So simple, yet so incomprehensible by the cadre of false Keynesian prophets who will never admit to this most elegant of realizations. It also means that America can expect more such farces as double stimulus roadsigns, and oil back at $140 (or much higher) before even another job is created out of all the excess money sloshing around.
Globalization has not broken down. In fact the US economy is more open than it has ever been. That means that stimulus, both monetary and fiscal if very prone to what is called leakage. We’ve had an enormous of stimulus in the US, it’s the biggest fiscal stimulus in the world, and huge unprecedented monetary stimulus. What’s been stimulated? Not jobs in Michigan. What’s been stimulated has been commodity markets and emerging markets. Because the liquidity just leaks out, and that’s why another round of stimulus would not stimulate in the promised way. It would stimulate the wrong things. And those things, commodity markets and emerging markets, are already overstimulated to the point of being nearly bubbles.