As we bear the brunt of this bear market (say that ten times fast), the potential for another recession becomes more of a possibility. Recessions negatively impact the economy, but on the other hand, might be the only way to stop the rampant inflation we’ve been witnessing over the last two years. Whether this outcome comes to pass, the other possibility that has everyone talk is the potential return of government stimulus. CNBC’s Annie Nova reports on the potential of both a recession and more stimulus, and how the two may affect one another.
Stimulus checks are an amazing tool that can help a lot of people pull themselves out of poverty in a weakened economy. In times of recession and economic distress, they have proven to be a beneficial aid. That said, many economists feel that stimulus checks are a double-edged sword, helping and hurting at the same time.
How They Help
The benefits of a stimulus check are pretty obvious. It’s more money in your pocket that you can use however you see fit. Additionally, stimulus checks are easy and faster to administer than other benefits like Social Security. The hidden benefit, the one that applies to the bigger picture, is how stimulus checks can be put back into the economy. When people have money to spend, they tend to spend it. The added revenue to the economy can help create jobs and stabilize demand, which lowers prices.
How They Hurt
The only ones really worried about stimulus checks are economists and politicians. The main fear may seem overdramatic to some, but it’s justified as well. The last round of stimulus was an experiment to say the least. We were dealing with the start of a pandemic, and no one quite understood what to expect. The spending, as a result of the bonus money we all had, in addition to pandemic-related supply shortages, led to the enormous rate of inflation and indirectly to the heightened interest rate. Their fear is that, if left unregulated, another round of stimulus will only continue to add to the amount of inflation we already have. That remains to be seen.