If the ECB was buying enough of their long dated bonds to drive the interest rates down into reasonable territory then they wouldn't have to sell short-dated bonds.

Heck, my prescription to solve this whole mess would be for the US Treasury to finance the purchase of Spanish and Italian debt.  All of it.  Issuing matching maturity US treasury bonds for every Spanish and Italian bond in existence with a 2+ percentage point spread would go a long way to shrinking the US budget deficit over the next decade and pulling Spain and Italy out of the bad equilibrium they are currently in.

There is exchange risk, of course, but you can't simultaneously argue that it would kill the dollar as well - if this action were to force down the dollar against the Euro, those bonds would be even more valuable in dollar terms.  In the other direction, the very existence of such a reserve of Euro-denominated debt should keep the dollar from appreciating much as the Treasury would just sell the bonds any time the dollar went up too much.

"If the ECB was buying enough of their long dated bonds"

And it can print money to do that.

"my prescription to solve this whole mess would be for the US Treasury to finance the purchase of Spanish and Italian debt"

Great idea. We could print some money to do that.  

And it can print money to do that.

Indeed it can.  And it would work.

Great idea. We could print some money to do that.

Yup.  That would work too.

Sometimes, all the economy really needs is to make the numbers on each side of the ledger add up so that we can get on with life.  It isn't a morality tale - if printing money increases Y more than not doing so (as is currently the case), then printing money is the thing to do.  When the converse is true, set the money on fire.  

Letting aggregate output fall to make some sort of moral point is just stupid.

That's beyond a Goldilocks view of inflation, that's completely delusional.

That's beyond a Goldilocks view of inflation, that's completely delusional.

I have to ask - if you believe printing or borrowing money causes inflation under all circumstances, why has the US had such a low rate of inflation since 2008?  Or Japan since 1990?

Certainly, if output is at or near 100% capacity, I agree - these things are very directly inflationary.  But there is currently no reason to believe that any advanced economy (even Germany) is currently operating anywhere near 100% capacity, particularly in the European periphery where unemployment is over 20%.

If everyone in the world decided that they wanted 25% more US goods, we would experience an export boom that would increase real GDP and employment, along with some inflation.  On balance, I think we would all agree that this would be a great thing, even if it was somewhat inflationary.

If that 25% increase in demand came about because of a massive overseas dollar counterfeiting operation, would it really make a difference in the short term?  Why?

(yes, there are very good reasons it would make a medium and long term difference once US output began to approach 100% capacity - but until that point, it would be an excellent growth driver)

We aren't better off if we are getting paid in counterfeit money.

"If that 25% increase in demand"

The idea is to increase national wealth.

"in the European periphery where unemployment is over 20%."

Inflation won't put those people to work, they need to deregulate employment markets.

By your logic, Germany leaving the EU would be a win for everybody. Germany could go back on the sound Deutsche Mark, allowing the rest of Europe too inflate their way to prosperity. And they wouldn't have German meanies telling them to cut government spending. It's incredible no one has thought of this solution.

Don't waste time trying to argue in good faith with a supply-sider.

I got more styles than prison got bricks- ain't that some shit?

Do you have an iPhone?

Yeah, we get it.  Africa is rich because they have iPhones, and people in the US should stop bitching about health care, because, damn it, at least they've got black and white TVs and microwaves, and therefore economic progress continues uninterrupted and unslowed.

No, you don't get it. Sorry.

No, I have a local pay-as-you-go company with no contracts or phone subsidies.  I don't really travel unless you count Mexico and a $500 phone just seems wasteful, as does paying more than $45/month for an unlimited plan.

I got more styles than prison got bricks- ain't that some shit?

But you do have a cell phone.

And a refrigerator!

I got more styles than prison got bricks- ain't that some shit?

You built your own refrigerator?!

I got it second-hand, just like the phone.  That's why I'm not poor anymore.

You don't need to run out and buy everything brand new every time, or buy another phone every time a new version comes out.

I got more styles than prison got bricks- ain't that some shit?

Oh, I see. Someone else built it.

Yep, a great and long-lasting example of quality workmanship from a unionized plant in Ohio.  

What about your refrigerator?  What's one thing you would say to your refrigerator if you had the chance?

I got more styles than prison got bricks- ain't that some shit?

I have no idea where my refrigerator was built.

You're not getting it probably because you can't think in a super-dense manner in the way that ZYX can. See his [stupid] point is that criticism of supply-side economics is invalid because he thinks that markets are created by manufacturers/suppliers. He thinks that Apple created the iPhone and thus created a market for smartphones or touchscreen phones and thus without Apple supplying us the iPhone there would be such market[s] and we would be stupid fucks living in sad world without i-devices. (Apparently only certain times suppliers are strong enough to create market, the rest of the time they destroy them.)

