A recent controversy that erupted was the question as to whether transfer payments (such as the $2000 transfer that was debated in the United States) would cause the economy to overheat. There is an interesting issue: even if $2000 is not enough, what about larger amounts? I have severe doubts that anyone could give a useful answer to what appears to be a simple quantitative question, without a country pushing the envelope for the sake of an economic experiment....Bond Economics
Transfers And Overheating
Brian Romanchuk
Except the economy does not run on fiat but on private bank deposits which the banks also create when they "lend."
ReplyDeleteNo wonder then that it's difficult to calculate the effect of "transfer" payments.
So not only is the current system inherently discriminatory and obsolete but it also confounds economic calculation.
Record bank deposits came from transfer payments associated with the last stimulus, back in March. We can reduce reliance on bank creation of deposits if transfer payments are increased. In fact, what we saw from the last stimulus, was that households paid down debt. This was a force that necessarily reduced the deposits created by bank loans.
ReplyDeleteNo Mike I read somewhere it’s because we stopped eating in restaurants and gong to the movies!
ReplyDelete;p
Production and service capacity isn't a fixed entity it responds in output according to demand and giving people more currency fuels demand. The switch to banknotes in the UK became a principal driver of the Industrial Revolution in the UK.
ReplyDeleteThere's no doubt that the money supply should INCREASE* to keep up with population growth and potential economic growth.
ReplyDeleteThe question is: Shall we do it ethically or via welfare and privileges for private interests such as banks and the rich?
Since we haven't done it ethically we are vexed by embarrassing and dangerous gross wealth inequality - not to mention some people being reduced to penury and suicide.
*Nor should it ever decrease either.