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The govt could just print the money out. Sure inflation, but when your economy is crashing inflation will encourage spending
by pmalynin 8y ago
The govt could just print the money out. Sure inflation, but when your economy is crashing inflation will encourage spending
- throw0101a 8y agoI don't think there would be inflation. Inflation begins (IMHO) when there's a lot of money in circulation: too much cash chasing too few resources, bidding up prices. In a bank run, people are taking home bills because they want them to be "safe" in case the bank goes under (never mind FDIC, which most people probably do not understand). Money sitting under the proverbial or literal mattress is not in circulation, and not going to cause the bidding-up of prices.
- gbear605 8y agoIt wouldn’t immediately cause inflation, but eventually they would start spending that money under their mattress, causing the amount of money in circulation to increase.
- 8note 8y agowouldn't that happen anyways? if people have money on banks, they're still going to use it eventually. the thing that changes if the money is under mattresses is that the banks stop having money to lend and invest. I don't know if that creates inflation or not?
- ric2b 8y agoYes, but now when it happens the newly created money is there as well.
- throw0101a 8y agoAt some point the panic would subside and they'd put their money back, though perhaps at another institution.
- pishpash 8y agoThere won't be inflation in that circumstance. The whole point would be to counter deflation with just enough money to bring about normal productivity before things really go south and nobody works at all. In the long run, the injection would need to be unwound when things are back to normal though, or else there might be inflationary phenomena in one form or the other. It's a tricky maneuver to execute because you're doing it on the broad economy, not specific sections.