I've been trying to wrap my brain around just what the "confidence fairy" stories are. I guess the Republican one is that our Galtian overlords expect there to be massive tax increases in the future, so they've just decided to withhold their productive activity until we can be sure of the end of Kenyan Muslim Socialism.
So let's turn to a more reasonable confidence story. Yes it's probably true that if business owners did see the confidence fairy and believed that a year from now there would be significantly more demand in the economy that this could be self-fulfilling prophecy. That is, by believing that there would be more demand for new homes and locally manufactured tcotchkes, homebuilders would start building and tchotchke manufactures would start making tchotckes in anticipation of future demand. By doing this, construction workers and tchotchke laborers would have more money to purchase homes and tchotchkes and hurray economy saved.
But what the hell does the confidence fairy have to do with the deficit when interest rates are so low? I just can't come up with any semi-plausible stories.
