🌰 In a nutshell: Stimulus is when governments pump money into the economy during a downturn.
📦 Unpack that a bit: When the economy stalls, people stop spending. They may have lost their jobs, or watched their neighbours lose their jobs, and tightened their belts accordingly. (They want to preserve their liquidity, in other words.) By giving people money — either directly or indirectly, through jobs — the impact of an economic slowdown is reduced.
👶 Tell a toddler: “You know how you get a bit cranky between meals? The granola bar I keep in my bag for those moments is like a stimulus.”
🤷🏽♂️ Whose idea was this, anyway? John Manyard Keynes, if we’re going to name names. The British economist developed the idea after the Great Depression, as he believed governments made a bad situation worse by not spending. “Let us be up and doing, using our idle resources to increase our wealth,” he wrote in 1928. “With men and plants unemployed, it is ridiculous to say that we cannot afford these new developments. It is precisely with these plants and these men that we shall afford them.”
👊Why stimulus matters:
“We are all Keynesians now“. Milton Friedman said that, suggesting that even those who advocate for “small government” and a hands-off approach to the economy realize that, when times are tough, the government has to jump in and keep money flowing. Those who beg to differ say governments shouldn’t spend money they don’t have.
📰 In the headlines:
• Massive stimulus packages in Canada, U.S. put cash on Main Street in departure from 2008 crisis — Financial Post
• Many Gen Zers might not qualify for the stimulus check — Business Insider
• The $1,200 stimulus checks are arriving. People are mostly spending them on food — Washington Post
🔀 See also: Imagine if the stimulus cheques came every month. That’s a serious proposal, and it’s called the UBI.