Friday, January 21, 2011

Still no disentanglement from Beckworth

He says:
Creditor households are reluctant to buy new cars or get their kitchens remodeled lest they lose their jobs in the future.
What if car producers are reluctant to sell their car production for fear of losing losing their stockpiles of input? That oil producers and steel producers might be hoarding oil and steel for fear of future shortages?

He goes on:
If these creditor households, firms, and banks all simultaneously started spending their excess money balances, this would increase total current-dollar spending and in turn spur a real economic recovery.
Paper is not equivalent to oil.   We use money because of a prior understanding that we cannot print oil.  Once Beckworth disentangles money, oil and shoelaces, then he might have a point, until then he can only speculate. 

No comments: