We have printed so much money, the only solution is to... print more?
It's almost like it is all a sneaky backdoor to letting the government redistribute wealth without real oversight...
But I think a more interesting aspect of this is the cynical way language around the same idea has changed. The Franchise Tax Board is calling them a "tax refund", though your "refund" is based on your income being low, rather than your tax bill having been high. But the press has certainly been cooperative in calling them "inflation relief" recently, though the program was planned before inflation rose to the top of so many people's list of concerns. Politically, Newsome wants as much credit as possible for handing back a windfall of taxpayer money that came in mostly because of economic conditions he did not create and taxes that he did not introduce.
https://www.ftb.ca.gov/about-ftb/newsroom/middle-class-tax-r...
1. Federal reserve makes several trillions in new money and lends it to the US Government.
2. The US Government passes “infrastructure” and “Covid relief” bills that shower billions on states and cities.
If not for this flow of printed money, most of the states would be cutting budgets since 2020.
So, yeah, a lot of it is printed.
Infrastructure for low density suburbs is a money pit that bankrupts cities.
Here is a good playlist that explains why this is the case:
https://www.youtube.com/watch?v=y_SXXTBypIg&list=PLJp5q-R0lZ...
... minus the "HS" part. Last I checked it was on the politically brokered "non-I-5" corridor (a silly, absurd route) and had a proposed SF->LA trip time of over 2.5 hours.
This is a "high speed" train, circa 1975. Current technology, as demonstrated by running trains elsewhere in the world, would make that route in under 2 hours.
What theory of science dictates infrastructure is the best place to spend it? If the answer is none, it’s a purely social policy and you’re spewing politically correct memory. That infra spend is not an immutable law of reality means there are options other than “poison the sky with expansive vanity projects.”
Even then, there’s plenty of money for both, and human agency available for both. We can stop pretending money is what drives human invention and discovery. It’s politically correct spoken tradition since it’s not an immutable law; how we feel about other economic choices is a range of possibilities, not just the ones we have been raised to speak of
Gavin Newsom in this case is acting like Robinhood. Taking from the rich and giving to the less well off.
So, your "children" comments are pure demagogy.
Seems like this is a case of a compulsive indebted gambler patting himself on the back for a good streak at the tables.
California's surplus came from temporarily increased CGT receipts. That trend will be reversed this year considering the markets, and they'll be back to bleeding 10 figures.
The only time government debt is bad is when the government can't make the payments.
Its not. Its happening in Europe too. Its a way to try to get people through the winter and avoid the energy crisis impacting ordinary people.
That's what a government should do - take care of its people during extraordinary times.
Over the past year businesses have increased their prices all over the board, you can’t then just simply say “but inflation!!” when you want to help the people with some amount of compensation for this.
You want to tax these megacorps additionally yes, especially if they’re profiting from the current situation. But at the same time, it’s also important to redestribute that wealth towards those who have the biggest problems right now.
And I am not saying not to help the poor people. I am saying printing money doesn't help poor people, it helps the rich. If you want to help poor people like I said you can tax the excess, or you can provide a specific minimal food/energy/shelter. But again, handing out money for free only helps the top of top.
As a side note, you know a lot of the poorest people in EM and frontier markets save money in USD either to escape their own inflating currency or as a dollar peg in their country. These people are poor and suffer the inflation in global markets, but they do not benefit from the US handouts. They can never outbid a money printer. And that's in fact the likely cause of the riots across the world in countries that don't have swap lines with the Fed.
It's using taxpayer money to artificially maintain prices high.
Because their income hasn’t increased nearly as much as the amount of inflation that occurred.
Though this action is redistributive, it is explicitly not about printing money. It is about spending excess tax dollars. You may have opinions about taxes in the state, and you may have opinions about redistribution, but overall if the state temporarily has a surplus (ie it shouldn't put this money towards increasing long running programs that will become a burden in future years), shouldn't it give that money back to the citizens in some form?
Unless the problem is with your wheels.
But Keynes advocated that governments should have surpluses in good times and spend more in bad ones. Normally because the state isn't able to carry a continuing large surplus, this isn't possible; it has to cut in lean years and give rebates otherwise. It's only in this short period of reversal in consecutive years that we can approach that policy. I'm guessing the same checks would have done more good if they could have waited until 2023 or later.
Do the fairly simple geometric series from that and you'll discover that all money creation generates additional taxation that extinguishes it - to the penny. All that changes with the tax rate is the number of hops before the money impulse disappears.
What you have to do to balance the system is remove some hops elsewhere. That's what threats about interest rate rises are supposed to do. Money then isn't created by loans, or the transaction hops from those loan creation events are fewer.
That reduction is what we call 'saving' and tends to show up in aggregate as a government deficit. The bigger the deficit, the more saving there was and the fewer transaction hops in the economy.
Saving is little more than voluntary taxation. The current approach is to go down the voluntary route rather than the compulsory one - largely because the population won't sanction any further taxes.
If the money used to purchase energy causes a large rise in the government deficit (or a significant reduction in the loan growth rate) then that will 'pay' for it without causing inflation.
Yes but the energy crisis isn't evenly distributed across the world. NA, for example, is still doing relatively well. While Europe is being hit relatively hard by the shortage and will likely have to import from more expensive sources than previous years to make it through the winter.
Furthermore, the way the European electricity market works[1], other energy sources are also bid up when the price of gas increases iff this gas is needed to ensure supply in a given hour of the day. So we have been overcharged both directly (gas), mostly indirectly (electricity) and completely indirectly (goods inflation) throughout all of 2022. This is seriously hollowing out the budgets of some European families.
I don't agree that blanket handouts are the solution, but some kind of compensation is needed to those most exposed, otherwise they will sink into poverty.
