zacb wrote:
And this is where I will disagree. Savings creates scarcity for dollars, which raises their value, thus helping the poor. So actually, when you redistribute that money, you will actually have higher inflation, which will hurt the poor, since their income does not keep up with the growth of the economy as much as those who are directly related to businesses.
Inflation comes very gradually after the redistribution (sticky prices/wages) and so redistribution has a temporary effect- as aggregate demand increases, output increases. In the long run, the economy is at full employment and producing at LRAS, but redistribution accelerates the expansionary process if in a recession. If the economy is already good...then you work to diminish money supply or raise taxes, etc.