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0 pointsOscarCunningham4y ago0 comments

> So if they go on more vacations, buy a flashy car, have more parties, you are saying that the Fed "takes that money straight back" and that it doesn't go to travel agencies, car dealers, caterers, party planners, service workers etc?

They do get the money. But the world hasn't become any more productive; the number of goods and services being produced is still the same. So when they spend that money and consume goods and services, someone else must necessarily be consuming less.

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croon4y ago

> They do get the money. But the world hasn't become any more productive; the number of goods and services being produced is still the same. So when they spend that money and consume goods and services, someone else must necessarily be consuming less.

More flights (its' virtue another discussion), more cars produced, more parties planned, food made, services rendered.

Of course production has gone up, and will continue when those people spend their money on their (smaller) houses etc.

And are you making your claim as a counterpoint to my scenario compared to inheritance? Because pushing money down the line to sit on it certainly does not make the world more productive.

OscarCunninghamOP4y ago

> More flights (its' virtue another discussion), more cars produced, more parties planned, food made, services rendered.

That would only be possible if we had previously been using the labour and capital to produce those things at less than 100% efficiency. That's not what happens. Businesses will always have been trying to operate as efficiently as possible. When demand increases they either have to increase prices or increase supply. Increasing prices will mean that someone else doesn't get the good or service. Increasing supply will mean employing extra labour or capital that would otherwise have been used elsewhere. Either way, spending money doesn't cause total productivity to increase.

(Unless of course the Fed screwed up and put us in a deflationary recession. In which case, yeah, extra spending would help. But that's only if they screwed up. Normally, they have already optimised the variable you're trying to adjust. Adjusting it away from the optimum will just cause them to push it back.)

croon4y ago

> ... or capital that would otherwise have been used elsewhere.

Or not used.

Throughout all of this, I don't generally disagree with your reasoning, but you're basing it all on assumptions I reject.

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croon4y ago

More flights (its' virtue another discussion), more cars produced, more parties planned, food made, services rendered.

Of course production has gone up, and will continue when those people spend their money on their (smaller) houses etc.

And are you making your claim as a counterpoint to my scenario compared to inheritance? Because pushing money down the line to sit on it certainly does not make the world more productive.

OscarCunninghamOP4y ago

> More flights (its' virtue another discussion), more cars produced, more parties planned, food made, services rendered.

croon4y ago

> ... or capital that would otherwise have been used elsewhere.

Or not used.

Throughout all of this, I don't generally disagree with your reasoning, but you're basing it all on assumptions I reject.

j / k navigate · click thread line to collapse