This line by Matt McOsker, in a comment on one of my recent posts, now reigns as the best line of the year in my personal pantheon. QE’s only direct effect is on the financial sector. It only affects the real sector — where people work to produce, buy, and sell real goods, and produce […]

The intellectual equivalent of medieval bloodletting: “We’ll just drain out the bad blood!“ Cross-posted at Asymptosis.

Much ado is made of the Fed’s “credibility,” which is dog-whistle-speak for its ability, willingness, and decided inclination to jump all over any (expected or imagined) whiff of that horrifying threat — inflation! — especially the most terrifying bogeyman, “wage inflation.” You won’t, on the other hand, find “credibility” discussed when people speak of the […]

Allan Marks, in a comment on a Krugman post, reminds me of one of my favorite scenes in filmdom. Krugman’s complaining that he doesn’t understand the rules that his detractors are arguing by, and Marks suggests he watch this (55 seconds): Is anyone else wishing our esteemed President knew the rules for knife fights? Cross-posted […]

Or: “Dudley Makes Mock of the Monetarists.” In my post The Fed is not “Printing Money.” It’s Retiring Bonds and Issuing Reserves, I said: …when the Fed gives the banks reserves and retires bonds, it’s taking on market risk/reward, replacing it with absolutely nonvolatile, risk/reward-free assets (at least in nominal terms). It’s removing leverage and volatility from […]

I’d like to reply to one confusion and one set of pushbacks on yesterday’s post: Currency and Reserve Balances I buried one fact: banks can reduce total Fed reserve balances by withdrawing currency — physical cash — from their Fed reserve accounts. I only gestured toward this in a parenthetical and a link. It’s a trivial […]

Mark Dow had a great post the other day: There is zero correlation between the Fed printing and the money supply. Deal with it. He points out (emphasis mine): From 1981 to 2006 total credit assets held by US financial institutions grew by $32.3 trillion (744%). How much do you think bank reserves at the […]

This graph speaks volumes: Profits as a Percent of GDP: Financial Corporations vs. Nonfinancial Corporations We saw a big decline in real businesses’ profit share in the 40s, then a slower semi-steady decline through the 70s, as wages constituted a larger share of GDP. Financial corps doubled, expanding and increasing profits, but they remained small […]

The OECD has finally updated their national account data with 2011 info for most countries, so I thought I’d update this post from a couple of years ago. If you’re thinking that the current (overblown) hoo-ra-ra about U.S. government deficits is a result of too much spending, or that U.S. taxes are insanely high and […]

I’ve ground the axe quite a bit over the years for the argument that Kevin Drum makes — and dismisses — here. In brief: poorer people spend a larger share of their income/wealth than richer people. So if poorer people have more income/wealth — if the distribution is more equal — there will be higher […]