Business RT spoke to leading Moscow financial expert (whatever the heck that is) Chris Weafer, a senior partner at Macro-Advisory.com.
(RT is nothing but the same, misinformed ideological crap. They had a chance to be different and they blew it.)
Here we go...
RT: Why can’t they simply print more dollars and pay their debt?
There is no debt. Treasuries are dollars (reserves) with a maturity and a coupon (interest). To "pay off" the Fed debits securities accounts and credits reserve accounts. This was done to the tune of $61.5 trillion last year and interest rates didn't spike, the dollar didn't collapse, there was no hyperinflation, in short, the world didn't come to an end.
Leading Moscow Financial Expert: No economy in the world can simply turn on its printing presses and create as much cash as it wishes, as this would make its currency worthless.
Absolutely wrong. Spending by government adds to income and savings of the non-government and that income is spent and the savings are invested, creating more productive capacity and demand for more goods and services, which entrepreneurs and businesses are glad to meet. If the quantity of goods and services increases with the money supply, which it does, this does not cause the exchange value of the currency to depreciate. Why would it? In a normal, competitive economy, government spending (money printing) does not and cannot create inflation.
Leading Moscow Financial Expert:If the amount of currency in issue is not sensibly related to the strength of the economy, then foreign trade partners will … devalue the currency quickly,” Weafer explains.
He sounds very confused when he says, "if the amount of currency is not sensibly related..." The fact of the matter is, the amount of currency is always related to the economy in that the spending (which creates the money) adds to demand, which leads to an increase in output or in other words, the strength of the economy.
Leading Moscow Financial ExpertIf you have one asset and income source which allows you to issue one dollar, and then you print one more dollar, everybody else will see what you have done and will value your one dollar at only fifty cents.
I have no idea what he means when he says, "If you have one asset and one income source that allows you to issue one dollar???" Makes no sense. The U.S. gov't is a monopolist and can issue as many dollars as it wants. Like so many Austrian/hard money people he fails to understand that M does not equal P (quantity of money does not equal price). The equation is MV=PT and they're all VARIABLES! That means, if M goes up, but V goes down and T goes up, then price goes down.
Leading Moscow Financial Expert:Some countries have done that in the past, but in those cases people soon had to use suitcases just to carry enough currency to buy a loaf of bread.”
In every single one of those cases the countries either had broken economies that were unable to raise production or, they were on a gold standard or some fixed exchange regime or had debts denominated in other currencies. There is not a single example in history of a currency issuing nation that had floating FX/non-convertibility with debts denominated in its own currency, that had inflation of the kind he described.
Leading Moscow Financial Expert:Under the Bretton Woods financial system, established in 1944, the amount of currency in circulation was linked to gold reserves. But in 1971, the US abandoned this system and started to include a number of other economic factors, based on a recognized ability to service debt and prevent inflation, and maintain orderly trade with the rest of the world.
Yes, the gold standard was abandoned, just as it was abandoned by most of the world duing the Great Depression because it created repeated episodes of panics and depressions and debilitating deflation. In short, it has always been abandoned because it doesn't work.
