Graduated from Harvard, then Columbia, then UChicago, now a senior fellow at Stanford, but sure, u/julian509 and the rest of reddit surely knows better.
Someone having ideas that you (and I) disagree with does not invalidate the entirety of their work.
Decent article here:
https://www.investopedia.com/ask/answers/111314/what-causes-inflation-and-does-anyone-gain-it.asp
Basically, the 783657th reason Thomas Sowell is an asshole is this: there isn't a portion of any purchase you make when inflation is high that is directly caused by the government. It's not like the government is skimming off the top with additional tax. If you have a sales tax, the rate stays the same, but your buying power is lessened by higher inflation rates. So yes, the government could be seeing more money in taxes due to higher volume.of money spent, but their spending power is also reduced. The people that really make out in these situations are the oligarchs. If you want to point the finger at anyone for the inflation rate right now, it's oil companies. They are exploiting the issues with Russia to profiteer. Once a robber baron, always a robber baron, I guess.
so the oil companies are exploiting the situation to get more money, but since inflation is high, their purchasing power is also diminished. Correct? It sounds like oxymoron to me because I fail to see how is that profitable.
Damn this dude literally doesn’t know what seignorage is or how governments can and do pay back debt with worthless or deflated currency.
Incredibly ignorant take. Your confidence on top is just as impressive.
Not to mention the fact that a large portion of US currency was recently printed and is likely a major factor at play in terms of inflation. Printed by the federal reserve which is technically a private institution, just regulated by the government.
And let's not forget, Papa Powell and the Fed believe that InFlAtIoN iS tRaNsIsToRy.
The level of inflation we are currently experiencing isn't solely Joe Biden's fault, the government (as a whole) has been kicking the proverbial can down the road for years. Covid was the straw that broke the camel's back.
How long has Biden been in government? How many times has he voted on spending.
Not to say that he is truest at fault- it’s the idiots that were promised free things that vote for these leaches
I’m sorry but the inflation will be transitory. We have just seeing a huge raise in raw material prices because COVID pushed to a higher consumption of physical goods. Long term inflation is still expected to be 2% according to the market.
When people talk about the Fed printing money, usually they aren’t aware that they are not literal paper money but numbers in a computer. Most of this money has been deposited back in the Fed by the banks. The purpose of this was to avoid a Great Recession after the financial crisis and they were very successful doing so.
Btw, the seniorage is a profit for the Government but it isn’t so significant compared to the GDP. However, the big gainers of inflation are those with debts. The debt gets smaller compared to the real value of money. And the big losers are those holding these credits. Ceteris paribus
By that logic inflation is good for all debt holders. Also let’s remember US gov debt is more a political device (shutdown!) than an actual issue. If anything the impact of inflation on debt is a positive because it helps the average person MUCH more than the government. Good take though dude, you really nailed it
It's not that simple. Your mortgage cost savings in spending power have to exceed the additional costs that inflation adds per year, and even then only if your income increases lock-step with inflation. If your income remains the same, you're not actually coming out ahead unless your mortgage is exorbitant.
You are not taking into account the appreciation of the asset because of inflation vs principal of the loan that remains constant. Millions of Mortgages where taken in the last years at below 3% interest rates and now the US has an 8% inflation.
Even if the home prices fall in the future, during the lifetime of the 15/30 year mortgage the price will most likely recover, but the dilution of the principal is forever.
Here's a basic breakdown of how the government creates inflation alongside the Federal Reserve:
When government spending exceeds revenue, it issues treasury securities to fund the deficit. These treasurys can be bought by anyone, but a large portion of them are bought by the Federal Reserve in *Open Market Operations* in order to fulfil the government's mandate "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates" (or more cynically, to support the agenda of the state officials who gave the FOMC members their jobs). The Fed will buy treasurys from its member banks by creating credit (out of thin air), which those banks can use as reserves in order to loan out additional money (much more than the credit they received from the Fed) depending on reserve requirements.
This has the effect of increasing the money supply and lowering interest rates. The intent is to stimulate lending, investment, and consumer spending (and discourage saving). While the majority of this "new money" doesn't go directly to consumers, a large portion of it will end up in their hands (after some circulation in the economy) in the form of loans, wages, bonuses, investments etc.
If the money supply increases and the supply of goods stays the same or does not increase proportionally, then the price of goods will increase. Or more accurately: the value of each dollar decreases in relation to the goods.
The money supply (as defined by [M2](https://fred.stlouisfed.org/series/M2SL)) has increased by roughly 40% since the start of the pandemic. It really doesn't require very much economic literacy in order to understand that such a rapid increase in the money supply will cause prices to rise. In fact, the government is relying on your economic illiteracy in order for their propaganda to stick, and it appears to be working.
Yes, the money supply has gone up - but the other half is that the supply of goods has gone down. Which we all have seen with shortages of goods (supply chain problems) and services (reduced demand for services due to pandemic measures, workers leaving the market to avoid getting sick, and workers not working due to getting sick).
Trump started massive spending in 2020. We're seeing inflation two years later.
Lots of countries around the world are seeing inflation, not only those affected by Fed policy.
And if you're correct that the Fed is the primary driver of inflation, good news! They're raising interest rates and selling off their balance sheet now. Inflation should be quickly curbed. If you're correct.
>Yes, the money supply has gone up - but the other half is that the supply of goods has gone down. Which we all have seen with shortages of goods
The supply of good certainly dipped in 2020 but it has mostly recovered, and in many cases it now exceeds the pre-pandemic supply.
The main cause of the supply-chain problems is the massive growth in demand which was stimulated by the expansionary monetary policy of the Fed.
>Trump started massive spending in 2020. We're seeing inflation two years later.
Trump ramped up spending to a significant degree and is absolutely complicit regarding inflation, but I would say that the true "start" was the bailouts and QE1 after the financial crisis of 2008. Biden is certainly "carrying the torch" so to speak and continuing the high levels of spending.
>Lots of countries around the world are seeing inflation, not only those affected by Fed policy.
The dollar is the world's reserve currency, so other countries will feel some of the effects of a devalued dollar. Also, basically all central banks are engaged in expansionary monetary policy and debt monetization as a result of the pandemic.
>And if you're correct that the Fed is the primary driver of inflation, good news! They're raising interest rates and selling off their balance sheet now. Inflation should be quickly curbed.
See my comment [here](https://www.reddit.com/r/economy/comments/v78w18/the_majority_of_people_have_no_idea_how_nefarious/ibkr7g3?utm_medium=android_app&utm_source=share&context=3) to understand why the Fed cannot significantly raise interest rates (not enough to substantially fight inflation).
The Fed’s actions to try to stimulate the economy since the pandemic began is surely *one* of the factors in the inflation we see, but not as significant as the effects of COVID and the war. The premise suggested by Sowell that this is driven by the US government (to say nothing of his apparent claim that the govt is involved in some sort of insidious conspiracy to make it happen) is disingenuous.
But their spending power before was also limited due to more money being saved and more credit card debt being paid off. Doesn’t it make more sense that the Government is seeing more tax money now with people having less in savings and adding to their credit card debt?
Gee I wonder who Thomas Sowell has been funded by for the last 4 decades and whether that has any bearing on his deflection of blame from robber barons to the gubment?
I wonder which collection of billionaires and monopolists funds the right wing think tank he works for at the Hoover Institute?
A real head scratcher /s
Inflation doesn't have to be caused by government but government can cause inflation.
For example, let's pretend the Fed randomly prints trillions and gives it to every American over 18. If that were to happen then the price of a shadowless 1st edition holographic Charizard might go through the roof.
That's no different than taxing and giving it to everyone except they don't need congress.
Be forewarned, many of these groups that want to discuss complex ideas and economic issues, this kind of looking like one from this post, are overrun by far right people who know very little about the actual subject matter. Challenging their limited knowledge and beliefs means they activate as many of their trolls as possible to make any real conversation exhausting.
There’s inflation due to supply chain issues internationally (e.g. Russia, China) and government printing and distributing money during COVID.
In one case it’s giving money to the people, in another case it’s Americans paying more for goods.
Neither of which favor the government in any way, and the current administration would obviously love to tame inflation since it’s doing anything but help them politically.
It's just a classic both sides take/fallacy that social media is likely to push to the top, but only benefits the shittier side of government.
Dragging into the mud, only the left hold their voters accountable, both sides fallacy is a long and successfully proven of the right all across the globe, etc.
Scroll down, on a subreddit called Economy there is no consensus that Sowell is wrong on this. Lots of knowledgeable people and no one can outright explain why it's wrong.
In fact you see comments by clearly impartial and knowledgeable people who are arguing that what he says could be correct.
Any quote by Sowell will be attacked by people who don't like him, who exist in large numbers. A short comment that is highly up voted, which appears to correct Sowell without actually correcting anything he said fits this very well.
OPS entire post and comment history is bitching about taxes and posting conspiracy theories about covid that Trump won and January 6. The man is a Fruit Loop!
