The US could print itself out of debt, but with an unbalanced budget and economy, that may be a disaster if it needs to finance new budget deficits. The result seems similar to the default.
Henry Ford made an interesting argument for printing money to fund productive enterprise in the context of a gold standard currency.
Just as it's okay to print money corresponding to central bank gold reserves, so too it's okay to print money to pay for the construction of the gold mine. Either way currency holders have real gold on the other side of the ledger.
Taking this one step further, it should be okay to print money to fund any enterprise whose output can be traded into gold. For example if we printed money to build a silver mine then the silver could be traded for gold at some ratio, so the currency holders would be in a protected position.
In fact whether the enterprise produces silver, timber, cars or software doesn't really matter as long the output is tradable for gold; and produces enough "gold value" to justify the newly printed currency.
I think the economics on this actually checks out. Although politicians in the real world would realistically use money printing for consumption rather than production.
Yes, this is the entire point. Government needs to spend productively to grow the economy.
Any spending can be inflationary if it’s perceived to not be productive.
How that spending is financed is a footnote. Domestic debt works, foreign debt works, but the central bank can also purchase bonds and that works too (and is not inflationary). This is what Japan has been doing for decades to great success.
Not to say that the transition is easy, and if too much of the USs debt is owned by 3rd parties that means that there will be currency value shocks that have to be mitigated.
It does not mean that there will be a crash, or a recession, or a default.
The counterargument is whether the government should be directing the allocation of resources via its spending rather than private actors.
Any money spent by the government in an economy is going to cause a redirection of resources from other actors to its own spending. In an economy running below its normal potential it makes it easy to justify because not much is getting done anyway, but if everyone is already doing a lot of stuff and there's not much spare capacity, then the government is effectively overriding the preferences of private citizens to its own ends to a much greater degree.
There's other arguments as well as to how efficiently the government tends to be at actually getting productive things done with its spending.
It's up to you whether this is good or not, but I'd argue it should not be our default position.
That's how the current system works too: newly created money goes through the banks, and so the ones who spend it first (and benefit from seigniorage) are the financial industry and its customers: corporations borrowing to invest in productive activity. The key thing to note is that this system (and Ford's) represents a system of continuous wealth transfer from the working class (who hold most of their money in cash or low interest savings accounts, and suffer the most from inflation) to the owners of the means of production.
Unfortunately I don’t remember exactly where I read it. It’s been a few years since I looked into Ford.
The mostly likely place is probably his autobiography “My Life and Work” where he talks about business/economic ideas quite a bit. Although it could also have been a newspaper article he wrote.
FWIW beware there’s a lot of serious antisemitism in that book. Which is a shame because it stains an otherwise fascinating book about early cars and 20th century business.
There is always next time. Unless you are an oil state. And either deflation or massive over printing means that next time fewer are willing to loan money. Maybe domestic holders will. But investors and foreign surely go somewhere more stable and less inflationary.
