Just wonder what if I can print money. This money is identical and cannot be distinguished from the government notes at all. Suppose that I can distribute the money printed to every single population in the contry (also at the same time like boo!! everyone has my notes), say I give everyone 10 trillion baht. I assume that this chunk of money can make the difference in wealth of the rich and poor not to be significant anymore. Those who have 10trillion + 10thousand (used to be poor) are considered not different from 10trillion +10million (used to be rich). I assume that everyone knows about this information but not in advance.
What would happen to their spending, price level? Will the flow of money adjust? that there will be rich and poor people again
The end result would be (1) Insanely high inflation (both for goods and also asset prices), (2) Everyone's wealth in cash or deposit form, will be equalised, as everyone now has effectively the same amount of cash,(3) But those with real assets, such as stock, land, gold etc, will still be richer than those who do not have real assets (because these asset prices will go up along with higher inflation) (4) There will be no change in real wage, which is still dictated by real variables.
Such a large amount of money injection would take almost no time to generate inflation. Luxurious houses that usually cost 100 million will be bid by so many people that their prices will sky rocket in minutes. The same will happen to nominal wage, salary etc. If you know this in advance, the best thing to do would be to convert all your cash and buy as much real assets as you can.
Anonymous
said...
8:01 pm
Cool!! Thanks krub ahhh I forgot to think about other components of wealth. /me must put on economic hat more often T_T
3 comments:
Just wonder what if I can print money. This money is identical and cannot be distinguished from the government notes at all. Suppose that I can distribute the money printed to every single population in the contry (also at the same time like boo!! everyone has my notes), say I give everyone 10 trillion baht. I assume that this chunk of money can make the difference in wealth of the rich and poor not to be significant anymore. Those who have 10trillion + 10thousand (used to be poor) are considered not different from 10trillion +10million (used to be rich). I assume that everyone knows about this information but not in advance.
What would happen to their spending, price level? Will the flow of money adjust? that there will be rich and poor people again
The end result would be (1) Insanely high inflation (both for goods and also asset prices), (2) Everyone's wealth in cash or deposit form, will be equalised, as everyone now has effectively the same amount of cash,(3) But those with real assets, such as stock, land, gold etc, will still be richer than those who do not have real assets (because these asset prices will go up along with higher inflation) (4) There will be no change in real wage, which is still dictated by real variables.
Such a large amount of money injection would take almost no time to generate inflation. Luxurious houses that usually cost 100 million will be bid by so many people that their prices will sky rocket in minutes. The same will happen to nominal wage, salary etc. If you know this in advance, the best thing to do would be to convert all your cash and buy as much real assets as you can.
Cool!! Thanks krub
ahhh I forgot to think about other components of wealth.
/me must put on economic hat more often T_T
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