Doesn’t that make inflation worse?
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I’ve got $20000 dollars and want to buy a car.
There are 5000 of the car I want to buy in existence. It’s a reasonably popular car and a lot of other people want it as well.
The government suddenly decides to give everyone and extra $20000.
There are still only 5000 desirable cars.
I offer the $20000 they wanted for the car, but the seller says no. Someone else having just made a windfall of an extra $20000 is willing to use that gifted money and the $20000 he originally had to offer $40k for the car. Is the dealer going to give you the car for $20000 or give it to the guy offering $40000? I think you know the answer.
Inflation is too much money chasing too few goods.
We have a double whammy here. The government gave out loads of “free” money during the pandemic since they made the awful decision to shut down economy instead of removing the people at risk. Shutting down the economy also reduced the supply of goods since they shut down production. So we have too much money chasing even fewer goods which makes the inflation even worse. The supply chain is still fixing itself somewhat, but we still have a huge excess of money floating around. The Fed is trying to cripple the economy enough to bleed out the excess cash without killing the economy. The government still spends like drunken sailors and keeps printing more money.
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