The New Money Realm

Brad Delong provides excellent descriptions of economic activities, and did an equally good job in discussing the three basic types of financial crisis. Does it sound boring?–it is, but that is not Brad’s fault. The key point I would have my Readers understand is that liquidity issues rarely affect the structural integrity of the economy, while insolvency issues invariably destabilize some aspect of the economy, and We are cursed with attempts to correct Corrections previously put in place. Remember that Santa is a two-edged Demon, who become January’s Debt load. The Readers probably imagine such effect disappears as One rises through the ranks of the financial sector; the reality states that Santa starts out as a weak Demon, and degrades from there.

Central bankers find themselves somewhat Nude at the Ball with articles like this One coming out. Traditional restorative mechanisms default under pressures of overblown Reserves held by foreign governments and the Private sector. There are already too many Dollars out there in the World, and measures to inflate for liquidity will start an avalanche of Dollars on the World market, inevitably starting a spiral Inflation. The Fed and Treasury might do best by adopting policies which would incite a Sell-off of those Dollar stocks, while introducing a Purchase program domestically for those Dollars. It would be an unusual practice of selling much control of Our banking system Overseas to gain liquidity, and would not work effectively if the U.S. Government continued deficit spending. Still, it seems the only policy option to stabilize the Dollar, and eventually appreciate it.

Readers should study this blog entry from the Director of the Congressional Budget Office. It gives an informed view of the current Tax impact within the United States. The facts can establish that the Bush Tax Cuts have did little for Taxpayers themselves, though they provided a great degree of gain for Business Profits. That Gain, though, came with a huge increase in National Debt, which has generated the Crisis of the previous paragraph. This blog points out that there has been a shift from revenues generated by Employment, to revenues earned from Capital Gains. Most Economists would acclaim this Shift as example of a expanding Economy, but I attribute to it a heavy loss of economic resiliency, with Markets being a quasi-quicksand for rapid loss of financial value. lgl