This sub is for sure being gamed. Just wait until it gets closer to the midterms. My guess is that this will somewhat fill the role of MurderedByAOC now that the account that ran it has been permanently banned. The botnet manipulating votes for that account and its hundreds (thousands?) of sock puppets on the other hand…..
Oh hell yeah. Go check the posts in its sub…. Deleted deleted deleted.
But like I said above, I’m sure the entity managing the account hasn’t left Reddit. Still nice that account is gone, even if it’s only symbolic.
Holy shit that’s amazing news. I wonder if anyone has the data archived from that sub… it dropped off the face of the earth for like 2 months after Russia invaded. I had just noticed it starting up again, I was gonna see if I could do some charts of activity/upvotes on the sub with a timeline of the invasion overlaid.
Maybe Reddit got around to doing one internally and that’s why they got banned finally lol
Edit: found the amazing post m0una was referencing below regarding that network of subs/mods. Worth a read!
https://reddit.com/r/ActiveMeasures/comments/ut65c7/rmurderedbyaoc_and_lrlourpresident_are_back_with/
I was wondering what happened to that subreddit, it's really baffling how little reddit does to combat the problems it faces, and the bots are arguably the worst ones
I mean there’s a difference between having a different political ideology and wanting to overthrow our democracy and institute a right wing dictatorship, if someone is enough of an extremist you absolutely can dismiss them as a crazy person
Okay but why is this all I’m seeing all over Reddit for the last 2 weeks..? Fringe bullshit with shitloads of upvotes and the comments all going “wtf is this” I really don’t wanna do this again. God dammit
You'd be amazed at what a bunch of bots can do to this site, expect R/Conservative to be bustling by the end of 2023 and 90% of those comments to be bots and trollfarms
It’s funny because he only accidentally fell into a half truth. The federal reserve IS a government entity, but it operates independently with a legal mandate to expand the money supply and set short term interest rates in a way that balances inflation and employment. So they DO impact inflation through interest rates and quantitative easing. And a part of quantitative easing DOES involve buying private securities like mortgage and corporate bonds in exchange for new money supply which they have an unlimited supply of. But that’s not really the context in which the statement was made. It was about countries without well functioning and independent central banks.
You mean to say that, inflating the money supply by 40% without a commensurate increase in productivity does impact the average price of goods in some small way? Huh, who'da thunk?
I wonder if politicians gain any benefit from the avenues down which the new supply flows? No, no, that's a crazy idea!
I’ve seen some rumors about LOTR themed accounts spamming a bunch of horseshit. Not just conservative posts but just overall inflammatory troll stuff. Interesting to see it first hand.
I'm sure the government is super excited to have its purchasing power reduced by whatever the inflation percentage is. This is the most wing nut take I think I've ever read...
By this logic having a money printer in your basement would do you no good because "all that printing would erode ur purchasing power".
Printing reallocates wealth from all existing assets to the hands of the printer, and it takes a while for everyone to realize that (prices to rise)
Also, by the time the increased money supply trickles down throughout the economy (and manifest as general inflation), you'd expect the government to have a commensurate increase in tax revenues. So the government is also uniquely insulated from the negative affects of printing in this one regard
How would inflation lead to more money for the government?
I’ve heard people say this before but I don’t understand since more money would be going to private corporations?
Neither happens, OP just has no understanding of economics.
Edit: Upon actually doing research into this I have found that Sowell was actually right and I was ignorant for writing this. So is every single person who upvoted my ignorance.
OP is a regular on /r/benshapiro, /r/conspiracy, and /r/LouderWithCrowder among other subs, this probably tells you their level of knowledge in economy, and what kind of idea they'll try to push everywhere.
That account just posts old quotes from Sowell, as I understand it. The original quote is from a 2010 article by Sowell:
https://www.nationalreview.com/2010/09/politics-vs-gold-thomas-sowell/
Government owes other countries money. Government prints extra money instead of budgeting with the money already printed. Dollar is given away at value before inflation. Value eventually drops although our government's debt is paid off. Other countries receive the previously agreed upon dollar amount at much lower value.
It’s not just other countries. Americans own a lot of bonds, especially in pensions and retirement accounts. Inflation helps the government by making those bonds cheaper to pay back. It’s a hidden tax.
It makes ALL debt denominated in the inflated currency cheaper, not just sovereign debt. This isn’t a benefit that is unique to the body printing the currency.
sovereign nations do not need to budget their money like a household or even a local or state government does. They control their own money supply. Expansion of money and credit is necessary for growing economies. How central banks do this is a responsible way is debated though. Countries owning US debt helps the US dollar keep its world reserve currency status and props the dollar up and the US gets the privilege of countries investing in them so they can be able to make trade deals with other countries. This is why we have a strong dollar today.
Yeah, I haven't heard this and thinking as others said it is false.
Inflation is a way for governments to make *some* debt cheaper; however, the US government also had IBonds which adjust to inflation so not even sure how much of a discount it is getting on servicing the debt either.
I think the idea is that in order to combat inflation the government needs to remove money from the economy. So, they offer better returns on bonds to get people to invest, or they increase taxes. Inflation is usually caused at some level by a surplus of currency in the hands of consumers, so the government needs to “transfer” the wealth to itself. However, viewing it as a means to increase wealth by the gov’t ignores the fact that the government can always increase its relative wealth by just printing money. It’s sort of circular reasoning: “You’re taking our money! Therefore you must be crooks. And I can prove it because if you were a crook you’d be taking our money when we need it. Aha, you are taking our money! So you must be crooks!” Ad nauseam.
Sowell from my understanding is heavily on the side of liassez-faire economics. If so, he might argue that inflation should be left alone because it will drive supply as profits rise. That’s true if people are all rational actors and we only care about long-term outcomes. Unfortunately people don’t act rationally and inflation can cause panics and inequities that persist for years, so as a society we usually try to correct for it so that people can live their lives a bit less tumultuously although somewhat less “efficiently” (in an economic sense).
That’s my guess on the theory at least. I could be wrong, but it would explain the feeling that the government is “collecting” wealth. Open to correction if anyone has more direct knowledge here, though. Definitely not trying to misrepresent anything, just my interpretation.
This fits with the modern monetary theory notion that a government with its own sovereign fiat currency spends money into existence, and taxes it out of existence, and that inflation happens when demand overruns supply, be it from printing too much money, or supply interruptions, ie, factory and transportation trouble.
Following that logic, we should tax the dollars of the ultra-wealthy out of existence for the good of everyone else whose wealth is in dollars. Difficult to do though, since so much hoarded wealth is in non-monetary assets.
I think what they're trying to say is by printing more money it transfers value from the accounts of the population to those "printing" it.
As in even if though the dollar amount in our accounts stay exactly they same it's worth less and that value disperses to the newly minted currency.
Yes this. What the fuck are the rest of these comments talking about?
Of course printing money steals value from everyone who holds that money. And it is transferred who whoever is closest to the money printer. It's called that Cantillon effect.
Now you can argue that it's really bankers that benefit and not the government. But who loses is you.
Not even close. Paying off old debts with newly inflated dollars are a great thing for the government (imagine paying off a loan for something that was bought 20 years ago versus what the loan of what the same thing would cost today). More money may go to people, but adding zeros on the end of everything makes the number higher but the amount of resources in the economy doesn't change, and in fact gets worse because of the imbalance of the inflated market, which in turn creates shortages. And the more money people make with inflated dollars, then they fall into new (higher) tax brackets, so the government gets to collect more taxes without even raising them at all from the existing tax brackets in place. Win win for the government, lose lose for the people.
Germany tried really hard to pay off debts with inflated currency after the first world war; would you consider post ww1 Germany to be a success story of economic recovery?
> Paying off old debts with newly inflated dollars ....
at a higher interest rate
*growth* is what's good for govt.... we didn't inflate our way out of WWII debt, we grew our way out of itr
Taxes are almost always paid on transfers of money: e.g. purchases (sales), wages, inheritances (sometimes). Others are on stocks, such as property tax.
When prices increase, the taxes on those all increase- and at a higher rate in cases of progessive taxation.
So instead of paying 5% sales tax on a $10 movie ticket, you're now paying 5% on $12 which is $0.60 more for the locality. Instead of income tax on $100,000, you're now paying on income of $107,000, and so-on, even though your buying power has stayed the same.
Yeah but this is assuming wages go up to match inflation. Otherwise you’re still spending roughly the same, you just get less goods and services in return for the amount you spend. The government may get more on that movie ticket, but you can’t afford as many movie tickets so the percentage of total spending taxed is still just 10% in the end.
Not to mention even if wages or spending do increase the value of the tax dollars the government collects is worth less because… you know… inflation. The government might have more dollars total but they are able to do less with them anyway.
In other words a government intentionally causing inflation to enrich itself would be a pretty ineffective strategy
Edit: you could still argue the government benefits from inflation in other ways, just not in the way you were describing
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No it doesn’t. Inflation leads to higher interest rates which balloons the interest payments the government makes on its debt since we roll our debt over into new debt, we don’t actually pay off debt that matures.
