William J. Polley sometimes makes me think I have written his stuff, though I definitely have not, especially this comment. I really worry that the Stimulus Package will actually crush the Recovery, by distorting basic Materials pricing. One must remember that Retail prices and the Retail Demand Curve have already stabilized under Recession conditions, and the Stimulus will raise those Retail prices; they could not do otherwise. Consumers, though, have stable Incomes which will not increase drastically until Businesses start to show good Profits. I do not see anything which would create the necessary Consumer Demand for the Stimulus to succeed.
The second element I find disturbing is centering the Stimulus around Banking, most importantly, the major conglomerate Banking corporations. You can give all the Money you want to Banks, and get Businesses to even draft large amounts of Cash from those Banks which they will spend. The trouble lays in the fact that the last thing any will spend it on is Wages, the immediate source of loss of control of the Cash. Business wants retention of that control to derive Profits from it; they will never get Profits from that Cash until it gets into the hands of the Consumer. Business management cannot seem to understand this; maybe I should make the Declaration that all funds in the Stimulus should be paid to Bank and Business only if they have given all Employees a 4% increase in Pay.
I have probably lost even Paul Krugman and Brad DeLong with that Call for a Worker Pay Raise. It does not matter, but it is intrinsic fact there will be a retreat down the Demand Curve in response to any Retail Price hikes; that retreat will equal about 4% by my estimate, with Household expenditures already absorbing over 90% of Income in Maintenance Costs. One does not feed a horse, by forcing the grain up the wrong end. I don’t know how this will turn out, but I am pulling on my nose already. lgl
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