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I have no problem if it actually results in more production.  But it seems to me that it has up until mow been borrowed almost solely to staunch losses due to following asset values and the damage this has done to corporate (not individual!) balance sheets.  Production is actually falling quite dramatically - in Ireland at least - and as far as I can see, else where as well.

notes from no w here
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Dec 23rd, 2008 at 08:44:55 PM EST
[ Parent ]
Yes, it is wrong to conflate the two.

The proposed "borrowing" for the stimulus, at least in the US, hasn't actually taken place yet. The argument over whether the proposed stimulus will create inflation is what I addressed above.

The "borrowing" that has taken place, to staunch the losses, is in the face of a massive de-leveraging and drop in liquidity ... it will be inflationary for a nation if it fails to staunch the losses at the same time that other nations succeed, but that is the risk of exchange rate collapse set to one side above.

Either the liquidity constraint continues, in which case there's no prospect of any inflationary impetus from the borrowing, or it doesn't, and the funds can be refunded, so there's no debt outstanding. Or, more likely, partway between the two, which would seem to be non-inflationary for the mix of reasons.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Dec 24th, 2008 at 12:38:49 AM EST
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