What I say is that I’m disappointed to find the Confidence Fairy alive and well on the Dope.
You know what would create investor confidence? Consumer demand. Why invest in the creation of more goods and services if there’s nobody who will buy them?
There are various ways to increase consumer demand, all of which involve putting more money in the hands of consumers. Direct job creation on the part of government by such things as infrastructure investment and paying states/localities to hire back laid-off teachers, increasing the minimum wage, extending unemployment insurance benefits, reversing the recent cut to food stamps - these things would all increase consumer demand. The last three would do a really good job of it in terms of bang for the buck, because you’d be putting money in the hands of people would of necessity spend nearly every last penny.
And enroute to creating investor confidence, these actions would make a very positive difference in the lives of real people.
The typical use of the confidence fairy is to justify some action on the grounds that it would build confidence. The tapering on the other hand was done as the result of an improving economy. I didn’t hear them say anything about this improving confidence, in fact they are moving slowly and keeping interest rates low so as not to screw things up.
Bernanke by the way seemed to say that the economy would be even better if the tight budget policy hadn’t cut jobs when it should have been increasing them - so he agrees with you.
You don’t think it will? You don’t think improved confidence increases consumer purchasing? Your Fairy makes sense but does not disallow a positive effect of consumer confidence.
I don’t buy the notion that consumers are going to more than barely notice this. Hell, I barely understand what QE3 does and how it works, and I’ve got a union card in mathematics. Most people are barely going to know that this is a taper and not a tapir. They’re going to look around their own lives and draw their level of consumer confidence from that.
Just to clarify, I never said anything about consumer confidence. Given that the majority of stock is traded by institutions and computers, regardless of the real reason the markets went up during his speech the uptick in the stock market wasn’t caused by grandmothers calling their brokers and saying “Bernanke at the Fed is saying X so we need to buy, Buy, BUY!”
And it probably will. But only because the market sees that the Fed’s actions indicate that they believe the economy has improved and is improving.
As I said, and I read Krugman religiously, the Confidence Fairy makes austerity improve the economy by inspiring confidence that deficits will be reduced and so there will be none of the inflation they were all expecting.
Let’s see if Krugman says Bernanke was appealing to the Confidence Fairy. I doubt he will.
It appears that last quarter’s GDP growth was much higher than previously reported. Is saying that increases confidence appealing to the Confidence Fairy also?
I haven’t said one word about Bernanke. I haven’t claimed he’s trying to improve the economy by increasing confidence.
I didn’t say the Confidence Fairy was alive and well at the Fed; I said it was alive and well here at the Dope.
I’ve been talking about Dopers who say that the taper will help the economy by increasing investor confidence.
This is right in the wheelhouse of what Krugman means by the ‘confidence fairy’ - the taper is a (mild) form of austerity, and according to the Dopers in question, it’s supposed to help the economy because it will increase investor confidence.
