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Yep fair enough, my initial 2nd paragraph was kind of declaring things outside the point of the rest of it. That was trying to punch up what people might 'know' which I think are incontrovertible, without going into subjective policy implications.
Having some amount of taxes is what gives the currency an initial anchor value. Those taxes being levied broadly and reoccurring every year is what makes the money universally accepted and used even in the private economy. The currency is an IOU where the only thing 'owed' upon redemption is tax relief. If you levy no taxes, then inflation definitely will regulate the value automatically to the desired savings amount of 0 (give or take some inertia).
The only thing unique to government is the ability to levy taxes (backed up by force). That's what allows them to indefinitely print up IOUs that promise to pay nothing but an abstract amount of value in a unit of measurement they make up, and people will still line up to earn those IOUs (working in the army or wherever).
The generalized logic is: "you will always value your creditor's own debt". Because you can cancel out the debts with each other. The government can decree that it's a universal creditor to everyone (everyone owes taxes, abstract amounts of value payable in nothing). Thus enabling it to actually simultaneously be a universal debtor to everyone (issuing IOUs far exceeding the tax liabilities, if people are willing to save some for a rainy day).
You can write any number of IOUs that say "I owe the bearer of this note 1 apple", and use that new money to pay for things. Maybe only people in your neighborhood will accept it (also helps if they know you have an apple tree in your yard, and that there aren't too many outstanding notes to enable a run on your apples). If you write "I owe the bearer of this note $1", then some people (particularly banks) may accept it as valuable if they trust your creditworthiness. Your deficit is indeed definitely everyone else's surplus, if splitting the economy into those 2 sectors is useful to any analysis. So we (in the non-Lykurg sector of the economy) do benefit. The only problem is you run out of creditworthiness before we get very stimulated.
Well, would you be happy holding millions/billions in checking/saving/bond accounts, or would you be tempted at some point to start buying stocks, yachts, and islands instead? It seems that most people tend to have savings targets to hit, after which they feel more free to spend any excess income. And their preferred asset allocation of savings maxes out at some desired amount of monetary savings.
But indeed, the government deficit could certainly be eleventy zillion dollars, if it were to end up in someone's account that has an infinite savings desire who wouldn't touch it. In the MV=PQ identity, that would be money increasing but velocity falling off a cliff, causing no effect on output or price level.
And I didn't say that there's no reason to want to shrink the government deficit, just that it does take an explanation. I could say that I do want to shrink the non-government surplus in hypothetical situations, if we're having obnoxious levels of inflation, maybe caused by too much government spending being indexed against the price level (causing a positive feedback loop that prevents automatic stabilization).
Finally, we indeed have basically never had much demand-pull inflation in the modern era of democracies with proper central banks using fiat currency (since the early 20th century at least). The bouts of inflation are usually better explained as cost-push, often from energy price shocks. The central bankers take credit for being wizards and steering the economies well, but it's probably those fiscal automatic stabilizers doing the work.
Ill note that you still havent explained why too much inflation is bad, or how we would know what "too much" is.
Transitioning out of just questions, I agree that the taxes give value to the IOUs, but I dont think the made up unit gives you all that much long-term. You can inflate away your debt, but expectations of inflation are built into the interest rate you are offered. Unless you can somehow inflate above expectations indefinitely, in the long term you need to tax back what you borrowed plus interest in real terms. There is no reason to borrow unless your position as the government gives you investment opportunities above market returns, youd just pay interest for no good reason.
I assume you're not asking for the various downsides of inflation in general and why people find it annoying when it's above some small amount like 1-2%? My original statement was that people should have the properly oriented mindset, where the problem of 'too much government debt' is along the lines of 'too much of a good thing'. The 'good thing' here is the money in the private sector, not inflation, if that was the confusion. This is all in contrast to most peoples' gut notion that "deficit" and "debt" sound negative and bad and worth minimizing on their own.