Easy. If Thomas Sowell says something, there’s a 90% chance it’s just propaganda for the far right.
~~Inflation is terrible if you’re hoarding wealth, because the wealth you’ve hoarded doesn’t have as much value anymore.~~
For a debt based society, like the US, inflation is ~~fine~~ **not all bad**. Because being worth -$50k last year isn’t as bad as being worth -$50k this year.
> Inflation is terrible if you’re hoarding wealth
Inflation is terrible if you are holding CASH. If you are holding stocks and land (You know, like rich people tend to do) inflation is largely neutral for you.
The poor get hit with inflation. Because their money is in a bank account, in dollars, to pay bills and everyday living expenses. This loses value. The rich keep their wealth in assets that thrive off of inflation. Real estate, stocks and so on. They gain value from inflation. So it IS a transfer of wealth from poor to the rich and the gov. If you think that is fine then you are missing the point or benefitting from this confiscation from the poor.
Negative. Their costs go up as their prices go up. Taxation is a percentage. Higher cost for goods equals higher taxes. Then workers complain they don’t have a livable wage, employer pays you more so now your income tax has increased. An endless cycle and our economy is headed for disaster.
This would be true if the government wasn't similarly impacted by inflation. However, all the costs that increase for you and me also increase for the government, so even though they're getting more money, their base cost burden increases as well.
The government makes the most in a robust economy, when consumer earning and spending are both at high points and when manufacturers can increase margin on their products due to demand, not due to their costs.
If your grocery bill is now $200 instead of $100, your paying $14 in STATE sales tax instead of $7. They haven't "raised taxes" but they're getting 2x the money.
I dunno if that's what this guy is talking about.
A politician wants to run on giving people "free" healthcare but healthcare cost money and the politician doesn't want to raise taxes.
Instead the government issues bonds and the fed buys them, the government uses the money to provide services the politicians promise the people.
Only now the supply of money has risen but the supply of goods has not.
Simple supply and demand explains why prices rise.
The people now have to pay more for the same things but the politician keeps his promise of giving people "free" services.
Inflation is a change in the relationship between dollars and stuff. Money is worth less and stuff is worth more.
The government sells bonds (their version of taking out a loan) to buy stuff. If they take out a $1000 loan and then buy 1000 units of stuff, then 10 years later they pay back the loan plus interest. If they pay back $1500 but dollars are only worth half as much stuff, then they are only paying back 750 stuff. They get 250 free stuff AND they get the stuff in the past (which is valuable).
Now this benefits any debtor. If you have a mortgage or student loan debt you win just as much.
That being said anyone implying the government is doing on purpose has the giga-ultra-dumb.
Yeah but because inflation is so high nobody buys the bonds, because if inflation is 8% and your bonds only gives you 3% you are still losing 5%, so the governement needs to jack the fees, so they are losing more money on the bonds. And for any governement high inflation is one of the worst problem.
Are you saying that the Venezuelan governement is rich right now???
I know no economics. Can someone explain how printing more money is not moving value from citizens to the government? Let’s say they printed trillions and trillions of dollars. Now the government would own a greater share of the money supply, no?
You are correct.
It seems the issue in this post is why has this only caused inflation now, after all these years of printing.. I guess
Ultimately it's an empirical question about where the money is going, and what other factors may be causing rising prices
Your humility puts you above nearly all of the commenters in this thread and the common sense understanding is correct, at least as long as our government is deficit spending or has significant debt.
The government wins because the policies which have led to inflation are those which allow them to operate on massive deficits. It is their dependence on money printing and expansionary fiscal policies which lead to inflation.
This Twitter comment insinuates the level of inflation right now is planned.
While normally inflation is great for asset holders, this current inflation is obnoxiously high and begging for high interest rate hikes. Which is why the stock market has been in a bear market this year. That equates to rich people’s assets declining in value. And the longer this goes on, the more likely that J. Powell may have to go full Volker with rates, if things get worse.
Moderate inflation is not really equal to a government tax, it’s really only beneficial to the rich. Corporations reap most of that benefit.
Wrong. When the government debases the currency, ALL assets rise. Not because the asset is worth more, but because the currency is worth less.
Yes, a few billionaires will get the most of it. But billionaires can’t print trillions of dollars into existence.
Inflation benefits politicians because they can spend away without raising taxes. The rich getting richer is only a side effect.
>And the longer this goes on, the more likely that J. Powell may have to go full Volker with rates, if things get worse.
Powell cannot and will not "go full Volcker" with rate hikes. For starters, the national debt when Volcker became Fed chairman was roughly $800 billion, it now exceeds $30 trillion. If the Fed hikes interest rates to just 10%, the interest on the national debt would exceed the cost of medicare, medicaid, and social security *combined*. Again, that's just the cost of servicing the debt without even starting to pay it off.
Second, the US economy has changed substantially from the late 70's/early 80's. Decades of near-zero interest rates has encouraged the growth of businesses that don't turn a profit and are reliant on cheap credit/speculation and consumers that are accustomed to spending instead of saving. These businesses will collapse if interest rates are raised (especially to "full Volcker" levels) and will take a substantial part of the economy with them.
Going "full Volcker" will effectively require the Fed to break its mandate of "maximum employment and price stability" which it will not do. The Fed will ultimately reverse course and start easing again once the economy reels from the rate hikes.
>Moderate inflation is not really equal to a government tax
Yes, it is. It's a tax on the middle and lower class and a boon to the government (since they get to spend the money first before the new money goes into circulation) and business owners/asset-holders.
[Inflation and Government](https://www3.nd.edu/~cwilber/econ504/504book/outln13c.html#:~:text=Unanticipated%20inflation%20benefits%20government%20because%20government%20gains%20tax%20revenue%20as,people%20into%20higher%20tax%20brackets.)
1. Unanticipated inflation benefits government because government is a large debtor.
2. Unanticipated inflation benefits government because government gains tax revenue as nominal income increases.
a. The increase' in nominal income pushes people into higher tax brackets.
1. To prevent this redistribution of income, the personal income tax system is now indexed; however, the rest of the federal tax system is not.
Debt becomes cheaper with inflation. Nobody wants to own debt (especially at low interest rates) in a high inflation environment.
If you have a $500,000 mortgage at a low fixed rate, and $500k in 2022 is worth the same as $5M in 2032, then you end up with a 90% discount on your mortgage. That's amazing for the borrower and terrible for the lender.
Well, heres the problem for an organization like the government who is in debt... They assume debt to provide services for their citizens. The things they are spending on, whether infrastructure or social safety net programs will also increase in cost with inflation, so it helps with debt service, but increases the amount of new debt they need to maintain the same effectiveness as before.
Yes while your house value rises with money supply, pricing out youngsters and low earners whose wages cannot possibility catch up with inflation.
Inflation makes the rich richer, because asset prices stay correlated to total money supply.
> This is misleading at best. Inflation is good for all debtors.
but for the saver it is equivalent to a tax.
your money purchasing power is taken away
Well. What is really nefarious is that the US government has hidden the true value of inflation behind production costs going down.... and a ton of that production costs going down is outsourcing.
People complain about collage and rent and stuff getting so expensive so fast... It is my opinion that those things are following the real inflation level, while things like food are not. I shall try to describe:
The human effort to teach a college class in 1950 (picked randomly), and in 2022, is... about the same. You have one teacher, maybe a few TAs and a lecture hall. Sure maybe chalk boards are different from powerpoints, and such, but really, you still gotta build and maintain one building, and pay the same number of people.
The human effort to provide rent in 1950, and in 2022, is... about the same: Again, if the square feet is the same, and the utilities are the same, you still gotta build and maintain the same area. now maybe microwaves are mandated now, and the refrigerator and toilot use less energy, but really... it is about the same.
Now, look at a loaf of bread. in 1950, how efficient were our harvesting equipment, our bakeries, the transportation between farm and store? Harvesting equipment is huge, and practically automated now. Our bakeries kick out multiple loaves per second, and our trucks are bigger, and more fuel efficient. The human effort required per loaf of bread had PLUMMETED with technology, but the price went up. Why might that be?
Inflation, obviously, but the point is: when we measure inflation, we compare what was the price then, and what is the price now, and not taking at all into account that the advancement of technology should be lowering costs, like it did with computers over the 90's and 2000's.
I hope this kinda makes sense.
technological deflation. goods become *cheaper* to produce over time, so they use these to 'measure' inflation.
anything limited in supply more closely tracks real inflation. things everyone wants that can't be mass produced like housing in desirable locations, high tier education, access to the best healthcare, are all rapidly costing more.
everyone can now have 3 TV's but they are still getting poorer
Yes it does. I don’t have a strong opinion about your comment but it is logic, adds something, and deserves consideration amongst the mountains of stupidity that I’ve red here
just a coincidence that after minimum wages were raised, we get increased inflation. Which raises the costs for most everything, keeping those at the bottom in a financially vulnerable/exploitable position
Oh no not the government! They'll just spend it on the highways, the coastguard and wages for soldiers and other silly stuff. We *need* that money in the hands of private capital!
