[hguant]

It's not that you omitted nuance, it's that your basic premise - "cash assistance to the poor generally does not drive inflation in any meaningful way, because the cash used is extracted via taxation in the first place, its, quite literally, shifting money around" - is fundamentally incorrect, and goes against both economic theory, and lived experience over the last few years post COVID.

> Its false equivalency to think cash assistance and many other forms of social welfare drives inflation more broadly, in the general case.

This is also probably why you're getting down voted - it's just wrong

1. taxation, either explicit or implicit through interest rate manipulation, doesn't impact monetary supply at the scale we're talking about here. It impacts the cost of, and therefore the availability of capital.

2. cash assistance to the poor isn't a simple "take $100 from Peter and give it to Paul" transaction. It transforms capital (what taxes impact) into money. This is a weird distinction, but capital isn't money. Think of it as two separate streams - there's a fictionalized capital stream of stock markets etc, and a "real world" money stream that interacts with good and services.

3. Cash assistance to the poor directly drives inflation because the demand for goods is decoupled from reality. By giving cash to the poor, you generate increased demand for the same amount of goods and services. This is econ 101 - demand goes up, prices go up. Because the monetary supply has been manipulated by injections from capital, this demand is decoupled from the cycles that would tamp it down.

Let me repeat that: a sudden increase in demand, coupled with more money in the system, decouples prices from the systems that keep them in place and drives inflation.

If you'd like an object lesson in this, I'd refer you to the past 3 years of experimentation with wealth transfers in the US, and the current inflation as a result of that.

Edit to add - I make no moral statements here. I think that cash assistance to the poor _is_ generally the least bad option of government assistance; however, we should be clear eyed about the costs of these actions, and not hand wave them away, only to be shocked, shocked, shocked, when those costs come due.

[no_wizard]

The past 3 years of experimentation of wealth transfer has wholly benefited the wealthy and corporations by a large margin. Direct cash assistance[0] in total cost is less than what just the PPP loans ended up costing the government, for example. This actually would be a great example of government spending that does cause inflation[1][2] and largely did not benefit the middle class (let alone the poor).

Cash assistance to the poor / middle class is more murky. While yes, short term inflation in part was driven by the broad relief payments[3], it is sustained by cheap money[4].

My argument is centrally that cash assistance to the poor and middle class, broadly, won't sustain inflation as prices rise and demand normalizes, as an efficient market should do. The distortion on that market happens with a combination of low interests, which drives cheap capital creation, which distorts natural price normalization, and fuels riskier investments, which are all observable economic cycles.

My conclusion, based on what I understand and evidence there in, is that cash assistance, especially in limited one shot capacity, is not going to sustain inflation at the pace we've been seeing it most broadly. One particular note is PPP loans (which were largely forgiven) + "cheap money" is a big driver in being able to sustain higher prices via "buffing" the balance sheets of businesses. If I can sustain demand loss at a higher price because my operating costs dropped significantly due to cheap (or in some cases "free") money, you've just distorted the market.

In a healthy environment, high prices should naturally have lead to lower demand, which would kick off the deflation cycle, which in a certain band, is healthy for the economy as a whole.

This is why there's arguments over whether interests rising more dramatically is the "right tool for the job".

To be honest, I'm not sure our understanding differs that much on this aspect, only in as so far as I am less critical of direct cash assistance to the poor / middle class than the assistance given to wealthy / corporations (in, for instance, form of PPP loans). I also don't think that cash assistance is the real long term driver of inflation at this stage.

I'd also like to note, I wasn't talking about pandemic relief per se, I was more talking about general cash assistance that you would typically see in welfare programs, which is provided via taxation, usually.

[0]: https://home.treasury.gov/policy-issues/coronavirus/assistan...

[1]: https://www.cnbc.com/2023/06/26/ppp-loan-fraud-drove-home-pr...

[2]: https://www.stlouisfed.org/en/publications/regional-economis...

[3]: https://www.federalreserve.gov/econres/notes/feds-notes/fisc...

[4]: https://www.imf.org/en/News/Articles/2022/07/11/CF-US-Econom...