{"id":5680,"date":"2015-02-14T07:40:40","date_gmt":"2015-02-14T12:40:40","guid":{"rendered":"http:\/\/olduvai.ca\/?p=5680"},"modified":"2015-02-14T07:40:40","modified_gmt":"2015-02-14T12:40:40","slug":"what-escape-velocity-december-business-sales-and-inventories-repudiate-the-money-printers-myth","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=5680","title":{"rendered":"What \u2018Escape Velocity\u2019? December Business Sales And Inventories Repudiate The Money Printers\u2019 Myth"},"content":{"rendered":"<h3 class=\"entry-title\"><a href=\"http:\/\/davidstockmanscontracorner.com\/what-escape-velocity-december-business-sales-and-inventories-repudiate-the-money-printers-myth\/\" target=\"_blank\">What \u2018Escape Velocity\u2019? December Business Sales And Inventories Repudiate The Money Printers\u2019 Myth<\/a><\/h3>\n<p>It is plain as day that massive central bank money printing and perpetual ZIRP\u00a0do not rejuvenate the main street economy under conditions of \u201cpeak debt\u201d. And the reason is so obvious that only Keynesian economists can\u2019t grasp it.<\/p>\n<p>To wit,\u00a0if the balance sheets of\u00a0households and businesses are tapped out\u2014\u2013then artificially suppressing interest rates cannot induce them to borrow even more money.\u00a0Accordingly, spending is constrained to what can be funded from\u00a0current income and cash flow after any set aside for new savings.\u00a0In contrast to the four decades of the\u00a0great credit expansion between 1970 and 2008, therefore, GDP can no longer be stimulated by incremental outlays\u00a0derived from hocking\u00a0household and business\u00a0balance sheets.<\/p>\n<p>The graph below\u00a0of the long-term trend of household leverage\u2014measured as total mortgage, credit card and other consumer debt compared to wage and salary income\u2014\u2013demonstrates the new normal. During the long period of credit expansion, the Fed\u2019s resort to low interest rates to stimulate borrowing and spending worked because households started the period with relatively clean balance sheets. As a result, central bank monetary stimulus caused leverage ratios to be ratcheted higher and higher in response to each round of rate cutting.<\/p>\n<p>Self-evidently that ratcheting process has stopped, and household leverage ratios have fallen, albeit to levels which are still aberrantly high by historical standards. What this means is that after the peak\u00a0debt inflection point was reached, the constraint on borrowing would not be the interest rate, as had been the case during the great credit inflation,\u00a0but the availability of income to leverage.<\/p>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>What \u2018Escape Velocity\u2019? December Business Sales And Inventories Repudiate The Money Printers\u2019 Myth It is plain as day that massive central bank money printing and perpetual ZIRP\u00a0do not rejuvenate the main street economy under conditions of \u201cpeak debt\u201d. And the reason is so obvious that only Keynesian economists can\u2019t grasp it. To wit,\u00a0if the balance [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[303,305,353,467,535,3128,1940,1939],"class_list":["post-5680","post","type-post","status-publish","format-standard","hentry","category-economics","tag-fed","tag-federal-reserve","tag-gdp","tag-keynesian-economics","tag-monetary-stimulus","tag-peak-debt","tag-zero-interest-rate-policy","tag-zirp"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/5680","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=5680"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/5680\/revisions"}],"predecessor-version":[{"id":5681,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/5680\/revisions\/5681"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=5680"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=5680"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=5680"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}