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>The COVID relief packages are just the government printing more money, making existing money worth less. The thing is, it only causes inflation when that mone
by aphextron 6y ago
>The COVID relief packages are just the government printing more money, making existing money worth less.
The thing is, it only causes inflation when that money circulates. But the Fed is just pumping it directly into the stock market. The result is sky high valuations and asset prices, but very little change in the actual day-to-day economy's monetary supply. This is why inflation is still under 2%. And sure, people could sell out and take their cash to invest elsewhere, but with 0% interest rates there's literally nowhere else to put it.
- latchkey 6y agoThe Fed is pumping money into the stock market and the businesses are buying back their stocks with it in order to pump up the markets even more. This was the downfall of Hertz already and it will be interesting in 2021 with the banks... https://www.investors.com/news/stress-tests-bank-stocks-dividends-buybacks-2021/ https://www.investors.com/news/stress-tests-bank-stocks-divi...
- krupan 6y agoThe simplest way to think about this is in terms of supply and demand. The supply of dollars is going up, so the price will go down, unless the demand for dollars also goes up. If people are selling stock, taking out loans, doing other things in order to demand and obtain dollars, then we won't see inflation. Yet.
- rualca 6y ago> If people are selling stock, taking out loans, doing other things in order to demand and obtain dollars, then we won't see inflation. Yet. Isn't it plausible that the dollar supply isn't actually reaching consumer markets, and consequently inflation stagnated because a drop in purchasing power leads to a drop in aggregate demand?
- krupan 6y agoThis comment expounds on what I said pretty well: https://news.ycombinator.com/item?id=25576634 https://news.ycombinator.com/item?id=25576634