Furthermore, nobody should forget that the subject of such policies is people. Not just numbers on a spreadsheet going up or down, but real life people who could need to eat, might have children to take care of, need a roof over their heads etc.
It is quite obvious if you take a look at any online crypto/stock trading forum that a lot of those extra stimulus checks are not going towards anything useful. We know from basic economics which you seem to think is invalid that increasing the money supply (through deficit spending on stimulus checks) and money velocity (by giving it to consumers directly instead of through e.g. increasing the supply of credit) increases inflation. We're also seeing record demand for consumer goods like PS5s, electronics, etc. Those happen to be the same products that consumers with excess money buy. Not food, because they can already afford food without the stimulus checks.
2) I definitely don't think I know everything, or anything really.
3) When a very basic idiom taught in entry level economics proves true again and again, I'm not sure how much complexity is required to prove it false. At that point it just feels like fighting for the point of fighting.
I don't want to debate goods and bads, economic complexities, etc. I am just stating what is taught in entry level classes appears to be correct.
The covid check was economic stimulus. Like what Bush W did for example. It literally stimulates the economy every time, because for every one of you and me who don't need it and save it, by investing it in companies via mutual funds, there are people who immediately spend it on things like food, also giving money to companies.
Now here's what happens when you don't give money to companies: they have to take loans with interest. That interest is later paid by customers via increased prices, because the supply side cost is now higher.
Companies also go out of business w/o money. You now have less supply, for inelastic demand (because it's food). This increases prices.
So, econ101: prices went up. Because supply chains were affected by the pandemic, and when supply cost goes up, you pay more. If you didn't have the stimulus checks, they would have gone up more. Much more.
Paying attention in econ101 helps know this. What you missed by not paying attention, is they were referring to printing money and Not giving it to people. Like the government having to fund itself, or the king funding himself. A stimulus check is trickle up economics, and Lowers prices. So econ101 taught us the opposite of your takeaway from that class. That class was of course called microeconomics, not econ101.
> A stimulus check is trickle up economics, and Lowers prices.
How, in your mind, does this sentence make any sense? Don't worry you can really lay into me, I won't reply.
If Biden forgives student loans is that going to lower the price of tuition?
since the point of the program was to stimulate production of New cars, which it did, creating an increase in GDP and jobs, the experiment was a success.
If Biden forgives student loans it will not lower the price of tuition. Since the point of student loan forgiveness is to help people get on their feet, and buy houses and cars, it not lowering the price of tuition would also mean a success.
I'm guessing you have a house mortgage. If I pay that off for you, will it lower the price of your house? I guess there's no point in doing it then. Because you wouldn't take that monthly mortgage payment and instead buy more stuff or invest in stocks, boosting the economy. You would clearly spend it on sponsoring a super-spreader own-the-libs rally.
This applies during a pandemic, when the companies doing the supply are going out of business, and when the demand side is out of a job and out of money to spend with those companies.
But, since my first explanation, which is exactly the same as what I retyped here, was not read by you beyond an out of context sentence, I have a very good idea about how your brain works, and why it still makes no sense to you. Now talk a bit about why the vaccine is a plot to take away our freedom. I'm here for the entertainment.
I ask because I'm unfamiliar with the basic curriculum in economics, although in the sciences some of the early concepts that we are taught include:
* Correlation is not causation
* Confirmation bias should be overcome by posing relevant testable questions rather than relying on anecdotes.
Except "your basic idiom" actually turns out to not be true in a lot of cases. It turns out that when you look at cases of notable inflation, these are nearly always accompanied by substantial supply side shocks, and that's also happening now.
For a good research article of a related example, see https://www.nber.org/system/files/chapters/c9160/revisions/c....
There is no practical way that handing out more money is going to create more resources. In theory there might be one, but in practice the globe just shut down percentages of the economy in response to the coronavirus. There are still policies in place where people willing and able to work are being mass-ejected from their jobs. Add money handouts to that and the only way to be surprised if prices go up is to be not paying any attention to anything economic.
Assuming that printing money automatically leads to inflation is assuming a lot of things such as all actors constantly making decisions based on the total supply of money, factories running at 100% of their capacity, the money being reinjected into the real economy and a ton of other over simplifications.
To the best of my knowledge, there is no serious work proving the existence of a direct cause-effect relationship between money printing and inflation in the real world. (Using historical data instead of an oversimplified model)
Actually, the euro zone increased its money supply by 5 since the 2000s, prices have only been multiplied by 1,4.
Hyperinflation is a different story, but those things are not caused by printing a few trillions.
Is it linear? No.
Is it the only possible cause? No.
Is it a cause? I think the obvious answer is yes, but obvious answers have been wrong before.
Look at the stock market and real estate and tell me there's no link between the money printing and inflation.
