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Fiscal Stimulus and Monetary Stimulus, Explained

Since the beginning of the pandemic, we've been hearing about fiscal stimulus and financial stimulus.  Today, Alex Cabot and Ed Lambert of Birch Run Financial break them both down.

Fiscal Stimulus:

• When the government increases spending, cuts taxes, or both.
• Can be measured by "Fiscal Multiplier," or "bang for your buck."
• We've implemented 5 specific cats of fiscal stimulus since the beginning of 2020.
• Returning to normal could be trick and could involve higher taxes on some Americans and businesses.

Monetary Stimulus:

Created through the Federal Reserve's management of interest rates and the money supply

Quantitative Easing

Low interest rates have resulted in TINA - "There Is No Alternative" 

Wealth Effect

This was implemented quickly, but must be stopped slowly.