Printing could fund entitlements at the cost of diluting purchasing power for everyone (including retirees). But Social Security is indexed to inflation, so it would pay out more as long as the government chooses to fund it through whatever means are available. Effectively this would continue to fund retirees while taxing all nonretirees, especially those who don’t own assets. Not a great situation and it would have political consequences, but it is theoretically possible.
I think we have enough people to theoretically support retirees (Japan does it with worse TFR), the problem is that declining relative wages makes it politically difficult, as lower earners would share a disproportionate burden. And retirement is just one issue of many, we are trying to run a giant resource-hungry country on a service economy. We’re only able to get away with this by using our aging military resources to force other countries to accept our role as a global middleman. It isn’t sustainable.
I now understand what you mean. This is how post-WW1 Germany tried to pay its WW1 "fines" which were pegged to gold [0]. The result was hyper-inflation - and 2 years later when this scheme was thrown out the currency stabilized. Most likely the same would happen in your scenario - the retirees would come ahead for a while, but only for a short time. So I do not think this is a solution for retirees (no matter their large political power)
These days currencies have no real assets behind them. One cannot expect to be able to purchase real goods / services indefinitely with a fictional construct (fiat currency)
It’s more complicated than that, as Germany’s punitive war debt was designed to cripple it and it didn’t have many options. It’s actually fairly difficult to create hyperinflation without being trapped in an extreme situation. But I agree that it’s generally a bad idea to put yourself at risk of it.
Fiat isn’t necessarily backed by nothing, that’s a misconception. It’s backed by the strength of the underlying economy, the perceived value of claims on the nation’s resources and services, the political stability of the nation, and the need to hold that currency for trade. The problem with fiat is that when those things are in decline, the lack of hard assets can cause a rapid devaluation, as the “invisible assets” backing the currency are now devalued. This compounds the decline.
Ok ok. I can’t wait to see how 2026 and 2027 will shake out. Trump’s choice to replace Jerome Powell will drive short term interest rates to zero because, among other things, US pays around $1 trillion / year in interest for its debt.
Getting these rates to 0 will require the Fed to print massive amounts of USD. Let’s see then how the USD is backed by something other than thin air.
(BTW - lots of countries managed to achieve hyperinflation: Zimbabwe, Venezuela, Russia and my home country of Romania in the 90s. It is not that difficult)
If they lower rates too much, they will have a problem finding buyers for Treasuries, so they are somewhat constrained. We’re not living in the pre-Covid era anymore, and people have better options than low % US Treasuries. The only way I can imagine ZIRP again is if a deflationary crash were about to hit. That might happen (eventually it will happen) but I am not foolish enough to bet on the timing.
The awkward US system is fairly robust against hyperinflation because the government can’t just print money directly. The one option for doing this, minting a “trillion dollar coin” and depositing it with the Treasury, is extremely risky because of the potential impact on normal Treasury funding. I would only expect this as a last resort when the economy is already heading towards disaster.
I suspect that true hyperinflation is an artifact of nations with wrecked economies trying to sustain themselves on fiat. Once you reach that point it’s already too late, so hyperinflation is a symptom, not the cause. In effect it’s a default on debts and a collapse of the monetary system.
I think we have enough people to theoretically support retirees (Japan does it with worse TFR), the problem is that declining relative wages makes it politically difficult, as lower earners would share a disproportionate burden. And retirement is just one issue of many, we are trying to run a giant resource-hungry country on a service economy. We’re only able to get away with this by using our aging military resources to force other countries to accept our role as a global middleman. It isn’t sustainable.