Currently there are talks of issuing a $1000 payout to all American citizens earning less than $130,000. Presuming the final number of recepients is 200 million people, this is equivalent to injecting 200 billion dollars into the economy out of thin air.

But of course money cannot be artificially increased without causing inflation, as demonstrated by the extreme example of Zimbabwe in the last decade. So how much value could the US dollar be expected to lose if the plan goes ahead?

  • The dollar is at an all-time high due to current situation and the flight to cash. A lower dollar would be welcome to lessen global economic distress.
    – Rocky
    Mar 21, 2020 at 17:19
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    Is it really injecting money "out of thin air", or is it the government borrowing the money? As it has been doing for a good many years...
    – jamesqf
    Mar 21, 2020 at 17:56
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    Note that a similar amount (order of magnitude) was issued in Jan/Feb 2008 late in the Bush administration, so it's not without a historical record to examine. Mar 21, 2020 at 18:45
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    I think this is more of a question for economics.stackexchange.com
    – Philipp
    Mar 21, 2020 at 22:00
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    @JonathanReez: Who exactly are the "they" who are talking about creating trillion dollar coins.
    – jamesqf
    Mar 22, 2020 at 2:52

3 Answers 3


This is a question on the minds of just about everyone in the FX markets right now. Unfortunately, there is no great answer. It's sort of like asking if stocks are going to go up or down. I'll list here the three big things that will determine the value of the USD in the medium term. There are many others but I believe these to be the big ones.

(1) The decrease in economic activity as a result of the coronavirus should be strongly deflationary. This can increase the amount of stuff that a dollar can buy because there isn't as much demand for the stuff. So effectively the dollar strengthens.

(2) A flight to safety during time of stress where the USD is generally considered the safest currency. The dollar has generally been strengthening against other currencies. Part of this strengthening has been related though to the fact that a lot of borrowing happens in USD and when you borrow USD and then lose money you have to pay back the USD that you lost. This has meant dollar buying, which has certainly contributed to the recent dollar strength.

(3) Stimulus/relief efforts on the part of the federal gov't to counteract the economic effects of the virus mean more debt to GDP. Giving people money to spend like this in inflationary, which should reduce the value of the dollar. The more debt you have relative to your ability to pay, then the more those lending to you should theoretically charge you in interest because you are a riskier borrower and less likely to make good on all of your payments.

So we have two deflationary effects and one large inflationary effect. The depth and length of the crisis will determine how much dollar "strength"* we see from #1 and #2, and the gov't response to the depth and breadth of the crisis will determine #3. They're intertwined.

*Here strength is relative to the price of goods and used in the deflationary sense of strength.

  • Is the giving of money really all that inflationary, considering that in many cases it will just be a partial replacement for lost income? It seems somewhat similar to collecting unemployment insurance (without the associated bureaucracy), and I don't think that's considered inflationary.
    – jamesqf
    Mar 22, 2020 at 2:55
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    "The decrease in economic activity as a result of the coronavirus should be strongly deflationary." But there's also a decrease in supply. And anticipation of loss of supply is driving increased demand in many areas. Mar 22, 2020 at 3:00
  • I'm not a currency trader, but is $200bil really enough to matter given the size of the US money supply? Or is it more of a straw that broke the camel's back kind of thing? Mar 22, 2020 at 11:58
  • @jamesqf increasing the money supply to give it to people to spend, in and of itself, should be inflationary. that's my #3 above. the fact that people lost employment and there is therefore a loss of demand is deflationary. that's my #1. the amount of #3 is done by the gov't, who is basing their decision partly on #1. that's why i said they're intertwined. Mar 22, 2020 at 15:22
  • @Accumulation Both very good points. We have a loss of supply of a lot of leisure services. And there has been a pull forward of demand for food. There has been an increase in demand for certain medical services, a delaying of demand for others. I think it helps to try and look past any shorter term or medium term disruptions (like hand sanitizer and toilet paper). That said, I don't know how to accurately estimate the balance of all of these things 1-2 yrs down the road. Ultimately will this experience change US consumer behavior. And mostly, this all depends how the virus plays out. Mar 22, 2020 at 15:28

Here’s my take. There’s no theory behind this. the M3 money supply is probably not a good denominator to use here, but it’s something to start with.

1000 * 200M = $200B M3 money supply is ~ $15 trillion

$200B / $15T = 1.3% devaluation

In contrast, world stock market capitalization has decreased from ~$70 trillion to ~$50 trillion in the span of 1 month.

A one time addition of $200B in additional government debt is insignificant compared to the $1 trillion in fiscal deficit we’ve been adding every year for the past 12 years. (Arguably for the past 200 years or more)

People have been complaining about fiscal deficits since the beginning of time.

However, given that most of the world is headed toward negative interest rates for government debt, its profitable to run up a debt, since bonds would be paying the government negative interest.


The figure to look at is government-debt-to-GDP:

Japan, 238% at 12/18

USA, 107% at 12/19

Euro Area, 87.9% at 12/18

UK, 80.8% at 12/19

Switzerland, 40.9% at 12/18

Russia, 14.6% at 12/18


And longer-term U.S. Treasury Securities did recently spike-back-up to higher yields from where recession expectations had pulled them down-to. It is possible for recession and inflation to occur at the same time and that is stagflation. (QE is combined with low short-term interest rates if control of longer-term interest rates is needed.)

Fiscal stimulus has the goal of increasing economic growth or avoiding recession. Inflation is okay if it is in step with economic growth.

Monetary stimulus really just runs the banking system but the banking system can facilitate growth.

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    Can you cite the source of your numbers? Mar 22, 2020 at 8:31
  • Please edit that into the answer. Mar 22, 2020 at 15:11

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