If You Didn't Get $12,000 From the Government This Year, Consider Yourself Among the Scammed

 In response to my post, On Chapter 4 Of Stephanie Kelton's "The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economics." Domminick Armentano writes in the comments:

Good argument RW but let's see whether it always applies. Assume the Covid 19 Relief package provides loans or actual money to owners of firms where employees have already been laid off. The money is printed out of thin air. The owner uses the money to produce new goods or services (the old goods he was producing 5 months ago are gone) and pay new income to workers (the old income that was generated 5 months ago is gone). So, first glance, I see new output and new income produced with the new money and I don't see any "bidding" away of labor resources from some alternative use. Who is "crowded out"?

This is all part of an argument I use to reject out of hand. My assumptions was always: Everybody working; resources and the supply of savings relatively fixed: there had to be crowding out with deficits and monetization (and rising interest rates). BUT rates have been falling and have stayed down for a decade or longer...even long rates. The gov. and Fed. have engaged in massive deficit spending and monetization for the last 15 years through two sharp recessions. There has, of course, been some "inflation" in some (asset) prices but certainly NOT the sort of numbers we saw in the late 1970s and early 1980s were I remember borrowing money at 12%.

RW response:

I see numerous problems with this take. The problem is not that owners of firms don't have things to produce. The problem is government lockdowns are preventing them from producing. No money is needed to launch owners into production mode, the restrictions on production via lockdowns have to be removed, that is all.

Indeed, black markets are  developing in extremely restrictive areas such as San Francisco where even haircuts are now given after a secret knock at a door and then entry is provided to the salon with boarded-up windows. This is not an aggregate money problem, it never is, it is an abusive government problem.

As far as this comment, assuming there is an owner mad enough to launch a new business that could be locked down at any moment:

 The owner uses the money to produce new goods or services (the old goods he was producing 5 months ago are gone) and pay new income to workers (the old income that was generated 5 months ago is gone). So, first glance, I see new output and new income produced with the new money and I don't see any "bidding" away of labor resources from some alternative use. Who is "crowded out"?

If a product has a price and is bid away by newly printed government money, then the person that was willing to pay the lower price is crowded out. This has nothing to do with added production. Markets clear, new bidding just distorts who gets the factors of production that is all.

As for price inflation, to buy into government propaganda indexes that there is little price inflation is always dangerous. As I have pointed out, the goods people are buying are facing significant inflation.

Food prices are up over 3.5% over the last 12 months, whether it is food bought for home or away from the home.

It should be remembered that President Nixon in 1971 imposed wage and price controls when the CPI was only 4.0%. 

To not be concerned about current price inflation of basic goods, makes one less responsible than Richard Nixon.

Further, the Great Money pump was just started earlier this year. All such money pumps start with a climb in capital assets and we are seeing that price explosion in capital assets, everything from the stock market to housing prices.

It takes time for the money to work its way to the consumer economy. That the increase in food prices is already over 3.5% is frightening. 

To not be concerned about price inflation at the present time makes one a good candidate for a position on the Federal Reserve Board of Governors. However, as I pointed out in The Fed Flunks: My Speech at the New York Federal Reserve Bank, the Fed has never gotten anything right.

The irresponsible Fed printing of nearly $4 trillion dollars in less than a year is outrageous. That is $12,000 per every American man, woman and child. It is very difficult to see how this will not make price inflation a major story in 2021. Did the average American get $12,000 from the Great Money Pump? Not a chance, the elitists got it and that is about it. As Nixon pointed out in 1971:

Inflation robs every American. Every one of you the 20 million who are retired and living on fixed incomes they're particularly hard-hit. Our homemakers find it harder than ever to balance the family budget.

Money printing is always bad. It is a scam designed to shovel funds to those close to power at the expense of the general population.

If you didn't get $12,000 from the government this year, consider yourself among the scammed. This is the beginning and end of the story.

-RW