Inflation is coming??

[Justin Thiesse]

I keep wondering if the Coronavirus is over in 2 months. Will Inflation hit an all time high? I believe with the stimulus the dollar will shrink and commodities will rise. The cost to build will go up great, causing existing real estate to spike. Thoughts??

[Scott Mac]

Hi Justin,

I think what some perceive as "Extra Money" being injected into the economy is really going to be "Replacement Money" for foregone wages from the Virus Situation.

Here's how I think of it (three illustrations):

Begging Hobo Bob.  For instance, if Hobo Bob begs begs $100 a day on the street corner, that money came from John Employed who earned it. The money changed hands but no extra buying power was created. The same amount of money chasing the same amount of good, means prices should not rise.

Working Ex-Hobo Bob.  Compare that to if Hobo Bob somehow suddenly became employable and went to work making $120,000 a year as an executive for Proctor and Gamble. In this instance more buying power is created. More money chasing the same amount of goods causes prices to go up.

Welfare Wanda.  Also, If Cradle to Grave Welfare Wanda has 10 kids who also go on Cradle to Grave Welfare, and the Federal government increases your taxes to give to them as Free Handouts, it's no different than the Begging Hobo Bob illustration. The same amount of money chasing the same amount of good, means prices should not rise.

This Virus money seems more like the Welfare Wanda illustration (just short term vs. Cradle to Grave) than the Employed Hobo Bob illustration. 

Although for attempted political persuasion purposes the media will probably claim otherwise.

Good Luck!