4 ms·
Yes this is common knowledge in econ supply/demand and money supply. Other currencies 1M base notes is not a lot (e.g. 1M dinar). You can just add/remove zer
by program_whiz 2y ago
Yes this is common knowledge in econ supply/demand and money supply.
Other currencies 1M base notes is not a lot (e.g. 1M dinar). You can just add/remove zeros but prices have adjusted, those people can't live like "millionaires" with 1M dinar.
There was a time goods like meat cost pennies, now it's $10 per pound. In those times $10,000 would be a life-altering amount of money, today most people have $10,000 in assets. The price of goods is related to money supply, they get more expensive if people have more money.
Money has no intrinsic value, it is balanced by whatever goods and services can be bought by it. If you add money but no goods and services, money is worth less (see COVID policy, increase money and decrease goods and services).
- wslh 2y agoThank you! The COVID policy example feels especially relevant because it illustrates the kind of sudden economic shift I'm curious about, rather than just changes in nominal currency values. To clarify my thought experiment: imagine a stable economy where suddenly every person worldwide is gifted $1 million USD. I'm interested in exploring how this kind of immediate influx would impact prices and standards of living, beyond just inflation.
- staunton 2y agoIf every person is giftet USD1M, prices of all things will go up by a lot. Furthermore, prices of necessities will rise by larger fractions because most people in the world are significantly poorer than the median of this forum. More generally, gifting every person worldwide the same amount of money seems roughly equivalent to taxing every above-average wealth person a fixed percentage of their surplus and giving every below-average-wealth person a fixed percentage of their deficit...
- cousin_it 2y agoI think that's not quite true, because rich people mostly keep their wealth in assets, not cash. Stock will just rise.
- staunton 2y agoWhich of my two claims is not true? Why should stock rise more than basic necessities? Of course, all prices would rise a lot. But I think stocks would rise by a smaller factor.
- cousin_it 2y agoAh sorry, I wasn't very clear. I was talking about your second claim - that giving people lots of money would redistribute a fixed proportion of wealth from the rich to the poor. My point was that the rich have most of their wealth in stocks and the like, so the redistribution would only affect the cash portion of their wealth, which is quite small.
- staunton 2y agoI see. The "taxation" scheme I had in mind was intended to apply to "any and all wealth", which I didn't make clear. Do you think it works out then? On a more realistic note, gifting every human 1M would probably completely break the financial system and cause a global recession...