February 2021

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« Zero Sum Plunder Gives Way to Positive Sum Trade | Main | MIses, Equilibrium and the Problem of Misplaced Concreteness »


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I've been travelling and haven't chimed in on the recent posts. Having spent a lot of time with businessmen reecntly,I will report that uncertainty is a constant in the discussion. There is no taste for risk taking in the current regime.

There is ample evidence that loans are available to good credits. Good credits are also likely to have lots of cash, however, so observed borrowing remains depressed. The mere observation of low credit creation does not tell us whether that reflects demand or supply constraints.

Banks are capital constrained (which I have been saying since the crisis began). That means they are fussier about the quality of the credits. So there are constraints on both the demand and supply side at work.

The stubbornly high unemployment rate is troublesome, and I also believe multiple factors are at work there. Given that people are being paid not to work for longer and longer periods, however, why exactly is that a surprise?

I would also suggest to pay more attention to the housing sector dynamics, given that it seems to be residential investment the key to explain the relative stagnation of private investment, as shown in this graph: http://research.stlouisfed.org/fred2/graph/?id=GPDIC1%2CPNFIC1%2CPRFIC1%2CNRIPDC1
In this graph you can see how nonresidential investment has partially recovered, but residential remains totally depressed.

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