Can printing money solve national debt?

Economics Economics Questions
1

The Emperor’s New Clothes: How to Pay off the National Debt & Give a 28.5% Tax Cut

From Britain. Legitimate or fallacious?

2

do you feel that national debt needs to be solved?? is debt solved or paid off??

3

the government is in debt because of printing money and if they print enough money to pay national debt people would switch currencies or buy gold because of inflation and inflation itself is hidden tax

yes they can but they will be poorer as a result but instead they need to cut spending completely and stop every dumb government service(that everything actually) , replace the central bank with a commodity currency and slowly pay if off with very low taxes

4

Unless the government have lent money in foreign currency or foreign credits (which is usually not the case for most of the debt) they can naturally pay it by just printing money.

I would be really happy if they where stupid enough to do that. Cause it would create hyper-inflation which would de facto break the government currency monopoly which is the most importaint tool they have to reminaing in power.

The reason it would create hyper-inflation is that for every real dollar the government create banks can create about 10 dollars in credit. If the government swaps all its debt for high-powered money the resulting increase in the money supply including credits would be massive.

Further more it would be almost impossible for said government to sell any more bonds in the future. So whenever they need more money from that point they would have to resort to the printing press creating even more high-powered money which is multiplicated in the banking system. Hyper-inflation is the inevitable result.

5

The article is paved with good intentions. He is not talking about printing money directly to pay the national debt. What he really wants to do is institute 100% reserve banking instead of fractional reserve banking. But I think he made an accounting error somewhere.

Here’s the meat of the article:

  1. Print cash and replace all the demand-deposits/IOUs that exist in the system with that cash. This means the government printing approx £850 billion in cash and injecting it directly into the vaults of the banks and into the accounts of individuals. Thus, if you deposited £100 once thinking it was “yours,” it now really exists in cash, with the bank acting as custodian of your money.
  2. Mandate all banks to hold your cash (100% reserved) on demand at all times.
  3. Wipe from the bank ledgers all the demand-deposits/IOUs as banks would not owe you money anymore. This means the “thin air” money disappears, to be replaced exactly with cash money. Note: this is not inflationary, as the cash replaces the demand-deposit which acted as money. As we have established, it is only thin-air that the banking system has created to facilitate the multiplicity of lending of the same bit of money, so its total replacement with cash would mean the money supply stays exactly the same.
  4. Require all banks to lend real savings that people knowingly place with banks to lend to businesses to get a return of interest and capital back when the business repays that loan. This is nice, simple and safe utility banking. This is what Mervyn King advocates.
  5. As you are not a creditor of the bank anymore, the banking system will only have its assets and its capital, i.e. no liabilities. This means that there never again could be a bank run.
  6. As for the banks, not having you the depositor as a liability anymore, they will suddenly be £850 billion better off, with no current liabilities and only assets (loans to business etc), post reform. The government can now put those assets into Mutuals, which would then immediately pay off the national debt, and leave the banks in exactly the same position net worth wise as they were prior to the reform, owned by their existing shareholders. As the national debt is still just under the £850 billion, which would be available as surplus assets of the banks, this could still be achieved.
  7. No national debt means no interest costs (currently £40 billion p.a) associated with paying for our borrowing. Therefore, give an immediate 28.5% income-tax cut. Total income-tax raised is £142 billion.

That’s the article, and I think there’s a mistake in there. Of course it’s inflationary. The way it is now, the depositors and the people the bank lent money cannot spend the money at the same time. But with this plan they will be able to. Then in step 6 he has the govt using it too, to repay the national debt.

Look at this way. Money is just a symbol for real things. How has he created more usefull things [like plasma tvs or whatever] with this scheme that will be used to pay off the national debt? He hasn’t. So clearly any paper shuffling to erase a debt means that somewhere, somehow, someone is getting ripped off.

EDIT: I see that people have raised these points in the comments, and he responds to them. Sadly, I don’t understand his answers.