Monday, August 19, 2013

The Demand-Side Fusion Bomb Is About To Burst It's Containment Vehicle?

Commentary by Roger Erickson

Who say's American ingenuity can't generate fusion?

Maybe there isn't enough demand from Consumers .. to reach critical mass yet?

'Cuz maybe, just maybe, they don't have the liquidity to express their mounting real demands!!

The demand-side bomb is about to burst it's containment vehicle?

The SME demand-side problem (Izabella Kaminska, FT Alphaville)
"There simply is not enough demand for credit from qualified U.S. small and medium business."

Be still my ticking fuse! Maybe Izabella should stick her finger one inch further into the hornet's nest, to see why no one's getting stung yet.

They're there. She just can't yet perceive their mounting demand for action. Gotta wonder how many inept policy wonks have ever witnessed a critical mass of adequate demand?

How many policy wonks even understand the concept of their own half-lives, time constants, energy-of-activation delays, and feed-forward, runaway feedback loops?

Or is this a NeoCon perceptual anomaly? If they can't see any aggregate demand building up, the Middle Class must be hiding it?

And are NeoCons consistent to their vows? If they don't want to see something, do they hide it from themselves?


googleheim said...

Republicans with sequester to lower the deficit.

Democrats lowering the deficit.

Fed raising rates ??

Dollar getting weaker ??

The whole premise to lowering the deficit and sequestering is supposed to contain the interest rates and make them lower
while strengthening the dollar.

This is all backwards ... why are the MMTer's not commenting on this ?

Mike Norman invariant #3 : the fed can set rates anywhere it wants without any market force telling or influencing ...


Mahaish Raja said...

"Mike Norman invariant #3 : the fed can set rates anywhere it wants without any market force telling or influencing ...


mike is correct. post 2008 and lehmans crash, the fed pays a support rate on bank reserves equivilant to the fed fund taget rate. so the fed fund rate can only be bid down to the support rate on reserves.

there is no liquidity management required through the bond market, at the shorter maturities.

so we essentailly have fed fund rate by decree, and no recalcitrant bond market in sight.

at longer maturities liquidity management is required, but the fed is god, because they have infinite liquidity, which trumps bond market vigilantes on any part of the yield curve ;)

Vytautas Vakrina said...

I would not attack Izabella@FT.

Clearly, she is very open-minded person. Her Dizzynomics on my RSS reader (currently Digg) is even unclasified. There is no category.

Roger Erickson said...

This is NOT an attack on Isabella.

It IS noting that even most of the supportive press coverage is 20 years behind even the latest round of fiscal policy literature, and the public is 80 years behind.

This is fiscal policy space, not about personal issues.

Marriner Eccles must be turning over in his grave witnessing the depths of policy discussion at the supposedly highest levels of public discourse. Kalecki too, not to mention Lerner.

Step 1 of re-orienting a disoriented public is alerting it to the depth of the context it actually faces, and the speed of the OODA loop required.

Otherwise, you doom fellow citizens to a lifetime of remaining a day late and a fiat short. :(