Sometimes I wonder if there just wasn't enough money to pay the bills.
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| Household debt divided by currency component of the money supply (blue; left) and personal savings divided by the currency component of the money supply (red; right). |
I'm not sure about y'all, but I don't think I have ever used a repo to pay a loan. Certainly other components of the money supply have been used - i.e. demand deposits.
Nice.
ReplyDeleteDoesn't reduce debt if you use credit to pay it off.
The relation between the stock of debt that must be paid, and the stock of money we can use to pay it, is overlooked or ignored by policymakers. This explains not only why we had the financial crisis, but also why they didn't see it coming.
Doesn't reduce debt if you use credit to pay it off.
DeleteExactly what I thought, which is why I did not include demand/saving deposits - the FDIC is a creditor (technically insurer). That may have sounded specie-minded of me but one function of government is to ensure confidence in the current economic system. Our closest form of specie just happens to be currency, which is rapidly withdrawn during bank runs, like at WaMu.