I think all those post WWII reserves you refer to...
I don't refer. At that time FED did not practice Keynesian pumping. I refer to the mass of unuitilized reserves which FED created last year.
actually belonged to the depositors, not the banks.
Banks own almost no reserves whatever their origin.
That's the primary difference.
That's no difference. The subject was demand regardless of the form of its wherewithal. After WW2 demand, in your definition of the term, was redirected to unavailable items.
So it was when the rationing ended,
According to Galbraith, chief WW2 price fixer and rationer extraordinaire, it ended in 1944. It ended because industry had caught up and less inventory build was perceived to be necessary as the war started to look winnable.
and industry was in the process of retooling, that you saw the demand increases and inflation.
Didn't you say that demand was already in the bag from savings?
They were back from the war, making babies, and looking to buy houses and products that existed in limited quantity due to retooling.
That was the point I was making that is similar to what's needed now. You said earlier there's too much capacity. Similarly after WW2 there was too much war materiele capacity when other kinds of capacity were needed.
But right now.. the consumer is TAPPED OUT,
What evidence can you cite to support this conclusion? You might take a look at savings:
research.stlouisfed.org pg 14
You're mistaking consumer psychology with consumer potential. The wherewithal is there, but the psychology isn't.
about to lose their homes, can't afford the PLETHORA of available consumer products that already exist. And the reserves you're talking about belong to the Banks, not the consumers.
Reserves don't belong to banks. They're loans to banks from the people and from the FED. When you make a deposit at a bank are you saying that the bank then owns the dough? That means it isn't a demand deposit, not a deposit that will be returned on demand. Simply, that's trivially false.
Further, the ability to borrow doesn't constitute a valid source of final demand. Final demand held up well when interest rates were 20%. If you don't believe that, check real consumptive expenditures for that time. Fluctuations in borrowing aren't well correlated with fluctuations of final demand.
It's just that the sales are going to low cost producers at any price point, and that ain't much made in the USA.
But that isn't the kind of "potential demand" that's going to pull this economy out of deflation.
We're not in deflation. Check any chart of real disposable income or CPI adj for fuel. You must not live in the US to believe that falling prices are occurring. Prices are falling only in inflated assets. Doesn't have much if anything to do with the "real", non-financial, non paper shuffling, economy whose GPL continues to rise. It doesn't care a wit about your deflation illusion.
Demand stimulus, per se, won't pull the economy out. One must stimulate the desire to output. One does that with financial reward and the reward must be earned, not fiated. Infinite stimulus won't stimulate an economy if it isn't competitive. The US hasn't been competitive for 30 years and after 30 years of indolence, it will take several decades of poverty to make the people realize they can't paper shuffle their way to prosperity.
The problem is that government money was misdirected and put in the wrong hands.
Government money? Government has, owns, no money.
There was an argument made last fall regarding the TARP funds. If that money had been given to businesses as a $20K tax credit for each employee that was hired and retained for at least a year, you'd have shored up the demand curve and cost FAR LESS than giving it to banks with no pool of qualified borrowers.
Very little of that money goes to renewable future income streams which provide the savings basis. Takes greed to accomplish that, not giveaways. Pumping up final demand pumps up prices more than output and thereby causes output to fall, and that means falling renewable income streams.
And that money would have been placed in the pockets of those who need it most, the consumers.
No one needs any more money. Less money is needed. Money has to be made dear through poverty in order to restore the desire to expend effort. Making money dear also promotes greed which is also critical, and greed comes from frugality which always attends dear money. This process is in gear now. The president is enhancing its force. This is bullish for stocks. The poorer Lil Guy gets, the higher stocks rise. |