The funny thing is that I had an iPhone. I actually have had 3 of them; I had the original, the 3GS, and 4. That's not what's funny. What's funny is that before I had any iPhone, I had a Windows mobile phone with a stylus that you could buy apps for. I also had an Archos media player that I could watch hi-res, full-length movies on. I also had a HP Tablet PC that converted in a laptop (at least 3 years before the iPad was even a sperm in Steve Jobs ballsack). I had an 8" touchscreen navigation system made by Alpine in my '06 TL.

I agree with ZYX that a product has to exist before I can purchase it, so technically a supplier is creating market in that regard, but there's lot of products that don't create markets, they just die or they never really blew up, that's because they don't have the demand. Also most products are creations made out of the parts of other products IE i-devices.

About the refrigerator. Amazing invention, it literally created the shitty beer market in Europe almost overnight. It's doubtful (actually it's factual incorrect) that the refrigerator created the "keeping shit cold" market because I'm pretty sure people were keeping shit cold in other ways before the refrigerator came around.  

...criticism of supply-side economics is invalid because he thinks that markets are created by manufacturers/suppliers

So . . . it wasn't what Shy Elf thought and it wasn't what improper thought-- was there a meaning relevant to the conversation to your question, or did you just sincerely want to know if HidingFromGoro had an iPhone?

He appears to believe that consumer demand drives the economy.

The trouble with the "supply side vs. demand side" argument is that both sides are reductionist and wrong. Zyx's iPhone example points out a specific error in the "demand side" argument -- namely, that people don't demand things that don't exist yet. Before Jobs said to Apple's development team, "make me a mobile computing platform with phone and wireless capability, with a color touchscreen" the world of mobile devices was populated by Nokia, Blackberry and Palm, and their clones.

Conversely, the "supply side" argument also has a flaw: not everything that gets supplied find a market. Examples abound -- look at the roster of failed MP3 player launches prior to the iPod.

The real answer is that the market is structured to reward risk. Not any specific individual risk -- but rather the process of evaluation, innovation, and investment which rewards the aggregate of individual decisions to assume risk. When we restrict that process, through monopolies and other rent-seeking (on the corporate side), or through excessive regulation/taxation and financial distortions (on the government side), the economy suffers.

The market does not reward risk, it rewards efficient allocation of resources.

The reason certain people oppose supply-side policies is not because they can present a coherent argument that such policies are ineffective, but because supply-side polices tend to interfere with wealth redistribution efforts.

The market does not reward risk, it rewards efficient allocation of resources.

Efficient allocation of resources?

Hmmmmmmmmmmm

I got more styles than prison got bricks- ain't that some shit?

Yes.

Doesn't really explain increasing income inequality or regulatory capture though- unless that is the goal of the Market, in which case then yes it it' pretty efficient.

I got more styles than prison got bricks- ain't that some shit?

Doesn't really explain increasing income inequality...

...or regulatory capture...

...unless that is the goal of the Market...

I don't think our current tax structure is particularly efficient. Do you?

The current tax structure is remarkably efficient if you're a Fortune 500 company.

I suppose it explains regulatory capture to the extent that it illustrates how regulations can distort markets.

Yes, if there were no laws then there would be no instances of those laws being circumvented.  I wounder if that should also be applied to property crime or IP law?

I got more styles than prison got bricks- ain't that some shit?

People do demand things that don't exist yet.  In the absence of supply the market clears at a production level of zero, but that doesn't imply that there isn't demand.

If markets rewarded risk as such, your best investment choice would be to visit Las Vegas.  It's just that the most of the currently unexploited opportunities to make profit without some sort of rent-seeking are mostly still unexploited because they entail some sort of risk.  Presumably that is what you meant to say.

I'm not sure why the insufficient aggregate demand problem discussion has morphed only into discussing how to create new expensive tech shit for rich people that they don't need.  Yeah, IT is one of the few sectors that still has technological progress at the rate we're used to, and the FacePlant IPO made a lot of money, but we do need other things, don't we?  Even in China, manufacturing is a decreasing share of the economy, and is smaller than services.  How about finding some way to fill the demand for, say, food, in east Africa?  Surely there's something they could do to pay for it.  It's only China that seems to be interested in outsourcing jobs there now.

As usual, the Onion has the best economic reporting.

how to create new expensive tech shit for rich people that they don't need.

I think that might be a wee bit dismissive of a consumer product category that is on the verge of selling a billion units a year.

Justin Bieber sold 370,000 albums since June 15th.

Google is activating nearly 1 million Android phones per day.

Android > Bieber

Word.

ICS is pretty dope, can't wait to upgrade to Jelly Bean.

Yeah.

I have to ask - if you believe printing or borrowing money causes inflation under all circumstances, why has the US had such a low rate of inflation since 2008?  Or Japan since 1990?

Now he's just messing with him.

"It is difficult to get a man to understand something if his salary depends on his not understanding it" ~Sinclair