Long story short, incentivize spending without creating any value.
Long story long, once upon a time we released 10 trillion dollars to stimulate the economy.
Why? To build a path out of the COVID recession felt from lock downs, a valid concern.
If we give people money, they’ll spend it.
And they sure did.
However, the purchase that were made didn’t result in long term value creation through goods and services.
Instead we saw prices rise as a flood of money undervalued everyone’s money.
And an asset bubble emerged, where instead of goods that produce value were purchased we saw a dumped into NFTs, crypto, stuff that sits around and doesn’t create value.
To adjust for these unsavory impacts, the Fed increased interest rate, which popped the asset bubble, leaving workers in a tricky situation where wages haven’t been adjusted for inflation so it feels like we’re making less.
The bottom line is, the only thing that creates long term value is an output of goods and services that people want.