DISQUS

Goldilocksisableachblond · 2 months ago

"So the Federal Reserve can print all the money it wants and buy all the Treasuries it wants; none of this will lead to consumer price inflation in the short run except via dollar depreciation and import prices. "

That's one big "except".

Oil at $150 or more would drive a stake thru the heart of the middle-class. Deleveraging consumers would be replaced by decomposing consumers.

Edward Harrison · 2 months ago

Remember, I am making a statement of fact, not one of position. The question was whether QE is inflationary. It is not when the demand for credit is low.

I have posted plenty of times saying I think quantitative easing is not a good policy - asset bubbles and commodity prices being a major reason why.

Goldilocksisableachblond · 2 months ago

Understood , and I agree in general with the points you made.

I just think too many people fail to grasp that inflation , as measured , often doesn't reflect the reality on the ground for the masses. The top 10% of earners , who receive around half of all income , won't be severely impacted by high oil prices , and they're not the ones currently buried in debt.

The rest , already on knife's edge , would be impacted. Rising oil would mean higher gasoline , heating & electric , imported food and drugs , etc. All necessitities and , together , a substantial part of middle-class budgets.

Dollar depreciation , absent immediate action to address the distorted income distribution , will make the crisis worse well before the export-related job increases that result from depreciation will begin to make it better.

Increasing gov't debt or a depreciating currency are not the problems , per se , they're just tools to implement policies. It's the policies that are the problem.

The solutions are out there , they're just not being discussed.

WalterW · 2 months ago

I think you mixed up the red and green circles in your graph.
With the graph being as it is, this quote does not make sense:
"However, in the interim, what we want is to get back to that green circle in the chart and higher GDP and stay away from the red circle and lower GDP"
You probably mean you want to go back to the RED circle and stay away from the GREEN one. (Unfortunately you colored those circles counterintuitively in the graph.)

Edward Harrison · 2 months ago

That's right. Thanks for catching that (I was mentally thinking green good, red bad)

WalterW · 2 months ago

Eh, and as I resumed reading, I ran into another one:
"What we want to know is how we get back to the green circle over time" - that would again be the RED circle... :)

Maybe better change the graph after all, somehow it really doesn't feel right to keep trying to move to red; I'd prefer go to where the grass is greener!

Edward Harrison · 2 months ago

Yes, that's why I originally swapped the two mentally. Poor choice of colors.

attitude_check · 2 months ago

But we can't liquidate capacity -- we outsourced it all overseas!

That means the only way to balance is through running a trade surplus! The $ has to drop alot before that happens. Good news, the $ is dropping!!!???? Oh d**n

Edward Harrison · 2 months ago

I am actually thinking most about financial services when I think of overcapacity