Long Tail Money Printing

It strikes me that at a high level, any country that prints a lot of money (faster than the rate of economic growth) has three possible objectives.

First, by devaluing the currency, to temporarily increase the export efficiency of that country relative to other countries that aren’t printing as much cash.

Secondly, to prime liquidity in their financial markets often in response to credit freezes based on the fear of defaults. Again a short term measure.

Noting that wealth is neither created nor destroyed by printing money – the value of everyone’s existing currency is just depreciated proportionally – money printing probably aids and abets the redistribution of wealth in favour of the few and especially those with non-currency assets.

So, if I were a conspiracy theorist I might argue that financial crises are good for the wealthy and insiders that are generally closer to the central bank that prints the money.

The proportional benefit of new money must be very positive for those who first handle it.

As it goes through multiple hands the benefit that sticks probably decreases quite non-linearly.

Eventually, towards the bottom of the pyramid there would be recipients worse off than they were before the printing.