On Tue, Apr 30, 2013 at 8:06 PM, Jim Devine <[email protected]> wrote:
> if he's right, then what's needed for demand stimulation is fiscal policy. > Of course, fiscal policy is going in the other direction from what's > recommended. Roubini is saying that austerity will keep the economy depressed, but if the Fed wants to respond to it with further QE, then it'll blow asset bubbles here and there, which will pop at some point worsening the economy. He sees evidence of that all around. The Fed is trying to compress spreads for specific asset classes, and I guess markets are such a delicate mechanism for anybody to mess with. So, rock and hard place. Implicit is that Fed and Treasury would not sit on their hands if bubbles popped, which is why the markets cannot discount QE "properly," but rather feeding the bubbles. They call it the government put. The other day, Yellen replied to Roubini that this is what regulation is for, I guess to prevent these bubbles from appearing in the first place or -- if they do -- from threatening the economy. One can read that reply as, "We'll cross those bridges when we get to them; in the long run we'll all be dead," etc. But I think I like better the overall direction hinted by that reply. It's May Day! I'm marching with the Occupiers. So, in that spirit, if the bubbles form and pop, banks start collapsing, then move decisively and place all banks -- shadow or not -- in receivership. Then we'll be talking. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
