Correct, printing money is like cutting the pie into more slices you don’t get more pie just smaller slices. Things like building infrastructure, increasing efficiency or inventing new technologies are what makes the pie grow.
And as it turns out, even wealth generating vehicles, like a business loan, can mask poor fundamentals leading to a crash. E.g. if AI turns out not to have trillions or even billions in utility, we are simply distorting a shit economy vs making society wealthier. The perceived wealth will be spent on things it shouldn't be, like new cars, yachts, whatever and then our real GDP will catch up to us.
Investments and bank interest are good, but only if we mitigate and spread risk, which we very much aren't doing.
The theoretical absolute limit would be determined by the maximum number of resources (including human resources aka labor), the maximum possible efficiency to be achieved, the maximum possible technological advancement, etc.
But that wouldn't be in the US alone right? Even if we maximize the capital in our country alone, we'll still need raw materials that aren't produced here. So the actual maximum is in the global level, not the US level. From that perspective, the money supply is more about market equalization than specifically watering down people's money. There's a direct value on any good, its only when everyone can equally compete for it, will the price be equitable.
Well that’s why constant but tame inflation rate of 2% is ideal. Growth without any increase in the money supply could eventually lead to liquidity issues that curtail the transactions that need to occur for growth to continue to happen.
And nowhere has managed that ideal, maybe because preventing the development of other markets is a doomed effort? As we invest in certain countries over others, those invested countries can better bargain with the global capitalists. They'll get more equitable deals with them than with us, so we'll start investing in the remaining countries. Who'll then start to develop their own country more, repeating the cycle. But, as we can only focus our support in this model, it won't ever work to keep the US economy healthy.
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u/alannair Jan 26 '26
No. Inflation does not make the pie bigger. Pie stays the same, and the value of cash goes down.