Friday, September 05, 2014
Good sign, maybe
Interesting observation from a branch of the Federal Reserve.
One of the great mysteries of the post-financial crisis world is why the U.S. has lacked inflation despite all the money being pumped into the economy. The St. Louis Federal Reserve thinks it has the answer: A paper the central bank branch published this week blames the low level of money movement in large part on consumers and their "willingness to hoard money." The paper also cites the Fed's own policies as a reason for consumers' unwillingness to spend.Of course inflation is not nearly as low as the Fed's bizarre mismeasurement, but it's still lower than you'd expect with so much loose money floating around. In any case, an increase in savings is PURELY GOOD. The cited article seems to ignore one basic cause for hoarding. Examining my own motivations, I find that zero interest rates cause me to hoard more. This seems wrong from a simple supply-demand viewpoint; if you're not getting paid to save, you should stop saving. But in fact I'm hoarding because the savings are not bringing a return. If I could count on the traditional 3% per year, I'd feel free to spend the 3% and leave the principal constant. Seems to be a semi-conscious distinction between earned and unearned money. The principal is money that I worked for, and needs to be kept. Interest is 'won' or 'free' money, which feels slightly improper or undeserved. I'd rather get it off my hands. [Is this Nature's internal instructions about riba?]
Labels: Natural law = Sharia law
¶ 4:25 AM
