Thursday, October 31, 2013

spending out of marginal income and wealth : transfer payments out of monetized borrowed fund versus QE out of monetized funds

if its not spent its accumulated as dollar assets

a massive transfer to  wage earners even the un constrained has wealth effects when accumulated

debt reduction by households out of payments off uncle 's credit card
is like petite  QE ?

of course reduction of real  debt over hang is mostly
 the work of wage inflation in the mid to long term

but now its nominal debt reduction
which if it is not combined with a household  credit trend growth rate reduction.....

place all this under the heading :

spending out of income v spending on credit

you choose

 which is better for households in the long run ?

but even if you insist on credit driven recovery
compared dollar for dollar

 at least equal QE   punch