Why the goverment of a country wouldn’t just make more money to make the country rich?
In: Economics
Being rich is about having stuff. If you have lots of money, and very little stuff to buy with that money, you’re still poor, you just have higher numbers on that poverty.
With that said, you can totally do this to an extent.
This is the concept of things like MMT and nominal GDP targeting, where you can absolutely guarantee that a certain number of dollars will be around in 10 years. And that therefore, it’s worth oh… investing in a woodworking business that makes wood paneling for new housing construction that gets paid for with 30-year mortgages.
Because they can, at least on a vague national average, guarantee that enough dollars get spent on rent over the next 30 years to justify building the apartment building and guarantee that (at least on average) the mortgage gets paid for 30 years.
And because you printed more dollars, someone went out and invested in a real business employing people to cut down trees to build nicer housing.
I have a mortgage. Give me 5% inflation for 5 years, and not only am I 25% less likely to default, but I at least attempt to take a lot more vacations to Southern Utah because my bank eats 25% of my mortgage payment. And that writ large means it’s worthwhile for Vegas to expand their airport, invest in Strip expansions, maybe add a new show… And employ people in the doing. Then when my bank goes under, you just run off another trillion dollars and recapitalize them.
That’s literally how the Boomers got rich. Bought houses on 20% mortgages at 12% inflation, then refinanced at 8 and later 4, while incomes in dollar terms quadrupled.
So you went from paying 40% of your income to the bank to paying 5%, assuming you didn’t pay it off out of petty cash in the 90’s sometime. That’s a lot of extra consumption/savings!
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