Inflation from Printing Money Pays Debts

When the government prints money, inflation results 6 mos later as the figure shows and that inflation pays down government debt due to spending in excess of taxes. However, when you spend more than you make, inflation also helps you pay your debts to purchase things that benefit your future. A mortgage for a house or a loan for a car are both examples of debt financed purchases that benefit your future as long as your income less expenses is enough to make the loan payments. When your debt payments exceed income less expenses, you then become bankrupt and need to sell your house and car in order to survive. If you take on even more debt to remain solvent, that can only be a temporary solution since you would increasing total debt by using the new debt to repay the old debt.

A government collects taxes and other revenues to pay for its spending and borrows money to pay for its big projects. A government prints money and loans that money to banks for a small interest payment that then pays for printing and distributing the money. Banks then use that money for loans that the Banks charge interest and withdrawals that the banks pay interest. When a government spends more than its revenues, it must borrow money just to pay for  that excessive spending. The government prints money called bonds with a promise to pay interest in the future despite the extra cost of debt interest payments, which the government pays for with taxes and inflation. Roads, bridges, dams, and government buildings are all examples of debt purchases that benefit the future as long as taxes less expenses represents tolerable inflation. When government debt payments exceed taxation, government can then raise taxes or take on new debt to repay the old debt. A government takes on debt by simply printing money because the government bond debt is actually equivalent to printing money.

Banks need government printed money as cash to support consumer buying and selling and so banks must take on government debt just to support a producer-consumer economy. The cost of that government debt is in the interest payments for its bonds as well as in the inflation of consumer goods and services. In other words, in the absence of government taxation, inflation is how the producer consumer pays for government spending.

Both government taxes and inflation pay for government spending and so money is just the same promise to pay as are government bonds. While an investor must hold a bond until it matures before reclaiming it as cash, cash is then simply a government bond as money that a consumer can immediately reclaim as goods and services less inflation. The government withholds taxes on every paycheck and so holds that cash for the year.

When debt is inexpensive, producers and consumers borrow more and are therefore willing to pay more for goods and services and that increases inflation. However, producer borrowing more also increases economic growth just as consumer spending more also increases economic growth.

When debt cost is expensive, producers and consumers borrow less and so have less to spend for goods and services and that decreases inflation.

When the government prints money for spending in excess of revenues, inflation occurs as a government tax on producers and consumers to pay for that excessive government spending. A government printing more money than its economic growth will cause excess inflation until the government prints just enough money to sustain growth with acceptable inflation.

Acceptable inflation occurs when the economy is growing and producers and consumers believe the government is not printing money in excess of economic growth.

When the government spends more than its revenues, the government prints more money to pay for that excessive spending and that increases inflation, which then pays for that excessive spending.

When the government spends less than revenues, the government prints less money and that decreases inflation.

When government increases its interest rate, that makes consumer debt more expensive and so decreases inflation.

When government lowers its overnight interest rate, that makes producer and consumer debt less expensive and so increases inflation, but also growth.

Acceptable inflation occurs when the economy is growing and consumers believe the government can repay its debt. Inflation then is just enough to pay for the cost of money and to allow enough excess money for economic growth.

Update on discrete aether sunspot number prediction... beating NOAA like a rug...

 

The reported cycle 25 sunspot number agrees very well with the discrete aether prediction. The 11.4 lyr distances of Procyon and 61Cygni from the sun are responsible for the 11.4 yr convection cycle of sunspot activity that has been tracked since 1600.

The well-known dearth of sunspots at the Maunder Minimum in 1680 coincided with a very cold period known as the little ice age. The discrete aether model shows that the Maunder Minimum was due to a particular alignment of the 61Cygni double star orbit.

Variation of Fine-Structure Constant over Cosmic Time

In a collapsing universe, cosmic time is different from an atom time since atom time is never at rest given the evolution of collapse rate from zero at the cmb creation to the speed of light at the final blackhole destiny. The red shifts of galaxy look-back spectra in the collapsing universe, unlike an expanding universe, are then due to both galaxy cosmic age as well as the velocity of universe collapse. Blackhole horizons in the collapsing universe are no longer singularities even though they still stop atom time and still exist in the flow of cosmic time of collapse.

In the expanding universe of contemporary Science, cosmic time is the same as atom time at rest with a constant expansion, but atom time does depend on relative velocity and acceleration. According to Science, the red shifts of galaxy spectra are then due to increasing galaxy velocities with look-back time in the expanding universe. Blackhole singularity horizons, though, do stop atom time and yet still exist in the flow of cosmic time expansion.

While some constants of Science are constants in the collapsing universe, the fine-structure constant as well as the speed of light do vary with universe collapse, but the fine-structure splittings of distant galaxies still remain proportional to contemporary splittings. Many argue against universe collapse since the fine-structure splittings of distant galaxies are proportional to contemporary fine-structure splittings. However, the fine-structure splittings are proportional to ratio of transition energy and relativistic electron energy, E_n/(m_ec²), and this ratio is constant in the collapsing universe [see Griffiths and Schroeter, Introduction to QM, 2018, 7.3.2]. This is because while E_n and c both increase in the collapsing universe, m_e decreases over cosmic time.

The collapsing universe is Lorentz invariant and maintains the equivalence of mass and energy just as does the expanding universe relativity. But the speed of light varies in the collapsing universe since the speed of light reflects the universe collapse rate for each epoch and not for all epochs as in the expanding universe. The classical electron spin rate, c/α, in the collapsing universe is constant and so α the fine-structure constant varies in the same way as does c.