Cullen Roche, the founder of the famous blog Pragmatic Capitalism, writes that he has summarized the top 10 puzzling economic myths based on the development of the US economy over the past five years.
In any case, the logic of ZF stamps is untenable. Under the existing monetary system, the real ZF stamps are the credit-creating activities of banks. The so-called ZF stamps actually refer to the issuance of banknotes and coins. These forms of money exist to facilitate the operation of the bank account system.
The myth of banks borrowing from the reserve currency is rooted in the concept of the currency multiplier, which is taught in any basic economics course. The so-called currency multiplier, also known as the currency expansion coefficient or currency expansion factor, refers to the multiplicative relationship between the money supply and the base currency, i.e. the amount of money produced by one unit of reserve. The currency multiplier is the concept of the unpredictable inflation expectation in the United States since the launch of QE by the Federal Reserve in 2009 and the rapid expansion of bank reserves with the expansion of the balance sheet of the Federal Reserve.
For a country such as the United States, where ZF controls the printing presses and therefore its debts are completely controlled in the monetary system it has created, it is ridiculous to say that it is bankrupt. Many Americans have complained about ZF's insane printing practices and are also worried about its ability to pay off debts. This seems somewhat contradictory. In theory, the US ZF can print unlimited amounts of money as it needs, but technically it is not.
As the name implies, the national debt is generally a debt to be repaid. Just as we carry a heavy debt in our lifetime and have to spend our lives trying to pay it off. Of course, this is not the case. The size of the US national debt has been expanding in recent years, and there is no such thing as a debt to be repaid as long as the US ZF has been doing well.
This does not mean, of course, that a massive issue of government bonds will not bring any disadvantages. It is also possible that the US ZF will spend money in useless places or misallocate resources, causing high inflation and thus lowering people's living standards. Of course, this is not inevitable. Not all ZF spending plans are very bad, just as not all private sector investments are necessarily good for the economy.
Quite simply, quantitative easing is a monetary policy in which the Federal Reserve attempts to change the composition of the balance sheet of the private sector by expanding its balance sheet. In other words, the Fed's purchase of private sector assets is tantamount to a continuous stampede. When people equate quantitative easing with stampede, it means that a large flow of funds into the private sector will lead to higher inflation rates. However, since quantitative easing does not change the net worth of the U.S. private sector, this policy is more like turning a savings account into a checking account.
Since the introduction of quantitative easing by the US Federal Reserve and the continuing expansion of the budget deficit, pernicious inflation has plagued the US ZF in recent years. Many people like to compare the situation in the United States with the situation in Weimar or Zimbabwe, but if you study the history of pernicious inflation, you will find that it is usually caused by certain specific disruptive events, namely: collapse of industrial production, ZF corruption, war failure, regime change or collapse, and the ceding of monetary sovereignty through pegged currency or foreign debt.
Given that the United States does not currently have the aforementioned situation, it is basically impossible to have a malignant inflation. A comparison of the United States with Panama or Zimbabwe is no different than finding common ground between an apple and a cucumber.
Many economists believe that ZF is aiming to suppress private investment through so-called marketable capital markets, so that the private sector can compete in the bond market. The concept has a big flaw in the past five years. The fact is that interest rates are falling like a meteor as ZF spending and deficits continue to expand in the United States. This naturally makes ZF's claims of pushing higher interest rates unassailable.
The Fed is a confusing and seemingly deeply secretive institution. Since its inception, the Fed has been subjected to much criticism and debate because it sometimes fails to effectively execute monetary policy. However, the execution of monetary policy was not the original intention of the Fed's establishment, but as a clearing house to maintain the stability of the banking system. The Fed was originally set up to mimic the architecture of the New York Clearinghouse.
Perhaps the biggest flaw in modern macroeconomics is the fallacy of composition. The theory of composition was proposed by the American economist Samuelson, meaning that what is locally true is not necessarily true in general. Specifically in the field of economics, it means that what is microeconomically true is not always true in macro; on the contrary, what is macroeconomically true may be wrong in micro. Samuelson believed that if we want to get more, others have to spit out more, and all of them appear at the same time in a situation of increased savings.
Economics is often seen as a science, but in most cases economics is merely the use of a political mask to disguise operational facts. Keynesian economists believe that ZF needs constant expansion of spending in order to stimulate economic growth. Monetarists believe that the Federal Reserve needs to strengthen policy independence and laxity. Austrians believe that ZF is bad, and it is best to abolish or weaken it.