The Central Banks Will Bail Us Out

The Chinesse just did it again. The Fed did it again in the repo market. Europe has not stopped doing it since the great recession. The equity markets love the bailouts. Banks love the bailouts. People in general are not really happy with bailouts.

Why don’t people love the bailouts? I think it is because they feel that it is unfair and that it contributes to the growing wealth gap. I also think that people in general are worried and waiting for the other shoe to drop.

With all these bailouts and all this cheap money, why is their not more inflation?

Why, with all the cheap money are not business building new capacity and upgrading their capital equipment or spending more on improving their workforce?

I am full of questions and I don’t have the answers.

It seems that bailouts are becoming less effective at stimulating business investment and even not very effective at stimulating consumer spending. The bail outs are working but they don’t seem to have real clout and we seem to be so dependent on them that the monetary stimulus can’t be removed.

How bad would the deflation be if the stimulus was removed.

Isn’t prevention of deflation hurtful to the poor? If the prices of goods and services came down then they could buy more. As we have seen changes in wages seem to react slower than changes in prices. Also the poorest workers have protection against falling wages, minimum wage. Would not falling prices stimulate demand. I have heard arguments that falling prices reduce demand because people will put of purchases waiting on lower prices. I think that argument is incorrect. Falling computer and phone prices don’t seem to delay peoples purchases. We want our stuff and we want it now.

It feels to me like the Central Bank Bailouts mostly benefit banks and stock holders at the expense of those who don’t own banks or stocks. I think maybe they should cut it out and let things shake out a bit.

TEK