Monday, February 9, 2009

Deficit may not get as big as expected with gov't receiving big new income flows

All the worries about $2 trillion budget deficits may be overblown. With the government now receiving big new income flows as a result of buying assets, the deficit may not get anywhere near projections. Taxpayers are making money, in the abstract, but losing income in reality. Sad, very sad, that no one seems to understand this. We continue to hurt ourselves.


googleheim said...

Could I ask :

If the Fed makes the money, then that is a tendency towards a surplus or tidy-tidy budge balancing.

If the Fed allows the money to stay and to FLOW into the REAL economy and not drain back into the Fed - then this is a source of liquidity and has a chance for multiplication and distribution.

However, any surplus is then attacked by the Republicans as big government and they want to make more handouts !!! and they think that midnight basketball is a waste and a free lunch!

Leave the money in the Real economy and let it swish things around.

Gee, how is it that fiscal conservative republican budget balancing act is actually AGAINST THE FREE MARKET ( for what it has been revealed to be since the bogus neoconservative smoke has cleared from it's mystic or mis-schtick ).

mike norman said...

The Fed is currently not recycling any income drain and that is evident by the decline in reserve balances. That is not to say they won't step in at some point, however, right now their is a net drain going on.

googleheim said...

Nouriel Roubini takes a so called analytical data driven view, but I think forgets that any further global deterioration will strengthen the dollar with folks seeking security.

Does make a good point about Southern Europe and their lack of tools - mainly currency.

Perhaps southern Europe can issue their own Mediterrean currency - ?