GREENSBORO, N.C. — All the stimulus checks, debit cards, and direct deposits that are going out are out. Folks want their money and they’re waiting for it.
Recently a viewer wrote us:
My parents who are retired say they are not receiving the funds from their 401K because the government is using their money to fund stimulus checks.
No disrespect here, but mom and dad are mistaken.
Stimulus money does not come from 401K’s, it does not come from taxes, it does not come from social security.
“What the Treasury Department does is they create bonds, bills, and T-notes, essentially IOU’s (signed document acknowledging a debt), and then they go and look for buyers. These buyers can be individuals, institutions, or sovereign governments. But the big buyer here is the Federal Reserve, or the FED because they have a magical option, they can actually print money to buy these IOU’s,” said Scott Braddock of Scott Braddock Financial.
When you hear that, I think most of us see dollar bills flying off the printer but really, everything is online. The FED would credit the Treasury Department the money and then the IOU's show up on the balance sheet of the Reserve.
All of it adds to our national debt. And while that doesn't affect us today or tomorrow, it's a concern for the next generation.
“Well, the real concern is always inflation. We don’t want to have too much money chasing too few goods. We don’t really have that issue right now, because all that money being pumped out is to plug what I call a spending hole, and this was brought on by the pandemic. People were sheltering in place, businesses were shut down, folks could not work, so they were having an issue stimulating the economy. What we need to pay attention to in reality moving forward is the government needs to do a good job of pulling back on some of these programs, because if they don’t time that correctly, then we could have too much demand and not enough supply,” said Braddock.
The concern is long term. It isn’t our generation that will feel it. It’s our children and grandchildren.
“What we want to pay attention to is inflation. We don’t have that problem right now, but as long as those interest rates remain low, we have the potential to create more debt and fund more programs. Again, at the end of the day we need to be watching and make sure we can pull back on these programs – the government that is – in a timely fashion, so we don’t’ find ourselves in an inflationary environment,” said Braddock.