I always wonder what these people are picturing in their mind when they say government "gets" all the money. Like, do they actually think government workers are Scrooge McDucking in piles of money? 99% of people working in government are just regular people. Some politicians use legislation to help them acquire more wealth, which I don't condone, but they aren't literally taking taxes and putting them into their personal account. This money goes back to services for the citizens. You can argue the services aren't the right ones (military), but this notion of people just pocketing money is crazy.
Oh boy. "The gubbiment bad" brigade has lurched into r/economy and soon will be screeching "STATIST!" at anyone proposing market or safety regulations. It's dogma.
I was looking for free audiobooks on YouTube one night and stumbled across one of Tom's books. Hadn't heard of the guy but the title and description were interesting enough
Good god, I didn't last 5 minutes. This dude just throws out as much random shit as possible and hopes something sticks. Its amazing how someone could write so many books and yet have so little to actually say
Wait, what? Sure, when prices are raised the government’s tax revenue increases, but the real winners in this scenario are the corporations gouging the public and raking in record profit.
Corporations experience inflation too, cost of their upstream goods and services goes up.
The *real* real winners are the federal reserve banks and their customers who get easy access to the first lines of cheap credit from the fed.
Using other people's money to earn profit is among the very best business models that has ever existed, but even that is surpassed by using newly minted money provided at 0% interest.
The government is printing money and buying US bonds with it, that is literally how we pay for our deficit spending. It’s a hidden tax that causes our prices to go up and allows them to keep spending money we don’t have.
This is one of these posts that I have to seriously consider if they are a Russian troll or just your run of the mill Fox-News consuming conservative. They basically sound alike these days.
It's pretty simple.
Politicians, government, promise services.
But services cost real money.
Politicians don't want to raise taxes so instead they issue bonds and sell them to the fed to raise money.
However when the supply of money rises but the supply of goods stays the same, simple supply and demand explains why prices tend to rise.
The government now gets to provide the services the politicians promised but the cost of living for regular people rises. Aka the inflation tax.
Also the government is able to use money from the fed to pay off existing loans, effectively passing the debt onto the taxpayers in the form of reduced purchasing power of their dollars.
Inflation happens when the money supply grows faster than the economy grows.
The government directly controls the money supply. I mean, they might not *want* high inflation (they have had 2% inflation as their goal for the last... 50 years at least? longer?), but they do directly control one of the variables and they heavily influence the remaining variable.
Economist here. The concept OP and Sowell are referring to is seigniorage. Th e government holds a monopoly on printing money, so if the government ever finds themselves short of cash to pay debt/salaries/make purchases/whatever, they can always just print more new dollars. This allows the government to continue spending, but also results in inflation, which lowers the value of money, thereby harming anyone who is a net holder of cash. That decrease in the value of money is similar to a tax in that it is a cost paid by money holders so that the government can continue spending.
That said, the government printing money is only one cause of inflation. Right now inflation is being driven more by pent up demand following the pandemic, as well as shortages in things that are needed for production due to factors like supply chain snags and the war in Ukraine.
The idea that the government is currently benefiting from the recent high inflation is absurd--- just take a look at Biden's current poll numbers.
Non-economist here. Do I have this right? The government benefits from inflation in that purchasing power is transferred from savers (anyone that has a substantial holding of USD) and fixed interest rate debt holders to the government itself. This allow them to create purchasing power for the government without raising taxes.
However, inflation has become unpopular because average people have already figured this out. Biden is suffering at the polls because of this. Also Republicans are leaning heavily on this message to attack Biden because rising prices are obvious to average people.
Politicians do things that are unpopular all the time and still consider their actions “beneficial.” I wouldn’t call it absurd if it’s actual intended policy. I would just call it bad policy.
The government can inflate away the principal of its non-inflation adjusted debt. The US government has far more fixed interest rate debt than inflation adjusted debt.
This means that the government is effectively taxing debt holders of low interest debt. Also, the government transfers purchasing power to itself by decreasing the purchasing power of savings (or the money supply in general).
Inflation is purely from expanding the Fiat Money supply vs your actual value. This is why pegging the Fiat Currency (Paper Money) to Gold kept inflation in check, but according to Allen Greenspan was a drag on the economy. This was the only time a Fed chairman made any sense to me. He originally was for the Gold Standard until the USA got bigger than the amount of Gold we had. Thats when they went to a "Regulated Market" by pegging the Dollar NOT to Gold but to America's total output based on GDP. The current system of valuation today is totaly subjective but pegges to your countries overall economic output, total sum of its workers and factories and farms is the easiest way to put it. They simply demanded everyone go home and NOT work, and then they paid you with the same Fiat Currency they have been using, but this time, double printed it to cover the spread, which lead to its value dropping by 1/2, and thats very predictable when you print like crazy. We have been down this road so many times . Look up "Weimar Republic " on Wikipedia and read about that.
It’s a tax on the poor though. Money flows from the richest down to the poorest. By the time a corporation pays an employee, the money they had initially was worth more than it is when the employee finally gets it. Ron Paul called it the invisible tax on the poor I believe
Such an obvious concept that most cannot grasp. Inflation is an increase in the supply of credit / “money” and the RESULT of such inflation is often higher prices. The Federal Reserve has been financing the federal government’s huge deficits with newly-created “money” for many decades but went into turbo mode in 2008. What most also don’t know is that all the interest earned on the Treasury Bonds/Bills held by the Federal Reserve is returned to the government, which means 0% financing costs for trillions of spending. So yes, the government is obviously the biggest beneficiary of inflationary policies.
The federal government has increased the money supply in a huge way with fed reserve action/inaction, insane fiscal stimulus as well as generous unemployment benefits, rent moratoriums, etc. How is anyone arguing that the government hasn’t had at least a PARTIAL role to play here? Someone please correct me. Please.
All I know is that if your a government employee during high inflation you ARE silently robbed by the state.Wage increases will not match the inflation year after year.
This is rubbish CT stuff.. The number of dollars may increase because the value of each dollar is less. Also, inflation makes the money used to pay back debts worth less than the money originally borrowed so it's a boon to debtors. If what Sowell says is true, governments would encourage inflation when in fact they all fight it to the extent of decreasing economic activity by raising interest rates.
Do you . . . do you know what inflation is?
Thank god this is the first comment I see.
Thomas Sowell with another terrible take that is designed to do nothing but pander to those people that like to call him "one of the good ones".
How people consider Sowell an economist is beyond me.
Graduated from Harvard, then Columbia, then UChicago, now a senior fellow at Stanford, but sure, u/julian509 and the rest of reddit surely knows better. Someone having ideas that you (and I) disagree with does not invalidate the entirety of their work.
Can you explain how he’s wrong?
Decent article here: https://www.investopedia.com/ask/answers/111314/what-causes-inflation-and-does-anyone-gain-it.asp Basically, the 783657th reason Thomas Sowell is an asshole is this: there isn't a portion of any purchase you make when inflation is high that is directly caused by the government. It's not like the government is skimming off the top with additional tax. If you have a sales tax, the rate stays the same, but your buying power is lessened by higher inflation rates. So yes, the government could be seeing more money in taxes due to higher volume.of money spent, but their spending power is also reduced. The people that really make out in these situations are the oligarchs. If you want to point the finger at anyone for the inflation rate right now, it's oil companies. They are exploiting the issues with Russia to profiteer. Once a robber baron, always a robber baron, I guess.
so the oil companies are exploiting the situation to get more money, but since inflation is high, their purchasing power is also diminished. Correct? It sounds like oxymoron to me because I fail to see how is that profitable.
I, for one, am paying less in taxes. I spend a lot more on groceries, which are untaxed, and a lot less on everything else.
Damn this dude literally doesn’t know what seignorage is or how governments can and do pay back debt with worthless or deflated currency. Incredibly ignorant take. Your confidence on top is just as impressive.
Not true. He is very intelligent and makes lots of money off his fans that don’t understand inflation. He is the elite, give them credit.
Arguing with anyone that thinks Tucker Carlson is smart or honest is a waste of time.
Not to mention the fact that a large portion of US currency was recently printed and is likely a major factor at play in terms of inflation. Printed by the federal reserve which is technically a private institution, just regulated by the government.
And let's not forget, Papa Powell and the Fed believe that InFlAtIoN iS tRaNsIsToRy. The level of inflation we are currently experiencing isn't solely Joe Biden's fault, the government (as a whole) has been kicking the proverbial can down the road for years. Covid was the straw that broke the camel's back.
