62.3 Why the Biden (and Trump!) Stimulus is OVERHYPED
———Part 3 Summary———
The 2007-09 crisis was a permanent shock. Neo-Keynesians do not believe such a thing is possible. But consumers? Not only do they believe in permanent shocks, they KNOW they are very real. Therefore, the Trump and Biden stimulus payments have NO CHANCE of fixing the economy.
———Episode 62 Intro———
“I glanced at the list, running over names (probably misspelled) that meant nothing to me, with my hand on the butt of my righthand gun. That one now contained a very special load. According to Vannay, there was only one sure way to kill a skin-man: with a piercing object of the holy metal. I had paid the blacksmith in gold, but the bullet he’d made me – the one that would roll under the hammer at first cock – was pure silver.” The scene is from The Wind Through the Keyhole, a 2012 Stephen King gunslinger novel. It’s not unheard of for the horror/fantasy-master’s characters to call on silver to battle something from the dark and murky gray.
From his 1986 novel, IT: “But that, of course, is only a joke, and not a very good one; there is only one story left, at least one he remembers, and that is the story of the silver slugs – how they were made in Zack Denbrough’s workshop on the night of July 23rd and how they were used on the 25th.” A great yarn, to be sure, but as members of an advanced civilization we KNOW there’s nothing in the shadows with blood-red eyes and tentacles. Then again… that’s precisely why Count Dracula moved to cosmopolitan London in Bram Stoker’s 1897 classic.
You see, the superstitious peasants of Transylvania knew the preternatural was real. Not so post-Enlightenment England where mucus-oozing pores and frightful claws were disclaimed. And what better place to hide disgusting aberrations, but in the shadows of denial and willfully forgotten knowledge?
Today, enlightened monetary-scientists placate us with soothing expectation policies that the banking shadows harbor no ill-proportioned beasts. But supposing there were. Is there a silver bullet we could roll under the hammer? In Part 2 of this, the 62nd Episode of Making Sense, Jeff Snider discusses one candidate: the Eurodollar Futures market. But first, two researchers for the Federal Reserve uncover the horror of quantitative easing. Then we conclude with the fantasy of government stimulus.
———Ep 62.3 Topics———
00:05 Trump and Biden stimulus payments are intended to ‘prime the pump’, accelerate a recovery
02:13 Economists, Neo-Keynesians do not believe a permanent shock to an economy is possible…
03:33 …but consumers not only believe in permanent shocks, they know they are very real
05:58 Milton Friedman stated that transitory income had modest impact on consumption
07:40 How have stimulus payments affected income and consumption?
09:51 The economy reflects deep-seated socioeconomic problems, not something stimulus will fix
———Ep 62.3 References———
Jeff Snider, Head of Global Investment Research for Alhambra Investments and Emil Kalinowski. Art by David Parkins. Podcast intro/outro is “Shadow of a Gunman” by Sight of Wonders and “Night Remains” by Farrell Wooten at Epidemic Sound.