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Politics : Politics for Pros- moderated
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alanrs
prometheus1976
To: frankw1900 who wrote (623307)1/25/2017 8:44:07 AM
From: skinowski2 Recommendations  Read Replies (3) of 794349
 
The reason depressions are deflationary is that folk are paying down bank debt, which destroys money. At such a time folk have no interest in taking out loans, which creates money.

Or perhaps it's worth taking one more step back, and figure out what created that situation. Excessive credit? Easy money causing misallocations?

As a guesstimate, divide our government deficit spending of roughly $1 trillion by the ??about 150 million recipients. Works out to about $550 per person per month. Takes this money - mostly used for spending - out of the pockets of 150 million individuals, and try to imagine what would happen to the SP500 valuations.

In other words, it could be argued that we are in a depression - which is papered over via government spending.

Incidentally, since most of the borrowed dollars are (probably) spent on consumption, they end up in the accounts of a variety of providers of goods and services. (Which may be the source of the several trillion dollars held by corporations overseas). In other words, government borrowing is the vehicle for income inequality.
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