Stimulus?

[Owlet]

Monetarily, destroying savings and dampening the desire to save is easily accomplished through ZIRP and a negative real rate of interest.  Those evil oil speculators were not so evil in the early days of QE 2.0 when the Fed was trying to stoke inflationary “expectations” to try to generate “modest” negative real interest rates.  In addition to making savings unappealing, ZIRP also, in the minds of central bankers/planners, increases borrowing activity (the trope that low interest rates are stimulative is still widely circulated and believed despite now years of empirical evidence to the contrary).  Finally, there is the “wealth effect” of rising asset prices through the enhanced speculation that I mentioned in the beginning.  Each of these measures is undertaken with the expressed understanding that they will “stimulate the economy”.

But each and every one of those monetary means to the quantitative ends are financial economy measures.  There is no direct pipeline into the real economy.  Philosophically, these central measures are dependent on the idea that financial risk-taking leads to real economy risk-taking.  It is an unquestioned pillar of modern economics and monetary science that encouraging “risky” behavior in the financial economy encourages and promotes “risky” behavior in the real economy.  Again, risk in the financial economy is believed to be a perfect (or near perfect) substitute for real economy risk.  By getting people to act on these financial impulses, getting money to flow in the financial economy, it is believed that this will eventually lead to real economy activity.

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Rather than leading to a self-sustaining recovery process where financial economy risk-taking leads to beneficial real economy processes, the enlarging financial economy, with its “easy” money returns, draws more and more resources into each bubble, away from where those resources would be far more useful and sustaining.  Financial engineering just does not compliment the real economy as intended.  In reality, asset bubbles are far more like vortices than bubbles.  They draw in more and more formerly useful material and leave destruction in their wake, and a system that can afford less and less the imbalances that these vortices inevitably lead to.

<snip>

In the end analysis, monetarism has the entire process backwards.  The demand for money and credit should be as a result of success in the real economy, not the method for creating activity there.  Consumption itself should be an offshoot of economic success, not the goal of generic activity.

There's a ton of comments on this piece, some stupid, some brilliant. The one that will stick with me is this:

You have oil, you have a century of growth.
You don't  have oil, you don't have any growth.  
It's not rocket science

.

nuff said
http://www.zerohedge.com/news/jeff-snider-explains-why-unexpected-back-right-schedule?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29