Corps have savings, workers do not.
"Nobody wants to work" is a bullshit narrative anyway considering employers generally did nothing to adapt their hiring practices.
More to the point
"Nobody wants to work" is a made up narrative so employers do not HAVE to adapt their hiring practices.
Well, no they did adapt by utilizing temp companies to fill non-temp positions (by which I mean positions that continue to exist past 6months to a year) to avoid paying benefits. It's comparable how pensions were largely phased out in favor of the 401k, which is now being phased out for ?
EJ, the economy is very complex but one thing to consider is that low interest rates are very good for the banks who are very good with the Federal Reserve. It's assumable the rates will go down eventually, though ideally not through the brutal reason of recession and social but not monetary policy austerity. For example in the previous recession it was necessary to lower the interest rates to absurdly low levels to encourage loaning in the trickle down scheme. A problem is after recovery the rates remained low for a very long time due to the sheer unstoppable power of the financial sector making it politically difficult to raise rates to say 2% or 3% before there was a crisis, due to fears of creating another recession or popping the bubble and taking blame for it. Paul Krugman and Larry Summers would differ and say keeping interest rates low was necessary in a time of Secular Stagnation
https://en.wikipedia.org/wiki/Secular_stagnationThe idea of secular stagnation dates back to the Great Depression, when some economists feared that the United States had permanently entered a period of low growth.[9] The Economist explained in 2018 that many factors may contribute to secular stagnation, by either driving up savings or reducing investment. Households paying down debt (i.e., deleveraging) increase savings and are spending less; businesses react to the lack of demand by investing less. This was a major factor in the slow U.S. GDP growth during 2009-2012 following the Great Recession. Another possible cause is income inequality, which shifts more money to the wealthy, who tend to save it rather than spend it, thus increasing savings and perhaps driving up financial asset prices. Aging populations (which spend less per capita) and a slowdown in productivity may also reduce investment. Central banks face a difficult dilemma; do they raise interest rates to ward off inflation (e.g., implement monetary policy austerity) assuming the economy is in a cyclical boom, or assume the economy (even if temporarily booming) is in secular stagnation and therefore take a more stimulative approach?[8]
Here is what I wrote in 2014 that supports this, though I do question if the theory as I've read it is ignoring specific modern causes to events in deference to less specific conditional comparisons. However their point of view is reasonable since my own point of view generally comes in the form of taking interest in what the economy is up to in regards to what conditions are causing me to pay attention to this dusty field of study rather than broad study as a field of choice, as well my general lack of comparable competency in the task of economics studies.
I had to copy and paste the post due to some odd quirk of the forums that won't allow it to have a quote button like most other posts. Here is the link to the post and a spoiler with a copy and paste.
http://www.bay12forums.com/smf/index.php?topic=122640.msg5476637#msg5476637Quote from: mainiac on July 14, 2014, 10:03:10 pm
Quote from: GreatJustice on July 14, 2014, 09:17:39 pm
I dunno, both parties seem to support the idea of the rich accumulating money being equivalent to the economy improving, they just have different methods of achieving that goal. The Republicans support tax breaks etc while the Democrats support literally giving them several trillion dollars indirectly via Federal Reserve purchases.
"Literally giving" in this case meaning "purchasing financial assets from them at market value". The purchased assets are hardly worthless: conservative source, liberal source
Quote from: greatorder on July 14, 2014, 09:07:05 pm
So, sound principle, but they don't work much beyond the principle itself, meaning that the money just accumulates like a puddle of piss around a terrified three year old's legs?
I'm actually working on a presentation on this very subject for class this week and I'm stuck on the fence. On the one hand, there is vast accumulation of those puddles of money:
http://research.stlouisfed.org/fred2/series/EXCSRESNS On the other hand, that's doesn't account for all of the QE money:
http://research.stlouisfed.org/fred2/series/WALCL But then there are questions with the M2 target and velocity and just... oh I dont know.
