Why didn't Helicopter Ben use his helicopter?

[Tupac Shakur]

"The Ben Bernank"

That video was pretty misguided, but I appreciate the reference.

[KrazyHorse]

It is hard for the Fed to get banks to lend more money. Monetary policy is a blunt instrument. The Fed has cut its' rates and expanded the money supply without so much effect on lending.

Who knows what the effect on lending has been? It's a counterfactual question.

pq[Households, corporations and government already have a considerable debts and the banks have quite a lot of problematic debt on their books.[/q]

Depends which banks you're talking about...

Many people and organisations are up to their perceived "debt capacity" with the consequence there are fewer borrowers regarded as a "good credit risk". The banks are feeling cautious about lending due to economic uncertainty (and perhaps regret about some of the lunacy we have seen in respect of junk bonds, NINJA loans and so forth). Households and corporations are now more prone to paying down their high debts in view of the economic uncertainties. The consequence of all this is that a big cut in interest rates leads to a rather smaller than usual increase in lending.

Mishmash of speculation and superficial understanding.

Pumping up the money supply increases uncertainty about the merits of holding US dollars and risks a flight of money out of the USA. There are already concerns that "the Americans are printing money galore, what's that going to do to the value of our US denominated investments, maybe we better flog off those investments and go elsewhere.

Wow, it's almost as though you have no idea about the difference between fixed income investments and real investments.

This is not the first time such a thing has happened. If I recall correctly a similar thing happened in Japan about 20 shares ago following the collapse of real estate and share price bubbles, which was symptomatic of, and a conributor to, a broader malaise in the Japanese economy at the time (there was a touch of the vicious circle about it). The Japanese central bank cut interest rates right down (to zero for a while IIRC) in an attempt to boost lending and economic activity. This was to no avail as the Japanese economy remained in the doldrums.

Good God. Decide whether you think that there's going to be USD flight or not.

Most of the calls for pump priming appear to be coming from Wall Street. If you tip a big pile of money into the economy it has to go somewhere. When money is invested somebody handles the transactions for a fee, ie Wall Street makes money. I hope Benny ignores Wall Street. (Alan Greenspan seemed to be Wall Streets' tea boy, expanding and contracting monetary policy with both eyes firmly on the "market". Umh, what about Main street, the other roughly 93% of the economy).

This doesn't even makes any sense...

[Kuciwalker]

Main Street

Wall Street

[KrazyHorse]

Never knew that. Do you have that data series?

http://www.marketwire.com/press-release/Trulias-Rent-vs-Buy-Index-Reveals-Top-10-Cities-for-Renting-Owning-Homes-1331996.htm

First thing I could find on Google.

God knows what the ratio is in Manhattan (below the park).

My annual rent is only 35k or so, but the price to buy is well over a mill (probably close to 1.4m; I am in the west village, where the price is ~1700 per sq ft)

[KrazyHorse]

Main Street

Wall Street

[Egbert]

Who knows what the effect on lending has been? It's a counterfactual question.

pq[Households, corporations and government already have a considerable debts and the banks have quite a lot of problematic debt on their books.[/q]

Depends which banks you're talking about...

Many people and organisations are up to their perceived "debt capacity" with the consequence there are fewer borrowers regarded as a "good credit risk". The banks are feeling cautious about lending due to economic uncertainty (and perhaps regret about some of the lunacy we have seen in respect of junk bonds, NINJA loans and so forth). Households and corporations are now more prone to paying down their high debts in view of the economic uncertainties. The consequence of all this is that a big cut in interest rates leads to a rather smaller than usual increase in lending.

Mishmash of speculation and superficial understanding.

Pumping up the money supply increases uncertainty about the merits of holding US dollars and risks a flight of money out of the USA. There are already concerns that "the Americans are printing money galore, what's that going to do to the value of our US denominated investments, maybe we better flog off those investments and go elsewhere.

Wow, it's almost as though you have no idea about the difference between fixed income investments and real investments.

This is not the first time such a thing has happened. If I recall correctly a similar thing happened in Japan about 20 shares ago following the collapse of real estate and share price bubbles, which was symptomatic of, and a conributor to, a broader malaise in the Japanese economy at the time (there was a touch of the vicious circle about it). The Japanese central bank cut interest rates right down (to zero for a while IIRC) in an attempt to boost lending and economic activity. This was to no avail as the Japanese economy remained in the doldrums.

Good God. Decide whether you think that there's going to be USD flight or not.

Most of the calls for pump priming appear to be coming from Wall Street. If you tip a big pile of money into the economy it has to go somewhere. When money is invested somebody handles the transactions for a fee, ie Wall Street makes money. I hope Benny ignores Wall Street. (Alan Greenspan seemed to be Wall Streets' tea boy, expanding and contracting monetary policy with both eyes firmly on the "market". Umh, what about Main street, the other roughly 93% of the economy).

This doesn't even makes any sense...

[Egbert]

Wall Street markets improving = businesses have more capital = businesses expand = more jobs = more employment = economic recovery. This should be obvious.

Those relationships not fixed. Booming markets can be an "asset price bubble" followed by a crash (recent example: the dotcom boom).
Pumping up Wall Street markets does not necessarily lead to economic recovery, might even make things worse.
Not obvious.

[KrazyHorse]

Why are there so many fantastically ignorant Poly commentators on monetary policy from Australia?

[Tupac Shakur]

Surely Heraclitus already has a thread somewhere discussing the implications of a prisoner-heavy settler stock on the mean intelligence of a nation.

[KrazyHorse]

They were white prisoners, so I doubt he'd acknowledge the validity of the comparison.

[Tupac Shakur]

I thought his hard-on was for Ashkenazi Jews and Northeast Asians?

[KrazyHorse]

Well, yeah. But most of his opprobrium is for blacks and Hispanics. He wouldn't admit the comparison between white prisoners and, say, today's American prison population.

[BeBMan]

I thought Fez was the heli guy at poly.

[KrazyHorse]

Sumner touches on some of the points I brought up. The Fed was NEVER out of options. Liquidity traps are a product of a failure of imagination, courage or both.

http://www.themoneyillusion.com/?p=7960&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Themoneyillusion+%28TheMoneyIllusion%29

[Egbert]

Here is a comment from the blog:

Thanks to you Scott I look for the Liquidity Traps in the aisle containing the Unicorn Steaks.