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Comment by hasnd | Hacker News Reader

You forgot the part where that causes massive inflation.

Honest question, but it sounds like you're describing that if ~11% (based on the parent numbers) of people weren't very poor the economic system would fail? Eg inflation would spiral out of control? (i assume spiral since they'd have more money, but money would be worth less, there by making them have less effective spending power - thereby needing them to have more money, etcetc.)

If so, sounds like morally something is fundamentally wrong if we require poor people to function. But i'm not an economist, so i've got zero feedback here.

Inflation and affordability are different concepts. I think affordability is the term I’ll use as it’s best for casual/lay economic discussions.

It would be unstable at first, like how inflation during Covid differed by industry/product type. This is a big shock to the system. But over time as it normalized sure things will have inflated but relative affordability basically will return to what it is now or where it started.

If you make $10 and food is $1, it’s no different than if you make $100 and food is $10. What’s been happening due to wage growth (lack of), is you make $11 and food is $2, next year you make $12 but food is $3, etc. from a relative perspective food cost is growing too fast to keep up. To make people feel wealthier, we need the ratio to move the other way, $15/$2 then $30/$3 or something similar. This is how a middle class would get re-established. It’s a tough thing to accomplish is our complex global economy. Were marching towards a global income equilibrium, which only puts downward pressure on a high labor cost economy like the US/CA/EU.

These are non real estate assets so they're already circulating through the economy in some way or another. It wouldn't cause inflation.

They said "net worth" which is assets not cash that's being spent. M0 would shoot up which causes inflation.

If they said "income" it'd still shoot up the velocity of money, since poor people have higher spending rates.

Inflation, which means a steady rise in prices overall, happens only when the total money supply in an economy grows. This increase in money, often called "printing money," can be physical cash or digital money created through lending and government policies. Without more money in the system, if prices go up in one area, they have to go down somewhere else because the total money available limits how much can be spent on everything. Sometimes prices rise temporarily due to supply problems, but that is not true inflation unless there is more money chasing goods. This key idea, highlighted by Milton Friedman in his Nobel Prize winning work, shows that lasting inflation is mainly caused by increases in the money supply.

Inflation is caused by a greater number of dollars chasing the same number of goods and services. Look at the used car market, or the housing market, or the GPU market during the crypto craze several years back. It all falls back to basic supply versus demand mechanics. Inflation can be caused by printing, but it can also be caused by redistributing money from location X (Microsoft stock) to location Y (food spending).

But it would reduce demand somewhere else if you have a fixed money supply. Therefore, the overall inflation rate would stay the same.

It does not.

It's unintuitive how, but it probably would cause prices to go haywire.

It could, at least temporarily. But there is no reason to belive it won't stabilise again.

Increased demand without increased production will increase prices. But then producers will follow, and production will increase, and prices will stabilise.

Increased tax on the rich and distributing it to poor moves a tiny bit of the combined 'voting power' we have over production as consumers to the poor, so there will be slightly less luxury cars produced and slight more food.

Stabilizing means we’ve done this whole thing for nothing.

No, because more poor people get to eat, which is a good thing.

If they could produce more they already would.

The only way of fixing this is decreasing demand by reducing the population numbers.

Why would they produce more if they could? It must meet the demand at the current price point. More money goes to poor people, more demand for food at the current price. That will increase the price, which will increase production. Short term the price might go up a lot, but then new production will come online, and the prices will fall back to today+delta.

It does. I'm not competing with billionaires for my bananas. A billionaire doesn't eat 10^6 times more bananas than me.

In Mexico, many people argued that raising the minimum wage would lead to massive inflation, but that did not happen when the increases were implemented.

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