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Hugh Hendry says:
"The point is that there is no precedent for quantitative easing succeeding......I think by the end of this year it will be shown that quantitative easing does not succeed in an environment where in America they have debt which is the equivalent of global GDP. How can you tempt people to take even more debt on?"
I like Hugh, he's an entertaining guy. He has been right the last 9 months, and he will be right for another 6 - then he'll get slaughtered.
He thinks QE can't succeed because total US debt is $53 trillion. OK, so print $53 trillion. Problem solved. It's just a number. The Fed can print $53 trillion, or $530 trillion, or $5000 trillion, if that is what it takes. There are political limitations on what they can print, but when the situation is dire enough they will be permitted to print whatever they need to in order to inflate away the problem. No shortage of zeros.
Like Mish and Steven Keen, he says "How can you tempt people to take even more debt on?". In other words, we are pushing in a string, the money multiplier effect is broken, we have no traction.
Well, when the banks stop lending, the Fed can lend directly to the goverment. The government CAN be tempted to take on more debt. It's addicted to the stuff. And it happily spends every dime it gets rather than hoarding, because it is OPM.
On the one hand, the Fed needs someone to lend trillions of newly created dollars to, someone who will go out and spend immediately. On the other, the goverment will come under pressure to do something about the homeless and the jobless, the people destitute once unemployment benefits "run out" (one of the sillier parts of the US system - no time limits in Europe).
Problem...solution. The Federal goverment steps in and institutes a European style, national system of unemployment benefits and housing assistance, without any time limits. They can rent forclosed houses and hotels for accomodation, hand out food-stamp debit cards, give the unemployed a regular cheque, etc. While you are at it, throw in universal health care, paid maternity leave, single mother's pensions, state funded daycare, the whole progresive wishlist.
That should chew through a few trillion.
Hugh Hendry says:
"The point is that there is no precedent for quantitative easing succeeding......I think by the end of this year it will be shown that quantitative easing does not succeed in an environment where in America they have debt which is the equivalent of global GDP. How can you tempt people to take even more debt on?"
He thinks QE can't succeed because total US debt is $53 trillion. OK, so print $53 trillion. Problem solved. It's just a number. The Fed can print $53 trillion, or $530 trillion, or $5000 trillion, if that is what it takes. There are political limitations on what they can print, but when the situation is dire enough they will be permitted to print whatever they need to in order to inflate away the problem. No shortage of zeros.
Like Mish and Steven Keen, he says "How can you tempt people to take even more debt on?". In other words, we are pushing in a string, the money multiplier effect is broken, we have no traction.
Well, when the banks stop lending, the Fed can lend directly to the goverment. The government CAN be tempted to take on more debt. It's addicted to the stuff. And it happily spends every dime it gets rather than hoarding, because it is OPM.
On the one hand, the Fed needs someone to lend trillions of newly created dollars to, someone who will go out and spend immediately. On the other, the goverment will come under pressure to do something about the homeless and the jobless, the people destitute once unemployment benefits "run out" (one of the sillier parts of the US system - no time limits in Europe).
Problem...solution. The Federal goverment steps in and institutes a European style, national system of unemployment benefits and housing assistance, without any time limits. They can rent forclosed houses and hotels for accomodation, hand out food-stamp debit cards, give the unemployed a regular cheque, etc. While you are at it, throw in universal health care, paid maternity leave, single mother's pensions, state funded daycare, the whole progresive wishlist.
That should chew through a few trillion.
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