Why, that is, apart from the puzzling fact that they don't act as though they were in business to help people realize the power of their dreams? Noahpinion dismantles the conventional wisdom that quantitative easement should be inducing banks to lend, spurring inflation, and driving down the unemployment rate.
I always assumed that the purpose of QE was to permit everyone to continue lying to themselves so we wouldn't have to confront the impact of deficit spending and entitlements. I can't say I'm surprised it's not whittling away at unemployment.
For QE and Krugman fans, though, here's a thoughtful piece on why Pittsburgh is recovering while Detroit is rotting. It turns out the problem in Detroit is sprawl. I think "sprawl" here means the incomprehensible flight of job-creators from a rotting city. If only there were some way to force them to stay.
H/t RWCG.
2 comments:
In what mirror universe do we not have inflation? Never mind housing prices (and gasoline varies with other factors); go to the grocery store. Where the prices are the same as they used to be, the box sizes are smaller. I haven't done a systematic study item by item, but looking at my ledger at home leaves me thinking the Fed numbers are tricksy.
Businesses aren't borrowing relative to history or present capacity. They don't see increasing demand, and they can't see how to produce more to support any increasing demand, since the cost of production is getting so high: labor costs aren't the bulk of production, but depending on the industry, they range from significant to the largest single cost. The cost of compliance with regulations ranging from reporting to environmental to ... is going up, also, but on an uncertain pace.
Banks aren't lending, also, relative to capacity because they have less money to lend--regulations are making them retain more of their loans, and they can't make money on interest payments; a significant portion of their loan income comes from fees (constricted) and selling the loans on.
As it is, mortgage lenders are setting themselves up for a hard fall with their present lending at rock bottom rates, right before the coming Bernanke inflation sets in.
Such borrowing as there is is for big ticket items (surprise), and that increase looks to me like pent up demand for the good that can't be held back anymore. If I'm right, we can see consumer big ticket purchasing fall off this fall. As it is, mortgage rules, bank caution, and rising interest rates (even these low rates) are pricing home loans out of reach of first-time buyers--only repeat buyers and established families are buying houses. In a better economy, the first timers wouldn't be getting left behind like this.
Eric Hines
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