New money is created all the time, and most of it not even by government spending, but through businesses taking loans.
When governments spend too much in competitive markets, i.e. on resources that aren’t there yet, then yes it drives up prices. Just running a deficit does increase the money supply, which still only causes inflation in some cases.
The classic inflation from the economy working a little too well is not a flat tax, since both wages and prices are growing. Savings on the other hand (except stocks), lose their value. Classic inflation erodes the savings of the rich, and erodes the debts of the poor.
And even then, the central bank can always increase the cost of businesses lending to slow things down. That has other downsides, but the point is:
Government deficits don’t always lead to inflation
When they do, a bit of inflation is not a bad thing, since wages grow too
The classic inflation from the economy working a little too well is not a flat tax, since both wages and prices are growing
Inflation doesn’t cause wages to grow proportionally, despite what some Harvard wankers like to pretend. Theoretical models are interesting in science, but for something like economy, they are completely useless.
Classic inflation erodes the savings of the rich, and erodes the debts of the poor.
Capital ROI is almost always greater than inflation, meaning wealth inequality increases regardless of inflation. This is before taking into account that physical assets (e.g. housing) also increase in value through inflation, meaning the owning class never loses money to inflation.
Again, theory and practice diverge pretty much entirely.
Inflation is a concept created by governments to be able to run on a perpetual deficit (necessary when you privatise everything profitable by selling it to your buddies). Making a tax on the poor is a “nice” benefit, but don’t be mistaken: if the owning class saw it as a threat to their wealth we’d be back to the gold standard already.
No no, you’re overthinking it. You’re applying economics 101, which has a lot of assumptions that don’t hold true in reality. For example, wages don’t increase with inflation. We’ve actively watched buying power decrease over the last 3 decades.
Here’s the simpler model. If there’s a hundred toys to buy in the world, and $100 in the world, one toy cost $1. If a bank know loans an extra $10, because they can due to reserve requirements, now there’s $110 in the world and still a hundred toys. So now a toy costs $1.10.
And the reason it’s a flat tax is because now every dollar worth ~.9 toys, and this punishes the poor who can now barely afford what they need to survive.
Economics classes only work because they wrap the ideas in lots of assumptions, like the concept that we have a functioning economy. It’s like physics 101 with no friction on surfaces and no wind drag.
I appreciate your response but I think you are applying Economics 101 haha :P
Monetarism hasn’t held up historically and doesn’t even take employment, growth, savings, price stickiness or export/import into account. Besides, we are talking about government spending, not private sector.
More money in circulation means more taxes - the money gets taken back out. And taxes can always be increased when the economy gets a lil too hot (we are nowhere near that). The picture you are painting onoy holds up when we have full employment and all businesses are at capacity, which is not how things look in most economies right now. More money results in businesses getting more revenue, which they can invest and use to hire more workers. No inflation, just growth and more employment.
The fact that buying power has decreased over the last decade is true but not because of inflation. It’s because neoliberalism has allowed capital to claim all of economic growth for itself. Before neoliberalism, higher profits could be captured for workers by strong unions (broadly speaking)
The kind of inflation that decreases purchasing power is a price shock, which has caused most of the inflation in the last few years. This has indeed impacted the poor most, but this kind of inflation also has nothing to do with an expanding monetary supply.
I really recommend researching MMT or demand-side economics.
governments with their own currencies don’t require taxes to have/spend money btw
Yeah, but spending money you don’t have, or printing money, causes inflation which is basically just a flat tax. And that punishes the poor.
Tax the rich.
Not always, and no.
New money is created all the time, and most of it not even by government spending, but through businesses taking loans.
When governments spend too much in competitive markets, i.e. on resources that aren’t there yet, then yes it drives up prices. Just running a deficit does increase the money supply, which still only causes inflation in some cases.
The classic inflation from the economy working a little too well is not a flat tax, since both wages and prices are growing. Savings on the other hand (except stocks), lose their value. Classic inflation erodes the savings of the rich, and erodes the debts of the poor.
And even then, the central bank can always increase the cost of businesses lending to slow things down. That has other downsides, but the point is:
But yes, tax the rich. Can’t argue with that
… Also called “printing money”.
Inflation doesn’t cause wages to grow proportionally, despite what some Harvard wankers like to pretend. Theoretical models are interesting in science, but for something like economy, they are completely useless.
Capital ROI is almost always greater than inflation, meaning wealth inequality increases regardless of inflation. This is before taking into account that physical assets (e.g. housing) also increase in value through inflation, meaning the owning class never loses money to inflation.
Again, theory and practice diverge pretty much entirely.
Inflation is a concept created by governments to be able to run on a perpetual deficit (necessary when you privatise everything profitable by selling it to your buddies). Making a tax on the poor is a “nice” benefit, but don’t be mistaken: if the owning class saw it as a threat to their wealth we’d be back to the gold standard already.
No no, you’re overthinking it. You’re applying economics 101, which has a lot of assumptions that don’t hold true in reality. For example, wages don’t increase with inflation. We’ve actively watched buying power decrease over the last 3 decades.
Here’s the simpler model. If there’s a hundred toys to buy in the world, and $100 in the world, one toy cost $1. If a bank know loans an extra $10, because they can due to reserve requirements, now there’s $110 in the world and still a hundred toys. So now a toy costs $1.10.
And the reason it’s a flat tax is because now every dollar worth ~.9 toys, and this punishes the poor who can now barely afford what they need to survive.
Economics classes only work because they wrap the ideas in lots of assumptions, like the concept that we have a functioning economy. It’s like physics 101 with no friction on surfaces and no wind drag.
I appreciate your response but I think you are applying Economics 101 haha :P
Monetarism hasn’t held up historically and doesn’t even take employment, growth, savings, price stickiness or export/import into account. Besides, we are talking about government spending, not private sector.
More money in circulation means more taxes - the money gets taken back out. And taxes can always be increased when the economy gets a lil too hot (we are nowhere near that). The picture you are painting onoy holds up when we have full employment and all businesses are at capacity, which is not how things look in most economies right now. More money results in businesses getting more revenue, which they can invest and use to hire more workers. No inflation, just growth and more employment.
The fact that buying power has decreased over the last decade is true but not because of inflation. It’s because neoliberalism has allowed capital to claim all of economic growth for itself. Before neoliberalism, higher profits could be captured for workers by strong unions (broadly speaking)
The kind of inflation that decreases purchasing power is a price shock, which has caused most of the inflation in the last few years. This has indeed impacted the poor most, but this kind of inflation also has nothing to do with an expanding monetary supply.
I really recommend researching MMT or demand-side economics.