5 ms·
If you print money, but only give it to the top 10% who use it to prop up the stock market, does that cause inflation? I don't understand how America can pump
by donmcronald 6y ago
If you print money, but only give it to the top 10% who use it to prop up the stock market, does that cause inflation? I don't understand how America can pump a couple trillion dollars into the economy and it doesn't seem to have any impact. If the average person is getting any of that it should cause inflation, shouldn't it?
- anoncareer0212 6y agoWe spent so many years hearing it trickles down that we didn't realize how inherently backwards it really is - why would anything trickle down into actual purchases, they're always asset price pumps
- TheSpiceIsLife 6y agoRather than trickle down economics I like to call it: Deluge up economics. We're all struggling to pay rent and groceries and transport costs / They're all struggling to find somewhere to park another hundred million, billion / trillion? Whatever.
- JMTQp8lwXL 6y agoInflation for luxury goods or the types of things the 10% buys (which has some overlap with everyone else: they too, need food, housing, etc). But most households don't need more than 1 washing machine. So you gift any amount to the top 10%, but washing machine prices aren't going anywhere.
- alisonkisk 6y agoHealthcare, education, housing prices go somewhere though.
- Red_Leaves_Flyy 6y agoJust about every thing limited by domestic labor has been inflating for decades.
- jcfrei 6y agoGlobalization is certainly a very important factor but technology also has to be mentioned. In lots of industries it has massively reduced the bargaining power of the working people. Mostly because increasing output is much less dependent on labour than in the past.
- Red_Leaves_Flyy 6y agoTechnology does not reduce labourers bargaining power. Legislating away workers protections, union busting, and allowing unchecked capitalism to depress wages while skimming the profits off the top and socializing the externalities reduces bargaining power.
- jdm2212 6y agoThere's no impact because people are sitting on cash rather than spending it. What the Fed accomplishes by handing out the $1 trillion is this: they kept all the _other_ money circulating. If people wanted to hoard $1 trillion because they're scared about the future, well, now they've hoarded it. They feel safe and they spend the rest of their money, and the economy keeps humming along. If instead they'd tried to hoard that $1 trillion without Fed intervention, there'd be an economic collapse.
- septillianator 6y agoPeople or Corps? Seems like stimulus money is eventually just finds its way to a handful of companies that are making piles with it.
- true_religion 6y agoPeople run corporations. When you see a round of layoffs it doesn't come out of mere cold blooded economic necessity. The leadership gets scared, and no longer feels optimistic thus they cut projects. Sure, you can give all the money directly to the common people, but you'd end up having to do that forever since the wider economy would collapse as rich share holders first feel doubt, then have those doubts confirmed in a self fulfilling prophecy. Common people should have non emergency sources of welfare, and governmental aid to rely on. If they don't, then the situation is aleady dire.
- germinalphrase 6y ago“ Common people should have non emergency sources of welfare, and governmental aid to rely on. If they don't, then the situation is aleady dire.” The pandemic is showing that most people and state governments are willfully unprepared to provide such welfare even in an emergency.
- rootw0rm 6y agoso basically...yes, it sucks either way.
- 6y ago
- andi999 6y agoInflation is mitigated by all products you buy come from china.
- deleted 6y ago[deleted]
- rocqua 6y ago> If the average person is getting any of that it should cause inflation, shouldn't it? That seems to be roughly correct. And yet, we are not seeing inflation. The conclusion seems easy to me (perhaps too easy). The average person is not seeing much of that money being printed. Instead, all of that money seems to be causing massive inflation in the stock market. The S&P500 and other similar indexes are incredibly high. This is not caused by their expected cash flows growing. Instead, it is is caused by the expected returns of other money falling. Hence the expected 'time discounted cash flows' are increasing, simply because the discount rate is falling. Or, in simpler terms, stocks prices are rising because people with a lot of money to spare need to put that money somewhere. And these people are getting a lot of extra money. This effect is not a total waste. It should mean it becomes easier for new ventures to raise money on the markets. This could enable the creation of new businesses and innovation. However, it could be a lot more effective to give this money to people who would do more with it than try and find a place to store it where they can still make some money of off it.
- baq 6y agoi've been following Krugman who basically says this is the case, just doesn't use the word 'inflation' in the context of the stock market - but indeed this is exactly what he's describing: free money is driving stock prices up. financial institutions don't buy food and gas, they buy financial instruments, so we don't see inflation in food and gas prices, we see inflation in stocks and t-bill yields?