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[1] : https://energy.ec.europa.eu/topics/markets-and-consumers/eu-...
> European governments printing more of their own currencies to give handouts to their citizens, resulting in inflation
couldn't they just tax it back from the wealthy in the end...?
This takes us back to what I wrote originally - why is inflation the way to do this as opposed to just tax and spend? That is, why not create a specific tax and implement that and use the proceeds to pay for poor people's energy? Money printing is just a dishonest way to sneak a tax in on people who might not recognize it as a tax.
There's also the political cost. I'm in favour of democracy in the ideal case, but obstructionism looks like a concern in some countries, people buy into lying spin and vote against their own interests, bills have their own cadence, and lawmakers are not always intellectual powerhouses. Case in point: the BoE reacted within hours to reduce the damage done by Liz Truss
Think again. You can't create energy by cutting taxes either. The tax cut can only be spent on energy, exacerbating the problem by making wasting energy much cheaper.
A check on the other hand discourages people to buy expensive energy because they could be spending the subsidy on something else that isn't energy constrained.
Capitalism's own solution so far was to create more available properties - more individual debt such as credit cards and mortgages, privatize public goods like health and education, more destruction of ecosystems, selling attention and disrupting work, and the latest fad, cryptocurrencies. But these are only temporary solutions, they do not address the core problem of increasing social inequality.
Likewise, printing money and giving them to the poor (while half of it goes directly to the top, because the decision-makers are only human) is a stopgap solution in the system where most money quickly end up accumulated at the top. It's a desperate attempt by governments to maintain social order.
In the middle of 20th century, the capitalism's tendency to create disparity was somewhat resolved in Keynesian approach, where state "investments" (based on taxation) were basically redistribution of the money back to the bottom, so that the process of accumulation could continue slower and indefinitely. That was eventually abandoned, for ideological reasons (people shouldn't get "free money", and the "private property" is sacrosanct).
However, it is the only known solution. The proper taxation of the rich (and property) is badly needed to long-term stabilize the capitalist system.
One could make an analogy with any other competition. When another competition starts, winners (of the old competition) are usually given the same place at the start as everybody else. This is because without this rule, the competition would quickly demotivate everybody. But this is happening under neoliberalism, and threatens to eventually halt the positives of the capitalist competition.
Well. Its capitalism's end. Neoliberalism is just an attempt to return to actual capitalism that existed back at the end of the 19th century. Before those pesky regulations, antitrust laws, all those workers' movements and rights for the plebs...
And no, it's not a "sneaky backdoor". It's the government doing what it should do, tighten financial inequality gaps. And preventing unnecessary suffering. We're still a society, we occasionally take care of the weaker people amongst us. (Frankly, not often enough)
And "without real oversight" is... you're aware this is going through the normal process of fund allocation, is reported widely in the press, and is part of the data that voters can take into account next round, no? It has just as much oversight as any other government spending. (Arguably more than some federal programs)
I get that fiscally conservative folks might disagree with this, and we can certainly debate merits. But "printing money" and "without oversight" are empty slogans without basis in fact.
No, that’s really, really not what the government should be doing.
What California does want to do is ensure poorer people aren't bearing the load disproportionately.
Also, while we can certainly argue if this is the best use of those funds, a quick reminder that the size of the US money supply is almost 22 trillion. We're about $6T above 2019 levels. California retaining $10B is not going to have any measurable impact on inflation.
Yes. Once you start printing money to fix problems, you fall into the pit of always needing to print more. See Zimbabwe’s $100 trillion dollar bill. I have one, it makes a great placemat.
The economy is the aggregate capability of a society to provide goods and services to people, if the economy collapses the goods and services that are being provided cease to be as well and people are worse off.
Short sighted statements like "people are more important than the economy" is a feel good virtue signaling that is indicative of an inability to think clearly about the consequences of actions and a substitution of emotional reasoning over rational thought.
A labourer making daily wages and supplemented by govt dollars will spend all of it. A millionaire with a few millions in the bank is not going to spend any of it. Especially during an overheated inflationary period. It’s better spent to the most vulnerable to pay for their food, gas and utilities.
This is exactly what needs to be done to keep spending going. It’s spending from a healthy and happy middle class that keeps the economy going. Can’t freeze them out. Not implementing measures like this would collapse the economy.
An economy with hopeless disenfranchised hungry poor majority is exactly the first ingredient in the recipe for revolts and revolutions.
Also..it’s heartless to not share a surplus to people who are suffering. We are a rich country. No one died because someone else got a little extra money to pay their electricity bill or gas.
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
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.
It is spend on overpriced assets.
The economy might be the aggregate production of society, but the distribution of the fruits of that production are not meaningless.
Nobody is proposing a return to subsistence farming, but some of us are willing to trade off a higher GDP for more equal distribution.
During Covid large checks were mailed out. Reddit was full of 'casual investors' throwing money at meme stocks that explained it was 'covid money' and thus didn't matter much to them.
Student loan debt forgiveness is the latest madness.
The end result? Those with the least money (the poor, and those on fixed incomes) are totally hosed. If you can't afford rent at $800, you surely can't afford it at $1400. More handouts only make the problem worse.
The Fed's response (raising interest rates) will make cars and houses out of reach for many.
Vote for politicians of any party who pledge fiscal responsibility. As a litmus test, judge their reactions to government handouts.
That's absurd; while a one-off is nowhere near as good as a basic income, a flat "handout" benefits the poor for obvious reasons (at the expense of the rich; there's no free lunch).
> The Fed's response (raising interest rates) will make cars and houses out of reach for many.
Buying cars and houses with money you don't have and hoping you can make up for it in the future is something we never should've normalised. Someone preaching "fiscal responsibility" should see this as a good thing.