Zimbabwe or Bust

$100 000 000 000 banknote with three eggs, a sample of what it could purchase

 

Matt wrote:  Couldn’t the government send me a $1,000 rebate check with my IRS return to make-up for the rising cost of fuel for example?

 

Matt,

 

Thanks for the question, but why stop at $1,000?  Why not $1,000,000?  If the government gave everyone a million dollars then wouldn’t that solve everything?   All you have to do is look at the current situation in Zimbabwe.  Everyone in Zimbabwe is a millionaire.  In fact, it has been proposed to raise their minimum wage to Z$100 billion.  Are they better off?  Of course not.  The country is going through its worst economic crisis in history.  There is 80% unemployment and widespread shortages of food and other basic essentials.  So even though they are all millionaires (even billionaires), that is still grossly inadequate to meet even the most basic living expenses. 

 

The key is in understanding the simple laws of supply and demand, the basic fundamentals of economics.  If you increase the supply of money that would in turn increase the demand for goods (i.e. gasoline) which would by law cause prices to increase.  So to answer your question, No, the government giving you $1,000 would not help make-up for rising fuel costs because that extra $1,000 you would get would be offset by gasoline costing $1,000 more.