Good news for the economy

[obvious Child]

Now, back to the topic, how will throwing more of the taxpayers money at this problem solve it?

It's how the money is spent. Despite the hundreds of good posts detailing why this recession is fundamentally different, partisan hackjobs refuse to actually learn anything. I've asked many a partisan here to explain why this one is different and every single one ran like a coward. Direct spending will only blunt the pain as will tax cuts. Neither have ever fixed a financial/liquidity crisis in recorded history. What does fix this particular type of recession is boosting lending. If private banks won't do it when their borrowing costs are negligible, there really isn't any choice but to have direct government lending to boost the supply of credit. This has worked before. The problem is that it often creates a bigger problem with businesses reliant upon cheap government financing often to the point where many loans become non-performing.

At the moment, $300 billion is too small to create the kind of NPL problems Asia has seen. But once you start on this path...it's dangerous to get get off and to stay on.

 

[phattonez]

Not because of increased savings, but because of increased demand for credit (which is a function of income growth). Strictly speaking, demand is outpacing supply.

And how does this not contradict the quote you love from Milton Friedman about how inflation is always and everywhere a monetary phenomenon. From what I can gather here, you're saying that supply not being able to keep up with demand is what is causing the price inflation.

If supply outpaces demand, then yes rates will fall. The issue arises when both demand and supply fall (demand for credit and supply of loans) which is where central banks become important.

The interest rate or the savings rate will fall?

 

[Geo Patric]

Banks are not lending because they (or so it would seem) do not have ample faith in US firm's ability to repay their loans on time.

well, eventually we will run out of money that we don't have... i guess it will stop then.

and yes, that is intended as a bit of humor, but if you look into it, you will see that there is some sense in it. we faced the same problem when Clinton inherited G.H.W Bush's 15% increase on Reagans 10% deficit turnaround of Carters surplus and we spent a lotta money before we ran outta money we didn't have and discovered the money that we DID have.

relax. the issue is good, competent Democratic hands.

geo.

 

[Kushinator]

And how does this not contradict the quote you love from Milton Friedman about how inflation is always and everywhere a monetary phenomenon. From what I can gather here, you're saying that supply not being able to keep up with demand is what is causing the price inflation.

Ha!

Because supply not being able to keep up with demand very well translates into a monetary phenomenon! Can you tell me how (and no it is not a quick question but rather straight forward)?

The interest rate or the savings rate will fall?

Without a central bank (or on a gold standard), banks will have to raise interest rates to attract lending capital.

 

[phattonez]

Ha!

Because supply not being able to keep up with demand very well translates into a monetary phenomenon! Can you tell me how (and no it is not a quick question but rather straight forward)?

You said that the situation was inflationary. But before you said that inflation was always and everywhere a monetary phenomenon. Can you reconcile this?

Without a central bank (or on a gold standard), banks will have to raise interest rates to attract lending capital.

When supply outpaces demand, I asked you which would fall: interest rates or savings rates?

 

[Kushinator]

You said that the situation was inflationary. But before you said that inflation was always and everywhere a monetary phenomenon. Can you reconcile this?

In the long run.

Now, care to answer my question?

When supply outpaces demand, I asked you which would fall: interest rates or savings rates?

LOL! You are killing me today!

The answer depends entirely upon the situation; more information is needed to answer the question with a definite.

 

[phattonez]

In the long run.

Now, care to answer my question?

I didn't say it was a monetary phenomenon. I was asking you how it was because you always say that inflation is always a monetary phenomenon. I was just asking you to clear up the issue, I was not making the claim yself.

LOL! You are killing me today!

The answer depends entirely upon the situation; more information is needed to answer the question with a definite.

When savings rates fall, interest rates rise. When savings rates rise, interest rates fall (all other things being equal). So when supply outpaces demand, what happens to interest rates?