both large and small)? Recently I had an argument with a friend. He said that we need to reduce taxes on firms in order to stimulate job creation. I said that since the Federal Reserve has engaged in aggressive quantitative easing and maintained low interest rates, credit is widely available, and lack of capital isn't the reason behind the lack of hiring. If it were profitable to hire more employees and expand, they would do so, since credit is so cheap. When firms do decide to take out these cheap loans, they only use them to pay down debt. This isn't happening because of the state of our economy: most firms are trying to contract and cut down on employment, and hiring more employees would only lead to more losses. He says the reason firms aren't hiring is because there is a lack of credit; that banks aren't lending money and that credit doesn't come cheap. I asked him why nothing the Federal Reserve had done has made the banks lend more freely, and he said it's because the banks are just sitting on the extra funds and are too scared to lend in this economy.
How would either of us go about proving our points? What statistics do you use? I think credit is available and that businesses just aren't interesting in taking out loans, however cheap they may be, because they have no good use for the money, so how do I measure how available credit is to businesses? And how do I measure how eager businesses are to take out loans (perhaps they are taking out loans to pay down existing debt)? If my friend is right, than credit isn't widely available and the banks are just sitting on the money. What statistics would he use to prove this? Would it have to do with comparing M3 to other measures of the money supply? How so?
How would either of us go about proving our points? What statistics do you use? I think credit is available and that businesses just aren't interesting in taking out loans, however cheap they may be, because they have no good use for the money, so how do I measure how available credit is to businesses? And how do I measure how eager businesses are to take out loans (perhaps they are taking out loans to pay down existing debt)? If my friend is right, than credit isn't widely available and the banks are just sitting on the money. What statistics would he use to prove this? Would it have to do with comparing M3 to other measures of the money supply? How so?