EUCOM Economic Analysis - Part I

[Firn]

He's still wrong to put the blame on the corporation instead of on the bank.

Meanwhile if he's irritated by the reserves held by banks - part of them are obligatory, and the Fed is free to pump more money into the system if those reserves are a problem.

Money held back slows down the rate of circulation which according to a quite established theory (not necessarily the theory Krugman likes) means less inflation. So this "less inflation" can be seen as a problem as Krugman does or as an opportunity to do something that usually drives inflation, such as the Fed giving the U.S. a gift in shape of buying some debt obligations at ridiculous conditions.

He's very, very arbitrary in blaming liquidity-hoarding corporations.

I think he is perfectly right for the very reasons he wrote. The lack of direct investment of an (greatly) increased share of the national income is no good for the aggregate demand. It is 'just' one part of a bad economic spiral but still not a good one for the whole economy.

BTW dividends would of course tend to go to people which will reinvest most of the captial, buying assets instead of consuming. At least Uncle Sam would get more revenue and this by hardly taxing the poor.