Re: Where to now?

On 11/20/2012 2:12 PM, John Williams wrote:
> On Tue, Nov 20, 2012 at 5:45 AM, Kevin O'Brien <[email protected]> wrote:
>> Right now, there is a ton of cash that is mostly on the sidelines
>> because the people who have it do not see opportunities for productive
>> investment.
> "Cash on the sidelines" is a useless concept, and perhaps worse than
> useless, actually misleading.
>
It works quite well for what I am describing. I did not see the point in 
going into a long analysis of where the money is, since the main point 
is that it is most definitely *not* going into anything that remotely 
creates jobs. Neither will giving those people even more money in the 
form of a tax cut.

>   Top-down
> management of a $15 trillion economy is virtually impossible, and
> despite constant claims to the contrary by politicians, the best that
> can be hoped for is to provide incentives that might possibly, in some
> indefinite amount of time, nudge some parts of the economy slightly in
> the direction some people might like.
>
OK, I'm not at all clear on how you got "top-down" management out of 
what I said. I'm pretty sure I never used the phrase. My only point is 
that people who have a lot of money now and do not invest it 
productively are not likely to suddenly discover productive uses for the 
money if you give them more of it. Another dollar in the hands of an 
average person is likely to result in another dollar worth of spending, 
which goes to products that a company must produce. In addition, if 
producing that product requires additional labor, there is a multiplier 
effect. Take that same dollar and give it to someone whose main interest 
is in feeding Cayman Island bank accounts, and you get bupkis. And if 
you find that dollar to give them by taking it away from someone who 
would have spent it, the result is actually negative. This result is not 
purely theoretical, either, since Europe is proving it on a daily basis. 
Anyone who keeps up on the news can see that Europe is having a much 
worse time of it than the U.S. right now. I don't really want to see us 
emulate that policy.

BTW, my doctoral dissertation at the University of Michigan involved 
banking and monetary issues. One of the best lessons I learned was that 
people who really understand what they are talking about can say it it 
plain English.

Regards,

-- 
Kevin B. O'Brien
[email protected]
A damsel with a dulcimer in a vision once I saw.