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by californical
1360 days ago
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But you just explained why this causes more inflation. In your words, it was money in the banks of wealthy people, meaning not being spent. Money that isn’t spent doesn’t cause inflation because it’s not competing for goods and services. By redistributing to poor people, that previously stationary money is now being used to compete for goods, since poor people generally spend all of their money. So more money is now chasing after the same goods, prices have to go up. It might make people feel good in the short term, but continuing inflation also hurts the poor, and could potentially widen wealth gaps even further since the wealthy are mostly invested in assets which can keep up with inflation, but poor people’s salaries do not keep up very well. Short term looks like a good move, but it just kicks the can and continues widening the divide of rich and poor |
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We need healthy enough money supply and sufficient money supply in circulation to keep the economy alive. If anything, this isn’t ‘charity’…it is to ensure minimum money supply to keep the economy healthy and prevent it from collapsing. But not too much to cause inflation. To deal with this, interest rates will go up.
It is more like electrolytes needed to keep the economy upright. It is not a lavish meal at a Michelin starred restaurant.
Also helpful to understand Phillips Curve and relationship between unemployment and inflation.
https://www.khanacademy.org/economics-finance-domain/ap-macr... : here is a good tutorial.
The govt is trying to bring down inflation to cool the economy after all the excess money supply during pandemic. That was necessary too.
So expect unemployment rates to rise in the short term. This money will help poor people and those looking at unemployment in the coming short term to survive. This is necessary. We still want them to be able to buy food and pay for gas and electricity as the correction goes underway.