2020
Figure 2:
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Now this seems weird to put that way, but ultimately I can put a lot of republican solutions into this category.
Climate change: not real, but if it was, giving billion dollar oil companies tax subsidies will motivate them to invest in green energy with no additional motivators needed
Education: we will give you vouchers to put your kids in private schools, but we wont mandate private schools accept all kids, or raise prices exponentially so the people who own jt make massive profits. Whatever, dont think about it.
Unemployment: I dont care if there are people starving. The CEOs need money to create jobs, and when theyre hungry enough they'll work
Low wages: give CEOs tax breaks, they'll pay more if they want to. Also find a better job
Healthcare: give the insurance CEOs tax breaks and subsidies and they'll lower insurance premiums instead of pocketing the money.
I'm trying to be relatively brief so maybe some of those wont come across as clearly "give the rich more money" as they are, but at the end of the day, what solutions does the right have for our problems that dont just put money in wealthy peoples pockets?
Edit: so I have 28 comments at the time im making this edit, and nobody has disputed that republicans just siphon money to the rich or has shown an economic policy that doesnt translate to siphoning money to the rich. They have just defended that giving rich people money somehow works. CAN ANYONE SHOW ME WHERE REPUBLICANS WANT TO DO ANYTHING BESIDES TAKE MONEY FROM ME AND THE MIDDLE CLASS AND GIVE IT TO THE RICH ANYWHERE?
Analysts expect a diminishing fiscal drag on participation as savings are run down, and find that the statistical importance of job retention schemes and virus fears for participation is declining. However, we expect the participation rate to remain structurally below its pre-pandemic trend, as job losses have triggered permanent labor force exits, especially for older workers.
The main and most obvious difference between monetary and fiscal policy is that monetary policy is set by the central bank and fiscal policy is implemented by the government. In the case of the UK, monetary policy is decided upon by the Bank of England which since 1997 has been independent from the government.
