Dromond
Pleasantly abstruse.
I have two links to news stories talking about the cliff the US economy is headed for. Both are sourced from the Telegraph.
RBS tells clients to prepare for 'monster' money-printing by the Federal Reserve
US money supply plunges at 1930s pace as Obama eyes fresh stimulus
That's a whole lot of reading, so I'll try to summarize.
The prime lending rate charged by the Federal Reserve is effectively zero. That's pretty much free money from the Fed. The government has been throwing unimaginable amounts of cash at the economy, attempting to stave off deflation and get consumption moving again.
Despite all these efforts, the money supply is contracting at a rate not seen since the early part of the Great Depression. This is a leading indicator of deflation, the bogeyman for economists everywhere.
The Keynesian response is to throw still more money at the problem. Do everything possible to keep deflation in check. That might work, if we weren't already leveraged up to our eyeballs. Austerity measures to draw down the deficit would absolutely push us over that cliff. On the flip side, sooner or later we are going to hit the debt wall. Losing access to ultra cheap credit would doom our economy just as surely as cutting back spending would. Imagine Greece writ large.
Personal opinion: It's a damned if we do and damned if we don't situation. It's also bigger than partisan politics. Republicans, Democrats, corrupt banks, corrupt financiers, and the public in general are all to blame. We are in the eye of the financial hurricane, and the other side of the eyewall is getting very close.
RBS tells clients to prepare for 'monster' money-printing by the Federal Reserve
US money supply plunges at 1930s pace as Obama eyes fresh stimulus
That's a whole lot of reading, so I'll try to summarize.
The prime lending rate charged by the Federal Reserve is effectively zero. That's pretty much free money from the Fed. The government has been throwing unimaginable amounts of cash at the economy, attempting to stave off deflation and get consumption moving again.
Despite all these efforts, the money supply is contracting at a rate not seen since the early part of the Great Depression. This is a leading indicator of deflation, the bogeyman for economists everywhere.
The Keynesian response is to throw still more money at the problem. Do everything possible to keep deflation in check. That might work, if we weren't already leveraged up to our eyeballs. Austerity measures to draw down the deficit would absolutely push us over that cliff. On the flip side, sooner or later we are going to hit the debt wall. Losing access to ultra cheap credit would doom our economy just as surely as cutting back spending would. Imagine Greece writ large.
Personal opinion: It's a damned if we do and damned if we don't situation. It's also bigger than partisan politics. Republicans, Democrats, corrupt banks, corrupt financiers, and the public in general are all to blame. We are in the eye of the financial hurricane, and the other side of the eyewall is getting very close.
