Debt Rattle February 14 2016
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Dorothea Lange Water supply in squatter camp near Calipatria CA 1937 • China’s Central Bank Says No Basis for Continued Yuan Decline (BBG) • Why Kurod
[See the full post at: Debt Rattle February 14 2016]Of all the stupid central bank ideas the dumbest is that confidence increases spending and consumption. No, money leads to spending and consumption and thus confidence. Money leads confidence not the other way around, confidence leading money.
I love the brilliant ‘new’ “cold fusion” idea, increase deficits. That can’t happen by choice in the US since it is political heresy. Every single working Republican politician in America supports a balanced budget or at least has to say they do. Now it is true that persistent tax cuts for almost 40 years have raised deficits but the increases have been incremental and almost never tied to overt fiscal expansion, ie. more spending. In the US anyway tax cuts can always appear but every trick in the book will be used to keep the deficit from rising.
Has this Stephen Englander been on Mars the last 40 years? Well his whole message is just pro forma BS with cutting taxes and more QE being the point and the fiscal expansion stuff thrown in just for the hell of it.
Deficit expansion in the US is never the actual or stated intention of policy. It always occurs because or revenue decline because of lower tax rate or lower tax revenues because of economic slow down. The latter is where we are this instant. Rising year over year tax receipts which have been strong for several years have now turned to YOY declines so the deficit is increasing already which translates into more Treasury borrowing. The Treasury is going to be pounding the market with supply for the next 6 weeks because of the seasonal factor of tax refunds but the amounts are going to be higher than anticipated just 2 months ago. This is an important factor in market liquidity and bodes ill for any stock market recovery in the short term. All of which really messes up the entire fiscal expansion road to growth thing.
Rapier,
I just had to read that Bloomberg article, because, I have to admit, I didn’t know who Englander was.
Wow, Keynesian propaganda is not dead, is it? Cold fusion? Wow, again. If I were a physicist, I might be offended by a currency strategist using such terms.
Anyways, you are exactly right in that it is money, otherwise known as a claim on wealth, which stimulates people to purchase, or trade. Never heard anyone tell me confidence burned a hole in their pocket. Maybe I just don’t talk to the right people.
How about we try this: support the parity price of raw materials, which means that the prices are in proper relationship to the rest of the economy. That generates enough income at that base level such that when it multiplies through the trade turn, there is enough national income for consumers to purchase their own production. In other words, put enough of our money (capital) reserves at the starting point of the economy so it can crank up enough velocity such that the consumers can spend earnings instead of “confidence”. Some people call this “monetizing” a basket of raw materials. Let’s forget about injecting debt somewhere in the middle of the thing, and then asking that money to be paid back, and then with interest on top of it. We’re so done with that.
What? The debt money monopolists won’t like that you say? You mean when people actually start to earn their way, they won’t want to rent the monopolists’ money as much? Clicking my fingers. Darn. What was I thinking?
Pardon me. I just had this strange feeling that I need to inspect the break lines of my car. That debt money monopolist financed auto of mine is getting old, you know. 😉
“Mr. Kuroda has also repeatedly rejected the notion that the central bank is running out of ammunition, insisting that there is “no limit” to its policy options. “If we judge that existing measures in the tool kit are not enough to achieve the goal, what we have to do is to devise new tools, rather than give up the goal,” he said.”
“If at first you don’t succeed, try, try again –then give up. There’s no use being a damned fool about it.” —W.C.Fields
Chris M,
Parity pricing? Surely you jest. That would make too much sense, and besides, than you couldn’t increase the “skim” on nearly stolen commodities.
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