The Fed: Money For Nothing

[Victor Galis]

The whole point of the stimulus bill is to stimulate the economy. Paying down South Carolina's debt won't do that, so why should Congress agree to it?

So that SC Republicans can score some political points.

[Naked Gents Rut]

The whole point of the stimulus bill is to stimulate the economy.

Incorrect. The stimulus package would've been structured quite differently if stimulating the economy was really the goal.

[KrazyHorse]

I'm interested in knowing why people are so eager to try fiscal stimulus when novel monetary stimuli (in the US) AND STANDARD MONETARY STIMULI (everywhere else) are not yet exhausted.

If I had my way the Fed would have started buying up risky assets from day one when the TED spread (and other measures of risk premia) shot up through the roof. Besides the fact that the Fed would turn a nice chunk of change on such an operation it would also have prevented them from having to push a rope by lowering the short rate to 0 just as it was already crashing.

If we think that the Fed is too dumb and slow to respond to significantly ameliorate economic crises in novel ways then I don't see how we're going to claim with a straight face that national governments the world over are going to be able to. That's just laughable. Never mind the fact that there is little to no evidence to suggest that fiscal stimuli of any kind ACTUALLY DO ANYTHING.

[Naked Gents Rut]

I'm interested in knowing why people are so eager to try fiscal stimulus when novel monetary stimuli (in the US) AND STANDARD MONETARY STIMULI (everywhere else) are not yet exhausted.

Fiscal stimulus offers the chance to shower money on your political supporters.

[KrazyHorse]

Oh, and for those who object to the Fed taking on risky assets because of the risk of loss to the government (who basically insure Fed assets) I would come straight out and say that if the Fed takes losses those losses will be monetized, not paid for by issuing more government debt. Last time I checked we were looking for ways to expand (and threaten to expand!) the money supply. How about that for a ****ing threat. We're buying 4 trillion dollars in junk bonds, MBS, penny stocks etc. Oh, and if we lose money on the deal we're going to just crank up the ****ing presses until we've made ourselves whole. Have fun with that...

[KrazyHorse]

I'm interested in knowing why people are so eager to try fiscal stimulus when novel monetary stimuli (in the US) AND STANDARD MONETARY STIMULI (everywhere else) are not yet exhausted.

Fiscal stimulus offers the chance to shower money on your political supporters.

More likely fiscal stimulus simply gives the chance to spend more, period. I have the feeling that most of those strongly in favour of this spending would be in favour of increased spending even without a crisis. That 40% is now being given the support of an extra 20% who are ****ting their pants.

[Naked Gents Rut]

More likely fiscal stimulus gives the chance to spend more. I have the feeling that most of those strongly in favour of this spending would be in favour of increased spending even without a crisis.

Well, that too. They're somewhat linked, though; people who want to spend more also want to direct much of that spending to their political constituencies.

[KrazyHorse]

I'm pretty sure education, health and construction spending crosses state lines. There's some lefty stuff about green energy and public transportation in there, but it's mainly just dressing. The bulk of the money seems pretty blind.

[Naked Gents Rut]

Education is clearly dominated by Democratic interest groups. Health is more even, but the insurance and drug companies (GOP strongholds) seem most likely to get ****ed.

Construction is good and blind; wish there had been more of it in the stimulus.

[KrazyHorse]

Given that Republicans have more kids than Democrats you'd think that education actually goes mostly to Repubs. And I'll admit that old people do vote Democrat. Construction is a good idea in theory (in the US) because there's more slack in the construction sector than anywhere else, but I wonder how easy it is to get money flowing to projects which aren't just hole-digging enterprises quickly.

[Naked Gents Rut]

Given that Republicans have more kids than Democrats you'd think that education actually goes mostly to Repubs.

You're forgetting the teacher's unions.

but I wonder how easy it is to get money flowing to projects which aren't just hole-digging enterprises quickly.

It probably wouldn't have been possible to spend much more on construction in a timeframe that would actually provide a stimulus. The stimulus bill as passed will spend tons of money in 2010, 2011 and beyond, however; I would've preferred it if that spending had not been approved at all or was devoted more toward infrastructure.

[KrazyHorse]

You're forgetting the teacher's unions.

They might be the most vocal segment looking for education funding, but the main beneficiaries are children and their families, not the teachers. The supply of new teachers is pretty large, so an increase in demand shouldn't tend to run up their salaries too much.

[Ramo]

K-12 education funding in the stimulus is more about plugging up the gaping holes in state budgets than new construction. You don't really want massive layoffs of teachers in this climate. Probably some of the more stimulative cash in the legislation.

[Ramo]

Health is more even, but the insurance and drug companies (GOP strongholds) seem most likely to get ****ed.

How exactly do you believe insurance and drug companies are being ****ed in the stimulus? They (particularly insurance) are likely to make out pretty damn well from the increases in funding to SCHIP, Cobra, and IT.

[Dinner]

More likely fiscal stimulus simply gives the chance to spend more, period. I have the feeling that most of those strongly in favour of this spending would be in favour of increased spending even without a crisis. That 40% is now being given the support of an extra 20% who are ****ting their pants.

That's a valid analysis.