And just imagine if we did the same thing, except instead of building weapons, we invested in healthcare, education, renewable energy, etc.
Once you understand the money system, you understand that we are drastically under performing compared to our potential because our citizens and politicians have a backwards understanding of our money. reminds me of a great little clip by Alan Watts:
https://www.youtube.com/watch?v=g-JMHiaYIiU
1) Government/central bank spend more than they take in taxes.
2) Private banks make loans to private sector (biz or individuals).
Money is destroyed by government running a surplus or by loans being repaid.
Note also that for the government to run a surplus the private sector must run a deficit (decrease savings or increase borrowing) in most circumstances.
The question is where money should be created and how it should be managed and controlled.
Bankruptcy is actually the way to reduce debt without destroying the matching money (but may have knock on effects on further lending and related money creation).
Inflation is less clear cut and comes in many forms, assets, import costs, wages, consumer goods.
Firstly, empirical evidence suggests otherwise. Political instability and inequality, both consequences of austerity, significantly hamper long-term growth and innovation. No country ever went from poor to rich by neglecting to invest in its people and infrastructure. Lots of countries have gone from rich to poor that way though.
Secondly, even if this were true what does it matter? Many people don't care about how fast the economy is growing overall if their personal fortunes are dwindling. That's just robbing Peter to pay Paul, except in this case Paul is already filthy rich.
Real money inherently has a limited supply, so there is no need for it to be managed or controlled; the market does that on its own. However, the fiat currencies that are used by central banks around the world are not real money. The arrogance of central banks thinking they can manage and control the economic interactions of millions of people in a country is what leads to these great depressions and recessions.
Economic crises today are nowhere near the disasters they were in the past. It's pretty obvious that the system's stability has increased–in the past, depression could mean starvation.
> The arrogance of central banks thinking they can manage and control the economic interactions of millions of people in a country...
The arrogance of physicians thinking they can manage and control the biological interactions of billions of cells...
Just because something has a lot of moving parts doesn't make it intractable. "Complex" is just latin for "put together", and we can always try to take it apart, learn about individual parts, and work our way up.
In any case, not doing anything is also a decision. It's a completely arbitrary idea–as if monetary policy were some sort of intrusion into the "natural law" of the economy.
I don't think that the rarity of starvation in modern times is due to central banks, but instead due to advances in farming that allows a very small percentage of people to produce enough food for everyone.
Physicians don't think they can manage and control the billions of cells in our bodies; we still don't understand how all of our cells even work. Physicians apply tested practices to individual people and hope that it addresses whatever medical problem is being observed. They understand that treatments are not one-size-fits-all and that mistakes can kill people. They also understand that our bodies self regulate and they are only trying to address a specific imbalance in their specific patient, not something that applies to an entire population.
Central banks think they can turn a couple of knobs (currency supply and interest rates) and control an entire economy made up of millions of people. Using the physician example, that's like thinking that the only two treatments needed for any medical condition are adjustments to our blood level and body temperature.
Monetary policy is a newer invention in the history of human civilization and even then, it wasn't always applied so universally. Monetary policy can only exist with central banks.
I don't know who defined this originally, but the six characteristics that money needs to have are durability, divisibility, portability, acceptability, limited supply, and uniformity. Additionally, money needs to serve as a store of value, a unit of account, and as a medium of exchange.
Fiat currencies do not have a limited supply and are therefore not a store of value (i.e., inflation constantly lowers the value of fiat currencies). The main reason that fiat currencies are still used as a medium of exchange is for the exact reason you mentioned: governments mandate their usage to pay taxes.
As an example, gold and silver have been used as money for 1000s of years because they meet all of those requirements.
The idea is that there are certain investments that give good returns. Governments can currently borrow at rates pretty close to 0%–even negative rates have popped up here and there. And you would actually have to subtract inflation from that as well.
So if some investment, say a new airport or funding for the National Science Foundation increases future growth even just slightly, it's perfectly fine to finance it with debt.
Is that growth, or does that fall under "eating the seed corn"? I agree the money supply has to expand when the economy expands, but that's not the same thing as printing a bunch of money and spending it during a recession.
In theory in a properly managed recovery from a recession bad debt is eliminated via loan restructuring and new more productive debt is created to replace it. And income insurance programs[1] are used to support demand. Austerity during a recession works poorly because instead of replacing unproductive debt with new more productive debt, austerity attempts to subsidize the owners of bad debt by taxing demand.
[1] Unemployment insurance, welfare, state run retirement, pensions, etc.
