Thursday, February 12, 2009

n-th Order Effects of Fiscal Stimulus

1. Pass fiscal stimulus.
2. Issue debt.
3. Create devaluation expectations. This is perhaps the most persuasive evidence for US dollar devaluation I've yet seen.
4. Consumers, expecting devaluation, buy imports today.
5. Fiscal stimulus less effective than planned.

I would be the first to concede that this is probably not a big deal, and is mostly an excuse to pass along that link I got from Free Exchange. However, I have personally made one or two small decisions I would not have made for a couple of months was I not expecting the US dollar to head somewhat south.

EDIT: I find it amusing to no end that about an hour after I wrote this, the greenback had a half-decent rally.

POSTSCRIPT: Does it ever bother game theorists that they can get different results for the same auction when they only permit bids in cents as opposed to in real numbers?

No comments: