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Originally Posted by SAllen2556
The problem is that the loans and stimulus were not financed by borrowing it was financed by increasing the quantity of money, and as a result we all have to pay for it now through inflation and higher interest rates. And inflation and higher interest rates hurt poor people first and more severely than wealthy people.
Even further, that higher income that your or your company is currently earning now gets taxed at a higher rate.
If the government actually does increase interest rates and lower the money supply what will surely follow is higher unemployment. It’s just a a matter of time.
You can’t spend your way out of a recession - or a pandemic. I thought everyone knew that from the 1970’s.
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Scott,
See what Adam says in post #75, he's got some great comments and points that are right on the money. Also, I understand your concern about the government pumping more money into the system, but that itself isn't necessarily going to cause runaway inflation. Look back at what happened after 2008 when our economy tanked due to the mortgage crisis. One of the main things they did was to push more money into the system, remember they called it quantitative easing? It took a few years to get things back on track, but it never really pushed us into an inflationary period.
As Adam also mentioned, this current inflationary situation seems by to be fueled mostly by the supply side issues we've had. It will likely take some time before things hopefully start settling down from the effects of the pandemic, and the supply chains and returning workforces will eventually catch up to the current excess demand that exists, and also allow for reserves and backup inventory all throughout the production and building industries to return to their more normal, pre-pandemic levels. In the meantime, we've got the classic supply and demand formula working against us.
Look at cars and housing for example. Their production and building were crushed because of the pandemic, and so to were their suppliers unable to continue providing parts and materials to them at pre-pandemic levels. But fortunately, everyone involved in those industries had reserves and backup inventory to keep providing what the market needed and demanded. But they blew through the backlogs and reserve inventories they had, till the demand finally exceeded what could be provided. And then, the lack of sufficient numbers of new cars and homes carried over to the secondary used car and rental markets, which also got quickly overwhelmed. And that's why we've seen new and used cars prices go through the roof, along with housing values and rents. But since it took a while to reach that point where our demand so overwhelmed the supply (and started pushing up all the prices), I think a lot of people have mistakenly thought it was all this government stimulus spending that inflated the prices instead, because it seems to fit the timeline for these rising costs perfectly.
To tie this all into our beloved hobby, this is exactly what's happened with PSA. Demand jumped, overwhelmed processing, services got shut down to work on the backlogs and get caught up, while also trying to find and train additional graders to get the work done. In the meantime, grading fees skyrocket so PSA can stop the overwhelming influx of work, yet allow them enough income to get the backlog under control, pay to find and train these new graders so desperately needed, and also pay and finance whatever other expansions or improvements PSA needs to facilitate everyone and remain in business till they can get operations, and fees and services, back to be more like they once were. Even PSA knows they can't simply leave things as they recently were, without eventually damaging the core business,potentially beyond repair.
And this highlights another reason the government would possibly want to make it look like they were overpaying businesses with these forgiven PPP loans. So these businesses would have additional funds to address problems along the lines of what PSA faced, and maybe not have to result to shutting operations and services down, and then severely jacking prices up and making the inflationary effect even worse, instead of better. So this demonstrates at least one way these excess PPP loan monies that everyone's complaining about being handed out and becoming the cause of our current inflationary issues, may actually be working to prevent inflation in many of these businesses.
Now before you go calling me out and questioning my logic about how if PPP loans may be able to stop a business doing what PSA had to do, why didn't the PPP loan monies help PSA? I don't know enough about their finances and internal operations to be able to give anyone a definitive answer, but if I'm speculating........
First off, PSA's surge in demand for them could have just been so unexpectedly fast and huge that they were one of the rare outliers where almost no amount of extra stimulus loan money could have saved them from what they've had to go through. Secondly, don't forget when the pandemic started PSA was part of a larger publicly traded company, and therefore may not have even been eligible for a PPP loan to begin with. And lastly, even if they were eligible and got a PPP loan, they got sold right at the beginning of 2021, not long after they would have the PPP loan forgiven, but just before everything blew up for them. I know none of the financial details of the sale, but it is possible that cash from the PPP loan went out to the prior owners as part of the sale, or was otherwise tied up in the sale or the business to where it couldn't be used to help the business under the new ownership.
Not sure what you mean by businesses getting taxed at higher rates, none of these forgiven PPP loans are taxable.