Monday, June 10, 2013

non-stable elasticities

Brad DeLong Says We Can't Do Anything to Raise Employment Because Billionaire Wall Street Bankers Are Still Too Dumb to Breathe by Dean Baker

DeLong doesn't mention the Fed's interest on excess reserves. The question is whether the banks will unload the trillions on reserve into the economy once the economy picks up. We'll get inflation. We'll get bubbles. But the Fed has said they will raise the IOER to prevent this. The IOER will also shore up the banks' balance sheets.

Made me think of what Bernstein was saying about non-stable elasticities. 

What the banks do with their reserves is one of those elasticities which could jump.

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