(I never had a diary, so I never could write "dear diary", but "dear blog" makes up for this loss.)
With annoying music on (why do I even have 'Air' in my iTunes library?), the clock indicating its 6.37, and the 'C' on my keyboard hardly working, why not write a little blog before I go off to Utrecht?
I have to say, I missed writing for my blog. But the past two weeks were so hectic. however, it means there's room for improvement!
What's been on my mind the past week?
- Fiscal or monetary stimulus? With the Fed hinting at further quantitative easing and trying everything in their power to get the money into the economy, the markets are not reacting too enthusiastic. Will an ever looser monetary policy get the U.S. economy going? I think not. What would help is to get the money velocity up, and this is not something the Fed could do. Giving consumers extra cash they don't want does not make them spend it right?
- Ok this sounds too simplistic, I admit. But it does come down to get the consumer spending in order for the U.S. economy to get in an upward spiral again.
- So: will tax cuts for the rich U.S. citizens have to be extended? Will it do any good (i.e. get spending up)? Maybe, maybe not. Why it could get spending up (or at least not get it down once the cuts expire): the rich are the most productive. If you get them to work, this will be very beneficial for productiveness. Lowering their marginal taxes gives them more incentive to work. Why it cannot get spending up: the rich will spend as much as they like anyhow. Even if they do not have the money to spend, they will borrow, because they believe they will have the money in the future (according to the 'lifetime spending hypothesis'). The poor, on the other hand, are credit constraint as they have no access to loans and they have also no high incomes. So: giving them more money could do a better job stimulating spending. That is, given that the poor do not foresee an even worse future and therefore safe their newly acquired credit to save. Which hypothesis is the most likely? My guess is the latter, but circumstances matter. And this is where Obama comes in...
Then the most important question: will we have a double dip?
So many are writing on this topic. I'll be joining the debate soon!
Now brush my teeth and off to Utrecht for another day as an intern.
Byebye
No comments:
Post a Comment