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Sorry if this sounds stupid. But my thinking was, if you print some limited amount of money and give all of it to the poor, the poor become richer, but the rich

by jrs99 13y ago

Sorry if this sounds stupid. But my thinking was, if you print some limited amount of money and give all of it to the poor, the poor become richer, but the rich become poorer in a way because their money is devalued. And the same is true if you tax the rich more and give that money to the poor?

EliRivers 13y ago
I think what you're saying is correct, but one of them is inflation and one of them is just moving money around without making any more of it; if you print more paper money, and give it out, there is now more paper money chasing the same amount of stuff. Prices rise - inflation. The people who had no money do now have some, so they can buy more stuff - they are richer. The people who had paper money now find that they can't buy quite as much stuff with it - they are poorer. I'm using a very simple (but I often find quite effective) definition of inflation - more money chasing the same amount of stuff. Note that this definition means that if the government prints a shedload of money but it goes straight into some kind of scheme where it's locked away and not dumped into the general economy, it's not inflation. If you take money from rich and give it to the poor, there is now the same amount of money chasing the same amount of stuff. Prices do not rise (well, actually, I suspect they will, because rich people were not spending their money and poor people do spend money, so the marketplace does see more money chasing the goods at that level, but this is prices rising because more people want to buy the stuff, not because there is more money chasing the same amount of stuff). The people who had no money do now have some, so they can buy more stuff - they are richer. The people who had paper money now find that they can't buy quite as much stuff with it - they are poorer. So in both cases the rich become a bit poorer, the poor become a bit richer. If you do this by printing money on a massive scale (Zimbabwe, Weimar Germany, etc.) people spot it happening (not least because they use wheelbarrow to carry the bus fare), inflation becomes entrenched, people stop trusting their own money, all sorts of fun stuff. Argentina's inflation rate is something around 20% to 30% depending on who you ask (don't ask the government - they have a history of not being very honest about it!) and they've seen capital flight, illegal currency trading (mostly illegal as the government has declared illegal currency trading activities that are completely legal in most of the rest of the world - for example, if you're going abroad, you need approval by the government to get some foreign currency and you must get an amount they approve), all that sort of thing, and Argentinian citizens do not trust their own currency to hold value.

by jrs99 13y ago

EliRivers 13y ago

I think what you're saying is correct, but one of them is inflation and one of them is just moving money around without making any more of it; if you print more paper money, and give it out, there is now more paper money chasing the same amount of stuff. Prices rise - inflation. The people who had no money do now have some, so they can buy more stuff - they are richer. The people who had paper money now find that they can't buy quite as much stuff with it - they are poorer. I'm using a very simple (but I often find quite effective) definition of inflation - more money chasing the same amount of stuff. Note that this definition means that if the government prints a shedload of money but it goes straight into some kind of scheme where it's locked away and not dumped into the general economy, it's not inflation. If you take money from rich and give it to the poor, there is now the same amount of money chasing the same amount of stuff. Prices do not rise (well, actually, I suspect they will, because rich people were not spending their money and poor people do spend money, so the marketplace does see more money chasing the goods at that level, but this is prices rising because more people want to buy the stuff, not because there is more money chasing the same amount of stuff). The people who had no money do now have some, so they can buy more stuff - they are richer. The people who had paper money now find that they can't buy quite as much stuff with it - they are poorer. So in both cases the rich become a bit poorer, the poor become a bit richer. If you do this by printing money on a massive scale (Zimbabwe, Weimar Germany, etc.) people spot it happening (not least because they use wheelbarrow to carry the bus fare), inflation becomes entrenched, people stop trusting their own money, all sorts of fun stuff. Argentina's inflation rate is something around 20% to 30% depending on who you ask (don't ask the government - they have a history of not being very honest about it!) and they've seen capital flight, illegal currency trading (mostly illegal as the government has declared illegal currency trading activities that are completely legal in most of the rest of the world - for example, if you're going abroad, you need approval by the government to get some foreign currency and you must get an amount they approve), all that sort of thing, and Argentinian citizens do not trust their own currency to hold value.