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  • #22403

    Hello Dr. Herbener,

    If inflation (an increase in the money supply) benefits the early receivers of the money, then would a policy of continually giving the newly printed money to the poor first help reduce poverty?



    Please forgive the delay in my response.

    Certainly, the Federal Reserve could reorient monetary inflation to benefit groups other than bankers, the Federal Government, borrowers, etc. But, it would take a radical change in the manner in which the Fed inflates the money stock. Its hard to see how its current method of open market operations to by redirected to subsidize the poor. Logistical and behavioral problems aside, the Fed could print currency and hand it out to the poor at its Federal Reserve District Banks or open checking accounts at commercial banks for the poor and and then credit those accounts. Such a procedure would subsidize the poor at the expense of later recipients of the new money. Because such a policy would continue the ill-effects of monetary inflation, it would be more inefficient for the economy than a tax-and-transfer policy.

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