Comment by amrocha
2 months ago
I don’t think that’s reasonable at all.
Can you imagine a world where a government could spend infinite money without any problems? If you can’t, then why would someone else think that? If you thought my understanding of macroeconomics was different from yours and you were genuinely curious, it would have been a good idea to start by asking questions. Or if you thought I was an idiot you could have just ignored me. But you chose to assume an obviously ridiculous premise to my comment and reply based on that. That’s the definition of a straw man argument.
If you still care to know, the constraint on government spending is real resources (and whether they can be usefully utilized of course).
I don’t know about the real estate situation in China, and I don’t know if it was financed by private debt or public debt, so I can’t comment on it.
Ok, so if you agree that infinite spending is impossible, and resource extraction is limited by the market, then what do you mean by:
> There actually literally is a free lunch
That debt issued by a central bank to its government to productively utilize real resources is not inflationary and not really “owed” to anyone. It’s an accounting detail.
In response to you saying that there is no free lunch since debt is always owed to someone.
> That debt issued by a central bank to its government to productively utilize real resources is not inflationary and not really “owed” to anyone. It’s an accounting detail.
This sentence doesn't make sense. "Debt issued to it's government"?
I presume you mean government debt issued to the central bank, whereby the central bank prints new money as a part of the loan?
It absolutely can be inflationary (see US inflation during Covid) if the money eventually makes it into the economy (e.g. by paying workers).
And yes, debt is always owed to someone. Whether that someone is the central bank doesn't mean it's a free lunch - not paying back the loan has consequences to the economy.