Sunday, December 24, 2017


FRED says:

1 comment:

The Arthurian said...

While looking for quotes I can reference on the topic Recent Predictions of Non-Vigor I ran across this: N.Y. Fed raises U.S. fourth-quarter GDP growth view to near 4 percent, dated 15 December 2017.

But how can it be that recent credit expansion is still going nowhere?

Maybe the increase in economic activity is due to all the hoarded corporate cash tucked away during the Obama years. Now, due to -- gasp -- Trump or whatever, that hoarded money is starting to get spent. That would shoot my Vigor Theory straight to hell.

But we'd still see vigor. If hoarded money is starting to circulate, that's good for economic growth. It should boost income. It should help those of us who are not at the very top of the income scale. If consumer spending grows because income is growing, and there's not a lot of consumer debt increase, that's a good thing. It would mean, among other things, that the expansion can continue.

And inflation? If we get inflation it would be due to the return of the hoards to circulation. Raising interest rates to restrict lending would do little to prevent such inflation. Nor, perhaps, would instituting tax incentives to accelerate the repayment of debt.

The lesson in this would be: Never again allow such accumulations of idle cash to arise. Tax that money away in the early stages, always.

The other lesson: Don't do a lot of quantitative easing (don't print a lot of money) thinking that you're on safe ground because the money is not being spent. It will be.

It will be.