Helicopter money (1) does cause inflation, but the reason that the inflation has been stubbornly low for a decade is precisely because the central banks are forbidden from doing helicopter money
When was the last time the Federal Reserve balance sheet went down? [0] And if it's of equal value, why doesn't someone want to buy it from them?
Giving people money not to work results in more money and less production. But there's a bunch of people with money, so demand is higher than it'd otherwise be.
In any case, do you have any proof that more food is bought? I'm having a hard time believing this, unless people were lacking food previously.
If they didn't spend that money on food, how did those prices increase? Which parts of the stuff that goes into food increased? Links to actual data is severely missing from all the assertions made here. A moderate one-time stimulus check is responsible, really? Because all that other money that was created was not given to many people and I would like to see some data if you want to claim it ended up with them anyway by now. General wide-spread wage increases of according size, for example.
So, food prices can go up and down even if food-specific demand is inelastic (that is, even if people eat the same amount and quality of food regardless of price).
FWIW I've found my food demand not to be 100% inelastic -- I have changed where I get fast food as a result of some price increases, and I've found that in times when I'm not making a steady income, I find it easier to maintain or lose weight.
We have supply chains disorganized because COVID, bad crops and, specially, crazy energy prices (that affect everything).
How could prices not go up?
or this is what happens when central banks reduce and keep interest rates at record low levels and destroy savings kept in a bank.
The addiction the American economy has to stimulus is not unlike a heroin addict. If you were to cut government spending drastically, or raise interest rates dramatically, the economy would suffer terrible withdrawals and most likely cease to function. Conversely, if you stay the course and continue with both fiscal and monetary stimulus, the economy will overdose, most likely causing it to cease to function.
I do not envy our politicians and central bankers. They are screwed either way. And I wouldn’t be surprised if a lot of them flee the country when the US Balkanizes.
Interest rates are low because investors and savers accept them to be low. If they were truly too low then companies would borrow and invest until full employment happens and wages go up at which point inflation would go up and so would the interest rate. No such thing happens. Germany has a debt brake and low debt to GDP because they are scared of the interest boogeyman and the only thing that happened is that the yield is zero or negative for every duration up to 30 year government bonds. A lot of people want to save money nowadays which puts downward pressure on interest rates.
If you were to raise interest rates then savers would save even more and the economy wouldn't die from withdrawal effects, it would die from a plain lack of money in the real part of the economy because saving money would be more profitable than doing real work.
Or maybe it's a combination of a lot of things.
But chances are it wasn't because of stimulus checks.
I don't know if it's even possible to answer whether a god exists, but it's quite easy to find the flaws in religious stories, and if anyone can answer that question, it's certainly not them.
Are the prices increasing since the hedge funds are investing there (after exiting normal stock market), or because suddenly people started to eat more?
Central banks just gave a lot of empty money to the rich: central bank is now holding thr bag of overpriced stock, while the rich exited and invest in resources.
This you wont even learn in advanced econ lessons, because actions of central banks are barely questioned.
Do you truely belive that poor people suddenly started to eat more?
Other reasons can be a drop in production (e.g. due to Brexit nobody wants to do bavk braking farm work), rising population and aspirations (people from third world also want smartphones, cars and good food), biofuel - which means less area used for food production.. but no, people who received some stimulus chcecks suddenly started to eat more.
Do explain. The cost of essentials is not affected by how much money people have to spend on it.
I mean, richer areas may attract more high-end grocery stores like Whole Foods or whatever, but the base price of food - what this index is about - is not affected by that.
If people can't afford groceries anymore, is that because they have too much money?
There are two issues at play here. One is that everyone has more money, and two is how everyone got more money.
Skipping one altogether, two explains most cost increases. When wages rise, it cost more to make everything. Because labor costs are higher. The farmer wants more money, the butcher wants more money, the drivers want more money, the stockers want more money, and the sellers well, they always want more money. When you double their wages, as what's been happening in the lower wage section recently, those costs affect the product. This is what many people miss about the minimum wage debate. If a guy stocking cans at the grocery makes 10 and hour, and the guy digging coal out of a mine makes 20 an hour, what happens when minimum wage goes up to 20? Of course the coal diggers want more money too, or else they'll take the easier job. This alone accounts for 'essentials.'
Going back to one again. The issue isn't that an individual person has more money. It's that -everyone- does. So it's not a rich person buying up extra, it's people that normally wouldn't buy a product enter the market.
Regardless what others have alluded to, a rise in demand always means a rise in prices. It's basic supply demand curves that have been studied forever.
An anecdote, rather unrelated: Supply demand curves aren't always what they seem. A pizza place could turn a profit selling pizzas for a few bucks. Demand initially surges, then recedes as people get sick of it. Turns out, it's worth more to price it so that people only sometimes buy it.
I'm not against a higher minimum wage. I'm less for these 'covid' checks that go out that a lot of people don't need. But, both of these things mean higher prices for everyone else.
For people upset at this comment: It's literally taught in ECON 101.