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When their money and credit run out, I anticipate they will demand government stimuli of some sort, perhaps renewed stimulus payments, and such will be provided to avoid a national economic crisis.
That's a very astute observation, and if that were to happen, wouldn't surprise me much, which is a sad commentary on our current state of governance.
Like a kid who doesn't get caught until 7/8ths of the cookie jar has already been liberated, our government, particularly over the past 15 years, has spent mightily on things that were not paid for through the creation of new wealth, but rather, by governmental slight of hand.
In the infamous 'OldAg2020' thread I stated that I had been baffled by the relative absence of inflation over this same period of time. That absence seemed to contradict everything that the 1970's era Chicago school monetarists in A&M's Economics Department (Phil and Wendy Gramm) drilled into my head.
Our leaders (in both parties, although one is a much more hardened offender) also must have been surprised by the lack of inflation over this period and so continued in their evil ways with impunity, taking cookie after cookie. Now, however, the bell is finally tolling. Mom has discovered what has happened and isn't happy.
Looking back over that period I can only surmise that we lacked serious inflation for (3) principle reasons:
1. The willingness of foreigners, whose own governments and central bankers were even more irresponsible than ours, to purchase dollars;
2. The great increase in the number of our products that were being made overseas, where labor costs are substantially less than they are in the U.S. {Of course, where did the unemployed Americans go for a living? -- Some transitioned to 'service' and some relied increasingly on governmental assistance}; and,
3. Our productivity gains over this same period were sizeable indeed (think internet expansion among other things), and thus masked the effect of having a dollar that was devaluing year after year.
On the third point, I'll offer an over simplified example. Let's say in 2005 it cost me $.75 to manufacture, transport and sell a loaf of bread, including all my administrative expenses. That loaf then sells to the consumer for $1.00.
Now, due to efficiencies across the spectrum brought on by technological advances, particularly on the administrative end of things, but also due to better computer controls in the manufacturing process, I'm able to make that same loaf of bread for $.65.
In theory, I can also sell that loaf for $.10 less than before, or, if I'd like to reward myself for being efficient, maybe $.08 less than before, so it hits the consumer's hands at $.92 per loaf.
Ah, but that would be deflationary you say, and we mustn't have that.
But, 'no problem' says the federal government. We'll devalue the currency a bit to fund 'other causes' and that same loaf will still sell for $1.00. We'll report stable prices and everyone will be happy, except for the consumer who may (but most likely not) figure out that he could have had another $.08 to spend on something else in addition to his loaf of bread.
TLDR -- Productivity increases masked a great deal of inflation in the last 15 years - productivity increases that were stalled or reversed recently due to COVID and other assorted BS.
Back in the '70's we also spent a great deal of time studying a quaint concept called the 'Time Value of Money'. I guess that is relevant again.
