Yes, but instead of consumption, that alternative money would be biased towards investment or even less productive activities, such as house price speculation. Consumer credit creates money where it has the greatest benefit.
> [...] that alternative money would be biased towards investment or even less productive activities, such as house price speculation.
How is that supposed to work? When the central bank injects money into the economy, they don't earmark it to be only spend in specific ways.
Just to forestall one pseudo-explanation: yes, a central bank usually injects money into the economy by buying government bonds. However (a) they buy the bonds at market prices and (b) the whole process is very well known and announced in advance, so market participants can and will anticipate what is happening. Money in the economy does not act on 'hydraulic' principles where it has an effect first on where it enters the economy and then slowly works its way through.
As a hypothetical: assume that the US Fed credibly announces today in 2023 that in 2030 they are going to keep printing money until American Dollar and the Japanese Yen are at par. (At the moment, 1 USD buys about 147 Yen.)
You can bet your hat that prices in the US would react long before 2030 has arrived, and thus long before any of that new money had been printed and had any chance to slowly work its way through the economy. Nothing special would happen on 2030-01-01 when the money-printing starts, because everything would have long been priced in already for years.
The economy in general, and monetary policy specifically, is all about expectations and anticipation.
I guess the idea that directly giving out money to consumers is more beneficial to the economy (e.g. if the government just gives a $1000 check to everyone making under 100k) they are more likely to just spend it on goods and services.
If the central bank printed an equivalent amount per capita, more of it would be invested (into both productive and unproductive assets). On the other hand that wouldn't increase consumer good inflation as much.
First, if you just hand money to individuals, it's very hard to remove that money from the economy later. If the central bank injects money by buying an asset, like a government bond, they can just sell it later to (approximately) remove the same amount of money as they previously injected.
> If the central bank printed an equivalent amount per capita, more of it would be invested (into both productive and unproductive assets).
What makes you think so?
Btw, 'money' doesn't really get invested, at least not on the level of the whole economy. If someone invests money by eg buying stock, that same amount of money is now in the seller's hand.
> On the other hand that wouldn't increase consumer good inflation as much.
And if you have an inflation target, you just print more money, until you hit it.
> First, if you just hand money to individuals, it's very hard to remove that money from the economy later
I'm not really arguing that that would be a better option (outside of exceptional circumstances) though.
> What makes you think so?
Because lower income households generally have low saving rates.
> Btw, 'money' doesn't really get invested, at least not on the level of the whole economy. If someone invests money by eg buying stock, that same amount of money is now in the seller's hand.
Which drives up the stock price a bit which makes it cheaper for the company to pay its workers, allows them to issue more stock/ borrow more/acquire other companies/etc.
> And if you have an inflation target, you just print more money, until you hit it.
You can't control where that money goes to though. So you are not unlikely to end up with bubbles in specific sectors while overall CPI remains low.
Bubbles don't really exist as a meaningful empiric concept. Especially not when you have a robust short selling system so that speculators can pop 'bubbles'.
Ok, higher inflation in certain sectors. e.g. "free" money resulted in housing prices growing at a much faster pace than goods and services for an extended period of time (something similar also applies to education in the US for instance)
> short selling system so that speculators can pop 'bubbles'.
Like in real estate? I mean technically, yeah it's not even really bubble in most places (obviously not China for instance). But I'm pretty sure you understand what I'm trying to say (or should, anyway)
