3 ms·

But if the investor receives the cash from the student as payment of their loan, they have to do something with that cash too (buy dinner at Per Se, grab a new

by nstj 10y ago

But if the investor receives the cash from the student as payment of their loan, they have to do something with that cash too (buy dinner at Per Se, grab a new Vertu phone, lend the money to a startup so that the startup can spend the money on consuming goods and services, etc)

ArkyBeagle 10y ago
Presumably, the Fed will send new money to Treasury for this, which will actually inflate the currency just a wee smidgen ( and in an economy in which the Fed's growth targets go chronically unmet this is no sin - quite the opposite). Otherwise... While there is an element of truth to that, see "the marginal value of a dollar". You "spend" your ten millionth dollar quite differently than you spend your ten thousandth. Some of these guys for whom money is simply a means of keeping score won't change their consumption patterns much no matter what. If you want to increase velocity, the way to do it is cause more cash to be in the hands of broke people.
- nstj 10y ago
  My bad, that makes a difference (ie: if you're increasing the monetary base, there will indeed be a change in spending - and theoretically it could even result in a lower velocity of money, as the money base might increase proportionally more than the increase in GDP). I didn't realise that Treasury actually held this paper. Still, I'm hesitant to draw the conclusion that giving cash to someone with a high MPC results in a markedly higher amount of consumption/expenditure in the economy, as if alternatively that cash was invested by someone with a high MPS it would be eventually spent anyway. Of course there would be some frictional element to this (money needs to be transferred when invested, etc) but I posit that more is made of this than should be.
  - ArkyBeagle 10y ago
    It's not really clear either way, but I don't see how they can do this without some increase in the monetary base. So I'm somewhat at risk in saying that; I just suspect it has to be true. It'll end up in the deficit just like everything else. As it should. Unlike QE{I,II,III}, this will increase the base. Saving and spending are both morally neutral; it's just that we think it's Good To Be A Rentier, so we (curiously) bias in a moral case for saving. The New Testament of finance :) allows for bankruptcy, to implement a mechanism for forgiveness. Saving is pragmatically good. But we seem to make a moral fetish of it - in fact, if our neighbor spends, spends, spends, we benefit. But Liberal Atomism doth make hypocrites of us all... Ignoring all this, monetary velocity is important and all other things being equal, I'd rather have it than not have it.

by nstj 10y ago

ArkyBeagle 10y ago

Presumably, the Fed will send new money to Treasury for this, which will actually inflate the currency just a wee smidgen ( and in an economy in which the Fed's growth targets go chronically unmet this is no sin - quite the opposite). Otherwise... While there is an element of truth to that, see "the marginal value of a dollar". You "spend" your ten millionth dollar quite differently than you spend your ten thousandth. Some of these guys for whom money is simply a means of keeping score won't change their consumption patterns much no matter what. If you want to increase velocity, the way to do it is cause more cash to be in the hands of broke people.

nstj 10y ago
My bad, that makes a difference (ie: if you're increasing the monetary base, there will indeed be a change in spending - and theoretically it could even result in a lower velocity of money, as the money base might increase proportionally more than the increase in GDP). I didn't realise that Treasury actually held this paper. Still, I'm hesitant to draw the conclusion that giving cash to someone with a high MPC results in a markedly higher amount of consumption/expenditure in the economy, as if alternatively that cash was invested by someone with a high MPS it would be eventually spent anyway. Of course there would be some frictional element to this (money needs to be transferred when invested, etc) but I posit that more is made of this than should be.
- ArkyBeagle 10y ago
  It's not really clear either way, but I don't see how they can do this without some increase in the monetary base. So I'm somewhat at risk in saying that; I just suspect it has to be true. It'll end up in the deficit just like everything else. As it should. Unlike QE{I,II,III}, this will increase the base. Saving and spending are both morally neutral; it's just that we think it's Good To Be A Rentier, so we (curiously) bias in a moral case for saving. The New Testament of finance :) allows for bankruptcy, to implement a mechanism for forgiveness. Saving is pragmatically good. But we seem to make a moral fetish of it - in fact, if our neighbor spends, spends, spends, we benefit. But Liberal Atomism doth make hypocrites of us all... Ignoring all this, monetary velocity is important and all other things being equal, I'd rather have it than not have it.