You don't think the US making up their own 'dollar' unit of measurement is too important? You must be on some kind of galactic time scale here for what long term means. This is surely one of the most important things about being a sovereign nation, creating and issuing your own currency.
Again, maybe I'm not thinking long term enough. But in the US, we went into millions, then billions, now trillions. Should we find the tens of trillions a special number, such that we wouldn't expect to see quadrillions? When and why would they ever need to 'tax back' this amount? The IOUs just roll over indefinitely.
Yeah once you recognize that all money is just transferable credit, you will notice that there is basically no economic difference between central bank reserves and treasury securities. So rather than one being 'money' and the other being 'borrowing', they are actually not 'borrowing' at all. They are just creating money in different forms. This fact has dawned on people like Larry Summers a decade after central bank reserves started paying interest just like treasury securities.
As for paying interest, it's purely a policy choice to pay anything other than 0% on any of these IOUs. It's a government subsidy to savers: they will give you more money for having money. There are various macroeconomic effects for any chosen rate. Currently the policymakers in charge think choosing to pay a higher interest rate is on balance more constrictive than stimulative, and think that low rates are on balance more stimulative.
Im asking for some kind of real economic cost; "Its annoying when the prices are different than I remember" doesnt count, no.
If you dont pay enough interest, people will stop lending you money.
Well, you said that the difference between me and the state is that the state can tax. If it doesnt actually need to do that, then whats the difference? Why cant I have ever-increasing amounts of debt that I service by taking on new debt?
What youre proposing here is "The Ponzi scheme that actually works". Because Ponzi schemes do work so long as the investors dont take out their money, ie stop letting you roll over your debt.
You could look it up, it's not my argument. It's good enough for me that most people hate it, so let's avoid it. It's fun when nickels are worth picking up off the ground and can get you a coke.
When you have your own currency and central bank, people don't 'lend' you your own money at all. You can print up IOUs and tell people they pay 0% or 150%, up to you if you want to subsidize savings.
I said the government levies 'some' taxes every year, reoccurring indefinitely, broadly on everyone. That provides a perpetual anchor value for the government's debt, understood universally, even though the amount outstanding can continue to rise (if people want to keep accumulating it for the future, for a rainy day, to pass down to their kids, whatever).
That doesn't imply anything about somehow taxing it all back and paying it all off or whatever, at some unspecified jubilee judgement day where we have to unwind everything.
I mean, thats some reasons, but when weighed against "prosperity beyond what anyone can imagine" they dont weigh especially strongly. Could you at least link it? MMT has lots of cranks that will be dismissed as not representative.
I also have 'some' income outside taking on debt. I can commit to spending part of it on buying back my own IOUs/debt service in the future. Indeed, my nominal income increases with inflation and economic growth, so this is in many ways like a relative tax. Also assume I live forever. Now can I blow up my debt to infinity? Propably not; propably there is some mechanism tieing the debt amount to the size of the tax base/income, but what?
So, I actually agree that, with fixed expenditures and relative taxes, you can just print money to make up the deficit and it will stabilise eventually. Youll have inflated down the expenditures so that they are covered by the taxes. But this will have reduced the real amount of the expenditures. What is the benefit of doing this over just cutting the expenditures to meet the income?
Indeed, you never have to actually go down to zero debt. But the debt is nonetheless tied to the ability to do that. It can not grow without limits in real terms. Consider: in your view printed cash and government debt are interchangable. So lets say we only print money. Then unlimited real growth of debt would mean unlimited real growth of GDP, or an unlimited willingness of people to sit on cash and never spend it. Neither is realistic.
This question of an "end date" where you unwind everything or absence thereof is in fact very interesting and fruitful to think about more broadly, because it leads to a lot of changes in economics, and Im not sure you understand this in a "settled science" way (else you would have likely lead with that, because thats the only point where your assumptions may differ from classical). For example, imagine you have no time prefencence and an investment that will keep yielding 10%/year indefinitely. What is the optimal amount to withdraw each year? For any given percentage, half of that is better in the long term... but 0 provides no utility at all.
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