It sounds absurd, but the idea that a country that creates its own currency can run out of money is more absurd.
Taxes appear to serve two purposes, creating a demand and regulating inflationary pressures. When inflation increases taxes should also increase.
Lets consider a simple example. A government want to buy an aircraft for $100 million.
Can they work their printing press to make $100 million in their own currency? Only if the seller accepts it. Sellers won't - they want the be paid in a "hard" currency like the dollar, sterling or the euro.
The only way the government can print enough money to buy the aircraft is to print enough that the pulp value is $100 million and barter it for the aircraft.
Hate to burst your bubble but this is how the Dollar, Sterling and Euro work.
I'll use the U.S as an example. Geithner is told to fund the purchase of a $100 million aircraft. The Treasury currently has $0 dollars, what does Geithner do?? He creates Treasuries and sells them to the market in exchange for Dollars to pay for the aircraft. If no one wants to buy the Treasuries and inflation is within the FEDs target window, then the FED will print money and purchase the Treasury. There is nothing hard about the U.S dollar. It is backed by nothing more than faith.
It sounds absurd, but the idea that a country that creates its own currency can run out of money is more absurd.
It's not absurd at all. You've overlooking the fact that currency has no fixed value and no intrinsic value.
They can print all the currency they want, but that doesn't mean it'll have any value.
"We can guarantee cash, but we cannot guarantee purchasing power." - Alan Greenspan
Your right, if there is an inflation then they can't print more money without doing damage to the economy. But printing money to lower unemployment is not inflationary. Whenever fresh money is used to utilize unused capacity, then inflation will not occur.
