Liquidity has been the issue. It has caused a jobless and demandless "recovery", but signs are starting to show that this is slowly but surely being corrected. Inflation hasn't been a significant issue since the late 70's.
I am either, nuts, or...
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MantaRevan
Emperor
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I think he was being sarcastic...
Just because you can't see it doesn't mean that people who know the subject can't.
Traitorfish
The Tighnahulish Kid
It's so cute that you think you can save the system from itself.
It's so cute that you think you can save the system from itself.
We can. We've proven it. What we are experiencing now is the ceasing to save the system from itself.
innonimatu
the resident Cassandra
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Liquidity is not the issue, and end of belief in the future payments of debt is. Adding liquidity doesn't make any of that debt go away, it only allows it to be ignored for some more time while it grows even more.
This can can still be papered over for some more time, that's the current strategy, but it can't forever.
The "collateral" for such debt is a thriving economy with a poulation willing & able to buy things and pay taxes. An economy where money is not moving around enough is going to cause the debts not to get paid. If you do not take care of the demand side of the equation, you will not get the money flowing fast enough.
Integral
Can't you hear it?
The advantage of the Money Thread is that I've already talked about this a bit.
The disadvantage is that I'd have to write a long post and do my homework if I were to comment extensively there.
But I don't have to do either of those things here!
The event
The Fed lowered the interest rate it charges on overnight (and longer-term?) swap lines between the Fed, ECB, BOJ, BOE, Bank of Canada and the Swiss Reserve Bank.
Why do we care?
There is a shortage of dollars in Europe. The Fed's action allows European central banks to borrow dollars a bit more cheaply to meet the demand for dollars in Europe. Yes, there is a significant demand for US$ in the Eurozone.
Is The End Nigh?
Stocks rose on the news because, um, that's what stocks do if monetary policy is expansionary (relative to expectations) and signals an expansionary stance in the future.
The Euro's still in a very shaky state and I don't know what endgame looks like. Orderly exit from the Euro seems unlikely so there will either be a messy reunion or a messy divorce after the big meeting on the 6th.
I mean, yeah, the macro outlook blows. China's housing bubble is showing signs of popping. Europe's sick from both structural and deficient-demand problems. The US is suffering from deficient demand.
I really hope a 1931 isn't around the corner. It's possible to avoid one: simply do a coordinated devaluation of the dollar, euro and yen against a commodity basket, then do some more QE until the deficient-demand problems are cleared. If you say "the Fed can't inflate," call the central banker of Zimbabwe. He sure as hell seems to know how to inflate.
Monetary policy can't do a thing about the Eurozone's structural problems. But it can make sure that we don't throw deficient-demand problems on top of the structural mess.
The disadvantage is that I'd have to write a long post and do my homework if I were to comment extensively there.
But I don't have to do either of those things here!
The event
The Fed lowered the interest rate it charges on overnight (and longer-term?) swap lines between the Fed, ECB, BOJ, BOE, Bank of Canada and the Swiss Reserve Bank.
Why do we care?
There is a shortage of dollars in Europe. The Fed's action allows European central banks to borrow dollars a bit more cheaply to meet the demand for dollars in Europe. Yes, there is a significant demand for US$ in the Eurozone.
Is The End Nigh?
Stocks rose on the news because, um, that's what stocks do if monetary policy is expansionary (relative to expectations) and signals an expansionary stance in the future.
The Euro's still in a very shaky state and I don't know what endgame looks like. Orderly exit from the Euro seems unlikely so there will either be a messy reunion or a messy divorce after the big meeting on the 6th.
I mean, yeah, the macro outlook blows. China's housing bubble is showing signs of popping. Europe's sick from both structural and deficient-demand problems. The US is suffering from deficient demand.
I really hope a 1931 isn't around the corner. It's possible to avoid one: simply do a coordinated devaluation of the dollar, euro and yen against a commodity basket, then do some more QE until the deficient-demand problems are cleared. If you say "the Fed can't inflate," call the central banker of Zimbabwe. He sure as hell seems to know how to inflate.
Monetary policy can't do a thing about the Eurozone's structural problems. But it can make sure that we don't throw deficient-demand problems on top of the structural mess.
Traitorfish
The Tighnahulish Kid
Not so. It's been proven that you can save the system from itself in a given set of circumstances, but not that you can do so under any circumstances. History only happens once, so even if you were given free reign, you have nothing approaching a guarantee that you could do much more than salvage the best of the wreckage.
Now you're just imagining a scenario where the system can't be saved. And then imposing that imagination on current events. You don't actually have a substantive reason for saying that it can't be saved. Just a desire for that to be true.
Quackers
The Frog
Is the end of capitalism nigh TF?
Traitorfish
The Tighnahulish Kid
Feel free to disagree with it, but, really, to call it unsubstantive is a wishful thinking far more profound than any that you could accuse me of.
I'm a humanist, Quackers, not an economicist. Capitalism ends when we end it, not a moment sooner.
Feel free to disagree with it, but, really, to call it unsubstantive is a wishful thinking far more profound than any that you could accuse me of.
History hasn't borne Marx out so far. Poor track record.
Traitorfish
The Tighnahulish Kid
You mean that capital is less concentrated, the economy more localised, industry more technologically primitive, the global working class smaller, and feudal societies more common than they all were in 1880? My my, I really need to brush up on my modern history...History hasn't borne Marx out so far. Poor track record.
You mean that capital is less concentrated, the economy more localised, industry more technologically primitive, the global working class smaller, and feudal societies more common than they all were in 1880? My my, I really need to brush up on my modern history...
And yet socialism and communism are less on the minds of people than any time in centuries.
Traitorfish
The Tighnahulish Kid
And the moon hasn't turned into a neon green octopus. What does that have to do with Marx and his predictions?
I'm just saying. I know I can make capitalism work. Because it's been done. You don't know that communism can work. Because it hasn't been done.
amadeus
Bishop of Bio-Dome
Uh, yes?
MantaRevan
Emperor
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It's bad when you have to title your post: "Am I nuts or..."
Quackers
The Frog
I'm a humanist, Quackers, not an economicist. Capitalism ends when we end it, not a moment sooner.
That doesn't help.
