Make It Rain?

I don’t claim to be an expert.  I just pay attention to this because it’s amusing, and as a whole says so much about how “our” economy has been structured.  So take what you will from the following:

-Yglesias: “There isn’t enough money!  The Fed needs to loosen up!  More dollars, more demand!”

-Sourcewatch, peer-reviewed by these guys: “Oh, they’ve been loose, it just went to high-finance…”

Truth be told, I kinda feel for Matt.  Blatant error (government can’t create demand out of thin air.  People want what they want, or they don’t) aside, I get why he would think this.  Much of the general public is sorely lacking in money, and he wishes that the Fed would just straight-up give them the cash.  Since they haven’t, he assumes they’re being stingy, when the reality is on the other side of that electrified-barbed-wire topped brick wall there’s a flood.  In fact, there’s been a flood for so long we generally don’t think about it anymore, all we knew was that there was a new “when I was your age…” story about shopping being written each week.  Prices are only slowing down because the rest of us have run into that wall at full speed.

As for what the non-financial sector has been doing with their money in the midst of this, here’s the answer from Barry Ritholz: Sittin’ on it.  But that started back when Thriller was the new shit.

So, the extensively government-backed financial sector, which long ago dropped any pretense to funding productive activities, still managed to screw up & threaten collapse.  The rest of the “private” sector benefits from the neutering of labor & sits around on a pile of cash, bitching about overcapacity.  Rather than a helicopter & printing press, may I recommend a battering ram?

Edit, 7/18/10: Contradiction Time!  Three days after suggesting the need for encouraging consumption via gov’t policy, Matt endorses a tax reform idea literally designed to discourage it…

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2 Responses to Make It Rain?

  1. dL says:

    To me, it might seem a fairly obvious point, but when the political class is held in utter contempt, I don’t think the economy is suffering from a shortage of politically-connected aggregate demand.

    The progressives, who mocked libertarians over a utopian disregard for political economy, are now suffering from their own utopian disregard for political economy. I hate to break it to Matt, but no one wants what he is selling. Demand for Matt’s political preferences is weak. That’s a problem for Matt and his stupid theory.

    Artificial exponential increases in spending for Matt’s preferences would be really bad news for all of us.

    Really, if this economy can’t rebut the silliness of macroeconomic aggregate demand, then you are a lost cause. You are not informed by empirical reality. You are a fanatic…

  2. b psycho says:

    That’s the sad part. This is, and has been for quite awhile, beyond stating as basic supply/demand. Current conditions are to economic policy what blowback is to foreign policy.

    The growth of the financial speculation part of the economy is directly attributable to the shifting of most workers from savings to debt. If Matt thought through the implications of that & responded accordingly, he’d end up getting fired from CAP.

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