Can capitalism buy it's own goods it produces without inflation? I heard someone claim that the only way the system balances is by printing money. Workers are paid less than the value they produce, and they're most of the consumers. So governments encourages workers to borrow money from banks (home loans, car loans, credit cards, and so on) to buy the goods they produce. But in the end the government still needs to purchase the excess through deficit spending. Like we saw for example during covid. In Canada government doubled its debt. To keep things from falling apart. And inflation is the only way they made it go on. But it's not sustainable, because now good chunk of taxes go to paying previous government's debt, and citizens get less services in return for more taxes. Clearly this loop is not sustainable too many times.
pessimizer|9 months ago
I think your model depends on "workers" being the only people who are taxed, so if workers are being paid less than the cost of the goods they have to consume, the government + workers must be running at a constant deficit.
But you also tax employers and owners.
Inflation is a tool intentionally used by governments to quickly lower wage costs across the board. People at the bottom end can be subsidized, and productive people whose nominal worth just went up with inflation will negotiate for higher pay. Everybody else gets a pay cut.