What is the foundation of demand side economy?
The credit policy of the Federal Reserve Bank. The credit structure of bank credit allowed for each wage per month that can support installment loans per month. Credit cards of $10 per month minimum payment of a $10,000 credit is an illustration of how liberal FRB policy is. So, credit card interest rates is very high(24.5%) to balance the defaults occurring. And FRB has to raise bank reserve from 6(1991) to 10, eventually to 18(soon) same as Japan.
What feds complain about inflation, its actually disguised from the credit policy they are running. We are building a $16 trillion economy, and Feds policy is steady as she goes. Any spookiness could cause Feds some adjustments in government deficits. If deficits are the only resulting problem. Then dollar devaluation will fix the problem.(If dollar is not worth much, then government deficit is not worth much) Not just dollar against gold or silver(inflation problem), but dollar against the trading partners around the world(export and import advantage). But we are doing consumption tax on gasoline that can balance past deficits because of the $1.2 trillion potential tax revenue, which can make dollar revaluation eventually when we are ready.
We have steady growth of economy since 1991, even when Greenspan goofed with 6.75% overnight discount rate and had to fix it with a $4 trillion government deficit since 2001. The microeconomists support the economical policy by accelerated corporate earnings which expands job creation(just in time), which supports Feds liberal credit policy(wages created), which supports atm cash management to avoid credit card defaults. Since 1993, atm machines had increase capacity from $50,000($5 bill) per machine to $250,000($20 bill, and thinner paper) per machine. The population is wise enough using self control by cash management instead of using credit cards for purchases.
We are watching developments at Feds and Wall street and Main street every day, to make sure all the variables are inline with expectation. Public views of this economy we are building has to know how everything is adjusted, when, where and how much? |
