Tuesday, December 16, 2008

Just Print it

“The Fed is sending a message that it will print money to an unlimited extent until it starts to see the economy expanding,”
says William Poole, former president of the St. Louis Federal Reserve Bank and now a senior fellow at the Cato Institute. The Fed today cut the Fed fund rate, or the overnight borrowing rate, to 0.25% today.

It's an appealing strategy because of course, it's been tried in Japan and didn't do much of anything but provide enough liquidity for people outside that country to make a lot of money on their misfortune. It's a good way to pay off massive debts though - just print it. The idea of a 0% main interest rate prevailed in Japan from 2001 to 2006, in order to pump up a sinking economy and stimulate lending. The hope of stimulating commercial banks to lend failed for them, but of course the idea of the US as a separate universe with different laws has been part of our policies for a long time and we still have a month to go before George leaves the building. Gentlemen -- start the presses.

So you say you could use some of that 0% financing yourself? Don't count on it. We're not banks, you know: we just bail them out.


Baltazar said...

Isn't the choice take it back from the very rich or print it ?

Buffalo said...

Aren't we playing Monoply?

Capt. Fogg said...

I don't know if there are any good choices -- and I think we're running out of them.

d nova said...


but seriously:

"From 2000 to 2001, government efforts to revive economic growth proved short lived and were hampered by the slowing of the US, European, and Asian economies. In 2002-07, growth improved and the lingering fears of deflation in prices and economic activity lessened, leading the central bank to raise interest rates to 0.25% in July 2006, up from the near 0% rate of the six years prior, and to 0.50% in February 2007."


"Real GDP in Japan grew at an average of roughly 1.5% yearly between 1991-1999, compared to growth in the 1980s of about 4% per year....

"Starting in 2003 Japan's economy began to recover, growing at 2.0% per year in 2003 and 2004, and 2.8 percent in 2005. Unlike previous recovery trends, domestic consumption has been the dominant factor in leading the growth. As predicted, the economic recovery continued in 2006 and 2007."


d nova said...

btw, i'm skeptical when cato institute says anything. they kept denying global warming at least as recently as last spring:


they've pulled their heads out of that particular patch of sand and started to seek a libertarian solution.