I disagree about it being inflationary. I’ve noticed that politicians, media, and even economists tied into politics really misunderstand inflation. They only want to understand it as a product of the state of government, ie the deficit.
Inflation is really about consumers verse producers. If there are more consumers and fewer producers you are going to see inflation. You cannot consume what you don’t produce and the increased competition to be the one to purchase the good, service, or labor, produces inflation. You also can’t consume something consumed by someone else. So when the government spends money on real physical things or hiring that causes inflation because those physical goods, labor, or mental effort applied by for example contractors can’t be applied elsewhere. This is why when the government spends it causes you to experience inflation, and not because a number elsewhere (the deficit) went up. If it did it would be spooky action at a distance without explanation.
So the inflation reduction act causes inflation because it spends money and competes with consumers and soaks up more labor into the government. The student loan forgiveness, which I don’t support, doesn’t cause inflation because it does absolutely nothing to change the cash flow of consumers (we weren’t actively paying off those loans anyway) and neither does it modify any aspect of the labor market.
But many economists are empirical rather than epistemological/rational. So deficit has a high degree of correlation with inflation because of that spending, and also because the value of the US dollar is owed to it being a tax payment token and so increases in taxes can reduce inflation… so there is a very very high degree of correlation, but if you don’t understand why that correlation occurs you can think that one immediately drives the other which isn’t true at all.
I would suggest that the government has some amount of duty to regulating the supply of money, though?
The student loan forgiveness, which I don’t support, doesn’t cause inflation because it does absolutely nothing to change the cash flow of consumers (we weren’t actively paying off those loans anyway) and neither does it modify any aspect of the labor market.
Wouldn’t it, though, encourage more reckless attendance of university and affect fiscal policies of Universities?
because the value of the US dollar is owed to it being a tax payment token and so increases in taxes can reduce inflation…
I’ve heard something like this before - that taxation is actually the destruction of money, and not really the collection of money. I am not sure what to think of it.
I’ve heard something like this before - that taxation is actually the destruction of money, and not really the collection of money. I am not sure what to think of it.
More and more people are catching onto it. When you look at the history of money it’s more apparent. Money was often instituted where a conquering empire needed to supply its soldiers. You could ship goods constantly to an occupied territory, creating a huge cost, a logistical nightmare, and depriving your citizens of the goods you send. Or you could physically steal from the people in the newly annexed area compelling insurgency. Or you could print up some tokens and give them to your solders and tell all the people that they need to give you ten of these by years end. Now your solders can just buy from the market.
Taxation gives money value so that what they print has enough value to be worth printing. As long as there is some taxation the money has some value, and their money printer enables them to print any arbitrary amount of value on demand as a result.
I disagree about it being inflationary. I’ve noticed that politicians, media, and even economists tied into politics really misunderstand inflation. They only want to understand it as a product of the state of government, ie the deficit.
Inflation is really about consumers verse producers. If there are more consumers and fewer producers you are going to see inflation. You cannot consume what you don’t produce and the increased competition to be the one to purchase the good, service, or labor, produces inflation. You also can’t consume something consumed by someone else. So when the government spends money on real physical things or hiring that causes inflation because those physical goods, labor, or mental effort applied by for example contractors can’t be applied elsewhere. This is why when the government spends it causes you to experience inflation, and not because a number elsewhere (the deficit) went up. If it did it would be spooky action at a distance without explanation.
So the inflation reduction act causes inflation because it spends money and competes with consumers and soaks up more labor into the government. The student loan forgiveness, which I don’t support, doesn’t cause inflation because it does absolutely nothing to change the cash flow of consumers (we weren’t actively paying off those loans anyway) and neither does it modify any aspect of the labor market.
But many economists are empirical rather than epistemological/rational. So deficit has a high degree of correlation with inflation because of that spending, and also because the value of the US dollar is owed to it being a tax payment token and so increases in taxes can reduce inflation… so there is a very very high degree of correlation, but if you don’t understand why that correlation occurs you can think that one immediately drives the other which isn’t true at all.
Interesting
I would suggest that the government has some amount of duty to regulating the supply of money, though?
Wouldn’t it, though, encourage more reckless attendance of university and affect fiscal policies of Universities?
I’ve heard something like this before - that taxation is actually the destruction of money, and not really the collection of money. I am not sure what to think of it.
More and more people are catching onto it. When you look at the history of money it’s more apparent. Money was often instituted where a conquering empire needed to supply its soldiers. You could ship goods constantly to an occupied territory, creating a huge cost, a logistical nightmare, and depriving your citizens of the goods you send. Or you could physically steal from the people in the newly annexed area compelling insurgency. Or you could print up some tokens and give them to your solders and tell all the people that they need to give you ten of these by years end. Now your solders can just buy from the market.
Taxation gives money value so that what they print has enough value to be worth printing. As long as there is some taxation the money has some value, and their money printer enables them to print any arbitrary amount of value on demand as a result.