baggerlord, U.S. Treasuries are low because there is no better place to park an oversupply of big global money. Interest rates are low becuase there is a huge global demand for U.S. Treasuries as a liquid place for excess funds. In the context of Global deleveraging there is a contraction of private credit; stated differently, in the aggregate there is weak demand for debt, for private loans, from qualified borrowers. So, there is a massive amount of excess funds that have to be put somewhere and at the same time there are serious questions about the solvency of major banks and many countries. Big money is looking for a holding place of liquidity...best choice for now appears to be the U.S. 10 Year...and to a lesser extent the German Bund and some other less liquid currecies of soveriengs with good balance sheets and commodity resources...Australia, Canada, Singapor...but only the U.S. Treasury market has the requisite liquidity for really big money. U.S. 10 year Treasury is the money of the world.
There is no real 'money' printing if the Fed balance sheet expands its assets in debt securities and the dollar liability paid to the banks simply returns to the Fed balance sheet as excess reserves. If the reserves are not being used to form private credit then no real 'money' is being created. In terms of the quantity theory there is no money creation...reserves of $1 dollar have the same impact as reserves of $1T dollars.
Oldtime, you scheme of 'Tax reduction stimulus' is no different than government targeted spending stimulus in that you are basing your recommendation on Keynesian demand management theory. The problem is not with consumption demand; the problem is with the lack of investment in maintaining or creating real assets that have future income. The fact that successful multi national corporations have excess funds is not becuase they don't have customers...they go that money becuase they do have customers...the problem is that as they look at the government fiscal proposals and problems going forward and the likely impacts on thier ability to possess future income. They have decided it is better to hold reserves than to invest in assets where their ability to possess the future income from those assets is uncertain.
Reducing taxes on poor people does nothing to promote growth (which should be understood as the increase in the income from aggregate assets). All the subsidies for the poor, all consumption and all government spending must ultimately come from the surplus cash flow from aggregate assets....if you don't invest in maintaining and creating those assets you have eventually have austerity forced on you...becuase your income declines.
Tax reduction as policy must be focused on the costs and incentives of capital formation applied to the creation and maintenance of assets. Other taxes need to be reconciled against the legitimate need for revenue to fund an appropriately sized government pursuing circuscribed and legitimate government objectives.
