Paulie
Diamond Member
- May 19, 2007
- 40,769
- 6,382
- 1,830
I was pleased to see the "Austrian Critique" section conspicuously present at the link.
Follow along with the video below to see how to install our site as a web app on your home screen.
Note: This feature may not be available in some browsers.
Milton Friedman suggested that a monetary authority can escape a liquidity trap by bypassing financial intermediaries to give money directly to consumers or businesses. This is referred to as a money gift or as helicopter money. The term helicopter money is meant to portray the image of a central banker dropping money on people from a helicopter. Political considerations make it difficult for a monetary authority to grant the money gift, because individuals and firms not receiving free money will exert political pressure. The monetary authority must act covertly to give gift money to specific individuals or firms without appearing to give money away.
Originally a Keynesian supporter of the New Deal and advocate of high taxes, in the 1950s his reinterpretation of the Keynesian consumption function challenged the basic Keynesian model. In the 1960s he promoted an alternative macroeconomic policy called monetarism. He theorized there existed a "natural rate of unemployment" and he argued the central government could not micromanage the economy because people would realize what the government was doing and shift their behavior to neutralize the impact of policies. He rejected the Phillips Curve and accurately predicted that Keynesian policies would cause "stagflation" (high inflation and low growth). He argued that a steady expansion of the money supply was the only wise policy, and warned against efforts by the treasury or central bank to do otherwise.
Guess we're all Kynesians now.
Okay. This stuff is a bit hard to grasp. So apparently most of the time the Fed can affect the economy...but not when there is no confidence.
Okay. This stuff is a bit hard to grasp. So apparently most of the time the Fed can affect the economy...but not when there is no confidence.
Okay. This stuff is a bit hard to grasp. So apparently most of the time the Fed can affect the economy...but not when there is no confidence.
Indeed. Conventional monetary policy ceases to work in a liquidity trap because when interest rates are zero or near zero, cash and treasury debt are perfect substitutes for one another. Thus, liquidity injections implemented by Central Bank purchases of treasuries do not have the normal intended effect. They simply pile up as bank reserves and in vaults. This is exactly what happened to Japan in the lost decade.Basically. The economy is about trust. When trust goes away, economic activity decreases.
When there is excess capacity, you have deflation. Cutting interest rates really cannot help the economy until the excess capacity goes away.
Indeed. Conventional monetary policy ceases to work in a liquidity trap because when interest rates are zero or near zero, cash and treasury debt are perfect substitutes for one another. Thus, liquidity injections implemented by Central Bank purchases of treasuries do not have the normal intended effect. They simply pile up as bank reserves and in vaults. This is exactly what happened to Japan in the lost decade.
Brian
Basically. The economy is about trust. When trust goes away, economic activity decreases.
When there is excess capacity, you have deflation. Cutting interest rates really cannot help the economy until the excess capacity goes away.
Just another facet of consumer confidence and market psychology. Until lenders FEEL confident enough, no amount of central bank or treasury machinations is going to have any effect.
It still appears we have pretty much found the bottom and in some cases moving beyond the bottom (aka the stock market saw it's bottom several weeks ago, and we are seeing at least some lending picking up) of this cycle. Don't see things getting a lot better anytime soon, but I doubt they will get any worse.
Lots of pent up demand, lots of pent up money just waiting for the dam to break. All the fed has done is pretty much guarantee we are going to have another asset bubble somewhere, very quickly yet again....
All the fed has done is pretty much guarantee we are going to have another asset bubble somewhere, very quickly yet again....
More debunking of this CRA nonsense
Community Reinvestment Act Makes Bankers Stupid, According to AEI Research « The Baseline Scenario
that some people will never give up in their fight to prove that the real source of societys ills is government attempts to help poor people
That's the philosophy that mostly drives the Republican party these days.
They've probably shelled out more for the rich in one year than they have for the poor in the last couple years.
I read everything with a bit is scepticism. Fact remains that the impetus for the economic collapse was the rapid rise in the cost of oil. That started inflation in all products that needed transportation to get to market, especially food items. (Transportation from the farm through several different stages of processing to central warehouses to store distributions centers and on to the stores.) The sudden rise in those food prices destabilized the economy and started a reduction in spending AND that resulted in layoffs that started the ball rolling. Considering that over half of the money that changes hands in America on a daily basis is done in the service sector, there was a rapid fall off in requests for services that absolutely did not need to be paid for. (Granma came home from Shady Hills Rest Home and moved into the back bedroom. After five elderly patients left Shady Hills, one staff member was laid off......)I wouldn't trust anything that the Fed says. Period.
What is the fancy economic jargon for "things are just too dang expensive"?
IMO that is the biggest problem. Prices of products from pop to Pontiacs is outrageous. $40,000 for a pickup truck...$4 for a gallon of milk...$300,000 for an average three bedroom home.
Something has to give.
None of which would have been a problem if workers salaries had been keeping up with inflation, of course.
But they were not..and have not since 1969.
Uh, Pauli? DUH! Read my post again. The poor are the boogeymen to the Republicans. Have been for as long as I remember. Hence the large group of Republicans that pretend that CRAs are the cause of the current economic trouble.Uh Rav, this past year, the government hasn't done a whole lot to help poor people through this crisis. Maybe you haven't been paying attention, but the government pretty much took care of the rich this year.
They've probably shelled out more for the rich in one year than they have for the poor in the last couple years.