So if markets rallied to historical highs during this news and process of all of trumps tax cuts and reforms these as few years, what could possibly be positive about biden ending most of these tax cuts?
Wallstreet would go absolutel bonkers if these tax cuts are withdrawn.
https://www.cnbc.com/2020/06/29/biden-tells-donors-he-will-end-most-of-trumps-tax-cuts.html
Trump inherited an economy on track for full employment. Then he adopted recession policies in a full employment economy. The result might have been even more a-go-go had he not created constant turmoil with international markets in an attempt to placate his uneducated followers, in the hope they will re-elect him.("Too many Mexicans taking your jobs, I'll start a fight with Mexico; Too much competition from China for the products you make, I'll start a fight with China.")
Now Trillions more have been dumped in because there is a genuine recession of an unusual sort. Once the recession is over, unless productivity magically increases more than expected -- unlikely -- the Central Bank will have to start withdrawing the excess dollars to hold inflation down.
They can do this by selling bonds, which results in a temporary exchange of money for Treasuries. The Treasuries can be rolled over more or less indefinitely so long as there are buyers, but the cumulative effect of ever increasing bond servicing -- which the government can handle without limit-- might eventually result in too much outside money in the economy compared to productivity, i.e., inflation. Actually I'm uncertain of this. It is not immediately clear what the eventual outcome will be of ever increasing amount of U.S. Treasuries finding their way into the economy. Perhaps you should take my comments in this paragraph cum grano salis.
Alternatively the government can raise taxes to remove money from the economy. This is a politically unattractive, but a very effective, means of reducing the amount of outside money in the economy that carries with it no future obligation, as bonds do.
The major factor, in an economy's money supply, which can only be controlled quite indirectly by the C.B., is inside money or "Credit". Inside money is a recursive function of the state of the economy. It's demand regulated, and small changes in interest rates are notably ineffective in spurring, or dampening down, demand for credit. What is very effective and profitable to creditors in the early stages of a recovery is an increase in credit demand brought on by putting the lower middle class on a subsistence diet, so they must use credit to make ends meet. That results in a big pay day for creditors until one day the debtor class is maxed out on credit and can't pay on their debts.
When the government spends a massive amount of outside money into the economy during boom times, one would ordinarily expect inflation. But that will also depend on where the money is. If it is efficiently mopped up into bonds than inflation can be checked. It's apparent that the central bank has been doing a pretty good job of money mopping in the U.S. economy. Another factor seems to be movement of money from circulation into corporate coffers where it may not be immediately spent or where it may be used for Stock buybacks with the sellers' proceeds ending up in bonds. Also, one should recognize the equities markets as destinations for money. Inflated equities are a place where ever increasing amounts of money may be tied up in shares. In market corrections large portions of the money previously tied up in shares moves into bonds. In either case, this money is not circulating in the goods and services markets.
