It's true that older workers and retirees have just lost $15 trillion in the collapse of the housing bubble and the stock market plunge, but that is no reason not to cut their Social Security, according to the Washington Post. After all, some of them still have enough money for food. Btw, someone has to explain the bank multiplier to the Post. Yes, giving a dollar in capital to the banks can end up generating $10 in loans, if they are prepared to make them. But, the benefit to the economy may be very little. The loans may go to buy cattle futures, credit default swaps, or shares of Goldman Sachs stock. None of these uses provide any direct stimulus to the economy. The economy is driven by real demand (C+I+G+X-M for those who have taken intro econ), and the relationship between more bank capital and an increase in real demand is very indirect at best.
--Dean Baker
