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Handing everyone a check directly increases inflation. There is no increase of the supply of goods, so everyone would competing for the same things and prices,
by Aunche 6y ago
Handing everyone a check directly increases inflation. There is no increase of the supply of goods, so everyone would competing for the same things and prices, raising prices. Poorer people spend more money paying off debt or purchasing consumer goods, so most of that money flows straight to the top anyways. Since this money comes straight from the money printer rather than through taxes, this means that the wealth gap gets exacerbated through stimulus checks.
Purchasing assets introduces liquidity, but isn't equivalent of handing people money. The Fed receives the equivalent value in the form of debt.
- skybrian 6y agoIn theory, the increased demand that might cause inflation could be partially or fully cancelled out by a tax increase. (In practice, Congress is unlikely to do it.) It looks like we are seeing supply bottlenecks in certain areas. The price of lumber is bottlenecked by sawmills and electronics are bottlenecked by fabs. But I wonder what’s not bottlenecked that could absorb more demand?
- 8note 6y agoThe GDP is very high versus what most poor people have to spend, so I can't imagine this inflation is much of an issue. There's more than enough stuff for people to be buying