Every level of our economic system is designed for short term return on investments. One big consequence is that if cash isn’t flowing to those at the bottom, it flows nowhere else. Luckily there’s a very simple—and indefinitely sustainable!—solution: direct cash transfer from the federal government. We print our own money, and we’re nowhere near any theoretical limit on amount of debt the US government can hold.
And we can easily turn this into a normal thing we do, just like Alaska’s “Permanent Fund” or Norway’s current program: to make it sustainable, the government could immediately purchase stocks and bonds cheaply (which would help restore some trust in the stock market, too), so when things start to return to normal, and those investments are growing again, the dividend and interest income could be used to keep the checks flowing, indefinitely. This has the added bonuses of acting as a permanent social safety net, and going a small way toward fixing income inequality. (For a full argument, read the People’s Policy Project’s paper, Social Wealth Fund for America.)
So here's how to think about it.
As Larry Summers put it, "economic time has been stopped, but financial time has not been stopped."We're witnessing a virtually unprecedented shock to real economic activity. Certain sectors of the economy are getting obliterated (restaurants, traval bars) while others are just getting crushed. How many people are buying sneakers right now?
But financial time marches on. Every day or month, people have to pay money for things. Their rent. Their mortgage. Their insurance. Medical costs. Auto bill. They have to buy basic necessities. Food. We can all hide in our homes, but the bills keep piling up regardless.
Financial time and economic time usually move roughy in sync with each other. Right now they're not. Hence the need for direct cash. So that people can hide in their homes, and meet their financial obligations.
Ok, so why not give people $100,000 per month instead of $1kBecause at some point, you need to restore balance between financial time and economic time. Right now we still have plenty of stuff. Basic necessities. Food etc. And if we were to take a one or two month pause on building homes or cars, it wouldn't be the end of the world
If everyone suddenly had $100,000 extra, then we'd be in a position where the demand from new households would absolutely swamp supply, leading to shortages and inflation. Which would get people nowhere. (Especially at a time where for health reasons, people must stay in)
Now is absolutely the time to GO BIG. Make sure households have plenty of money to buy all their basic necessities, rent etc. But the reductio ad absurdum fails, because by going so extreme you create all kinds of shortages an inflation/inflation that aren't an issue now.
Bottom line: Although many people hate to hear it, you *CAN* create wealth by printing money, because if that prevents foreclosures and evictions etc. then that's a societal plus. But ultimately we need production to come back on and get even with finance
And hopefully that production and normal real economic activity is something we see as soon as a couple of months from now.