What Did You Buy Today?

[Otter]

(03-18-2020, 11:53 AM)vbin Wrote:

(03-18-2020, 11:50 AM)Otter Wrote: I am actually encouraged that we do not appear to be making the same mistakes of 1929. Flooding the private sector with "helicopter money" is a good play when the major risk is 20% unemployment (Mnuchin's comments to Republican Senators yesterday), demand shocks, and a deflationary spiral.

Steer the car away from the cliff with no guardrail, and get back to worrying about inflation later once it is even a plausible risk. The liquidity balance can always be shifted through tax policy and bond issuance in the future.

Did not get what exactly you were trying to say here. Lol. Sorry.

When there is a serious risk of economic depression (unemployment over 15%), the key is to ensure that the private sector is as well-capitalized as possible to weather the storm. The government creates the money supply, and can expand it to prevent or mitigate the effects of deflation and to promote employment. Later, when the risk of deflation has abated, the government can suck excess liquidity back out of the system by raising taxes or issuing bonds, to avoid excessive inflation.