I don’t claim to be an expert. I just pay attention to this because it’s amusing, and as a whole says so much about how “our” economy has been structured. So take what you will from the following:
–Yglesias: “There isn’t enough money! The Fed needs to loosen up! More dollars, more demand!”
Truth be told, I kinda feel for Matt. Blatant error (government can’t create demand out of thin air. People want what they want, or they don’t) aside, I get why he would think this. Much of the general public is sorely lacking in money, and he wishes that the Fed would just straight-up give them the cash. Since they haven’t, he assumes they’re being stingy, when the reality is on the other side of that electrified-barbed-wire topped brick wall there’s a flood. In fact, there’s been a flood for so long we generally don’t think about it anymore, all we knew was that there was a new “when I was your age…” story about shopping being written each week. Prices are only slowing down because the rest of us have run into that wall at full speed.
As for what the non-financial sector has been doing with their money in the midst of this, here’s the answer from Barry Ritholz: Sittin’ on it. But that started back when Thriller was the new shit.
So, the extensively government-backed financial sector, which long ago dropped any pretense to funding productive activities, still managed to screw up & threaten collapse. The rest of the “private” sector benefits from the neutering of labor & sits around on a pile of cash, bitching about overcapacity. Rather than a helicopter & printing press, may I recommend a battering ram?
Edit, 7/18/10: Contradiction Time! Three days after suggesting the need for encouraging consumption via gov’t policy, Matt endorses a tax reform idea literally designed to discourage it…