| > Giving people more money doesn't make them buy more basic goods, just more assets Under normal circumstances, in the limit as starting income approaches infinity, this is correct (marginal propensity to consume approaches 0 and marginal propensity to save approaches 1.) In the limit as starting income approaches 0, OTOH, the opposite is true (marginal propensity to consume approaches 1 and marginal propensity to save approaches 0.) While there may be some future society with the distribution of income such that the former limit is a decent approximation of average behavior, but for real current societies the latter limit is a fairly good approximation, with observed society-wide marginal propensity to consume in modern developed countries, IIRC, around 0.9 (90% of added income goes to spending, 10% to savings/investment.) > so price of normal goods doesn't go up but price of assets do Were that true, supply gluts in a commodity used for money (like, say, the result of Spain bringing in vast hoards of New World precious metals) would have no impact on nominal consumer prices while driving up nominal asset prices. This is, empirically, not true. |