"They can crank out all the money they want.
Does not mean anyone will want to spend it."
When I read Bernanke's infamous speech in Nov '02 I was struck by something he said to the effect: The FED can create all the demand they want by exercising their printing press. I thought at the time that he was an idiot, but now, a year later, I'm not so sure he wasn't right. You expect a Japanese outcome where the punchbowl is filled, the lights are lit and the music cranked up, but no one shows up to the party. I begin to think my wife is correct - as long as there is kool-aid, people will drink it. We here in the US are not Japanese. We have figured out a way to live beyond our means by allowing the rest of the world to loan us the money to buy their stuff, and they can't stop loaning it because it would devastate their own economies. The Chinese CB bought my cash-out re-fi mortgage from FNM, but they cannot move the real estate to China. The Japanese CB loans me the money to buy my big-screen Toshiba because if they don't, I won't buy and some poor schmuck in Yokohama or somewhere will be out of a job. So far, every time naysayers call for an end to profligacy, credit expands more notches. How do you know it will end? What bell will ring?
"Have you seen a chart of money supply lately?"
Of course. Money is fleeing CDs, the Money Market, and savings and is going to consumption, corporate bonds and the stock market. This is pumping up confidence, which is starting to pump up capex, and is at least slowing the rate of job losses. Show me the ill effects of the drop in money supply to get my attention. It is not enough to simply assert ugly outcomes. |
