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I was wondering, if I was suddenly worth 1 Trillion $, say a sudden bank glitch gave me the money, and nobody noticed, what would happen I suppose massive inflation would make the dollar worthless, but would that happen if I was really responsible with my money? What would happen if I don't release all that money into circulation in the economy all at once, and only use a really small portion of it every year. In that case, would that money have any widespread economic impact at all? It would only be lying in a bank account, and wouldn't be buying anything.

In a sense, it seems like the government can print money when it wants, meaning it also has a theoretical "trillion dollars" lying around, and that doesn't do anything.

Any answer would be appreciated, thanks.

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    $\begingroup$ Please clarify your specific problem or provide additional details to highlight exactly what you need. As it's currently written, it's hard to tell exactly what you're asking. $\endgroup$
    – Giskard
    Commented Jul 18, 2022 at 8:31

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A bank glitch couldn't give you a trillion dollars. A bank glitch could only make the bank computer think the bank had a debt of a trillion dollars to you.

When you go to the bank teller and ask them to withdraw your trillion dollars, they will either
(1) give you all the money from their vault and then go bankrupt so all the other customers lose their money, or
(2) investigate the glitch

Now, the central bank's accounts are actual dollars. If the central bank computer has a glitch it could actually create a trillion dollars for real. But only banks have accounts at the central bank, so you wouldn't get a trillion dollars this way. Banks have to be careful and responsible with their money - if a bank manager transferred the trillion dollars to his own account, instead of reporting the glitch and giving it back, they'd go to prison.

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    $\begingroup$ This doesn't address the question but discusses the assumption. $\endgroup$
    – BrsG
    Commented Jul 19, 2022 at 11:18
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It is an unrealistic assumption that no one would realize 1 Trillion.

That said, if you are simply interested in what happens to inflation if money supply increases significantly, your 1 Trillion is not that much after all. The below shows M1 (~ currency, liquid demand / savings deposits). The definition changed as @1muflon1 pointed out correctly but nonetheless, M1 (prior to the change in definition) went from 1373 in Dec 2007 to 4000 in Feb 2020, yet inflation was very low throughout the entire period. Money supply generally has a large impact on inflation - all else equal though. Eventually, if money supply increases enormously, you will end up with hyper inflation as seen in many countries before.

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It also does not matter if you use your money in your bank account or not, because your deposit is a liability of the bank. For example, your bank may use the money in your deposit account to make loans to other people or businesses. Maybe I am wrong, but I understood that question as a purely hypothetical example without much attention to details - with the goal to understand what would happen to inflation if money supply increases a lot. If we use the unrealistic example of one person gaining 1 Trillion, and assume it's just possible, there will be a bank, with a lot of newly added deposits. For this unrealistic example, one should in my opinion also ignore all regulatory issues with this (it will have a significant impact on a lot of metrics that banks need to compute). In any case, the money will get into circulation indirectly if it is sitting on the deposit account (which is why I wrote it does not matter). The exact impact on inflation is pretty much impossible to determine, because an additional 1 Trillion in deposits in a single bank just don't work. The "recent" spikes in inflation across the globe show how difficult it is to explain inflation ahead of time even in real world settings. There was very little agreement among professional forecasters on the magnitude and path of inflation.

Side remark, the government does not decide money supply, the FED does. The government has some influence like the president appoints the FED chairman but ultimately, monetary policy decisions lie in the hands of the FED only. Trump appointed Powell and later said that he is “not even a little bit happy” with his appointment of Jerome Powell.

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    $\begingroup$ 1. The M1 money supply “increased” due to change in how Fed defines M1, that is not actual increase in the quantity of money but just change in a definition. See the notes under the figure that says the definition of M1 changed in 2020. 2. "Side remark, the government does not decide money supply, the FED does" - this does not make sense, Fed is government institution, that is like saying government does not pass laws congress does. 3. studies show there is strong correlation between money supply and inflation, e.g. see Frain 2004, studies also show that money supply growth granger causes it $\endgroup$
    – 1muflon1
    Commented Jul 18, 2022 at 11:17
  • $\begingroup$ but that is like saying CIA or NASA is not government because that’s just independent organization where head positions are filled with appointees by president... even though these are (politically) independent technocratic organizations they are government organization $\endgroup$
    – 1muflon1
    Commented Jul 18, 2022 at 13:27
  • $\begingroup$ I eventually upvoted the answer as I think after the corrections it’s good, but I still think the part about saying government does not decide fed decides needs to be better explained: I suggest maybe saying executive branch of the government does not decide $\endgroup$
    – 1muflon1
    Commented Jul 18, 2022 at 13:30
  • $\begingroup$ NASA's budget is set by an annual process that begins with a proposal from the White House and ends with legislation passed by Congress and signed by the President. The FED's monetary policy does not have to go through any such steps. Ultimately, you are right, taken to the extreme, the government could certainly find ways to get rid of the current setup as well. $\endgroup$
    – AKdemy
    Commented Jul 18, 2022 at 13:30
  • $\begingroup$ but just because Fed has autonomy in its policy that does not mean its not government agency, Supreme Court is also independent. Also let me settle this by referring to the authority stlouisfed.org/open-vault/2018/november/…. I am quoting: "The Fed can best be described as independent within the government." ... "The System comprises a central governmental agency, the Federal Reserve Board of Governors, as well as 12 regional Reserve banks (and many branches) located in cities throughout the U.S." Also Fed uses .gov domain that is reserved $\endgroup$
    – 1muflon1
    Commented Jul 18, 2022 at 13:40

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