RUSSIAN ANALYST: CONSEQUENCES OF rampant dollar printing

Vince Dhimos answered a question at Quora.
 
https://www.quora.com/Why-can-not-USA-buy-out-other-countries-as-it-prints-dollars-freely-There-might-be-collateral-difficulties-in-maintaining-it-but-I-dont-think-the-dollar-drops-this-way-as-the-excess-money-is-used-to-buy-foreign-and/answer/Vince-Dhimos
 
WHY CAN NOT USA BUY OUT OTHER COUNTRIES AS IT PRINTS DOLLARS FREELY? THERE MIGHT BE COLLATERAL DIFFICULTIES IN MAINTAINING IT BUT I DON’T THINK THE DOLLAR DROPS THIS WAY AS THE EXCESS MONEY IS USED TO BUY FOREIGN AND NOT TO REDESTRIBUTE IT TO THE MARKET.
 
What will result in the growth of public debt of the USA and Europe. Is it possible to build up debts without consequences.
 
US financial media are keeping the true economic picture hidden, which is why I turn to Russian analysis.
 
Following is my translation of an economic analysis from here https://zen.yandex.ru/media/id/5d5f39b11e8e3f00adf4d4ea/k-chemu-privedet-rost-gosdolga-ssha-i-evropy-neujeli-mojno-narascivat-dolgi-bez-posledstvii-5eb16ed66c15632218124aca?&utm_campaign=dbr
 
May 5, 2020
 
There is a belief that public debt can be increased indefinitely without consequences. This is actually not the case. I will briefly tell you why
 
2007: Senator Obama criticizes George W. Bush for growing government debt by 4.5 trillion. over 8 years
 
2016: Trump accused Barack Obama of increasing the public debt by 9 trillion dollars over 8 years and promised that he will get rid of public debt
 
Following this logic, the next president should accuse Trump of building up public debt by 18 trillion. Rights?
 
2020: Trump justifies high public debt and its growth of 9 trillion over 4 years.
 
Well, yes, each new president scolds the previous one and doubles the public debt over the next 8 years.
 
The media write that low interest rates make public debt risk-free. Let's look at the dependence of economic growth on public debt
 
dependence of US GDP growth on public debt (for chart, see orig)
 
Bond yields are approaching zero, public debt is growing faster every year, and the pace of economic growth is lower.
 
Fact: a couple of years ago, each new dollar of debt added 0.4 dollars to GDP, vs only $ 0.25 now, and this trend will continue
 
The economy grew rapidly until 1980, when it did not begin to actively build up public debt, which after that led to 40 years of deflationary pressure, lower interest rates and a slowdown in economic growth.
 
Throughout the world, countries have accumulated 78 trillion in debts, 20% of which have a negative interest rate.
 
If large debts and a low prime rate equal economic growth, then why do neither Japan nor Europe show anything but growth in public debt?
 
Japan’s GDP by years (see orig)
 
0-1% growth is called stagnation, but this is actually a de facto decrease, because global average growth is 3.5%. It is as if countries were participating in a marathon, where the average speed of the athletes is 35 km, and but you are at 5 km and you are glad that you are at least not moving backward. Your competitors are overtaking you and this is a decline, not stagnation. It’s just that the share of developed countries with great debt will decline year after year in the global economy, just as has been happening continuously for centuries.
 
Japan's similar situation to Europe and the USA (see orig)
 
And accounting for imaginary income from illegal activities in GDP and other manipulation of statistics does not help. An increase of 0% is a decline. The United States under Trump had increases of 2% or even 3%, but this is a temporary effect of a change in the tax system and the squeezing of "allies."
 
Countries are caught in a liquidity trap. A contraction in the money supply will lead to an even greater economic downturn, and a further reduction in the prime rate down to negative values ​​will not lead to economic growth. If the economy does not grow even with super-cheap loans, then it is impossible to do without a deep purge of inefficient enterprises and a decline in living standards, but you can only delay this and accumulate the consequences.
 
In a crisis, currencies like the yen, the dollar and the euro, as well as the bonds of these countries are very much in demand so new debt does not cause a surge in inflation, but when the crisis ends, investors will go back to emerging markets and drop reliable securities and to avoid high inflation, the prime rate will have to be raised, bankrupting many businesses, which fail to show good results even with super cheap loans.
 
Conclusion
 
Debt build-up only disguises the consequences of economic problems and without a deep purge of inefficient sectors of the economy and lower living standards, these is no way out of the crisis.
 
China regularly bankrupts inefficient companies, which is why Western media like to complain about problems in the Chinese economy, but this is just the right choice.
 
I think a severe crisis is coming in the next +three years and this crisis will be much more severe than 2008. And yes, it’s not a crisis yet, but only the consequences of an epidemic that they are hiding with debt as before.