Lok Sang Ho

Friday's Jobs Report: Key Variables to Watch

Chinese factories are closing and migrant workers are returning home. Imports are declining faster than exports. If the Yuan and the Yen should rise more, China and Japan cannot afford to import because though the currencies could exchange for more US dollars high unemployment means that they cannot place big orders for American goods like what they used to do. Remember how many Boeing planes China ordered just a couple of years ago. And remember that Japan has been running a trade deficit for months.

Wall Street Breakfast: Must-Know News

The prognosis is quite positive in 2009 as the Fed and the Federal Government both adopt aggressive measures to contain the crisis. The approach adopted by the FDIC is yet another example of sealing further losses that I have commented on previously. This is working and will prevent the economy from an otherwise quite possible downward spin as portrayed by Roubini and others.

'Bailouts' Are Misunderstood

The comment about velocity at least makes sense. MV is spending. And if MV is greater than P(0)y then P(0) becomes P(1) and it is much higher. Then you will indeed have inflation and even hyperinflation.

However, if MV is no bigger than P(0)y even as M rises there will be no inflation. Aggregate spending as a flow as to be bigger than aggregate supply as a flow before you will have inflation.

Economists understand that V is not a constant. Indeed V is now falling. That is why there is an imperative for stimulation.

Why Bailouts Are Not the Answer

It is certainly correct that Americans need to keep spending within their means. But the immediate concern must be to save the jobs of Americans and the homes of those who have been working hard and paying their mortgages honestly. Without jobs and incomes, where can savings come from?