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View Diary: How much Stimulus is Needed? Estimate: $1T to $1.6T (22 comments)

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  •  It won't create massive global inflation (1+ / 0-)
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    mickslam

    unless other countries believe that we will be irresponsible after the spending and allow more inflation.  Which they probably won't.  Which is the problem.  We can't get inflation, we are getting deflation.  This is not the US 1932, where spending a ton of money alone is a viable way out.  Its Japan 1994.  We are stuck in a liquidity trap.

    •  I agree - inflation will not be a problem (1+ / 0-)
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      iRobert

      we are staring in the face of global deflation and recession.   An extra 10% of US GDP in one year cannot affect inflation globally.  I wouldn't be suprised for inflation to be in the 1% range even after this spending.

      I am repeating myself, and thats ok.

      by mickslam on Fri Dec 19, 2008 at 09:53:24 AM PST

      [ Parent ]

    •  It will create massive inflation (0+ / 0-)

      Just like 8 months ago, nobody believe there is going to be deflation. Since price of everything going to the moon. The planet was experiencing gigantic inflation.

      Inflation won't happen now, or next week. But it will happen with that much new money. It will come fast and hard.

      (Let's face it, the only way to fix the economy is rebuilding, wealth redistribution, and rearranging production lines. But all that simply sounds un-american.  So they will simply print money and doing the "free market" dance.)

      and you can already calculate the flow...

      •  Your wrong! Ha! ;p (1+ / 0-)
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        mickslam

        Just like 8 months ago, nobody believe there is going to be deflation. Since price of everything going to the moon. The planet was experiencing gigantic inflation.

        A lot of people didn't predict this global collapse in the banking sector.  But a lot of people did consider a liquidity trap possible.

        Inflation won't happen now, or next week. But it will happen with that much new money. It will come fast and hard.

        Based on what evidence?  Has Japan seen massive inflation?  They are still experiencing anemic inflation to deflation since the '90's and their debt to GDP ratio is something like 170%.  The thing you are missing is that right now the collapse of major industries, the financial crisis, and above all else peoples fear keeping them from investing is sucking money OUT of the economy.  Fast.  And the more money gets sucked out, the more appealing its going to appear to hold money, and then even more gets sucked out.  

        (Let's face it, the only way to fix the economy is rebuilding, wealth redistribution, and rearranging production lines. But all that simply sounds un-american.  So they will simply print money and doing the "free market" dance.)

         "Fix" the econo0my means two different things.  One the one hand, we need to improve our long term competitive, has competitive infrastructure, and create a economy that is more equitable and sustainable.  That's important, and we should make the stimulus work towards that end.  But fixing the economy also means making it grow again, restoring investor confidence,  freeing up financial markets, and staving off mass unemployment.  If we don't do the latter we will never succeed at our long term goals in the former.  Which is why we need a massive stimulus package.  

        •  gah.. (1+ / 0-)
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          mickslam

          Not Japan again.

          Japan export their capital out after their domestic economic stagnate. China and NY got the japanese cheap money. Wallstreet got the japanese cheap money (carry trade)

          Notice how the yen is surging now while japanese economy is imploding? That's the Yen coming home. Those are all the "free money they pump in the early 2K.

          --
          fixing the economy only means one thing:

          one can't consume more than one earns. That means increasing productivity to pass consumption. Real production.  Screwing around with money supply won't do jack if it doesn't translate with "real" production of goods and service.

          •  1/2 agree (0+ / 0-)

            I agree, we need to fix the consumption/demand side of the equation.

            But I think the reason inflation will not be a problem is because of the money supply fixes you are most likely talking about tend to have less of an impact on inflation than is believed.

            I am repeating myself, and thats ok.

            by mickslam on Fri Dec 19, 2008 at 02:33:10 PM PST

            [ Parent ]

            •  I don't think so (1+ / 0-)
              Recommended by:
              mickslam

              The only reason we have so called "deflation" right now it's

              a) consumer is tapped out, they simply can't get more loan to go shopping.

              b) Every one of those crooks and scammers bankers need dollar liquidity to cover their lost bet.

              Once the global market snaps back into trading mode (eg. back to europe, asia and latin america) transaction...  people are going to releasing dollars.

              The reason dollars are strong right now is simply because all they have to settle all debt and bets. Everybody needs dollar to do it.

              There is no reason whatsoever why people in Asia, europe or latin america, let alone middle east experiencing dollar/credit crunch. Their books are in order.

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