freakonomics

Don’t be selfish; spend your stimulus check (Monetary Policy)

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The Federal Reserve has used every tool they have to incentivize spending and borrowing, measures that exceed their actions at any other point in history. Macroeconomic tools are like adjusting the throttle and turning the wheel on the Titanic—there is going to be significant lag before your speed and course adjusts, and by that time you may be trying to steer in a different direction. If you’ve ever driven a boat, you understand. The U.S. economy is the biggest boat ever built.

Does the government just print money?

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In the normal scheme of things, we don’t really question where money comes from or how the system works. We only pay attention if it stops working, or, perhaps, when we see our government follow up the biggest spending bill in history by casually mentioning it may add a few hundred billion a few weeks later. The American Recovery and Reinvestment Act of 2008 under President Obama was initially billed at under $800,000,000,000 (800B), as a reminder, and here we find ourselves talking about The CARES Act as “2 Trillion” just because it’s easier to say than “2 point 3 Trillion”! Two syllables, three hundred billion dollars.

Start paying attention (budget deficits)

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In other words, if things went according to plan, the United States national debt would have increased by over a trillion dollars in 2020! Now, things are not going according to plan on both sides: we’re now spending an additional $2 Trillion and government revenues are primarily based on taxing income and payroll, both of which are going to decrease this year.