On 11/20/2012 2:12 PM, John Williams wrote:
On Tue, Nov 20, 2012 at 5:45 AM, Kevin O'Brien <zwil...@zwilnik.com> wrote:
Right now, there is a ton of cash that is mostly on the sidelines
because the people who have it do not see opportunities for productive
investment.
"Cash on the sidelines" is a useless concept, and perhaps worse than
useless, actually misleading.
It works quite well for what I am describing. I did not see the point in
going into a long analysis of where the money is, since the main point
is that it is most definitely *not* going into anything that remotely
creates jobs. Neither will giving those people even more money in the
form of a tax cut.
Top-down
management of a $15 trillion economy is virtually impossible, and
despite constant claims to the contrary by politicians, the best that
can be hoped for is to provide incentives that might possibly, in some
indefinite amount of time, nudge some parts of the economy slightly in
the direction some people might like.
OK, I'm not at all clear on how you got "top-down" management out of
what I said. I'm pretty sure I never used the phrase. My only point is
that people who have a lot of money now and do not invest it
productively are not likely to suddenly discover productive uses for the
money if you give them more of it. Another dollar in the hands of an
average person is likely to result in another dollar worth of spending,
which goes to products that a company must produce. In addition, if
producing that product requires additional labor, there is a multiplier
effect. Take that same dollar and give it to someone whose main interest
is in feeding Cayman Island bank accounts, and you get bupkis. And if
you find that dollar to give them by taking it away from someone who
would have spent it, the result is actually negative. This result is not
purely theoretical, either, since Europe is proving it on a daily basis.
Anyone who keeps up on the news can see that Europe is having a much
worse time of it than the U.S. right now. I don't really want to see us
emulate that policy.
BTW, my doctoral dissertation at the University of Michigan involved
banking and monetary issues. One of the best lessons I learned was that
people who really understand what they are talking about can say it it
plain English.
Regards,
--
Kevin B. O'Brien
zwil...@zwilnik.com
A damsel with a dulcimer in a vision once I saw.
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