[quote=pri_dk]
I’m surprised that people make these arguments so often without thinking it through.
Capital (savings) goes to a company, the company is in the business of selling stuff.
Somebody has gotta buy that stuff for the cycle to work.
Lots of companies have plenty of cash right now. The economy needs capital, but it also needs demand.
I’d buy something but there’s really nothing that interests me. Flu’s camera suggestion was good, but I’m gonna pass. Too much money for just an upgrade.[/quote]
You are making comments against your own arguments. The blank Keynesian argument that demand needs to be stimulated in recession is not entirely valid. I believe demand needs to be stimulated only when there is panic in the market. It does not need to be stimulated if the product mix is out of whack comparing to a sustainable consumption need. Take housing for example, we need to stimulate demand when there is panic against owning a house. But we don’t need to stimulate demand for 2006-2007 era pricing because it is not what people need.
I would argue that at the moment we don’t need to stimulate the short-term demand because consumer is not in panic mood and the companies who got the capital with demand stimulus are in China, and the capital is recycled back in the US treasury. We need to stimulate the long-term demand which means less debts for the consumer and more savings. But Bernanke are punishing savers and encouraging debts right now to have shorter gains at the cost of long term pains.
