If you print 10x as much money, but it all goes into capital investment such that 10x as many goods are produced because of higher efficiency of production thanks to said capital you won't have rising prices. This is why the price of semiconductors and other mass produced goods have fallen even though the money supply has expanded significantly in recent years.
Similarly, if you destroy a country's infrastructure in a war and keep the amount of money the same, you'll have rising prices for what production is available.
The problem with most monetary systems is that the increased money is not well invested enough causing the supply of goods relative to the supply of money to become imbalanced thus raising prices. This is the difficult problem that the Chinese have to solve in their monetary expansion: channeling the money into productive uses instead of hoarding or capital consumption (e.g burning the furniture to keep warm).
You are confused between banknotes and actual money. You are confused between the central bank and the executive government. Just because the Government controls the central bank, it doesn't mean it IS the central bank.
The government mints banknotes, it cannot create money without reducing it's value. Banknotes are backed by government's own debt to the central bank. So, even if you print 10x the number of notes already in circulation, it's backed by the same government debt, and so, the value of yuan will fall to a tenth.
The bureau of printing and engraving mints banknotes but it sells them to the fed at the cost of production. That's why they say "Federal Reserve Note", they are representative of a debt of the Federal Reserve, but enough with the technicalities.
Your biggest problem in understanding money's effect on prices is that you think that one dollar of newly created money is spread throughout the population evenly and thus raises prices evenly. This is not the case. If it is created by the banking system it goes into new bank loans, and since banks prefer to lend against collateral, it raises the prices of the assets that those banks lend against thus resulting in asset bubbles and inflated real estate, and stock prices.
If the government spends it on transfer payments, then it's going to go in to less productive uses and thus have a greater impact on prices of consumer goods. If however, the Chinese government is channeling it into loans for highly effective infrastructure projects such as railways, aqueducts, etc. then it is going to have less impact on prices and may even lower them in directly affected areas such as the cost of transporting goods because the new capital will lower the cost of production and increase supplies of raw materials and other factors of production.
>they are representative of a debt of the Federal Reserve
NO! NO!
They represent the debt of the Government. Just this misunderstanding invalidates the rest of your argument.
>If however, the Chinese government is channeling it into loans for highly effective infrastructure projects such as railways, aqueducts, etc.
You're asking the government to run a more-deficit budget. 10 times more, from your previous comments. What will this money be used for? Labour and raw materials. Since there is only finite amount of these in their country, The government will essentially be paying more salaries to get the same job done, more money for the same resources. If you haven't figured it out yet, THIS IS INFLATION.
Treasury bills and notes are debts of the government. They pay interest. Federal Reserve Notes(FRN) are debt of the Federal Reserve and they pay no interest. Do you want me to go dig out the Federal Reserve Act and quote line and verse? Debts of the government are payable in FRNs. FRNs are debts. One FRN can be redeemed for exactly one FRN.
Why do people build a road or a factory? When Elon Musk builds a factory for batteries in Nevada he is doing it to lower the per unit cost of battery production due to increased efficiency. When someone paves a road to their house they are doing so to lower the cost in vehicle maintenance and time to traverse that road. Capital is created to lower costs.
You fall for the Keynesian fallacy that capital investment is just "spending"; that creating capital is economically equivalent to paying people to take a whole bunch of raw materials and burn them in a bonfire. Thus, you cannot distinguish between productive capital investment ,which lowers prices, and unproductive uses of resources, which raises prices. You probably think that war is good for the economy because it increases "spending".
Seriously? Read your comment again to understand it's absurdity.
I don't wish to sound belligerent, but You simply don't understand money at all.
You're suggesting increased government spending on infrastructure. But you somehow think the government can do that without borrowing money either from the Central Bank or the people. If this were possible, wouldn't all governments be doing this already?
If the Central Bank asks the Treasury to print more money than the amount of assets it holds, (assets = Treasury bonds), it will either be (a) no longer capable of fulfilling it's obligations or (b) effectively devaluating the currency and thereby increasing the inflation.
Also, Bank notes are not "debt". They're transferable IOUs.
I don't fall in any economic-theory-based fallacies as you're suggesting. You think government can make money out of thin air and I am telling you that it cannot.
>You probably think that war is good for the economy because it increases "spending".
Unlike you, I do not ideologically believe in some economic theory.
Similarly, if you destroy a country's infrastructure in a war and keep the amount of money the same, you'll have rising prices for what production is available.
The problem with most monetary systems is that the increased money is not well invested enough causing the supply of goods relative to the supply of money to become imbalanced thus raising prices. This is the difficult problem that the Chinese have to solve in their monetary expansion: channeling the money into productive uses instead of hoarding or capital consumption (e.g burning the furniture to keep warm).