tldr: Stimulus package will spark the inflation. QE did not spark the infrlation, but the stimulus(wich will 95% will be spend on goods/services) will. (well, ofc the money going back to economy boost inflation more than money not spent yet. but thats not the point)
If the stimulus money only allowed people to maintain their income level rather than increase it, then the inflation pressure can't be coming from increased consumer spending.
GDP only dropped 2.3% last year [0], so there's approximately the same amount of stuff to buy.
The linked article reads to me like an incoherent attempt to scare people into thinking the stimulus was a bad idea.
Monetary stimulus (QE, Low interest rates) is not fiscal stimulus (spending). Maybe we need to do a lot less buying assets, and a bit more spending on people and jobs. The parent is recommending the latter (spending), not the former.
what does money not spent have to do with anything? it's money that didn't exist that was created. The point of the article wasn't to talk about what causes inflation, its to talk about how inflation is a tax, and the stimulus package turned a period of deflation into a period of inflation.
That blurb wasn't posted posted in the context of stimulus: it was posted in the context that we're entering into the same stagnation that Japan has placed themselves in where there's a feedback loop between low consumer demand and businesses cutting both wages and hiring, further hurting consumer demand which then further hurts the economy.
This stimulus is different from QE in the sense that it went directly to consumers. QE never went directly to consumers, but instead stayed with banks. Personally, I think you can see QE's inflationary effect in both the stock and housing market, but that's just me.
The statement about the lack of inflation from QE and other stimulus programs from 2008 is pretty questionable. There's been little inflation as measured using usual consumer price indices, but the construction of those indices is typically fairly focused on consumer goods and underweights the assets that rich people tend to invest in (stocks, real estate, bonds, etc).
The QE and stimulus programs from 2008 were significantly more targeted toward the upper and upper-middle classes (arguably without that much trickle-down), and so there wouldn't be much significant inflation as measured by consumer price indices.
But if we look at the assets that rich people invest in (since it's mostly wealthier people who benefited from the 2008 stimulus programs), then I'd say there's been a significant amount of inflation - P/E ratios for stocks have been historically high in the last few years, real estate in desirable cities has gotten significantly more expensive, and bond yields have been low.
We seem to be already seeing some of the same, with the stock market being pushed up by the Fed's commitment to 4T+ in stimulus this time around and ever lower interest rates.
QE was meant to work in tandem with the stimulus bill put forward by President Obama. The stimulus bill would create jobs to help fuel demand, and interest rates would stay low so that loans could be made more easily to companies that contracted with the government, thus helping them to expand and creating more demand in the economy.
Unfortunately the stimulus bill wasn't large enough (even though it was 787 billion dollars). This was the largest recession ever. The Great Depression needed a stimulus bill called World War II. What followed were over 2 decades of prosperity. The most recent stimulus plan simply wasn't big enough to allow companies to grab Wall Street's attention, so Wall Street parked its money elsewhere.
TL;DR: not enough jobs were created so people got poorer while Wall Street got richer.
> While Federal Reserve officials and economists acknowledge the temporary boost, it’s unclear whether a more durable pickup in inflationary pressures is underway against a backdrop of soaring commodities costs, trillions of dollars in government economic stimulus and incipient signs of higher labor costs.
I still have issue with the characterization. It's "against the backdrop of ... trillions of dollars" as though increased price levels and increasing the money supply by 25% are unrelated.
Many times these articles write about stimulus and people think its the $1600 checks some people received. But what doesn't get reported is what the lion share of the money actually went to, buying up financial assets from banks.
" ... which in turn, will cause inflation and soaring of prices of gold and other assets."
Whether they do that or not, it is not likely to cause much inflation. Funding for the scheme is meant to be taken from other, existing, programs, so the total stimulus is zero or near zero. Even if it does boost the price of some luxury items, and I am skeptical that will do so to any significant degree, that would simply reduce the consumption of said luxuries. Also, you aren't going to buy much gold with 7k p.a..
> isn’t triggering the desired effect of a stimulus package
That's why Congress people were careful not to call it a stimulus.
The payment was to pay people to stay home safely without (hopefully) losing their livelihood. It wasn't about stimulating demand for the economy.
Yes, there are worries about deflation if consumers don't spend like they did before (although consumer spending in the USA has been out of control for too long).
this story could be used to teach some macroeconomics lessons. There’s direct stimulus causing a boom(bills printed) because they spend it so fast, lending at 0 interest, and how directly a countries faith in their money can cause a devaluation
Actually the website is fine. I mean that the OP was double counting money injected in the economy by adding up legislative actions and executive actions with federal reserve actions. If you consider bonds money, then QE isn't injecting new money because that removes bonds. If you don't consider bonds money, then the stimulus spending isn't injecting new money, because that was funded through bonds.
The article refers to changes in tax policy that go beyond pandemic stimulus.
Focusing only on pandemic stimulus misses the big picture.
Either way, injecting money into the economy at this scale creates significant inflation. This inflation reduces inflation-adjusted incomes. It doesn’t matter all that much if it’s going to people or businesses, it’s going to cause inflation.
its a poor article boasting a flashy headline.
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