Replacing income tax with tariffs
A story making the rounds right now is that Trump proposed eliminating the federal income tax and replacing it with tari
No idea what u mean .
But fwiw monetary policy for inflation lagged around 18-24 months for the real economy .
Since u seem to be an easy right wing ideologue by the post I saw from you ? U will surely admire this reference ….
Economists Milton Friedman and Anna J. Schwartz studied long historical spans of monetary policy and the macroeconomy in the U.S. and U.K. and described the importance of long and variable lags.5 In his book A Program for Monetary Stability, Friedman writes, “There is much evidence that monetary changes have their effect only after a considerable lag and over a long period and that the lag is rather variable.”6
Friedman then quantifies such lags in monetary policy (although he characterizes this policy as operating through changes in the money supply, or “stock,” rather than through changes in interest rates) for the period he and Schwartz had studied, which covered the mid-19th to the mid-20th centuries.
On the lagged effects of monetary policy, Friedman wrote that, averaged over the 18 business cycles they studied, “peaks in the rate of change in the stock of money tend to precede peaks in general business by about 16 months and troughs in the rate of change in the stock of money to precede troughs in general business by about 12 months.” Moreover, he found a similar relationship applied to inflation. Today, we would associate what Friedman called “general business” with measures like employment level, consumption and real gross domestic product.
On the variability of lags, Friedman wrote that “the recorded lead has varied between 6 and 29 months at peaks and between 4 and 22 months at troughs.” For Friedman, the variability is the crux of the problem.
So yes money supply drop but for the real economy , its effect like inflation isn’t immediately for obvious reasons .
what do you mean "only 1k per month". 1k per month per 335M people is 4 trillion USD, approx double the total federal income tax revenue.Deficits are inflationary and surpluses are deflationary, that's uncontroversial.If you tax the rich for 1 trillion and give that to the poor that's very inflationary, because the rich weren't spending them, the poor would be.If you cut taxes
I don’t think kids got 1k per month ….to equate 335 millions Americans .
Nah .
The creation of money isn’t just by the government.
Banks do as well .
My point was when the government gave household 1k per month or some similar amount , it’s kinda of like a reimbursement of taxes that people was suppose to pay .
So the equation is easy .
People don’t produce more but have more money into their hands will be inflationary .
When rich get the money , the financial assets goes up (that is where they spend their money).
When poor people got the money ,cpi inflation goes up and eventually asset prices goes up because, well people spend and the owners of assets (the rich) gets paid off eventually through more profitable financial assets (stocks).
U can try to mix the issue with deficit spending , where tax comes from and w.e else but the principle of supply and demand won’t change .
More taxes people have less money (deflationary).
Less tax people have more money (inflationary).
The economy as a whole (government +pricate sector) will determine if we are in a deflationary or inflationary period .
The economy is more then « if u cut the tax from X it’s equal 100% x result .,..
More variables are at play .
Assets prices don't contribute to inflation.
If house prices double but rent stays the same, that's 0 inflation
If you tax the rich for 1 trillion and give that to the poor that's very inflationary,
Assuming a balanced budget, no, that wouldn't be inflationary. Sure, you would see prices increase in stuff that poor people are buying as demand increased, but this would be a temporary flux. And this would be balanced out by lower prices in capital goods industries, which is presumably what the rich would have spent the money on. So you wouldn't see overall sustained increased prices, but you would see a short term increase in something like CPI probably. But as resources were bid towards consumer goods industries we'd except prices to go back to normal, assuming total production remained constant. And then once the redistributed wealth runs out i'd expect a crash of some sort.
Although how exactly you tax the rich for 1 trillion is important to understanding the situation as well. Are we talking a wealth tax here or what? Because that would presumably cause a lot of rich people to not enter your country and/or leave it as well.
Assuming a balanced budget, no, that wouldn't be inflationary. Sure, you would see prices increase in stuff that poor people are buying as demand increased, but this would be a temporary flux. And this would be balanced out by lower prices in capital goods industries, which is presumably what the rich would have spent the money on. So you wouldn't see overall sustained increase
Assuming a balanced budget yes, it would be.
It's inflation even if it is temporary.
The rich simply didn't spend that money, it's in their bank accounts. From there it's sometimes loaned to agents which will use it to exercise demand on the economy but with a time lag, and bank lending isn't restrained by available funds anyway in a fractionary reserve banking system.
Using more technical parlance if you want, the velocity of money gets higher if you put it in the hands of the poors.
Inflation doesn't depend only on money quantity
Assets prices don't contribute to inflation.
If house prices double but rent stays the same, that's 0 inflation
If u think house prices doubling in 10 years should not be count as inflation I don’t know what to tell you shrug .
FWIW
https://www.brookings.edu/articles/how-d...
Over time, changes in house prices do predict changes in rents—although the relationship is far from one-to-one and occurs with long lags. Xiaoqing Zhou and Jim Dolmas of the Dallas Fed find that the correlation between house price growth and OER inflation peaks at about 0.75 after 16 months.
We all know the cpi have big problems (for many reasons) and a bit fix by the government and some items and interpretation do not make much sense (like housing cost being replace by rent) but we still use it as a general economical variable nonetheless because there isn’t anything much better .
But to claim house prices , stocks, gold do not suffer inflation just because some government decided not to included them in their cpi calculation , and so inflation do not exist , it’s pretty ridiculous .
