Talking with friends about various arguments, that could be interesting for the people on the Left, it can be useful to say, that to get its money, the welfare state needs to inflate money in an unholy alliance with the banks. Basically, they have to defend the guarantee of fat profits to the evil banksters and big business, who they are so opposed to. And the transfer of wealth from the poor to the rich is surely something they won’t feel comfortable around.
That is all nice, but what if a smart Leftie would say, well, then, why don’t we skip the banks and give it to the poor directly? Let’s just print the money and let the transfer of wealth work the other way around! It’s all for the poor you know!
We have some ideas on this, but would like to hear your answers.
(This was most likely answered elsewhere, if so, please point me to the thread or article.)
Two answers, the quick and easy to understand one, and the more complete but complicated one:
Because that would create a class of people completely dependent from goverment that would have no oportunity to progress due to the rampant inflation. They would be slaves to the goverment.
Because it distorts the capital structures and creates bubbles, making everybody poorer.
The pie [of physical objects like food etc, not paper money] can only be eaten once. Sure, you can print money and thus transfer wealth from one person to another, but once they spend the money, where is the next meal coming from? If you give them more paper money, it won’t help much, because there is less pie to go round now that the first chunk has been bitten off. Eventually there is no pie left at all.
In other words, we should be worrying about something else completely, mainly how to make bigger and bigger pies. Printing money doesn’t do that. On the contrary. Bigger pies are made by underconsumption now, in other words saving up and investing. Printing money certainly doesn’t lead to saving money, because people think “Spend now while the money is still worth something.”
Rapid redistribution of wealth from the productive labouring and entrepreneurial classes would discourage production, hamper investments and also mean cuts in jobs that could have been provided for the poorer workforce. Sure the poor might see the amoutn of money they have in their pockets increase but there could scarcely be a faster way to make the money they hold both simultaneously worthless and chase around a smaller quantity of goods than via the above mentioned scheme.
One day, I hope people finally realise the principle that there is truly no such thing as a free lunch is as fundamental as the laws of thermodynamics.
Because savings are the only way poor people, or nations, can get out of poverty. If you devalue people’s savings, you trap them in poverty.
My mother told me of a time my father and grandfather saved for many years to buy a car in the Soviet Union. When they finally had enough money, on the day they went to buy the car, the government announced a massive devaluation, and their savings were gone.
