The central bank is printing tons of money and continuously pumping it into the economy. Americans don't feel the effects of that as everyone uses American dollars. So it's almost as if the central bank is creating gold, which is suppose to be a finite quantity. It does nothing.
At the end of the day corporations must borrow that money and corporations are sitting on tons of their own money, they don't want more money to hire employees. They don't know what to do with the money they have. They can make goods, but no one will buy them at the levels of profit they need. So they just sit on the money.
When the fact is the economy is efficient and they should be making goods even if they are not profitable, i.e. at cost... just to create employment, give people money, with which they can buy things. But that's not how the profit motive works. The management consultants and management theory have pushed this idea in their heads, and they are sticking to it, that they need to create profit always. Shareholders demand it! But profit is hard to come buy these days. So they sit around and do nothing instead. Jobs don't get created, people are starved for money and that vicious cycle ensues and consumption goes down.
The Central Banks are simply not creating enough inflation, if demand is a problem.
In the most extreme case, the central bank can either just buy any assets under the sun, or start dropping cash from helicopters (slightly more realistically: give every citizen a bunch of money).
In any case, have you heard of nominal income level targeting?
Ie the central bank instead of targeting inflation, targets what's more important: the aggregate income of all workers. (Targeting Gross Domestic Income instead of just the wage share is also possible.)
They set a target of eg 5% nominal growth a year, and announce it. Then do everything necessary to make it happen.
If the post-2008 world isn't proof enough that printing money does not automatically increase aggregate demand, I don't know what would count as proof in Econ.
By the way, I'm not saying it can increase AD, just that it does not automatically does so, for some reason that is widespread now.
The central bank can always inflate. If printing lots of money isn't enough, they just need to print some more money.
And, if they manage to buy all of government debt without creating any inflation, that's awesome on some level as well: they just managed to monetize all the public debt without any adverse side effects. (And for sovereign debt, monetization is about as good as eliminating it.)
Well the point of that is to affect NPV of money right and force investment. And corporations go meh, too much risk. I think that's what's happening. I think even the negative interest rate isn't going to make them budge because the profit margins are razor thin, and even if you make something doesn't mean it will all not be wasted. The economy is saturated and the corps don't know how to make profit in it so they rather sit around and do nothing, and let China and other countries produce everything and then try to be the middle man or something as such with minimal risk and investment.
> When the fact is the economy is efficient and they should be making goods even if they are not profitable, i.e. at cost... just to create employment, give people money, with which they can buy things.
People already have jobs, they have low-paying jobs. When someone is already spending every dollar they get, there is no way to make them spend more. All this talk of investment, inflation, job creation, it's missing the basic point that to get businesses to make more goods you first need someone able to buy them, and that in turn means getting them out of low-paying jobs and into high-paying jobs.
The way I see it, the problem is a skills gap. To get someone in a higher-paying job, they need skills that are more in demand. If you want to understand why people are stuck in low-paying jobs, look no further than a failed education system.
And yet in the market for skills provision, we see high prices, nondischargeable debt ... and low return for those supposedly enskilled.
I'm talking of higher education, of course.
My thought for some time has been that we cannot educate ourselves out of this mess. Robert Gordon's The Rise and Fall of American Growth both discounts education as a positive factor and sees debt and access as negatives.
The central bank is printing tons of money and continuously pumping it into the economy.
The Federal Reserve stopped its quantitative easing back in late 2014. It's true the additional money supply is still out there, but it hasn't added any more in the last 1.5+ years.
At the end of the day corporations must borrow that money and corporations are sitting on tons of their own money, they don't want more money to hire employees. They don't know what to do with the money they have. They can make goods, but no one will buy them at the levels of profit they need. So they just sit on the money.
When the fact is the economy is efficient and they should be making goods even if they are not profitable, i.e. at cost... just to create employment, give people money, with which they can buy things. But that's not how the profit motive works. The management consultants and management theory have pushed this idea in their heads, and they are sticking to it, that they need to create profit always. Shareholders demand it! But profit is hard to come buy these days. So they sit around and do nothing instead. Jobs don't get created, people are starved for money and that vicious cycle ensues and consumption goes down.