> As long as the money is given to folks who need and/or will spend it, it feels like this is the exact situation where the federal government steps in for stimulus.
No, it's still a bad idea as stimulus.
It might or might not be the right idea from a humanitarian point of view. No opinion on that topic.
But if you care about nominal spending in the American economy, the Fed can do the job just fine. Just have them buy assets until total nominal spending (and thus also inflation) is up where you want it. Start with American government bonds, but if that's not enough, expand to other assets as well and keep buying.
You may ask: what if this doesn't work to raise spending nor inflation?
Well, that's the best case! Congratulations: that means the Fed just bought up all the assets in the world in return for some ink and paper. [0] And all that without devaluing the dollar, since we assumed no inflation would result.
Your negative example of people _not_ spending the money they are given turns into the best kind of person you want to be buying assets from, if you are the creator of said money.
Of course, in practice this will raise spending. Especially if you announce the policy in a clear and credible way, spending will increase almost immediately even before you implement anything. Markets are all about anticipating expected events.
No need to enlarge the government budget or the deficit.
Oh, and if you are looking for practical steps to raise spending in the economy and the above programme is too radical for you; then a simple first step is to eliminate positive interest rates on (excess) reserves that banks park at the Fed.
In the Fed's defense, they lowered the interest on excess reserves to 0.1%. But you can argue that they should lower it further, perhaps to -1%. Make banks pay to park money at the Fed, so that they prefer bringing that money into the real economy. Either by spending it themselves, or by lending it to people to spend it for them.
[0] To be more precise: in return for some even cheaper to create numbers in a computer. Nobody prints these sums of money any more.
No, it's still a bad idea as stimulus.
It might or might not be the right idea from a humanitarian point of view. No opinion on that topic.
But if you care about nominal spending in the American economy, the Fed can do the job just fine. Just have them buy assets until total nominal spending (and thus also inflation) is up where you want it. Start with American government bonds, but if that's not enough, expand to other assets as well and keep buying.
You may ask: what if this doesn't work to raise spending nor inflation?
Well, that's the best case! Congratulations: that means the Fed just bought up all the assets in the world in return for some ink and paper. [0] And all that without devaluing the dollar, since we assumed no inflation would result.
Your negative example of people _not_ spending the money they are given turns into the best kind of person you want to be buying assets from, if you are the creator of said money.
Of course, in practice this will raise spending. Especially if you announce the policy in a clear and credible way, spending will increase almost immediately even before you implement anything. Markets are all about anticipating expected events.
No need to enlarge the government budget or the deficit.
Oh, and if you are looking for practical steps to raise spending in the economy and the above programme is too radical for you; then a simple first step is to eliminate positive interest rates on (excess) reserves that banks park at the Fed.
In the Fed's defense, they lowered the interest on excess reserves to 0.1%. But you can argue that they should lower it further, perhaps to -1%. Make banks pay to park money at the Fed, so that they prefer bringing that money into the real economy. Either by spending it themselves, or by lending it to people to spend it for them.
[0] To be more precise: in return for some even cheaper to create numbers in a computer. Nobody prints these sums of money any more.