No, the US economy isn’t going to collapse. Don’t worry about stimulus inflation, don’t worry about stock bubbles.

I’m seeing dozens, maybe hundreds of these stories, all across Medium and other sites that the US economy is “on the verge of collapse.”

It’s not happening. It’s changing, yes, but collapse is such a strong word, and not at all accurate.

Let’s look at the reasons people are giving first.

All this stimulus money is being drawn out of an inkwell, the influx of ‘funny money will break everything!

First off, not just the U.S., but the entire world runs of what’s called “Fiat Currency”. I could give a long run down on what it is, but the short version is, “It’s worth is ‘just because we said so’.” As long as the US continues to say so (which it will), the US currency will continue to be worth something. Further, the US has been making more of this ‘funny money’ all the time for a century. What’s different this time is instead of the U.S. making funny money and then giving it to banks, it’s making funny money and handing it out to people in the form of a stimulus.

There’s a lot of math I could do to talk about the effect of this on the economy, (And if you want to learn in a hurry, I recommend Robert Heinlein’s book, “For Us, the Living”… horrible novel, but one of the best economics textbooks ever.) but the short version is:

Banks like to make money for themselves. People like to take care of their families. Therefore, people will spend the money and boost the economy, but banks will try to use the money to take more money from other people.

As such, for government use of newly printed money, using it on a public stimulus is the absolute king, top-of-the-hill, unapproachable, unquestionable absolute ruler of best economic uses.

This is a result of one of the most interesting quirks of the American economy. Whenever the U.S. spends a dollar on public stimulus, this makes the US two dollars in gross profit for the U.S. (for a net profit of 1 dollar). When the U.S. spends a dollar on the banks, it makes 20 cents gross profit (for a net loss of 80 cents.)

To point out how this works, I’ll show you how it functions.

Lets say Bill gets a government stimulus of a dollar. He goes and buys a coffee at his local favorite shop. (He pays sales tax on it.) The coffee shop (which pays income tax on it), then puts part of that dollar towards the waitress (paying payroll taxes on it, and she pays income taxes on it), then she spends what she got of it as part of a TV purchase. This generates more sales tax, payroll tax, income tax, and so on.

The result is everybody got extra money, and at the end of the day, Uncle Sam gets tax income on it each time it changes hands. On average, money given out this way doubles in value. And this isn’t some magically inflating money, because when people have more money, not only does demand go up, but business income goes up which increases supply shortly thereafter. It’s an everyone wins situation…

… well, except for one entity.

You see, when people get a stimulus, that’s money, for some people, that they won’t need as part of their loan. The one person who ‘suffers’ (if you can call still being insanely wealthy and powerful suffering), is the banks. People need them less when there’s a stimulus.

Which brings us to who ‘wins’ when money is given to the banks.

The answer is… banks.

That’s it.

When the bank gets cash as a gift from the government, it’s response is… use it to back loans. Instead of that money going to someone to start passing around, it is loaned out to that someone instead, doesn’t actually increase the economic flow, and actually will siphon out some of that person’s money interest, overall lowering the amount of money that will get passed around. The banks get a larger piece of the pie, and everyone else suffers: citizens, government, non-bank businesses, everyone.

Here’s another ‘reason’ people are giving of the ‘coming collapse of the U.S.’

The stock market is getting unstable! It’s going to fall/burst/bubble/etc. Something that sounds bad! It must be horrible for the US economy if that happens!

Here’s the thing… the health of the stock market is as useful for judging the US economy as using the health of ticks to judge the health of a dog.

First off, a thing people often forget about stocks. The stocks are a market. That’s why it’s called the Stock Market. Just like a grocery market, the fish market, the furniture market, etc. All that the stock market is, is yet another store. And the thing is, stocks are one of the most useless ‘resources’ to the economy. You don’t use a stock to build a house, you don’t use a bond to season your restaurant’s roast, you don’t have a hedge fund sew into a clothing pattern, you don’t use an index fund to repair your car. All stocks do are move money around in an internal system (from company to stockholder, from buyer to seller). However, stocks do pay dividends. This means the company pays stockholders. This means a company has less money to hire people or to move the economy, and many stock funds are used to… buy more stocks. As far as the actual economy, stocks are a negative commodity.

The only connection the stock market has to the real economy is its ability to predict the likelihood of people freaking out about the stock market (which, when they freak out, is a bit of a problem, but that’s on the topic of nearly any national freakout, not just stocks.) If the stock market were to instantly disappear tomorrow, and people didn’t freak out, business could proceed as normal, unaffected. Will people lose money in the stock market if the stocks burst? Sure. But that money doesn’t disappear, someone else has it, and economy proceeds as normal. If you’re worried about the stock market busting, then don’t invest in it. Simple as that.

All-in-all, freak-outs about the US economy are just fearmongering and buying into bank propaganda. In short, don’t worry about it.

Politics: [Glasdog (Geo-Libertarian Anarcho-Socialist for Directly Organized Governance)] Gender: [Bigendered] Sexuality: [Bisexual] Religious views: [Neophist]