antagon
The Man
- Dec 6, 2009
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nope. you're right, getting the money supply to a target, or rates, or relative buck valuations is difficult and expensive. the more artificial (or stimulative), the more out of synch these each will be, i'd guess. full-floating currency markets can absorb a lot of pressure without budging. it is like tug of war with a rubber-band rope.[
You have summarized basic deflation and why it is difficult to impossible to correct with QE.
But that supports my original distrust of the ways in which currency value is allegedly set. Because it demonstrates that powerful market forces can undermine efforts to deflate currencies, which calls into question the ability of the fed to undermine the value of the dollar no matter how much money they distribute via QE.
Can you suggest a real formulaic approach in which the fed could introduce money into the economy and achieve direct destruction of dollar value within the limitations of our present system?
And what about deficit spending? Deficit spending is another way to inject money directly into circulation, targeted quite specifically.
this is where i'm at with policy. i think there's a need or benefit in having the fed's monetary policy, too, especially since so much of that money comes back as treasuries purchases by reserve banks, particularly in asia, but fiscal policy makes the economy hum and can have more direct effect with clear deadlines.that's merely monetary liquidation. fiscally, the issuer could decide to subsidize corn-chip makers with billions in purchasing power. the chipmakers will inflate the price of corn in turn by upsetting the ratio of willing cash to dearer and dearer corn. this is a crude example in a narrow market, but it shows how deficit spending introduces liquidity without the central bank's involvement, and in a way which might still effect inflation -- certainly on the street.
antagonian protectionism entails broad subsidy of $2-3 dollars/hour on hourly wages up to a cap, for example. this will empower job market demand, and in turn labor market demand, which would allow policy-level austerity to entitlements and a transition of the largess to productivity support rather than subsistence... but that's fiscal recourse. the fed's on their own with that other shit. i dont have any better idea than you do, there.