Unprecedented levels of stimulus around the whole world. If that isn't the precursor for some airpockets/bubbles of mispricing to emerge.. I don't know what is.
I was reading Sapiens by Yuval Harari today and he had an explanation of easy credit that i liked. You are basically betting that enough innovation and progress happens to underpin the money you've "borrowed" from the future - when that doesn't happen...the bubble bursts. I wonder what sort of progress would smooth over the extraordinary credit injection we've seen in 2020.
Giving money directly to businesses (especially hedge funds and banks) is a mistake which will have terrible consequences. If we need stimulus to stave off a debt deflation spirals we should give money directly to people. It could be structured as a modern debt jubilee, as suggested by Steve Keen, or as UBI, as suggested by many including Andrew Yang.
It is more of a mistake now than in the past. In the 1930s, yeah sending checks to everyone as a form of stimulus would have been highly complex and difficult. Banks were the only society wide economic linkages at the time. That is less true today. Today you can sends cash to a large portion of people with existing infrastructure and clearly you could get near 100% with a dedicated platform/process to do so.
The argument for giving money directly to businesses is that it makes the recovery easier. Many argue that we needed to give more money directly to businesses, that it was wrong to let unemployment get so high when we could just pay businesses to keep people on.
Giving money to businesses to keep people employed is a non-starter in the US as there is no political will to ensure those businesses don't just furlough employees anyway and pocket the bonus - will for both writing effective regulations and post-hoc enforcement against businesses that skirt them.
It also directly creates zombie companies if applied to industries that can't possibly bounce back, like travel etc.
IMO the appropriate business-saving economic response would have been to statutorily suspend all rent/mortgage/loan payments denominated in USD. That's the bulk of most small businesses' fixed burn rate. Needing to service the debt black hole is our primary source of inflexibility.
Of course given that we're still "debating" whether the pandemic is even real or not, figuring out what is appropriate is purely academic. Enjoy your token $1200 while the looters loot billions.
Businesses have no incentive to keep employees on. If you want businesses to keep employees on then you offer to do exactly what the UK did https://www.bbc.com/news/business-51982005
This is not at all what the USA is doing. The USA is making a terrible, terrible mistake. Trickle down economics once again, and trickle down doesn't work. At least not for the bottom 9/10 of society.
The only progress I can think of is the amount of people that might enter the global economy at a higher tier class. More lower middle class everywhere from India to China to America to Brazil, etc). That’s the only sure fire bet (as usual).
Globally, we’re going to need more Netflix watching, IPhone buying, startup working, Starbucks drinking sneaker-heads for this to all work out.
>> I wonder what sort of progress would smooth over the extraordinary credit injection we've seen in 2020.
> A successful Mars colony, obviously :) Gaining a second planet might possibly justify this level of credit.
I'm not so sure. From the perspective of Earth economics, a Mars colony may be no different from a massive, useless boondoggle. The colony would obviously consume massive amounts of Earth resources, but what products and services would it provide Earth in return and is the production of those things on Mars economically justifiable?
One way to rephrase your question would be to take a look at the sum total of commodities markets, specifically the subset that includes natural resources (specifically precious metals) mineable on mars. How much of that market is bottlenecked by supply?
You can apply this approach to more complex commodities to theorize about the upper limits, but I think this is a good way to get started.
> specifically the subset that includes natural resources (specifically precious metals) mineable on mars. How much of that market is bottlenecked by supply?
IIRC, mining on Mars for export to Earth doesn't make much sense vs mining on an asteroid, since you're paying for transport through an extra gravity well.
I'm reminded of A Canticle for Leibowitz: space colonies were built for nationalistic reasons, and none of the promised economic benefits to their founder nations ever materialized. The only good they did was act as a lifeboat for humanity after the people on Earth destroyed themselves in a second nuclear holocaust.
I think in terms of the money supply, assets haven't gone up in excess of the increase in money. so not a bubble yet. too many people skeptical of it to be a bubble.
I don't see any big progress or innovations to get velocity into money so we are going to be stagnant for some time.
give it 10-20 years then baby boomers won't be around and we can proceed with a global project against climate change and for renewables, I think that will be it.
I was reading Sapiens by Yuval Harari today and he had an explanation of easy credit that i liked. You are basically betting that enough innovation and progress happens to underpin the money you've "borrowed" from the future - when that doesn't happen...the bubble bursts. I wonder what sort of progress would smooth over the extraordinary credit injection we've seen in 2020.