Wednesday, August 11, 2010

Trickle down economics

So yesterday, the Federal Reserve basically said that the economy is double dipping. That's great if you're on a roller coaster, not so great if you're part of an economy that has lost millions of jobs over the past three years. So now the Fed is going to start printing some money by buying Treasuries.

Will that work? In the fever-fogged dreams of Ben Bernanke and Milton Friedman, it might work. But as has been repeated multiple times before, when you're at the zero bounds printing money is merely pushing on a string -- it all disappears under mattresses as fast as you print it. Unless some entity actually takes that money and spends it, at which point it starts contributing to economic activity.

Now... what kind of entity could take that money and spend it? Let's see, I'm thinking about this really big entity, that is actually receiving the money that the Fed is printing... gosh, what could that entity be called? Certainly nothing as mundane as "Federal Government of the United States of America", everybody knows that governments can't spend money, they can only consume money into a black hole of suck after which it disappears forever from the economy. Well, everybody who is a total fucking moron or a dishonest partisan hack knows that, anyhow... the rest of us knows that the money gets spent and goes to, like, people, in exchange for goods and services. And that when there's slack goods and services in an economy -- like, say, in ours, where factory utilization is low and unemployment is high -- this means that goods and services that otherwise wouldn't be moving in the economy start moving in the economy. But sadly, it's only us sane people who know this, and the lunatics are in charge of the loony bin... a.k.a., WASF.

-- Badtux the Economics Penguin


  1. Yeah but there's a whole new crowd out there, who's saying...hey that sounds like a good idea...
    The rest of us are just grabbing our ass so we can kiss it goodbye.

  2. Gotta love that Bernanke, huh?

    The ultimate string pusher (and who benefits again?).

    Lunatics are not in charge, my friend.

    I fear they know all to well what they are doing.

    After all, they used to be very smart guys.

    And I don't have any other explanation (a logical one anyway).

    Love ya,


    printing money is merely pushing on a string

  3. But sadly, it's only us sane people who know this, and the lunatics are in charge of the loony bin...

    Hahahaha, he thinks he's sane.

    Oh well, I don't give a rats ass, I removed myself from that loop. Bring on the hard times, they are good for me.

  4. I'm not as confident as you in this stimulus plan:

    1. low factory utilization
    2. government spending
    3. ???
    4. high factory utilization!

    It's unlikely that the federal government is capable of producing the type of demand that is a substitute for that of a highly diverse and fragmented economy. Yeah the government can spend a couple billion on fixing bridges and roads, but is that really a substitute for a million people spending a couple thousand dollars on a million different things? Doubtful. One of the better proposals I've heard is from Martin Feldstein - he suggests inciting demand by handing out prepaid debit cards so that money is actually spent by individuals (who are trying to save the money they otherwise would spend) and doesn't disappear under a mattress as you say.


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