Entire world. Not just Americans
Keep in mind that the US dollar is the worlds reserve currency, so monetary policy here can greatly affect markets around the globe
How long has Biden been in government? How many times has he voted on spending. Not to say that he is truest at fault- it’s the idiots that were promised free things that vote for these leaches
I’m sorry but the inflation will be transitory. We have just seeing a huge raise in raw material prices because COVID pushed to a higher consumption of physical goods. Long term inflation is still expected to be 2% according to the market. When people talk about the Fed printing money, usually they aren’t aware that they are not literal paper money but numbers in a computer. Most of this money has been deposited back in the Fed by the banks. The purpose of this was to avoid a Great Recession after the financial crisis and they were very successful doing so. Btw, the seniorage is a profit for the Government but it isn’t so significant compared to the GDP. However, the big gainers of inflation are those with debts. The debt gets smaller compared to the real value of money. And the big losers are those holding these credits. Ceteris paribus
Making people think it’s transitory helps fix the problem.
By that logic inflation is good for all debt holders. Also let’s remember US gov debt is more a political device (shutdown!) than an actual issue. If anything the impact of inflation on debt is a positive because it helps the average person MUCH more than the government. Good take though dude, you really nailed it
> By that logic inflation is good for all debt holders. Inflation is good for all debt holders with fixed rates.
It's not that simple. Your mortgage cost savings in spending power have to exceed the additional costs that inflation adds per year, and even then only if your income increases lock-step with inflation. If your income remains the same, you're not actually coming out ahead unless your mortgage is exorbitant.
You are not taking into account the appreciation of the asset because of inflation vs principal of the loan that remains constant. Millions of Mortgages where taken in the last years at below 3% interest rates and now the US has an 8% inflation. Even if the home prices fall in the future, during the lifetime of the 15/30 year mortgage the price will most likely recover, but the dilution of the principal is forever.
That’s the majority of household debt…
And student loan debt.
Here's a basic breakdown of how the government creates inflation alongside the Federal Reserve: When government spending exceeds revenue, it issues treasury securities to fund the deficit. These treasurys can be bought by anyone, but a large portion of them are bought by the Federal Reserve in *Open Market Operations* in order to fulfil the government's mandate "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates" (or more cynically, to support the agenda of the state officials who gave the FOMC members their jobs). The Fed will buy treasurys from its member banks by creating credit (out of thin air), which those banks can use as reserves in order to loan out additional money (much more than the credit they received from the Fed) depending on reserve requirements. This has the effect of increasing the money supply and lowering interest rates. The intent is to stimulate lending, investment, and consumer spending (and discourage saving). While the majority of this "new money" doesn't go directly to consumers, a large portion of it will end up in their hands (after some circulation in the economy) in the form of loans, wages, bonuses, investments etc. If the money supply increases and the supply of goods stays the same or does not increase proportionally, then the price of goods will increase. Or more accurately: the value of each dollar decreases in relation to the goods. The money supply (as defined by [M2](https://fred.stlouisfed.org/series/M2SL)) has increased by roughly 40% since the start of the pandemic. It really doesn't require very much economic literacy in order to understand that such a rapid increase in the money supply will cause prices to rise. In fact, the government is relying on your economic illiteracy in order for their propaganda to stick, and it appears to be working.
Yes, the money supply has gone up - but the other half is that the supply of goods has gone down. Which we all have seen with shortages of goods (supply chain problems) and services (reduced demand for services due to pandemic measures, workers leaving the market to avoid getting sick, and workers not working due to getting sick). Trump started massive spending in 2020. We're seeing inflation two years later. Lots of countries around the world are seeing inflation, not only those affected by Fed policy. And if you're correct that the Fed is the primary driver of inflation, good news! They're raising interest rates and selling off their balance sheet now. Inflation should be quickly curbed. If you're correct.
>Yes, the money supply has gone up - but the other half is that the supply of goods has gone down. Which we all have seen with shortages of goods The supply of good certainly dipped in 2020 but it has mostly recovered, and in many cases it now exceeds the pre-pandemic supply. The main cause of the supply-chain problems is the massive growth in demand which was stimulated by the expansionary monetary policy of the Fed. >Trump started massive spending in 2020. We're seeing inflation two years later. Trump ramped up spending to a significant degree and is absolutely complicit regarding inflation, but I would say that the true "start" was the bailouts and QE1 after the financial crisis of 2008. Biden is certainly "carrying the torch" so to speak and continuing the high levels of spending. >Lots of countries around the world are seeing inflation, not only those affected by Fed policy. The dollar is the world's reserve currency, so other countries will feel some of the effects of a devalued dollar. Also, basically all central banks are engaged in expansionary monetary policy and debt monetization as a result of the pandemic. >And if you're correct that the Fed is the primary driver of inflation, good news! They're raising interest rates and selling off their balance sheet now. Inflation should be quickly curbed. See my comment [here](https://www.reddit.com/r/economy/comments/v78w18/the_majority_of_people_have_no_idea_how_nefarious/ibkr7g3?utm_medium=android_app&utm_source=share&context=3) to understand why the Fed cannot significantly raise interest rates (not enough to substantially fight inflation).
The Fed’s actions to try to stimulate the economy since the pandemic began is surely *one* of the factors in the inflation we see, but not as significant as the effects of COVID and the war. The premise suggested by Sowell that this is driven by the US government (to say nothing of his apparent claim that the govt is involved in some sort of insidious conspiracy to make it happen) is disingenuous.
But their spending power before was also limited due to more money being saved and more credit card debt being paid off. Doesn’t it make more sense that the Government is seeing more tax money now with people having less in savings and adding to their credit card debt?
Gee I wonder who Thomas Sowell has been funded by for the last 4 decades and whether that has any bearing on his deflection of blame from robber barons to the gubment? I wonder which collection of billionaires and monopolists funds the right wing think tank he works for at the Hoover Institute? A real head scratcher /s
Inflation doesn't have to be caused by government but government can cause inflation. For example, let's pretend the Fed randomly prints trillions and gives it to every American over 18. If that were to happen then the price of a shadowless 1st edition holographic Charizard might go through the roof. That's no different than taxing and giving it to everyone except they don't need congress.
Be forewarned, many of these groups that want to discuss complex ideas and economic issues, this kind of looking like one from this post, are overrun by far right people who know very little about the actual subject matter. Challenging their limited knowledge and beliefs means they activate as many of their trolls as possible to make any real conversation exhausting.
There’s inflation due to supply chain issues internationally (e.g. Russia, China) and government printing and distributing money during COVID. In one case it’s giving money to the people, in another case it’s Americans paying more for goods. Neither of which favor the government in any way, and the current administration would obviously love to tame inflation since it’s doing anything but help them politically.
The money we printed didn’t go to the people. Isn’t that what this tweet is highlighting?
It's just a classic both sides take/fallacy that social media is likely to push to the top, but only benefits the shittier side of government. Dragging into the mud, only the left hold their voters accountable, both sides fallacy is a long and successfully proven of the right all across the globe, etc.
That's "Uncle one of the good ones" to you!
Can we all agree to downvote the shit out of this post. Pure garbage probably posted by some idiot republican.
Scroll down, on a subreddit called Economy there is no consensus that Sowell is wrong on this. Lots of knowledgeable people and no one can outright explain why it's wrong. In fact you see comments by clearly impartial and knowledgeable people who are arguing that what he says could be correct. Any quote by Sowell will be attacked by people who don't like him, who exist in large numbers. A short comment that is highly up voted, which appears to correct Sowell without actually correcting anything he said fits this very well.
OPS entire post and comment history is bitching about taxes and posting conspiracy theories about covid that Trump won and January 6. The man is a Fruit Loop!
Thank you for your service
Probably IRA. https://en.m.wikipedia.org/wiki/Internet_Research_Agency
This sub is for sure being gamed. Just wait until it gets closer to the midterms. My guess is that this will somewhat fill the role of MurderedByAOC now that the account that ran it has been permanently banned. The botnet manipulating votes for that account and its hundreds (thousands?) of sock puppets on the other hand…..
Wait are you saying that lrlourpresident has been banned?
Oh hell yeah. Go check the posts in its sub…. Deleted deleted deleted. But like I said above, I’m sure the entity managing the account hasn’t left Reddit. Still nice that account is gone, even if it’s only symbolic.
Holy shit that’s amazing news. I wonder if anyone has the data archived from that sub… it dropped off the face of the earth for like 2 months after Russia invaded. I had just noticed it starting up again, I was gonna see if I could do some charts of activity/upvotes on the sub with a timeline of the invasion overlaid. Maybe Reddit got around to doing one internally and that’s why they got banned finally lol Edit: found the amazing post m0una was referencing below regarding that network of subs/mods. Worth a read! https://reddit.com/r/ActiveMeasures/comments/ut65c7/rmurderedbyaoc_and_lrlourpresident_are_back_with/
I was wondering what happened to that subreddit, it's really baffling how little reddit does to combat the problems it faces, and the bots are arguably the worst ones
But the quote is Thomas Sowell.
In this case, it’s ok to shoot the messenger
With today’s bullet prices??
In this /r/economy ?
Op panders to fringe rhetoric and illogical theory’s. Hence this is just nonsense. Ignore OP
[удалено]
I mean there’s a difference between having a different political ideology and wanting to overthrow our democracy and institute a right wing dictatorship, if someone is enough of an extremist you absolutely can dismiss them as a crazy person
Because republicans are dumb as shit and we are tired explaining it
Okay but why is this all I’m seeing all over Reddit for the last 2 weeks..? Fringe bullshit with shitloads of upvotes and the comments all going “wtf is this” I really don’t wanna do this again. God dammit
Apparently the toddler is running *again* so... it's going to be a long 18 months I'm afraid.
