Why stimulus won’t work
As 50 million storage lockers filled to capacity with consumer crap are emptied in a desperate move to reduce expenses and raise cash, the value of literally everything ever manufactured will fall to near-zero. charles hughes smith
Are there really 50 million storage lockers in America? Are there 5 million in Canada? I doubt it. But there are lots as well as basements full of stuff. Twenty years of maxed out credit cards and steady employment produces a mountain of stuff. A contraction in the economy would bring some of that stuff to market. Anyone who has ever been to a garage sale knows how much that stuff is worth. Marked to market that popcorn maker/waffle iron/CRT monitor is, at best, ten cents on the dollar. At worst it’s landfill and that costs money to haul and to dump.
Giving the middle class extra money is unlikely to make them charge out to the mall and buy more “stuff”. And, at the moment in Canada, the Opposition (perhaps soon to be Canada’s New New Government) is baying for more money to be helicoptered out of Ottawa. The net effect of which will be a monetary inflation. Oh Joy!
You seem to be mistaking long-term with short-term issues. In the short term, giving the middle class more money will simply see them paying off debt, which is already made money and won’t really help the economy – but it will make creditors more likely to lend in the future. What will increase consumer confidence is the belief that we’ll have jobs in the future. What we learned from Japan’s deflationary spiral was that you have to act before the psychology of waiting gets established – if I wait a few months, price will drop. Yes, price drops, which is a response to decreased demand, and in response to decreased demand fewer units are created, so downsizing results, so people hang onto their money, etc.
It’s more than about giving away fist-fulls of cash, it’s about interrupting a cycle before it starts.