In my opinion one of the major downsides of having all that money sitting around in safe bank accounts is exemplified in the recession that my area still has not emerged from. During risky times even more money will be left than normal in those safe accounts instead of in circulation being used by less wealthy people where it would be purchasing consumer goods to help pull the economy out of recession rather than stagnating in an account to avoid risk of loss. What people will stow away in hard times seems like a hard thing to predict as well which helps make the effect unpredictable, leaving it unclear until years afterwards and the numbers have been seen. In my opinion it had a heavy effect, as jobs were being lost with very few being created in turn which caused consumer spending to go down. If I remember correctly the federal reserve had to lower rates much farther, well below what banks lend at to make them consider releasing more stagnant money to stimulate our top to bottom economy. Unfortunately the two liters of sweet caffeinated beverage I depend on to stay conscious has roughly doubled in necessary dollar amount to purchase due to inflation because the banks had to be more or less bribed to perform their main responsibility to society but that's a different issue.
Honestly we should be grateful it wasn't a big recession first and that it's started as inflationary issues, and that the Federal Reserve is raising rates, as a recession would be far more difficult to counter at near 0% interest rates. I think they even went below 0% rates for a period during the recession if I remember correctly, which I might not be.
Here is a theory post from 2013 that like the above spoiler also reflects the burning public anger at the banking industry of those times and long before I knew of the theory of Secular Stagnation. It is only partially true in hindsight, mostly in regards to looming inflation, as I assumed at the time it would be gradual in a boiling frog approach. I've since revised it as in the interim I learned about the two economies theory (wherin there is a luxury consumer economy and a common consumer economy, I probably don't have the terminology correct). In addition I think the banking sector as I would have believed in 2013 is not as much to blame in this economic situation of inflation today despite increasing the top of the economy's money supply, because 1: the relatively rapid inflation seen from 2021ish and in 2022 will at least temporarily raise interest rates and 2: they have little direct influence over consumer pricing of goods as far as I'm aware unless they are cooking futures or something. At least some of the inflationary issues are supply related, but I don't know where the bottleneck is from manufacturing process to consumer, though I would guess profit pricing shenanigans that reflect in the Consumer Price Index also play a role (especially if partisanship is involved); as well as logistics shortfalls and supply chain issues that fall into this. The conspiracist in me says it would be a politically fruitful time to create/bolster such crises through pricing/supply problems before an election especially while yelling loudly about government regulation being at fault, but I have no evidence of this other than fuel companies at least seeming to be doing this. Also I read an article that the now $100 cheapest adult men's shoes at the retailer costs them roughly $4 to import and place on the shelf, so maybe not such a crazy idea to ponder if it's gone beyond making consumers eat cost increases.
Figured you might find this interesting. There was a massive leak of offshore accounts details, which is apparently got lots of juicy info in it. http://www.icij.org/offshore/secret-files-expose-offshores-global-impact
http://www.icij.org/blog/2013/04/highlights-offshore-leaks-so-far
Nice, very well done and my appreciative thanks. At least 1/3 of the world's wealth is stagnating in bank accounts seemingly doing nothing useful, huh. No wonder I can't find a job.
That's why one of Occupy's main messages has been that inequality is the problem. When somebody has so much wealth that they literally have no use for it other than hoarding it for its own sake, everyone else suffers for their obscene mental compulsion.
Don't banks invest money on behalf of their investors (account holders)? Just because there's money in an account, doesn't by itself tell us the "money is doing nothing useful".
The money sitting idle in the bank is a symptom of the problem, though, not the problem itself. Unutilized money ceases to have any economic meaning. e.g. if you had 1 billion dollars and bury it in a hole in the ground, that's 1 billion that's no longer in circulation. Too much aggressive investing could actually be inflationary / a bubble, e.g. you might prefer the money sits in the bank rather than everyone drives property prices through the roof for "investment properties", and regular people can't buy or rent a house.
If they don't invest it locally or in country at least, it encourages the current banking system (in the USA) to release freshly printed money directly to the banks because the system is designed from a trickle down perspective. If I may propose a theory, this causes inflation which doesn't effect the banks (as much) because they are the ones receiving the new money supply. By giving it directly to banks to loan, if they fail to put it back into a useful place, there is no recourse but to give them even more money in the hope they do something useful. If they receive 100% or a large percentage anyways of the new money, by not loaning what they receive, the inflation would not apply as much to them as they are the ones receiving the new money and thus the inflation, which is sort of percentage based will not effect them meaningfully because it puts even more of a majority of the money supply into their power. Meanwhile, non-banks are effected dramatically by the manipulation of money supply and clamor for ever lower interest rates because apparently the banks are not receiving enough to loan.