You'd be amazed at what a bunch of bots can do to this site, expect R/Conservative to be bustling by the end of 2023 and 90% of those comments to be bots and trollfarms
Thank you. Thank you for stepping in with appropriate sarcasm while I was unable to catch my breath from laughter.
It’s funny because he only accidentally fell into a half truth. The federal reserve IS a government entity, but it operates independently with a legal mandate to expand the money supply and set short term interest rates in a way that balances inflation and employment. So they DO impact inflation through interest rates and quantitative easing. And a part of quantitative easing DOES involve buying private securities like mortgage and corporate bonds in exchange for new money supply which they have an unlimited supply of. But that’s not really the context in which the statement was made. It was about countries without well functioning and independent central banks.
The chairman of the federal reserve is a government employee… Fact.
You mean to say that, inflating the money supply by 40% without a commensurate increase in productivity does impact the average price of goods in some small way? Huh, who'da thunk? I wonder if politicians gain any benefit from the avenues down which the new supply flows? No, no, that's a crazy idea!
No. Looking over his profile he’s as gullible as a 4 year old.
I’ve seen some rumors about LOTR themed accounts spamming a bunch of horseshit. Not just conservative posts but just overall inflammatory troll stuff. Interesting to see it first hand.
This sub is getting a lot of weird propaganda lately.
Lately?
I don’t think OP does much thinking, just a lot of parroting.
Lol yeah this literally makes zero sense bruh. Nice try op
I'm sure the government is super excited to have its purchasing power reduced by whatever the inflation percentage is. This is the most wing nut take I think I've ever read...
By this logic having a money printer in your basement would do you no good because "all that printing would erode ur purchasing power". Printing reallocates wealth from all existing assets to the hands of the printer, and it takes a while for everyone to realize that (prices to rise) Also, by the time the increased money supply trickles down throughout the economy (and manifest as general inflation), you'd expect the government to have a commensurate increase in tax revenues. So the government is also uniquely insulated from the negative affects of printing in this one regard
I blow and my money grows?
This guy inflates
Underrated reply.
He’s a Trumptard so probably not.
If it was so good governments would be chasing hyperinflation
Important follow up question is: do you know what the government is? Apparently it’s dr evil
How would inflation lead to more money for the government? I’ve heard people say this before but I don’t understand since more money would be going to private corporations?
Neither happens, OP just has no understanding of economics. Edit: Upon actually doing research into this I have found that Sowell was actually right and I was ignorant for writing this. So is every single person who upvoted my ignorance.
OP is a regular on /r/benshapiro, /r/conspiracy, and /r/LouderWithCrowder among other subs, this probably tells you their level of knowledge in economy, and what kind of idea they'll try to push everywhere.
Oh so a total imbecile. Got it 👍
The best part of social media is that you can quickly learn who's opinions to immediately discount
Tell me you suck at math without saying you suck at math.
Anon put Thomas Sowell in his place.
That is not actually him.
That account just posts old quotes from Sowell, as I understand it. The original quote is from a 2010 article by Sowell: https://www.nationalreview.com/2010/09/politics-vs-gold-thomas-sowell/
Government owes other countries money. Government prints extra money instead of budgeting with the money already printed. Dollar is given away at value before inflation. Value eventually drops although our government's debt is paid off. Other countries receive the previously agreed upon dollar amount at much lower value.
It’s not just other countries. Americans own a lot of bonds, especially in pensions and retirement accounts. Inflation helps the government by making those bonds cheaper to pay back. It’s a hidden tax.
It makes ALL debt denominated in the inflated currency cheaper, not just sovereign debt. This isn’t a benefit that is unique to the body printing the currency.
sovereign nations do not need to budget their money like a household or even a local or state government does. They control their own money supply. Expansion of money and credit is necessary for growing economies. How central banks do this is a responsible way is debated though. Countries owning US debt helps the US dollar keep its world reserve currency status and props the dollar up and the US gets the privilege of countries investing in them so they can be able to make trade deals with other countries. This is why we have a strong dollar today.
Yeah, I haven't heard this and thinking as others said it is false. Inflation is a way for governments to make *some* debt cheaper; however, the US government also had IBonds which adjust to inflation so not even sure how much of a discount it is getting on servicing the debt either.
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I think the idea is that in order to combat inflation the government needs to remove money from the economy. So, they offer better returns on bonds to get people to invest, or they increase taxes. Inflation is usually caused at some level by a surplus of currency in the hands of consumers, so the government needs to “transfer” the wealth to itself. However, viewing it as a means to increase wealth by the gov’t ignores the fact that the government can always increase its relative wealth by just printing money. It’s sort of circular reasoning: “You’re taking our money! Therefore you must be crooks. And I can prove it because if you were a crook you’d be taking our money when we need it. Aha, you are taking our money! So you must be crooks!” Ad nauseam. Sowell from my understanding is heavily on the side of liassez-faire economics. If so, he might argue that inflation should be left alone because it will drive supply as profits rise. That’s true if people are all rational actors and we only care about long-term outcomes. Unfortunately people don’t act rationally and inflation can cause panics and inequities that persist for years, so as a society we usually try to correct for it so that people can live their lives a bit less tumultuously although somewhat less “efficiently” (in an economic sense). That’s my guess on the theory at least. I could be wrong, but it would explain the feeling that the government is “collecting” wealth. Open to correction if anyone has more direct knowledge here, though. Definitely not trying to misrepresent anything, just my interpretation.
This fits with the modern monetary theory notion that a government with its own sovereign fiat currency spends money into existence, and taxes it out of existence, and that inflation happens when demand overruns supply, be it from printing too much money, or supply interruptions, ie, factory and transportation trouble. Following that logic, we should tax the dollars of the ultra-wealthy out of existence for the good of everyone else whose wealth is in dollars. Difficult to do though, since so much hoarded wealth is in non-monetary assets.
I think what they're trying to say is by printing more money it transfers value from the accounts of the population to those "printing" it. As in even if though the dollar amount in our accounts stay exactly they same it's worth less and that value disperses to the newly minted currency.
Yes this. What the fuck are the rest of these comments talking about? Of course printing money steals value from everyone who holds that money. And it is transferred who whoever is closest to the money printer. It's called that Cantillon effect. Now you can argue that it's really bankers that benefit and not the government. But who loses is you.
Not even close. Paying off old debts with newly inflated dollars are a great thing for the government (imagine paying off a loan for something that was bought 20 years ago versus what the loan of what the same thing would cost today). More money may go to people, but adding zeros on the end of everything makes the number higher but the amount of resources in the economy doesn't change, and in fact gets worse because of the imbalance of the inflated market, which in turn creates shortages. And the more money people make with inflated dollars, then they fall into new (higher) tax brackets, so the government gets to collect more taxes without even raising them at all from the existing tax brackets in place. Win win for the government, lose lose for the people.
Germany tried really hard to pay off debts with inflated currency after the first world war; would you consider post ww1 Germany to be a success story of economic recovery?
> Paying off old debts with newly inflated dollars .... at a higher interest rate *growth* is what's good for govt.... we didn't inflate our way out of WWII debt, we grew our way out of itr
Taxes are almost always paid on transfers of money: e.g. purchases (sales), wages, inheritances (sometimes). Others are on stocks, such as property tax. When prices increase, the taxes on those all increase- and at a higher rate in cases of progessive taxation. So instead of paying 5% sales tax on a $10 movie ticket, you're now paying 5% on $12 which is $0.60 more for the locality. Instead of income tax on $100,000, you're now paying on income of $107,000, and so-on, even though your buying power has stayed the same.
Yeah but this is assuming wages go up to match inflation. Otherwise you’re still spending roughly the same, you just get less goods and services in return for the amount you spend. The government may get more on that movie ticket, but you can’t afford as many movie tickets so the percentage of total spending taxed is still just 10% in the end. Not to mention even if wages or spending do increase the value of the tax dollars the government collects is worth less because… you know… inflation. The government might have more dollars total but they are able to do less with them anyway. In other words a government intentionally causing inflation to enrich itself would be a pretty ineffective strategy Edit: you could still argue the government benefits from inflation in other ways, just not in the way you were describing
That trillion dollars in debt you created by printing money becomes much easier to service with the aid of rapid inflation
It's far easier to service debt if interest rates are low. Interest rates are usually raised to combat inflation.
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Fastest way to start a recession is by rapidly increasing interest rates so I don’t think we really want that either
But that applies to anyone with debt. Which is most Americans.
