Wall Street Minds, Capital Redistribution And Monetary Policy
This tale begins in the month of July, in a small town. The weather is pleasant but with averaging one visitor a month the little town looks totally deserted. It is tough times, everybody is in debt, and everybody lives on credit.
A well-heeled stranger shows up in town. He proceeds to the town's restaurant hotel and lays a $100 bill on the reception desk and asks to sit down in order to dine and later be shown the rooms. The owner of the establishment takes the $100 bill and runs out to pay his debt to the produce and meat packaging supply house.
With a fresh hundred dollar bill in hand, the butcher supply owner hastily pays his debt to the rancher who in turn scrambles to pay $100 for feed costs. The feed and grain guy seeing this fresh money makes his way to the fuel supplier for his machinery and uses the 100 bucks to pay part of his fuel bill.
The fuel merchant owns a debt to the town prostitute who, because times were hard, offered her services on credit. With the $100 in hand, she runs over to the hotel and give the owner the $100 bill to pay down her bill for rooms she had to rent for past clients.
Seeing the $100 bill back in his hands, the hotel owner lays the bill back it its original location. The wealthy tourist finishes his meal and feels refreshed and decides on foregoing the room inspections and stay at the hotel. He returns to the front desk, pays for his meal with pocket change and takes back the $100 bill and leaves to continue his journey.
As the story unfolds, so far, no one earned anything. However, the whole town is now with less debt, and looks to the future with a little more optimism. That is similar to how the United States Government is doing business today shifting liabilities from one balance sheet to another.
Now the wealthy tourist was impressed by his meal and had nice things to say about the town and it became a news story. Soon after, 8 new tourists make their way to the town hotel. The owner overcome by the bonanza of new customers wants to raise his room charges and menu prices. The butcher, rancher and feed and fuel suppliers are in the throes of raising their prices. And the prostitute needed to raise her prices in order to cover the increased room rates.
As long as everyone is proactive paying off their debts, money circulates. Bailouts haven't done much of anything other than pay off some debts, mostly that of the big folks in a way that liabilities have been transfer from one balance sheet to another. However, when the positive news emerges and "green shoots" of optimism takes hold, gushing new purchases by the little people will surge and lift all boats ... and on off we go to the races we go. In order to remain ahead of the news, get your Wall Street Journal subscription today. - 23167
A well-heeled stranger shows up in town. He proceeds to the town's restaurant hotel and lays a $100 bill on the reception desk and asks to sit down in order to dine and later be shown the rooms. The owner of the establishment takes the $100 bill and runs out to pay his debt to the produce and meat packaging supply house.
With a fresh hundred dollar bill in hand, the butcher supply owner hastily pays his debt to the rancher who in turn scrambles to pay $100 for feed costs. The feed and grain guy seeing this fresh money makes his way to the fuel supplier for his machinery and uses the 100 bucks to pay part of his fuel bill.
The fuel merchant owns a debt to the town prostitute who, because times were hard, offered her services on credit. With the $100 in hand, she runs over to the hotel and give the owner the $100 bill to pay down her bill for rooms she had to rent for past clients.
Seeing the $100 bill back in his hands, the hotel owner lays the bill back it its original location. The wealthy tourist finishes his meal and feels refreshed and decides on foregoing the room inspections and stay at the hotel. He returns to the front desk, pays for his meal with pocket change and takes back the $100 bill and leaves to continue his journey.
As the story unfolds, so far, no one earned anything. However, the whole town is now with less debt, and looks to the future with a little more optimism. That is similar to how the United States Government is doing business today shifting liabilities from one balance sheet to another.
Now the wealthy tourist was impressed by his meal and had nice things to say about the town and it became a news story. Soon after, 8 new tourists make their way to the town hotel. The owner overcome by the bonanza of new customers wants to raise his room charges and menu prices. The butcher, rancher and feed and fuel suppliers are in the throes of raising their prices. And the prostitute needed to raise her prices in order to cover the increased room rates.
As long as everyone is proactive paying off their debts, money circulates. Bailouts haven't done much of anything other than pay off some debts, mostly that of the big folks in a way that liabilities have been transfer from one balance sheet to another. However, when the positive news emerges and "green shoots" of optimism takes hold, gushing new purchases by the little people will surge and lift all boats ... and on off we go to the races we go. In order to remain ahead of the news, get your Wall Street Journal subscription today. - 23167
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posted by X - Men @ 2:49 AM
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