Meanwhile, at such low interest rates, there doesn't seem to me much incentive for banks to loan out more than what is necessary to pay back the interest or to fulfill their obligations. I'd suggest this is why growth has been extremely modest; the banks only loan the bare minimum to cover their obligations, which are themselves growing greater due to their accumulation of Fed loans; in other words an increase of volume being behind the modest growth despite being near 0% interest to the banks and much higher when leaving the banks, allowing them to easily limit the amount they have to put out for loan. Thus, perhaps if a large, likely international bank wishes to continue to accumulate easy, easy capital which can then loaned out at dozens or hundreds of times the interest they pay to the Fed (possibly once Fed interest rates go back up, as to increase loans now might stimulate the economy enough to encourage the Fed to raise rates on future loans), a bank could easily benefit if they allow their money to stagnate for as long as it continues to result in very low interest rate loans from the Federal reserve.
My solution would be to raise the Fed's rate as well as raising the rate on already outstanding loans. It would not crash the banks unless they refuse to find good loans or unless good loans do not exist. If good loans do not exist if I had the power I'd set up a government controlled banking and loans to operate at a minimized loss headed up by people disconnected and perhaps even that despise the current banking industry yet who are knowledgeable and willing to learn enough to run such a thing, and the leader would have to be a person with political ambitions willing to sign a non-corruption agreement wherein he trades all his 'political capital' if the organization becomes corrupt under their watch.
To allow the banks to continue what I consider blatant looting of government and citizens will result in an a slowly at best but surely inflated currency, an inflation that effects the many small holders of money the most because they have the least and that little will be worth less in trade, and the much fewer large holders almost nothing because they will have accumulated all the additional money added to the system while still being the most likely, on an individual level, to be able to flee from the currency should it indicate a crash due to inflation due to having enough to be able to live internationally rather than being forced to live locally.
As you can see, as well as having a solution that was silly once it got past "raise interest rates" it was also quite wrong in some ways, for example inflation has increased markedly over a short period of time after relatively normal rates of increase. However if we recall to the tail end of the Trump years when stimulus checks went out, they were necessary to prevent recession as the average savings of the US household was something like $600 with a disruption of working hours foreseen. In that way it was somewhat correct in criticizing money supply distribution. If we see that at least some crucial industries are profiteering during economic crises yet are uncontrollable by public interest (government) while indeed applying pressure for further deregulation/bailouts/tax breaks, it's perhaps not such a crazy idea to suggest reforms. Perhaps an evololution of the quoted theory is to take some of the money supply distributed to the top, and instead distribute it at the bottom in some form of stimulating cheque.
That would of course were it to become more than an emergency policy likely require ways to control price as more money supply hits the non-luxury consumer market, and price controls would be exceptionally unpopular with business owners as well as potentially helping to cause negative situations such as the following link.
https://en.wikipedia.org/wiki/Shortages_in_VenezuelaSince I haven't learned my lesson about posting unrealistic (non)solutions: Perhaps a better way than price controls would be to limit such non-emergency Federal Reserve stimulating cheques to be only usable for small scale production capital that encourages the growth of "cottage" or micro-business to bolster supply rather than demand. For instance at age 25 and 35 a person became in this silly idea eligible for a check that may only be used on small scale production capital. That would have many issues of unfairness I haven't pondered in depth such as access/ownership of land as a determining factor of the value of a stimulus limited to the purchase of capital (no good if you don't have a place to put it unless it fits in an apartment). Also the impact on supply and how to guide a sideline stimulus to useful and non price cratering crashing ends should a particular capital investment prove popular and begin cranking out supply with.
However I truly appreciated the no questions asked stimulus checks when I received them so I am hesitent to say they should only be used in emergencies when I factor in the personally positive experience that receiving a government check from the Donald and then the Joe was for me at the time. I was like dang I sure could have used one of these during the recession instead of selling my car.
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Topic: Armchair Economics Thread - Re-Resurrection (Read 33990 times)