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If the government pays w/o raising taxes then then taxpayer doesn't suffer, the 'wealth holders' suffer (via inflation), which is exactly the correct thing to h
by greysphere 7y ago
If the government pays w/o raising taxes then then taxpayer doesn't suffer, the 'wealth holders' suffer (via inflation), which is exactly the correct thing to have happen. Their wealth 'value' was predicated on a smooth 5% annual growth rate. That isn't going to happen so it should just be worth less. No one really suffers in that case, the system is just corrected to match reality.
Of course this isn't what will happen, the value of the wealthy will be protected at the cost of others sufferring.
("But what about my grandma who's CDs aren't going to be able to cover her retirement expenses, aren't they suffering?" Societal safety nets should cover her living expenses. The rest she's saved should go to luxuries, and yes those luxuries will go down, like everyone else's with excess wealth.)
- aaronblohowiak 7y agoIf you get the injection amount right there won’t be inflation because the amount injected will match the amount usually spent. Under the regime of falling demand, we would expect prices to fall (deflation, ie why the stock market has taken a hit) but if you can inject money now and take it out later, there won’t be a rise in total volume of money shuffling around, so no inflationary pressure
- frequentnapper 7y agoI am a "wealth holder" who has been working and saving up to buy a house but still can't afford it. So my money should now be worth even less.
- bequanna 7y agoBingo, but that’s kinda the point. Cash in the short term is probably a fine idea. But low interest rates are meant to encourage deploying capital into risk investments or consumption with the promise of inflation eating your buying power if you hold cash.
- greysphere 7y agoYep! The only way you get around it is if you 'invested' in something that (a) either gets 'subsidized by law' (rent and other contracts falls into this category, until the law changes), or (b) still can be produced and is in demand during the economic shutdown.
- bequanna 7y agoInflation doesn’t really punish all “wealth holders” just those that hold cash and cash equivalents. Real estate and the stock market should benefit from inflation when it is paired with some growth. Stagflation, however, is just bad for everyone.
- ericd 7y agoThis isn’t quite true, because you’re taxed on nominal, not real gains. If I own a share of a company worth $100, and the USD drops in value by 50%, but my perfect inflation hedge of a stock (which they’re generally not) shoots up to $200. I’m not richer in any real sense, and the I still have to pay ~30% tax on the increase in value in CA when I sell it. Better than holding dollars in that scenario, though.
- greysphere 7y agoAbsolutely, the theory being the other assets will adjust to their correct value on their own (see: stock market plunge), unless they are propped up by bailouts or whatnot.