More on Evil Rich People
If you have a dollar and you tear it up or put it in a mattress, you have done a public service. By removing money from the supply you have increased, however slightly, the value of all the others in circulation.
But who would tear up money! Lets say you put it in a bank. The bank is going to take your dollar and loan it to someone else. That someone else is, presumably, going to invest it in a home or in a business and hopefully reap more from the dollar than its face value. The bank gets interest and they pass a bit on to you for being such a nice guy and letting them use it.
Now we have these evil rich people… Horrible… They have a lot more than everybody else! Some say we should tax it away and spend it on those who have much much less. This works only in so far as you realize that now you have increased demand for, food lets say. Increased demand means increased prices, so the dollars you redistributed will now buy less of whatever the needier people needed.
Usually that would mean that supply would be increased. Those evil rich people typically don’t keep their money in mattresses (which would be fine) but they keep it in bank accounts and other investments which is what drives supply expansion.
You may see the issue, I hope so because there will be a test next Friday and it’s 50% of your grade.
That’s right. By redistributing we gave everyone more money (it could be government support like food stamps or something, rent subsidies, whatever), but it can now buy less and there is less capital available for the market to quickly react by expansion.
Practically no problem was solved. The amount of money you have makes no difference if it can’t buy you what you need. If we stick with food, you might notice that money has little or no nutritional value (although 90% of it does apparently contain cocaine, which makes me wonder what they are doing over the at bureau of engraving and printing…). If people were going hungry before, they are still going to be hungry, the hunger will just be spread more evenly.
If we back up a bit, the rich having amassed great wealth isn’t going to do anything for hunger either. There is no reason to have an expanded supply if there is no more demand.
Here’s an idea. Don’t worry about the rich! Lets have the government stop printing money! Yes a strange concept. Fiat currency is just another way to tax, but through inflation. Government needs money, government prints money, government spends money, money supply increases, money now worth less, government pays back borrowed dollars with dollars worth less than the original dollars…
Wait… WTF? Yes the wonders of modern economics.