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Growth in inequality correlates very nicely with expansion of the money supply. My theory is that when you print money, most of the new money finds its way int

Growth in inequality correlates very nicely with expansion of the money supply. My theory is that when you print money, most of the new money finds its way into the pockets of the rich. Even though we print new money to pay for government spending (via bonds) - eventually all that new money trickles up to people that own assets. And the people that own the most assets gain the most new money. I think we should return to WWII to 1980 period where we paid for government programs via taxation, and not money printing. My hunch is that this is the only way to reduce income inequality.

CyberDildonics 6y ago
This seems like a solid assessment - we should at least keep our eye on the ball. https://fred.stlouisfed.org/series/M1REAL https://fred.stlouisfed.org/series/M1REAL
bleepblorp 6y ago
> Growth in inequality correlates very nicely with expansion of the money supply. This gets complicated. The money supply has to expand to keep up with growth; getting the flexibility to do this is the reason why the world abandoned the gold standard. Failure to expand the monetary base adequately leads to deflationary economics, which is another kind of hell entirely. That said, the fed's response to the last two economic disasters (2008 and 2020) has been to do quantitative easing in ways that do concentrate wealth in the hands of asset owners. Buying questionable assets with printed money does give the owners of those assets money at the expense of non-asset holders. There are ways to respond to economic disasters without increasing inequality, but these choices are not politically feasible in America as they would involve giving money directly to people who don't have much of it. Giving money to rich people (through monetary or fiscal policy) is seen as politically good, while giving money to anyone else is 'welfare' and is a political third rail. Economists do know how to deal with these issues. The problem, as with everything else in America, is that the politicians (hello, Mitch McConnell) and interest groups (hello, Koch network) who have a veto over policy don't want to deal with them.
jwess 6y ago
I'm not sure if it's realistic to offset all our printing with increases in taxation. I think the money trickles up exactly the way you described, and I agree that government programs should be paid for by taxation instead of money printing--but what can be taxed to make up the multi-trillion dollar difference? Consider that the federal government collected revenues of $3.5 trillion in 2019, or more than $10,000 for every person in the country. State revenues combined were more than $1 trillion in 2019, for a total average tax liability of about $13,600 per-capita. I don't see a realistic way to double or triple that revenue number while taxing income alone (and citizens would naturally demand a commensurate increase in government services if such a tax increase applied at lower-income levels). Taxing wealth or ownership in companies is another route, but individuals who own any notable percentage of a public company are naturally very mobile, and could easily change their country of residence to somewhere more tax-friendly (like former Google CEO Eric Schmidt may be planning). It seems like a difficult position to be in for the government.
- voisin 6y ago
  > I'm not sure if it's realistic to offset all our printing with increases in taxation. I think the money trickles up exactly the way you described, and I agree that government programs should be paid for by taxation instead of money printing--but what can be taxed to make up the multi-trillion dollar difference? You either pay for it up front via taxation or later via inflation (increase in money supply). You are focused on increasing revenue but why not exercise some restraint and, oh I dunno, cut back on the ridiculous military overspending that doesn’t improve quality of life for the people paying the taxes?

CyberDildonics 6y ago

This seems like a solid assessment - we should at least keep our eye on the ball. https://fred.stlouisfed.org/series/M1REAL https://fred.stlouisfed.org/series/M1REAL

bleepblorp 6y ago

> Growth in inequality correlates very nicely with expansion of the money supply. This gets complicated. The money supply has to expand to keep up with growth; getting the flexibility to do this is the reason why the world abandoned the gold standard. Failure to expand the monetary base adequately leads to deflationary economics, which is another kind of hell entirely. That said, the fed's response to the last two economic disasters (2008 and 2020) has been to do quantitative easing in ways that do concentrate wealth in the hands of asset owners. Buying questionable assets with printed money does give the owners of those assets money at the expense of non-asset holders. There are ways to respond to economic disasters without increasing inequality, but these choices are not politically feasible in America as they would involve giving money directly to people who don't have much of it. Giving money to rich people (through monetary or fiscal policy) is seen as politically good, while giving money to anyone else is 'welfare' and is a political third rail. Economists do know how to deal with these issues. The problem, as with everything else in America, is that the politicians (hello, Mitch McConnell) and interest groups (hello, Koch network) who have a veto over policy don't want to deal with them.

jwess 6y ago

I'm not sure if it's realistic to offset all our printing with increases in taxation. I think the money trickles up exactly the way you described, and I agree that government programs should be paid for by taxation instead of money printing--but what can be taxed to make up the multi-trillion dollar difference? Consider that the federal government collected revenues of $3.5 trillion in 2019, or more than $10,000 for every person in the country. State revenues combined were more than $1 trillion in 2019, for a total average tax liability of about $13,600 per-capita. I don't see a realistic way to double or triple that revenue number while taxing income alone (and citizens would naturally demand a commensurate increase in government services if such a tax increase applied at lower-income levels). Taxing wealth or ownership in companies is another route, but individuals who own any notable percentage of a public company are naturally very mobile, and could easily change their country of residence to somewhere more tax-friendly (like former Google CEO Eric Schmidt may be planning). It seems like a difficult position to be in for the government.

voisin 6y ago
> I'm not sure if it's realistic to offset all our printing with increases in taxation. I think the money trickles up exactly the way you described, and I agree that government programs should be paid for by taxation instead of money printing--but what can be taxed to make up the multi-trillion dollar difference? You either pay for it up front via taxation or later via inflation (increase in money supply). You are focused on increasing revenue but why not exercise some restraint and, oh I dunno, cut back on the ridiculous military overspending that doesn’t improve quality of life for the people paying the taxes?