Thoughts

Money Supply

hey if you have a few minutes to burn, i can go into depth about the whole thing at a large macro economic perspective

this is the thing that worries me in the context of our current society--people complain about income inequality but it's a symptom of something else

for a healthy economy, you need cash velocity and money needs to be moving through the economy

one way to tell this isn't happening is when interest rates are negative (europe) or very low (US)

a negative interest rate basically means that you're punished for hoarding wealth, so you're incentivized to invest in something just to not erode your position

and a low interest rate is the fed/gov saying "plz use more money, kthxbye"

i got into a lot of reddit arguments over why the latest stimulus wasn't going to cause inflation and then i gave up because this is something that's hard to grasp vs just saying "money printer go brrr lol"

when the government injected 2-3 trillion into the economy, let's say everyone got that $1200 stimulus and a lot of businesses got free money in the form of the PPP loan, and other businesses got entirely bailed out

so all of this cash shows up in the market, so of course you expect inflation

but what actually happens? most of the cash gets spent at costco, amazon, walmart, etc

and those companies have billionaires sitting at the top--whatever doesn't go into their accounts, stays in the corporate account (aka apple), and the leftover gets kicked to shareholders

and the lion's share of shareholders (because of existing income inequality) are very wealthy ones (from a quantitative perspective)

so all of this cash just get recentralized into a handful of corporations and wealthy individuals and the actual money supply did not increase (or maybe it did, for a blip of time)

and because all of this "wealth" just sits there, you get no inflation

this is the biggest problem that the fed is faced with--they have no tools to correct this behavior--QE and cash injection just leads to more wealth inequality

a secondary effect: when you have people on social media saying "if we just tax 50% of the rich 400 people's wealth, we could cure all infectious diseases!"

not that simple--all of that money is locked away, and if it suddenly appeared and got into play, all of the money would be worth less because now you've actually activated inflation

by sitting in wealthy people's accounts, it's artificially making real cash more valuable

money is a proxy for exchange of goods/services/power, and you can't magically cure malaria and poverty by thinking you'll go raid wealthy people's accounts for magic beans--you would need to use said magic beans to get people to do real work and there's a lot of work to be done so you need a lot of magic beans at which point they're not really all that magical and motivating anymore

anyway, this effect happens on a smaller scale in corporations

and this is why antitrust is critical for the economy--what good does it do to have 5 giant lumbering corporations that just centralize cash and never do anything with it?

break them apart, invest in startups, but real startups, not the academia or big corp version (you know what i mean when i say this)

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