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Old 09-06-2011, 01:46 AM
Parallax Parallax is offline
Join Date: May 2011
Posts: 219
Default Re: Booze and Money (Tim Fernholz & Megan McArdle)

Originally Posted by sugarkang View Post
Money is only as good as what it buys. Relative to gold/platinum, the dollar has been losing value. It appears the FED has been keeping us in line with CPI, but everything might have gotten cheaper with real wages rising if backed by hard assets.
CPI is not a number central bankers pull out of their behind. It is based on things people actually buy. Why do you think we have CPI less food and energy?? Because the good old CPI has food and energy items in it!

When houses get cheap enough, people start buying them. The entire home construction market is idle because nobody wants to take a loss on their homes. A helicopter drop is more moral hazard. I'm not saying we shouldn't do that, but what makes you Keynesians so sure?
You see this is exactly the problem. What you are stating is called Say's law which essentially says supply creates its own demand. Now in ordinary times this works. But these are not ordinary times and if you don't believe me find me the last instance when the yield on US treasuries fell below 2%.
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