Tuesday, November 9, 2010

A Footnote to the Post Below

Using footnotes in blogs is awkward. It forces the reader to switch back and forth between the main text and footnote, an extra step that disrupts reading. Hypertext suffers from the same drawback.

In a printed page, the matter is easier, but only if the footnote is at the bottom of the page. With a quick movement of the eyes then, the reader can read the footnote and continue with the main text.

In my books I use footnotes in two ways: to provide the source for a material I quote and to buttress the argument I make in the main body of the text. In the post below, I pointed out that when capital cannot generate profits, it will have no reason to borrow money, even if the money is offered at no cost. Under that condition the focus shifts to cutbacks, including dismantling the plant and equipment.

If I were writing that in a book, I would have footnoted it with the following Financial Times story. Under the heading US banks see demand for business loans drop, the paper reported today:
Bank loan officers say that demand for loans from small US companies fell in the past three months, casting doubt on how much the Federal Reserve can stimulate the economy ...every bank reporting a decline in small business loan demand said that its customers had caught back on their investment in plant or equipment.

There was a decline in loan demand from larger companies as well, with 25 per cent of loan officers saying it had fallen compared with 18 per cent who said that it rose.
Does Bernanke know this? That is the subject of the concluding part of the Time Preference/QE series.