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Holding aside the other points, them holding wealth of immense size is anti-inflationary because they’re holding their wealth and not spending it. If you releas
by fnordpiglet 4y ago
Holding aside the other points, them holding wealth of immense size is anti-inflationary because they’re holding their wealth and not spending it. If you released their wealth into the economy overall to be freely spent on Doritos by everyone, that would cause inflation. One reason raising interest rates decreases inflation is it causes more savings (to collect interest) and less leveraged spending (to decrease debt and interest payments). The wealthy tend to retain their wealth as savings regardless of interest rates simply because they can’t possibly spend it all that fast.
- NickC25 4y agoThis is where the M2 Velocity chart again comes into play. Taxing the uber-wealthy is actually deflationary, not inflationary. Taking away their ability to hoard unimaginable amounts of money actually helps the economy tremendously. The money that sat around in Jeff's or Elon's bank account doing nothing but accruing interest actually flows back into the economy, reducing the need government's need to print more money. How, and why? People still need money, the economy still needs money, the business cycle and the real world still need to continue. Even if one person takes an outsized percentage the money supply, the underlying conditions that allows everyone else to participate in the overall economy remain unchanged except for one critical point. The only change is that because one person has so much money that they've effectively skewed the velocity of an average (currency of your choice), the government has no choice but to step in and print more money.