4 ms·
The same way we are funding massive corporate bailouts. Sovereign government debt does not work like personal debt, for the simple reason that money can be prin
by cultus 6y ago
The same way we are funding massive corporate bailouts. Sovereign government debt does not work like personal debt, for the simple reason that money can be printed. Fears of inflation in a time like this are completely unwarranted.
edit: Back of the envelope math shows that 1000/month for the US population is about $4 trillion/year. The Fed has pumped more than that into financial markets since this pandemic has started, alone. That is why the S&P is back up to where it was in 2018, despite the world suffering the greatest demand shock in history. Pumping up the financial markets is doing nowhere near the economic good that a UBI would right now.
- xur17 6y agoI agree that worries of inflation are unwarranted (if anything we are at risk of deflation), but what happens after the economy returns? Aren't we at risk of inflation from all of the new money dumped into the economy?
- cultus 6y agoWe'll have to wait and see. If it winds up being too much government spending to avoid inflation, then taxes would have to be raised to cut down the inflation. I don't think this would be such a bad thing, since the income redistribution would be a benefit anyway. My guess is that it wouldn't cause much inflation, since much of the demand destruction we've seen will be permanent.
- guerrilla 6y agoUS consumer debt is exceptionally high [1]. This was true long before the pandemic. There is plenty of demand for money on the books and the underclass has a long way to catch up even after that. 1. https://www.thebalance.com/consumer-debt-statistics-causes-and-impact-3305704 https://www.thebalance.com/consumer-debt-statistics-causes-a...
- LaEc 6y agoIf inflationary pressures get to high, the Fed will raise the Fed Funds rate, affecting the market interest rates, incentivizing saving, decreasing inflationary pressures.
- throwaway894345 6y agoWhy are they completely unwarranted? I'm not an economist, so it's not obvious to me why printing money wouldn't lead create an inflation problem that is worse than the unemployment problem. I would be very interested to know the details that allow us to say such things so confidently. EDIT: Thanks to those who provided such insightful answers! Very helpful for a layperson like me.
- zhte415 6y agohttps://en.wikipedia.org/wiki/Equation_of_exchange https://en.wikipedia.org/wiki/Equation_of_exchange The velocity has dropped rapidly in recent weeks. To not increase supply would be deflationary.
- cultus 6y agoIt's completely unwarranted because you essentially can't have inflation in a depression. There isn't enough demand competing for supply to raise prices. That is why governments and central banks usually try to inject money into the economy in lean times, and take it out to keep it from overheating. It's the basis of essentially all macroeconomic management. The real danger in times of low demand is a deflationary spiral. Those are fiendishly hard to get out of, as the last few decades for Japan have demonstrated.
- guerrilla 6y agoInflation is caused by "too many dollars chasing too few goods" not literal money printing. The demand for basic goods as needs are going unmet is actually pretty high. A lot of the printed money would actually go to paying off debt and thus actually destroying money.
- deleted 6y ago[deleted]
- legitster 6y agoThe Fed did not just print money - it added liquidity into the market via long term term obligations or asset swaps.
- cultus 6y agoThat's money that wasn't in the economy before that is now. They are growing their balance sheet with bonds and other assets, and paying for it with money they make.
- AnimalMuppet 6y agoIsn't that the approach that Venezuela took? To me, any proposal to fund UBI by printing money has to explain why Venezuela failed, and how the new proposal is different in a way that matters.
- bsanr2 6y agoVenezuela - and, frankly, the rest of the world - is reliant on monetary policy set by outside parties, who can also impose explicit (import/export) and de facto (loan terms) sanctions should their political positioning be undesirable. How much does the US government subsidize the average US citizen in services, tax rebates, etc.? Is it more or less than what Venezuela offered its citizens in cash payments? I honestly don't know, but I've become more convinced lately that Venezuela's issues have less to do with the efficacy of their policies than they do objections to the nature of their intended distribution of wealth.
- LaEc 6y agoThe Fed is lending money to prevent a financial crisis, not simply giving it away. Look back at the 2008 crisis and see that the government actually profited significantly from issuing those debts in the long term. UBI is a giveaway not a loan.
- toomuchtodo 6y agoUBI is a generous tax credit. The Fed is printing money by their lending operations, devaluing the dollar in the process.
- cultus 6y agoSix of one, half a dozen of the other. The difference is that Fed injections benefit the wealthy, and a UBI benefits the poor most. This is not inflationary, since we are in a depression. As far as devaluing the dollar versus other currencies, everyone else is creating tons of money as well. I'd really welcome a dollar devaluation, actually, to help with our trade deficit.
- toomuchtodo 6y agoNo argument from me! It's all just spreadsheet economics, with everyone attempting to shape the narrative to meet their ideology.
- LaEc 6y agoLet us assume that your concerns about devaluation come true. Let us say that Poor Man has $10,000 and Rich Man has $10,000,000. Devaluation of dollar by 10% means poor man loses $1,000 and Rich man loses $1,000,000. Who loses out more under devaluation?
- vkou 6y agoPoor man typically doesn't have $10,000, what they have is $10,000 and a $200,000 debt. And not all inflation is created equal. With QE, the printed dollars never make it to Main street, they end up inflating asset prices, while the price of butter stays the same. Whether that's a good thing is an exercise for the reader.
- deleted 6y ago[deleted]
- pxue 6y agoQE is not magically injecting trillions into the economy. Feds really don’t give a shit about the economy of dinners and rents of the little people. They care about macro employment rates. Shit, we could have a country 100% employment rate and people can’t pay rent, feds would still be patting themselves on the back for a job well done.