Free Federal Reserve Credit Cards for all (dilute and win)
Pablo Díaz de Rábago
February 10, 2009
The new US government is on the verge of defining priorities in the use of the remainder of the TARP moneys and has to make a hard choice, i.e. what should deflate and what should not.
In an “Alice in Wonderland” kind of nightmare, we are standing before the apex of the debt super-cycle and our pumping machine has to decide the characters that need to be reflated to life first, since all of them are badly punctured.
The obvious ones are the banks since they seem to be (of have been) the agents for money creation. Inflate the banks and the rest of the world will be reflated, or so the saying goes.
Well, in this world of turmoil, the only thing we know for sure is that banks are not in any position to commit the same mistakes and are not reflating further. Moreover, since the size of the banking industry is one-fifth of the financial assets, they alone will not bring the zombie back to life.
Well, then reflate the companies then. But as we have seen, companies are also in no mood to help since theirs is the most volatile of economies, similar to the flowers of a too exhuberant plant that has suddenly withered with the lack of water. At the most the water will keep companies barely alive through the cycle, which is no small achievement.
Only one other option for reflation is left: the king of aggregate demand, the consumer. One idea would be to mail to every person a Federal Reserve Bank credit card with a large balance of money (either long-term credit or even free money) that would vanish if not used within each and every month. This mechanism, coupled together with a decision of G20 economies to set a say 5-year 5% inflation target to be revised in 2015 to go back to the 2% long term trend would generate a 30% nominal “free” cushion of government debt (diluted with inflation) and help dilute the debt bubble whilst sustaining present economic activity.
2 Comments »
RSS feed for comments on this post. | TrackBack URI | bookmark on del.icio.us.
Leave a comment
Advertencia de Protección de Datos:
Los datos personales capturados con ocasión de la utilización del formulario de comentarios (nombre/apodo, dirección de correo electrónico, sitio web y dirección IP), serán incluidos en un fichero del propietario del sitio web y se publicarán (excepto su dirección de correo electrónico y su dirección IP) en esta página con la finalidad de permitir opinar públicamente al lector, así como para en su caso contestar al comentario o consultas que formule. Podrá ejercitar sus derechos de acceso, de rectificación, de cancelación y de oposición en lo referido a dichos datos personales dirigiendo un correo electrónico a la dirección: datos.personales@blogeuropa.eu.
----
Privacy notice:
Please be informed that by using the comments form, your personal data (name/nickname, e-mail address, website and IP address), will be included in a file owned by the website proprietor and published along your comment (except for your e-mail and IP addresses), in order for the reader to publicly comment, as well as -should that be the case-, to respond to any comment or query that readers may have made. You will be able to exercise your rights to access, rectify, cancel and oppose such personal data by sending an e-mail to the following address: datos.personales@blogeuropa.eu.
[...] colega y amigo Pablo Díaz de Rábago defiende, en un post reciente Free Federal Reserve Credit Cards for all (dilute and win) publicado en http://www.BlogEuropa.eu , que se incentive la demanda agregada a través del consumo. Por [...]
Pingback by Una propuesta para salir de la crisis: tarjetas de crédito gratis | Empresas y Profesionales — February 19, 2009 @ 4:14 pm
[...] colega y amigo Pablo Díaz de Rábago defiende, en un post reciente Free Federal Reserve Credit Cards for all (dilute and win) publicado en http://www.BlogEuropa.eu , que se incentive la demanda agregada a través del consumo. Por [...]
Pingback by Una propuesta para salir de la crisis: tarjetas de crédito gratis - IE Business School | Empresas y Profesionales — February 19, 2009 @ 4:15 pm