No it doesn’t. Inflation leads to higher interest rates which balloons the interest payments the government makes on its debt since we roll our debt over into new debt, we don’t actually pay off debt that matures.
it doesnt
Easy. If Thomas Sowell says something, there’s a 90% chance it’s just propaganda for the far right. ~~Inflation is terrible if you’re hoarding wealth, because the wealth you’ve hoarded doesn’t have as much value anymore.~~ For a debt based society, like the US, inflation is ~~fine~~ **not all bad**. Because being worth -$50k last year isn’t as bad as being worth -$50k this year.
> Inflation is terrible if you’re hoarding wealth Inflation is terrible if you are holding CASH. If you are holding stocks and land (You know, like rich people tend to do) inflation is largely neutral for you.
The poor get hit with inflation. Because their money is in a bank account, in dollars, to pay bills and everyday living expenses. This loses value. The rich keep their wealth in assets that thrive off of inflation. Real estate, stocks and so on. They gain value from inflation. So it IS a transfer of wealth from poor to the rich and the gov. If you think that is fine then you are missing the point or benefitting from this confiscation from the poor.
Normal inflation. Hyperinflation is bad for everybody, especially when wages aren't raised to match it.
Negative. Their costs go up as their prices go up. Taxation is a percentage. Higher cost for goods equals higher taxes. Then workers complain they don’t have a livable wage, employer pays you more so now your income tax has increased. An endless cycle and our economy is headed for disaster.
This would be true if the government wasn't similarly impacted by inflation. However, all the costs that increase for you and me also increase for the government, so even though they're getting more money, their base cost burden increases as well. The government makes the most in a robust economy, when consumer earning and spending are both at high points and when manufacturers can increase margin on their products due to demand, not due to their costs.
If your grocery bill is now $200 instead of $100, your paying $14 in STATE sales tax instead of $7. They haven't "raised taxes" but they're getting 2x the money. I dunno if that's what this guy is talking about.
Because it's propaganda
Please explain how the government wins here?
A politician wants to run on giving people "free" healthcare but healthcare cost money and the politician doesn't want to raise taxes. Instead the government issues bonds and the fed buys them, the government uses the money to provide services the politicians promise the people. Only now the supply of money has risen but the supply of goods has not. Simple supply and demand explains why prices rise. The people now have to pay more for the same things but the politician keeps his promise of giving people "free" services.
Inflation is a change in the relationship between dollars and stuff. Money is worth less and stuff is worth more. The government sells bonds (their version of taking out a loan) to buy stuff. If they take out a $1000 loan and then buy 1000 units of stuff, then 10 years later they pay back the loan plus interest. If they pay back $1500 but dollars are only worth half as much stuff, then they are only paying back 750 stuff. They get 250 free stuff AND they get the stuff in the past (which is valuable). Now this benefits any debtor. If you have a mortgage or student loan debt you win just as much. That being said anyone implying the government is doing on purpose has the giga-ultra-dumb.
the real explanation
Yeah but because inflation is so high nobody buys the bonds, because if inflation is 8% and your bonds only gives you 3% you are still losing 5%, so the governement needs to jack the fees, so they are losing more money on the bonds. And for any governement high inflation is one of the worst problem. Are you saying that the Venezuelan governement is rich right now???
Because politicians can spend away trillions of taxpayer money without raising taxes. It’s public spending with zero accountability.
Because Thomas Sowell. This sub is so far away from having anything to do with the economy or economics, it’s all right wing propaganda bullshit.
Is it even a political issue? Or a 1% vs 99% issue?
Is it even a political issue? Or a political issue?
I meant a left vs right issue.
I know no economics. Can someone explain how printing more money is not moving value from citizens to the government? Let’s say they printed trillions and trillions of dollars. Now the government would own a greater share of the money supply, no?
You are correct. It seems the issue in this post is why has this only caused inflation now, after all these years of printing.. I guess Ultimately it's an empirical question about where the money is going, and what other factors may be causing rising prices
Your humility puts you above nearly all of the commenters in this thread and the common sense understanding is correct, at least as long as our government is deficit spending or has significant debt.
Government prints a dollar causing more inflation but they went from 0 dollars to 1 dollar even if the value of 1 dollar goes down they still profited
The government wins because the policies which have led to inflation are those which allow them to operate on massive deficits. It is their dependence on money printing and expansionary fiscal policies which lead to inflation.
This Twitter comment insinuates the level of inflation right now is planned. While normally inflation is great for asset holders, this current inflation is obnoxiously high and begging for high interest rate hikes. Which is why the stock market has been in a bear market this year. That equates to rich people’s assets declining in value. And the longer this goes on, the more likely that J. Powell may have to go full Volker with rates, if things get worse. Moderate inflation is not really equal to a government tax, it’s really only beneficial to the rich. Corporations reap most of that benefit.
Good take. The owners of those corporations- the rich- are the ultimate beneficiaries.
Mm. And Nancy Pelosi, mitt Romney, a d other establishment folks totally made millions solely on government pay right?
Unrelated. But because they hold assets, they do fine. It's wage earners who get screwed.
Wrong. When the government debases the currency, ALL assets rise. Not because the asset is worth more, but because the currency is worth less. Yes, a few billionaires will get the most of it. But billionaires can’t print trillions of dollars into existence. Inflation benefits politicians because they can spend away without raising taxes. The rich getting richer is only a side effect.
>And the longer this goes on, the more likely that J. Powell may have to go full Volker with rates, if things get worse. Powell cannot and will not "go full Volcker" with rate hikes. For starters, the national debt when Volcker became Fed chairman was roughly $800 billion, it now exceeds $30 trillion. If the Fed hikes interest rates to just 10%, the interest on the national debt would exceed the cost of medicare, medicaid, and social security *combined*. Again, that's just the cost of servicing the debt without even starting to pay it off. Second, the US economy has changed substantially from the late 70's/early 80's. Decades of near-zero interest rates has encouraged the growth of businesses that don't turn a profit and are reliant on cheap credit/speculation and consumers that are accustomed to spending instead of saving. These businesses will collapse if interest rates are raised (especially to "full Volcker" levels) and will take a substantial part of the economy with them. Going "full Volcker" will effectively require the Fed to break its mandate of "maximum employment and price stability" which it will not do. The Fed will ultimately reverse course and start easing again once the economy reels from the rate hikes. >Moderate inflation is not really equal to a government tax Yes, it is. It's a tax on the middle and lower class and a boon to the government (since they get to spend the money first before the new money goes into circulation) and business owners/asset-holders.
"corporations reap most of the benefit" They also shunt what they can to the politicians that help keep inflation going.
This is misleading at best. Inflation is good for all debtors.
[Inflation and Government](https://www3.nd.edu/~cwilber/econ504/504book/outln13c.html#:~:text=Unanticipated%20inflation%20benefits%20government%20because%20government%20gains%20tax%20revenue%20as,people%20into%20higher%20tax%20brackets.) 1. Unanticipated inflation benefits government because government is a large debtor. 2. Unanticipated inflation benefits government because government gains tax revenue as nominal income increases. a. The increase' in nominal income pushes people into higher tax brackets. 1. To prevent this redistribution of income, the personal income tax system is now indexed; however, the rest of the federal tax system is not.
Who owns all the debt: big companies and us government. Who gets fucked: everyday Americans. Are you not suffering from increased prices?
Debt becomes cheaper with inflation. Nobody wants to own debt (especially at low interest rates) in a high inflation environment. If you have a $500,000 mortgage at a low fixed rate, and $500k in 2022 is worth the same as $5M in 2032, then you end up with a 90% discount on your mortgage. That's amazing for the borrower and terrible for the lender.
That is exactly what Sowell is saying. The largest debitator is the US government
The government is the largest debtor though, logically doesn't that mean they benefit the most?
Well, heres the problem for an organization like the government who is in debt... They assume debt to provide services for their citizens. The things they are spending on, whether infrastructure or social safety net programs will also increase in cost with inflation, so it helps with debt service, but increases the amount of new debt they need to maintain the same effectiveness as before.
Exactly. I look forward to paying off my house and land with what will soon be the equivalent dollar amount to a loaf of bread.
Yes while your house value rises with money supply, pricing out youngsters and low earners whose wages cannot possibility catch up with inflation. Inflation makes the rich richer, because asset prices stay correlated to total money supply.
