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Spherical cow model assuming everyone is honest and had steady income before this. Everybody just issues bonds to get paid what they used to make, and the government buys and tosses them. The inflation socializes the cost evenly. Where does this breaks if honesty holds?
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Forming a hypothesis that this sort of crisis is only a problem to the extent people try to profiteer from it. It’s a giant prisoner’s dilemma. Profiteering = defection.
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Trying to falsify it, the next breakpoint is courage. People change spending habits to conserve cash. That’s also a prisoner’s dilemma. If nobody does it, the inflation literally cancels out. You pay purely with wait times for backlogged work which piled up.
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Now we’re finally at a real breakdown which doesn’t depend on character: wait times. Everybody wants to catch up on the deferred, non-substituted consumption at the same time.
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It breaks at minimum wage when inflation makes it unlivable. Inflation 'socializes the cost' only to a round cow approximation, in reality it really really doesn't.
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Seems like a lot of fiddly bits just to print money to pay people their previous incomes. I.e. the fiction wears off that the Fed doesn't just directly monetize all US debt either way. May ALLOW them to do so on a technicality, but feels like just amending the FRA would be easier
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I think the “government buys” part is the farthest stretch. But I also think it’s possible people could respect each others’ bonds up to extents, and this *could be* enough, even without honesty assumptions.
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No real resources are being created by bonds. Labor still isn't being used efficiently, goods still aren't being produced. Overall lower global supply for nearly all goods causes prices to skyrocket as people compete to buy a limited supply. Massive inflation -> economy breaks
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