[ch4s3]

> By my understanding, the case for stimulus checks leading to inflation comes when the stimulus checks are paid for by printing more money (thus increasing the overall money supply).

Money supply isn't the only factor in the monetary side of inflation. The velocity of money[1] is also important. If you "printed" a load of new fiat currency but it all stayed in say for example savings accounts, then its pressure on inflation would be greatly diminished. The spending of that money is what bids up prices when more goods and services can't be produced fast enough.

The fear here is that the stimulus checks will increase the velocity of money. Tax dollars sitting in CA's coffers is effectively not part of the money supply. As soon as the check go out, it reenters the money supply and probably gets spent.

[1] https://en.wikipedia.org/wiki/Velocity_of_money

[koheripbal]

In fact, new money supply is a minority influence on inflation. The demand for USD as a result of economic activity is the primary factor for inflation (which also influence the velocity of money).

Of course, this is California ONLY - whereas the USD is a global reserve currency, so the impact on inflation will be minimal.

The bigger issue I see here is that there's a tax surplus, but the gov't isn't paying the money back to the people who paid taxes - it's just a flat refund.

This is effectively a forced wealth re-distribution, which I think raises ethical questions.

[ch4s3]

> In fact, new money supply is a minority influence on inflation

This obviously depends on how the money supply is created and deployed. If you take out loans to hand out stimulus check you get more inflation than you would from a similar dollar value of QE.

[koheripbal]

Not if only one US state is doing this.

USD is a MASSIVE global currency.

[ch4s3]

Yeah, sure but CA is an economy the size of France and represents a LOT of consumer purchasing power. Some cost like rent are also pretty local and represent a relatively fixed supply of goods. I wouldn't personally bank on global demand for dollars absorbing a bunch of new money supply sloshing around in markets local to CA.

[r00fus]

> This is effectively a forced wealth re-distribution, which I think raises ethical questions.

Regressive tax structure (which happens when enough wealthy find ways to shelter their tax outlay) is already wealth redistribution but in the other way.

This is an attempt to spur the economy by giving money to those most likely to spend it.

Also it's an election year.

[ch4s3]

> This is an attempt to spur the economy

Yes, that's why people are pointing out that this is inflationary. The economy is already running really hot. This is demand side stimulus when consumer demand is already very high relative to the availability of goods and services.