If the U.S. tried to print its way out of debt (theoretically)

Some might be wondering, just out of theoretical curiosity, what would happen if the U.S. tried to just suddenly print its way out of debt.
(Ignoring of course all the lenders that would get cheated out their money, old people who would have their retirement savings decimated, and the total loss of confidence in the U.S. and destruction of the country's credit rating, since this would be equivalent to a default)

As of September 2022, the amount on the Federal Reserve's Balance sheet was $8.8 trillion.
The U.S. national debt was $30.93 trillion.

If at that point the U.S. suddenly just printed money to pay off the debt it would devalue the value of the dollar by a factor of 4.515 and we would (theoretically) expect an inflation rate of 450%.

Back in 2011 I did a similar calculation which showed doing that would devalue the dollar by a factor of 7.
Of course, in January 2011 the Federal Reserve's balance sheet was only $2.43 trillion, much less than today.
The U.S. national debt in 2011 was $14.79 trillion.

(calculation: 14.79 divided by 2.43, and then add 1 to cover the original)

According to an inflation calculator, there has been 35.6% inflation between 2011 and 2022.
If we assume that is correct, this seems to suggest there is a disconnect between the amount of inflation we might theoretically expect and the amount of inflation actually observed.

Between 2011 and 2022 the Federal Reserve's Balance Sheet increased by a factor of 3.62, yet we did not see 362% inflation.
Part of that is because the Federal Reserve bought up and holds a lot of the U.S. debt, which is backing the dollar in a way.

As of January 2022 the Federal Reserve held $5.66 trillion in treasury securities in its Assets. That means that about 64% of the Federal Reserve's Assets on the Balance Sheet is U.S. debt. It also means that if that were to suddenly disappear, if it were to be devalued with 450% inflation, it would only be worth the current equivalent of $1.26 trillion (a 4.4 trillion loss), or in other words half of the Assets on the Balance Sheet would disappear. This would immediately devalue the value of dollar by a factor of 2, creating a compounding multiplier effect of 200% inflation, on top of any other inflation.

So this means that instead of 450% inflation, there would be 900% inflation.

Another simpler way to look at this would be to take the national debt, divide by the Federal Reserve Assets on the Balance Sheet excluding the government debt in the Assets on that Balance Sheet, to come up with the numerical factor by which the dollar would lose its value.

 

As world trade was increasing it would have been possible to continue
expanding the amount of dollars out there, that is, to print a lot more
and have a ready market for them, because the USD was
the international world currency, but the Bidden administration decided to

force other countries off the dollar so they will very soon settle on a new
currency for trade world wide, and there will be a lot of unwanted dollars
around eventually.

The hope pre-Biden was Industry 4.0 and the great increases
in wealth all over the world would produce a big market for dollars
as the financial programs are set up to use the USD as currency

Maybe you'll get a Nobel Prize for working out why the Bidden
administration decided to dynamite the biggest source of income the US
had. It will either be a Nobel Prize for economics or one for discovering
a new type of insanity.

 

It's ironic how the right wing constantly contradicts itself re radically expanding the money supply policies then crying about expanding the money supply with hot money when the left does it. It was 'free marketers' who invented the Certificates of Deposit scam in the early 1960's to get around the New Dealer restraints on banking that were the first move towards the 'Too Big To Fail' and boom and bust cycles we have had since the 1960's. In the case of CD's they were fine with printing hot money to increase debt capacity, and using a gimmick to have the Feds insure their loans as 'deposits', making them easier to sell to the public.

 

A lot of conservative Republicans and Libertarians objected, or would have objected, to those policies from Republican politicians. If they had known about it. But the media didn't make a big deal about it, so a lot of them didn't even know or realize it was an issue that was happening. And of course we know why the media didn't try to bring that to the forefront.

It's not as much as a Democrat-Republican issue as some might think. The pattern has been, since Bill Clinton, more money has been spent during the time of each successive President. Each President just outdoes the last, regardless of what Party they are from.

In my opinion the Housing Crisis and 2007 Recession did not actually have so much (or as much) to do with lessening of regulatory restraints, like the narrative tells us.

Progressives and neoliberals always seem to think more regulation is the answer, and if there exists a problem that lack of regulation is to blame.

It can be pointed out that there are several ways in which government involvement in the economy and mortgage industry contributed to the problem.

A lot of those on both the Left, and the conservative Right were outraged and objected to the bailouts for the big banks, but a coalition of Republican leaders and Neoliberals in the Democratic Party were afraid and quickly pushed the legislation through. It was seen as an emergency, no time for adequate public discussion and debate.

Keep in mind more Democrats voted in favor of the bailout than Republicans.
PolitiFact | Kurt Schrader says more Republicans than Democrats voted in favor of the Wall Street bailout

"As it turns out, the House actually had to vote twice for the particular bill in which TARP was included. The first vote was on Sept. 29, 2008. The legislation failed to move, though, with 205 representatives voting in favor and 228 against. Of those who voted for the the passage, 140 were Democrats and 65 were Republicans.

A few days later, with the economy worsening, the bill got a second life when Senate members took a completely unrelated piece of legislation that hadn’t much moved anywhere for months and stuffed it with the bailout language. The new bill passed the Senate on Oct. 1, 2008. On that day, 39 Democrats, 34 Republicans and one Independent voted in favor of the legislation.

The House then voted on the TARP language -- for the second time -- two days after the Senate, on Oct. 3, 2008. Ninety-one Republicans joined 172 Democrats in voting for the bill."​

 

the entire world is doing it now, we are in a weird position, if we fall, the world falls with us - it's a global economy now, we are not isolated

we saw how connected the world is during covid with our supply issues

if we isolate ourselves, then the rest of the world could pass us by and not care if we fail

 

If the U.S. falls, the rest of the world will not be able to bail the U.S. out. Or willing.

The size of the U.S. economy is too large compared to other countries in the world. China and Russia are definitely not going to provide any help. India has plenty of poverty problems and will have to focus on their own. Canada has a lower population than the largest state in the U.S.

 

perception is reality, and right now the world fails if we fail, any money is worthless unless people want to believe it's not

when we print money it helps their countries too, why they support it

I agree with you, over population is an issue, a world issue

once the rich can get AI to do all the work, resources will get more locked down and people will starve, as the rich will see a resource shortage as a threat to them, they couldn't care less about the working class