As you asked...
I gather from different comments that the credit creation by government stimulus amounted to very little if nothing. To sum it up:
-it signalled the market that it is safe to borrow and sell dollars at no interest
-it restarted "investing", or speculation in raw materials, like oil, soy, and some metals with the side effect that gold established itself over 1K.
-this also ensured a price for crude which is high enough to support Russia (Russia would run into problems when oil prices are below 50 or so for a longer time).
-it oiled the dealmaking on Wall.St somewhat, as evidenced by the flood of VC-backed exit IPOs this year, compared to none last year. Besides, a load of secondary offerings even in less seasoned names has been done.
-it probably lifted other asset prices and derivatives (like CDOs) a few percent, perhaps 20 or 30 percent from their depressed valuations; but little seen from above (par).
-lastly, it was reflected in the recent GDP growth number with a multiplier of not more than 1.
But without "real" effects on production and jobs thus wages it could be even harder for the common folks to serve debt, if escalating prices for goods and services reduce their ability to pay.
A debenture is not edible nor is the house it paid.
And for small or medium sized banks with a hopelessly underwater book the recovery is too little and too late. Need evidence: despite 100 closures and an "improving" economy the list of problembanks is mushrooming.
(at the same time the FDIC states that they hold back with closing banks; in normal times many of the walking dead would have shut down earlier).
Inflation, hm. Inflation would require escalating money creation and a much more severe dollar devaluation against most currencies.
To add one subtle point: as we already know, the only cure against high prices are - high prices. Translation: if prices for certain raw materials are too low today and in the near future, long term supply could be put at risk; so in the long run prices could jump much higher and worse, supply could be disrupted if producers were to close plants... |
