Why can’t governments print an unlimited amount of money? - Jonathan Smith

Translator: Xosé María Moreno

In March 2020, the COVID-19 pandemic rocked economies worldwide.

En marzo de 2020, a pandemia da COVID-19 fixo cambalear a economía en todo o mundo.

Millions of people lost their jobs,

Millóns de persoas perderon os seus traballos

and many businesses struggled to survive or shut down completely.

e moitos negocios tiveron dificultades para sobrevivir ou pecharon para sempre.

Governments responded with some of the largest economic relief packages

Os gobernos responderon cun dos maiores paquetes de rescate

in history—

da historia.

the United States alone spent $2.2 trillion on a first round of relief.

EEUU gastou 2,2 billóns de dólares na primeira ronda de rescate.

So where did all this money come from?

De onde saiu todo ese diñeiro?

Most countries have a central bank that manages the money supply

A maioría de países teñen un banco central que xestiona o fornecemento de diñeiro

and is independent from the government to prevent political interference.

e é independente do goberno para evitar a intromisión política.

The government can implement many types of economic policy,

O goberno pode implementar tipos de economía política,

like decreasing people's taxes

como reducir as taxas

and creating jobs through public infrastructure projects,

e crear postos de traballo a través de proxectos de infrasctructura

but it actually can’t just increase the money supply.

pero non pode, realmente, aumentar o fornecemento de diñeiro.

The central bank determines how much money is in circulation at a time.

O banco central determina canto diñeiro está en circulación en certo momento.

So why can’t central banks authorize the printing of unlimited money

Por que os bancos centrais non autorizan a impresión ilimitada de diñeiro?

to help an economy in crisis?

para axudaren a economía en crise?

They could, but that’s a short-term solution

Poderían, mais esa é unha solución a curto prazo

that doesn’t necessarily boost economic growth in the long-term,

que non necesariamente impulsa o medre económico a longo prazo,

and can actually hurt the economy.

e pode, en realidade, danar a economía.

Why?

Por que?

With more money in circulation,

Con máis cartos en circulación,

manufacturers of goods like food, clothing, and cars

a fabricación de bens como comida, roupa e coches

could respond to demand simply by raising prices,

podería reaccionar á demanda aumentando os prezos,

rather than manufacturing more of these goods

e non producindo máis destes bens

and creating new jobs in the process.

e mais creando, ao mesmo tempo, novos traballos

This would mean you could no longer buy as much with the same amount of money—

Isto significaría que xa non poderiamos mercar o mesmo con igual diñeiro:

a situation known as inflation.

é o que se coñece como inflación.

A little bit of inflation, about 2% a year,

Unha pouca de inflación, un 2% ao ano,

is considered a sign of economic health, but more can quickly derail an economy.

é considerado como un signo positivo, pero máis pode rápido danar a economía.

In recent decades, central banks have tried an approach

Nestas últimas décadas, os bancos centrais intentan como solución

called quantitative easing to infuse the economy with cash

a chamada flexibilización cuantitativa para animar a economía con diñeiro

while maintaining a low risk of severe inflation.

e mantendo un risco baixo dunha inflación severa.

In this approach,

Neste método,

a central bank increases cash flow by purchasing another entity’s bonds.

un banco central aumenta a circulación de cartos comprando bonos doutra entidade.

Anyone can buy bonds from corporations or governments.

Calquera pode mercar bonos a corporacións ou gobernos.

When you buy a bond, you’re essentially loaning money to the company—

Cando o compras, en esencia, prestas diñeiro a esa empresa

or government— with the promise that they’ll pay it back later with interest.

ou goberno coa promesa de que cho devolva con intereses.

This is why buying bonds is sometimes referred to as buying debt.

Esta é a razón pola que ás veces comprar bonos é considerado como comprar débeda.

When an individual buys a bond, they're using money that's already in circulation.

Cando alguén compra un bono, usa diñeiro que xa estaba en circulación.

But when the central bank buys a bond, it essentially creates cash,

Porén cando un banco central compra un bono, en realidade crea diñeiro,

supplying money that didn’t exist before in exchange for bonds.

aporta cartos que non existían antes a cambio de bonos.

Both during the 2008-2009 financial crisis and again in 2020,

Durante a crise financieira de 2008-09 e outra ven en 2020,

the United States’ central bank, the Federal Reserve,

o banco central de EEUU, a Reserva Federal

bought bonds from the US government called treasury bonds.

mercou bonos do Tesouro do goberno dos EEUU.

Historically, many people have purchased these bonds as a safe form of investment,

Historicamente, moita xente comprou estes bonos como un xeito seguro de investimento

knowing the US government will pay them back with interest.

sabendo que o goberno dos EEUU os pagaría con intereses.

In early 2020, the Federal Reserve pledged to buy unlimited treasury bonds,

A inicios do 2020, a Reserva Federal pro- meteu mercar bonos do tesoro sen límite,

loaning the U.S. government an unprecedented amount of money—

prestando ao goberno dos EEUU unha cantidade de diñeiro sen precedentes,

cash that the government used to fund relief efforts

cartos que o goberno usou para financiar plans de axuda

like stimulus checks and unemployment benefits.

como cheques de estímulo e subsidios de paro.

This isn’t equivalent to simply printing money,

Isto non equivale a imprimir diñeiro,

though it may sound similar.

aínda que soe moi parecido.

Because of the way bonds are priced, by buying so many,

Marcando o prezo dos bonos, ao mercar tantos,

the Federal Reserve effectively lowered the return on them,

a Reserva Federal reduce o beneficio dos mesmos,

which incentivizes other investors to lend to riskier entities—

o que incentiva que outros investidores presten a entidades menos seguras

like small and midsize companies— in order to get a decent return.

isto é: pequenas e medianas empresas, para recibiren un beneficio decente.

Encouraging lending this way should help companies of all sizes borrow money

Incentivar estes préstamos axudaría a que empresas de calquera tamaño obteñan cartos

to funnel into projects and hires,

para centrárense en proxectos e novos empregos,

boosting the economy over time in addition to helping the government

impulsando a economía ademais de axudar a que goberno

supply people with urgently needed cash in the short term.

achegue diñeiro a quen urxentemente o necesita a curto prazo.

The Federal Reserve’s pledge to buy unlimited government debt

A promesa da Reserva Federal de comprar sen limites a débeda gubernamental

has raised some questions— and eyebrows.

provocou preguntas e sospeitas.

In theory, this means the government could issue more bonds,

En teoría, isto significa que o goberno podería emitir máis bonos,

which the central bank would purchase.

que o banco central compraría.

The government could then use the money from the new bonds

O goberno podería entón coller o diñeiro dos novos bonos

to pay off the old bonds,

para pagar os vellos,

effectively meaning the government never pays back its debt to the central bank.

o que significa que o goberno nunca devolvería a súa débeda ao banco central.

Citing this and other theoretical scenarios,

Ante este e outros escenarios teóricos,

some economists have raised concerns that a central bank buying government debt

algúns economistas denuncian que se o banco central merca a débeda do goberno

is a subversion of a system designed to protect the economy.

perverte o sistema deseñado para protexer a economía.

Others have insisted these measures are necessary,

Outros insisten que estas medidas son necesarias,

and have so far helped stabilize economies.

e teñen por agora estabilizado as economías.

Though quantitative easing has become a lot more common in recent years,

Aínda que a flexibilización cuantitativa é moito máis habitual estes tempos,

it’s still relatively new, and potential consequences are still unfolding.

resulta relativamente nova e as conse- cuencias non están por agora desveladas.