Richard Koo on 'Balance Sheet Recessions'

Discussion in 'Economy' started by Widdekind, May 5, 2012.

  1. Widdekind
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    Widdekind Member

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    Richard Koo clearly explains much of the recent financial fiasco, highlighting the potential of "Fiscal Stimulus" -- i.e. Government deficit spending -- to "force" funds back into the economy. Money flow through an economy is like blood flow in your body -- if everybody is Saving (to pay off debt), then "blood is pooling in every organ", draining "blood" from the circulating "blood-stream", until no more "blood" is left to circulate. Government stimulus is like tapping into every organ, "forcefully" (thru Taxes) draining out accumulated "blood", and "forcefully" pumping the blood back into the circulatory system.

    Real interest-rates are zero percent. Nobody is borrowing (b/c they're legally bankrupt, and must pay down debt). So, at this moment, Government borrowing would be cheaper than ever; and would "crowd out" no private-sector businesses. The Chinese invested heavily in regional "super-projects". Perhaps Government borrowing could fund the development of Canadian oil shale deposits ? Or, perhaps foreign borrowers could be courted, to borrow money, for "direct foreign investment" into the domestic US economy, c.p. China moving manufacturing to the US ?

    [ame=http://www.youtube.com/watch?v=Tt3KdH1uk-c&feature=relmfu]Richard Koo: How the West is Repeating Japan's Mistakes - YouTube[/ame]​
     
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