Nov 6, 2010

Speaking of Voodoo Money

All the president's flack men were breathless in announcing the $10 billion deal with India. Bomba will buy airplanes and stuff from us to support about 54,000 U.S. jobs.*


Let's play pretend. Pretend the deals actually occur as advertised. Pretend India actually pays the bill.**  That's $10 billion injected into the national economy.


On Wednesday, when a majority of us were taking the victory lap and most of the rest were crying in their Chablis, the  Federal Reserve Board launched  "QE2," a barbaric misuse of the English language to denote creating, out of thin air, 600 billion new dollars by buying American government bonds with money that doesn't exist.

If and when  the  the nation of OOHHMMM reaches into the pocket of its bed sheet and forks over our $10 billion in productively earned money, it will represent 1.6 per cent -- one-decimal-six -- of the the $600 billion imaginary greenbacks. Ben and the rest of the Washington monetarist geese see this as shrewd Yankee trading.


Top of my head, I can identify at least eight or ten objections to my analysis,  and a good Keynes/Samuelson-trained economist will open the action by hollering "Multiplier effect, you moron. Multiplier effect!"

Absolutely. The airplane makers makers of American will collect the Indian cash via their Boeing and GE bosses. They'll take it to the WalMart and buy crap made in China.

I have no immediate  plan to contract something incurable, but if I do I'll be proud to proclaim myself sound as a dollar.


* Never mind that (a) the deals had been under discussion for months or years and (b) these aren't necessarily new jobs.

** I have dealt with the Third World, up close and personal. Rule One is that if you don't get your money up front, you stand a very good chance of not getting it at all.

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