When you take out a loan, even if it is at a very low interest rate, even if people can claim it's a negative real rate, you are not getting more money. You're getting more levered, which is the opposite of getting more money. When the problem is an overlevered economy, the solution cannot be even more leverage, but that's the only lever (apologies) the Fed really has and the confusion between this sort of horizontal money and the vertical money provided by government fiscal policy continues to lie at the heart of our ongoing financial crises and the difficulty of traditional economics to apprehend what is going on.Winterspeak
Foie Gras Bubble
Yes, people need more income, not more debt.
ReplyDeleteJust one addition. The impact is greater, even in the near term, when people believe view the change as permanent, not a one-time stimulus check.
All the economists ever want to talk about is stimulus: countercyclical boosts to restore the old status quo. But the status quo sucks.