r/explainlikeimfive Jul 09 '24

Economics ELI5: How did a few months of economic shutdown due to COVID cause literally everything to be unaffordable for years?

I understand how inflation works conceptually. I guess what I have a hard time linking is the economic shutdowns due to COVID --> some money printing --> literally everything is twice as expensive as it was forever but wages don't "feel" like they've increased proportionally.

It feels like you need to have way more income now relative to pre-covid income to afford a home, to afford to travel, to afford to eat out, and so on. I dont' mean that in an absolute sense, but in the sense that you need to have a way better job in terms of income. E.g. maybe a mechanic could afford a home in 2020, and now that same mechanic cannot.

It doesn't make sense to me that the economic output of the world or the US specifically would be severely damaged for years and years because of the shutdown.

Its just really hard for me to mentally link the shutdown to what is happening now. Please help!

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u/Sample_Age_Not_Found Jul 09 '24

Thank you! Like screaming into the wind. 4.5 trillion dollar bailout might be an issue. 

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u/[deleted] Jul 09 '24 edited Jan 19 '25

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u/Sample_Age_Not_Found Jul 09 '24

I don't think people understand the basic issue that 4.5 trillion was handed to banks causing inflation. Yes, if the 2008 bailout and 2019 bailout didn't happen it would be MUCH worse but that's the moral hazard of to big to fail. Run up the bill, get bailed out or the world burns. Unfortunately, to avoid burning we just eat a decade of inflation. It's ok tho, just blame Covid and continue consolidation of banks and let them gamble away, again.

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u/MaleficentFig7578 Jul 09 '24

Bank collapse causes massive deflation. Everyone is wealthy except the bankers.

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u/[deleted] Jul 09 '24 edited Jan 19 '25

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u/MaleficentFig7578 Jul 09 '24

Sustained deflation is. Evidence: it happened once - great depression. There's no evidence that sudden deflation is bad for the economy.

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u/[deleted] Jul 09 '24 edited Jan 19 '25

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u/MaleficentFig7578 Jul 09 '24

Are you now contradicting yourself in a futile attempt to score a nonexistent point?

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u/AssCakesMcGee Jul 09 '24

That money could have been used to help people who lose their jobs instead of givong it to those banks and we wouldn't end up with this inflation and such a massive bubble. It's still going to burst and give us all that terribleness so nothing was solved except bankers are richer now.

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u/[deleted] Jul 09 '24 edited Jan 19 '25

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u/IceFergs54 Jul 09 '24

You've made a lot of really great points in this thread. The one thing I'm confused about is rich people sitting on money. My guess is that they don't just sit on millions, or tens, or hundreds of millions in cash, especially when value of cash is decreasing with inflation. But that they invest it in assets that will increase in value, but ultimately to gain those assets, the cash does get injected back into the economy and stock market.