Are we in danger of going the Weimar Republic route here?

[Darkstar One]

So, we're in the midst of a $2 trillion stimulus here, and consensus seems to be at least one more is going to be needed of that size or bigger.

Now, my knowledge of economics is limited, but this is essentially printing money and passing it out, isn't it?
Isn't that what sent the Weimar Republic down the skids?
Can someone with more knowledge please explain to me how this is similar or different?

[Zarathud]

The Weimar Republic tried to fund a World War with deficit spending in an age of the gold standard. Germany lost the war it couldn’t afford then got hit with massive and punitive war reparations that had to be repaid at a time of economic crisis.

The US has (for now) the largest economy and is considered a safe-haven during foreign and domestic crises. We’re borrowing during the crisis to pay later and there’s a huge demand to shelter assets in US debt — making borrowing costs (interest rates) incredibly low. Economics says NOW is the time to borrow and grow. The is a risk of inflation but that’s offset by the supply/demand shocks of the pandemic.

[malchior]

The Weimar had hyperinflation because the UK/France demanded war reparation payments in gold or foreign currency (e.g. not marks). They couldn't keep up buying gold/foreign currency especially with an economy that was saddled with high taxes. They got caught in a loop of intentionally inflating to be able to pay the war debt. Eventually they lost the race and had to build out a new currency. IMO the gold standard bit is a bit of a side story. It factored in but this wasn't just a currency supply issue, it was a balance of payments issue. Also, factor in economics wasn't where we are now, plus the Entente powers weren't too keen on letting the Germans off the hook easily. The Entente thought they were avoiding a second war instead of breaking Germany and fomenting a second even worse war. At one point they even accused Germany of intentionally trashing their economy to avoid paying the debt.

An important thing we've learned over the last 100 years is that sovereign debt loads don't necessarily lead to inflation when denominated in your own currency. Ours is somewhere around 100% GDP depending on which flavor you subscribe to. Japan runs about 300% Debt to GDP and have dealt with persistent deflation for years. That said, more money in circulation is usually a good thing as long as it isn't chasing something of systemic importance. A solid example would be oil in 1970s. OPEC embargoed oil and a good supply of dollars chased the price of the limited supply of oil and gasoline up. Everyone needed to buy it and would essentially buy it at whatever price they could. Bad crops without substitutions also sometimes see this effect. That is usually the source of inflation. We are actually probably more in danger of deflation with some spot inflation risks. For example, let's say some of the food supply chain issues persist people with cash may bid up the price of certain goods that end up having short supply. It won't be widespread but will affect some parts of the economy potentially. This program likely counteracts some of the deflation risk and exacerbates the inflation risks elsewhere. This is unavoidable as the economy usually has sick areas even in good times.

What this is doing though is burdening future generations because total debt service is a long-term issue. Especially with the GOP low tax cult. Eventually the problem won't be inflation. Instead it'll likely be a decreasing capacity to have the resources to react to future crises. Still this is a better outcome than allowing the economy to crash out. Economies are fragile and hard to re-establish once they get out of sync.

[Holman]

Our Weimar troubles go way beyond the currency.

[malchior]

Our Weimar troubles go way beyond the currency.

+1. This is a way more concise and accurate statement.