Heresy Financial: Why Does the US Borrow and Tax When It Can Print Money?

During the pandemic, the U.S. government printed trillions of dollars. Much of that money went to keep companies operating. Some of it went out in the form of stimulus payments. Along the way, the government continued to accrue new debt.

The moves have led to an interesting policy question. Why is the government borrowing money for its needs when it can just print it? And why tax your citizens to raise money for government spending?

The answer to that can be seen in the massive jump in inflation over the past few years. More money chasing the same amount of goods will lead to higher prices.

In this way, one could view borrowing money as inflationary, but with a twist. Because that money has to be repaid with interest, it should only be used for worthwhile goals. Especially when those goals could lead to further economic growth.

Taxes can also fund the government. But they also reduce the amount of potential inflation. That’s because money that’s taxed is money that’s not going into the consumer economy.

In short, governments have a variety of ways to obtain and spend money. How they do that could lead to inflationary effects.

Investors who see their governments printing money or greatly increasing their debts may want to move to inflation-resistant investments. That includes dividend growth stocks, commodities, and cryptocurrencies.