tag:blogger.com,1999:blog-5908830827135060852.post7770337416459108053..comments2024-03-01T02:40:14.946-05:00Comments on Bond Economics: Supply And Demand: To Be DeterminedBrian Romanchukhttp://www.blogger.com/profile/02699198289421951151noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-5908830827135060852.post-25598381769042283622020-04-13T06:24:52.358-04:002020-04-13T06:24:52.358-04:00The massive stimulus packages of nearly 20% of OEC...The massive stimulus packages of nearly 20% of OECD GDP should offset any demand led deflationary trends. From anecdotal evidence, people want to return to normalcy, which needs two legs to be confirmed - source of funds and use of funds. If govt and firms can ensure a steady source of fund through recovery (say 3-4months), then one would assume consumer confidence in spending will come back even in the most people-dense sectors. Its a most interesting complex set of factors at play, people's own sense of safety, desire for economic independence, wealth creation/savings, search for normalcy etc. A fascinating study for market / economic viewers who are fortunate enough not be affected, yet.<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-10119645679308373602020-04-12T17:36:48.807-04:002020-04-12T17:36:48.807-04:00Sure there are a lot of people still working in &#...Sure there are a lot of people still working in 'essential' sectors- but I have no problem with them receiving a bonus for doing so in these times. Anyways $1200 is not much money compared to median monthly incomes of what maybe $5000 per month? If 30% of people lose most of their normal income now we are not nearly replacing income in the private sector with that check. So we are looking at a large decrease in effective demand. Which means that we might see disinflation rather than inflationary effects. At least in the way I understand what causes inflation.Jerry Brownnoreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-42912676273004476022020-04-12T16:15:58.879-04:002020-04-12T16:15:58.879-04:00I would disagree on the point that government reli...I would disagree on the point that government relief has been mostly focused on income replacement. I am thinking of the $1200 designated for U.S. adults.<br /><br />In COVID-19 response, government has divided the private economy into at least two subdivisions: <i> essential </i> and <i> non-essential. </i> The essential sector continues to have near normal income albeit with increased risk. In contrast, the non-essential sector has been ordered to shutdown until further notice. The non-essential sector is destined to suffer severe economic hurt.<br /><br />Government itself is considered (for good reasons) to be a third sector. Employees of government (for the most part) are not presently expected to suffer income loss during the pandemic response.<br /><br />I already said that the $1200 handout will go to all U.S. adults, which obviously includes adults gaining income from both essential and government sectors. Only adults previously gaining income from the non-essential sector can claim that government support is replacing lost income. For the other two sectors, the $1200 is welcome but unneeded enrichment. This inequality can only expand the perceived economic differences between economic sectors.<br /><br />Steve Keen and others have authored an article expressing similar (but less specific) concerns. See <a href="https://www.nakedcapitalism.com/2020/04/the-use-and-abuse-of-mmt.html" rel="nofollow"> "The Use and Abuse of MMT". </a><br /><br />I discuss the $1200 sector unfairness in my own post <a href="https://www.mechanicalmoney.com/2020/04/mmt-style-economic-distortions.html" rel="nofollow"> "MMT Style Economic Distortions". </a>Roger Sparkshttps://www.blogger.com/profile/01734503500078064208noreply@blogger.comtag:blogger.com,1999:blog-5908830827135060852.post-72619431897149591872020-04-12T10:55:02.887-04:002020-04-12T10:55:02.887-04:00Yes. You note that government relief has so far b...Yes. You note that government relief has so far been mostly centered on income replacement. But what percentage of previous income is that replacing? I doubt it is 75% and for me it is 0% so far, but maybe I will get that check in the mail soon.<br /><br />If consumption is in any way a function of income, then I really can't worry about inflation so long as food is still being produced and transported. Rents are definitely not going up- I'm happy if people can just pay a percentage of the rent contract for now. Not sure how happy the bank will be if I pay a percentage of the mortgage payment. Oh well- never been fond of banks.<br /><br />Gasoline prices have plummeted around here which is also fine with me. So that would seem rather deflationary for a lot of things. Strange times.Jerry Brownnoreply@blogger.com