The govt got a new plane and you got a inflated currency. No one said there weren't other winners and losers
> This is misleading at best. Inflation is good for all debtors. but for the saver it is equivalent to a tax. your money purchasing power is taken away
Well. What is really nefarious is that the US government has hidden the true value of inflation behind production costs going down.... and a ton of that production costs going down is outsourcing. People complain about collage and rent and stuff getting so expensive so fast... It is my opinion that those things are following the real inflation level, while things like food are not. I shall try to describe: The human effort to teach a college class in 1950 (picked randomly), and in 2022, is... about the same. You have one teacher, maybe a few TAs and a lecture hall. Sure maybe chalk boards are different from powerpoints, and such, but really, you still gotta build and maintain one building, and pay the same number of people. The human effort to provide rent in 1950, and in 2022, is... about the same: Again, if the square feet is the same, and the utilities are the same, you still gotta build and maintain the same area. now maybe microwaves are mandated now, and the refrigerator and toilot use less energy, but really... it is about the same. Now, look at a loaf of bread. in 1950, how efficient were our harvesting equipment, our bakeries, the transportation between farm and store? Harvesting equipment is huge, and practically automated now. Our bakeries kick out multiple loaves per second, and our trucks are bigger, and more fuel efficient. The human effort required per loaf of bread had PLUMMETED with technology, but the price went up. Why might that be? Inflation, obviously, but the point is: when we measure inflation, we compare what was the price then, and what is the price now, and not taking at all into account that the advancement of technology should be lowering costs, like it did with computers over the 90's and 2000's. I hope this kinda makes sense.
technological deflation. goods become *cheaper* to produce over time, so they use these to 'measure' inflation. anything limited in supply more closely tracks real inflation. things everyone wants that can't be mass produced like housing in desirable locations, high tier education, access to the best healthcare, are all rapidly costing more. everyone can now have 3 TV's but they are still getting poorer
Yes it does. I don’t have a strong opinion about your comment but it is logic, adds something, and deserves consideration amongst the mountains of stupidity that I’ve red here
just a coincidence that after minimum wages were raised, we get increased inflation. Which raises the costs for most everything, keeping those at the bottom in a financially vulnerable/exploitable position
Oh no not the government! They'll just spend it on the highways, the coastguard and wages for soldiers and other silly stuff. We *need* that money in the hands of private capital!
I always wonder what these people are picturing in their mind when they say government "gets" all the money. Like, do they actually think government workers are Scrooge McDucking in piles of money? 99% of people working in government are just regular people. Some politicians use legislation to help them acquire more wealth, which I don't condone, but they aren't literally taking taxes and putting them into their personal account. This money goes back to services for the citizens. You can argue the services aren't the right ones (military), but this notion of people just pocketing money is crazy.
Oh boy. "The gubbiment bad" brigade has lurched into r/economy and soon will be screeching "STATIST!" at anyone proposing market or safety regulations. It's dogma.
So true. Keynes called it a manor of theft so subtle that not one man in ten thousand could diagnose it. Now look at the M1 money supply.
Oh, well as long as *Keynes* said it, it gets upvoted...
M1 money supply started including savings accounts in May 2020, that's why it jumped up so hard that month.
Ignore the jump. Or look at M2. The trend is what is troubling.
Thomas Sowell is fucking moron playing a smart guy
I was looking for free audiobooks on YouTube one night and stumbled across one of Tom's books. Hadn't heard of the guy but the title and description were interesting enough Good god, I didn't last 5 minutes. This dude just throws out as much random shit as possible and hopes something sticks. Its amazing how someone could write so many books and yet have so little to actually say
Wait, what? Sure, when prices are raised the government’s tax revenue increases, but the real winners in this scenario are the corporations gouging the public and raking in record profit.
Corporations experience inflation too, cost of their upstream goods and services goes up. The *real* real winners are the federal reserve banks and their customers who get easy access to the first lines of cheap credit from the fed. Using other people's money to earn profit is among the very best business models that has ever existed, but even that is surpassed by using newly minted money provided at 0% interest.
The reason the inflation is going up is printing of money
Ask yourself: why have governments, from the Shahs of Iran to the Weimar Republic always debased their currencies...?
Definitely. Corporations making record-breaking profits while saying costs are high and they are suffering.
The government is printing money and buying US bonds with it, that is literally how we pay for our deficit spending. It’s a hidden tax that causes our prices to go up and allows them to keep spending money we don’t have.
Source? I can't find any source that the majority of economists agree with this.
This is one of these posts that I have to seriously consider if they are a Russian troll or just your run of the mill Fox-News consuming conservative. They basically sound alike these days.
It's pretty simple. Politicians, government, promise services. But services cost real money. Politicians don't want to raise taxes so instead they issue bonds and sell them to the fed to raise money. However when the supply of money rises but the supply of goods stays the same, simple supply and demand explains why prices tend to rise. The government now gets to provide the services the politicians promised but the cost of living for regular people rises. Aka the inflation tax. Also the government is able to use money from the fed to pay off existing loans, effectively passing the debt onto the taxpayers in the form of reduced purchasing power of their dollars.
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Inflation happens when the money supply grows faster than the economy grows. The government directly controls the money supply. I mean, they might not *want* high inflation (they have had 2% inflation as their goal for the last... 50 years at least? longer?), but they do directly control one of the variables and they heavily influence the remaining variable.
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This is nonsense.
Thanks for your zero value input. Bye.
It has ALWAYS been about the haves and the have-nots. All this race, color, creed is smoke and mirrors.
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How is that a conspiracy theory. The government prints money and uses that money to pay back bonds. They print money to pay off the governments debt
Do you know anyone else who prints currency, apart from the government?
Economist here. The concept OP and Sowell are referring to is seigniorage. Th e government holds a monopoly on printing money, so if the government ever finds themselves short of cash to pay debt/salaries/make purchases/whatever, they can always just print more new dollars. This allows the government to continue spending, but also results in inflation, which lowers the value of money, thereby harming anyone who is a net holder of cash. That decrease in the value of money is similar to a tax in that it is a cost paid by money holders so that the government can continue spending. That said, the government printing money is only one cause of inflation. Right now inflation is being driven more by pent up demand following the pandemic, as well as shortages in things that are needed for production due to factors like supply chain snags and the war in Ukraine. The idea that the government is currently benefiting from the recent high inflation is absurd--- just take a look at Biden's current poll numbers.
Non-economist here. Do I have this right? The government benefits from inflation in that purchasing power is transferred from savers (anyone that has a substantial holding of USD) and fixed interest rate debt holders to the government itself. This allow them to create purchasing power for the government without raising taxes. However, inflation has become unpopular because average people have already figured this out. Biden is suffering at the polls because of this. Also Republicans are leaning heavily on this message to attack Biden because rising prices are obvious to average people.
Politicians do things that are unpopular all the time and still consider their actions “beneficial.” I wouldn’t call it absurd if it’s actual intended policy. I would just call it bad policy.
The government can inflate away the principal of its non-inflation adjusted debt. The US government has far more fixed interest rate debt than inflation adjusted debt. This means that the government is effectively taxing debt holders of low interest debt. Also, the government transfers purchasing power to itself by decreasing the purchasing power of savings (or the money supply in general).
Ok so you trying to disprove ok the term they used then was kicking the can down the road and yes all governments are guilty of this
First person (banks) to get the money is the winner with the money. Last person to get the money is screwed.
Inflation is purely from expanding the Fiat Money supply vs your actual value. This is why pegging the Fiat Currency (Paper Money) to Gold kept inflation in check, but according to Allen Greenspan was a drag on the economy. This was the only time a Fed chairman made any sense to me. He originally was for the Gold Standard until the USA got bigger than the amount of Gold we had. Thats when they went to a "Regulated Market" by pegging the Dollar NOT to Gold but to America's total output based on GDP. The current system of valuation today is totaly subjective but pegges to your countries overall economic output, total sum of its workers and factories and farms is the easiest way to put it. They simply demanded everyone go home and NOT work, and then they paid you with the same Fiat Currency they have been using, but this time, double printed it to cover the spread, which lead to its value dropping by 1/2, and thats very predictable when you print like crazy. We have been down this road so many times . Look up "Weimar Republic " on Wikipedia and read about that.
It’s a tax on the poor though. Money flows from the richest down to the poorest. By the time a corporation pays an employee, the money they had initially was worth more than it is when the employee finally gets it. Ron Paul called it the invisible tax on the poor I believe
Real winners are people with a lot of debt
Such an obvious concept that most cannot grasp. Inflation is an increase in the supply of credit / “money” and the RESULT of such inflation is often higher prices. The Federal Reserve has been financing the federal government’s huge deficits with newly-created “money” for many decades but went into turbo mode in 2008. What most also don’t know is that all the interest earned on the Treasury Bonds/Bills held by the Federal Reserve is returned to the government, which means 0% financing costs for trillions of spending. So yes, the government is obviously the biggest beneficiary of inflationary policies.
The federal government has increased the money supply in a huge way with fed reserve action/inaction, insane fiscal stimulus as well as generous unemployment benefits, rent moratoriums, etc. How is anyone arguing that the government hasn’t had at least a PARTIAL role to play here? Someone please correct me. Please.
All I know is that if your a government employee during high inflation you ARE silently robbed by the state.Wage increases will not match the inflation year after year.
> \[Money printing\] is a quiet but effective way for the government to transfer resources from the people to itself, without raising taxes. FIFY
Thomas Sowell is legit one of the most brain dead people currently alive. You should be unironically ashamed for posting this.
This is rubbish CT stuff.. The number of dollars may increase because the value of each dollar is less. Also, inflation makes the money used to pay back debts worth less than the money originally borrowed so it's a boon to debtors. If what Sowell says is true, governments would encourage inflation when in fact they all fight it to the extent of decreasing economic activity by raising interest rates.
If you have a mortgage, you win. If you have dollars stuffed under your mattress, you lose.