patio

Economic Themes for 2009

Same question: OK, let's say the spigots open. Who is on the receiving end of those spigots, how does the money get into circulation?


On Jan 12 10:54 AM OldLimey wrote:

> Gtarras: I assume the author is thinking of a figure well in excess
> of the $1 trillion you mention. Not only are there the bailouts and
> the Obama stimulus to consider, but also whatever the Fed pumps out
> into the economy via asset purchases.
>
> In addition to the size of the numbers, an important and now widely
> discussed issue is how soon and to what extent the velocity of circulation
> will take off. I assume this is what the author is referring to when
> he says "When and if the spigots are opened and these new dollars
> cascade into the real economy...." To extend the analogy, I personally
> reckon the spiggots are already open but flow is being held back
> by an 'air lock'; once that is cleared, assuming that it can be,
> it will be up to the central banks to edge the spiggots closed. Unfortunately,
> I'm not convinced that machine analogies truly reflect the complications
> involved in attempting to fine-tune an economy. I think the author's
> warning in his last two paragraphs is on the mark.

Economic Themes for 2009

In every one of these discussions ( on SA, not just this author ), you cannot just talk about money printing in isolation, you must add velocity, and the supposed mechanisms of how all this money gets into circulation. We know banks currently aren't lendng, except to those few who qualify under the new guidelines ( guidelines back to sanity ). we know companies aren't expanding, consumers aren't spending, so who is at the till asking for new credit?
Then, you must discuss our printing relative to other countries and their printing, to discuss whose currency will devalue relative to the others.
That sounds bossy, you "must" do these things- sorry, poorly worded.
I mean it seems to me you can't look at one aspect in isolation.