Originally posted by Kunsoo Actually, it will help to pull money out of insurance companies, who made record profits while most of the country languished in 2009. And construction is a key base of the economy. So it will help, which is why Republicans will fight relief funds tooth and nail unless they can be matched with cuts - the goal being to avoid a net gain of money into the economy until after 2012.
Originally posted by quackquack It causes money to be spent and gives us nothing new. It is completely wasteful. Just about any other spending product should gives us something in return. Here, at best, you'd try to put your self in the same situation you once were in.
Wasn't it Keynes who said that the government could give people money to dig holes and refill them and it would stimulate the economy?
Originally posted by dryhump No doubt if unemployment goes down in areas affected by the hurricane, the president will take credit for it. "And I, Barack Obama, president of these United States brought down a great storm upon the lands and said, Let my people work."
I think that hurricane was sent by God, hoping to blow Obama off the face of the earth...
Originally posted by sh76 Wasn't it Keynes who said that the government could give people money to dig holes and refill them and it would stimulate the economy?
So why not just give people money and skip the unproductive work?
That's right, we already do that with the welfare state and the economy is great!
Do yourself a favor and ignore Keynes and Krugman.
The "demand side" Keynesian principle, as opposed to the "supply side" principle, is that if you put money into the hands of consumers, then venture capital will become productive in order to pursue that money, which will generate a round of wages, and thus a new round of investment, and so on - "priming the pump" in what is called a "multiplier" and acknowledged grudgingly even by people like Hayek (who will obsess on inflation). The more conservative principle is that if you put money into a venture capitalist's hands he will do something productive with it and create jobs. But if there are no jobs then he is not going to invest in anything which is dependent on consumption. Instead, he will invest in mergers (as happened to Reagan in 1981), or gold, or something of next to no value for jobs purposes.
We are learning that now. Investors, or what Fox News likes to call "the productive class" is sitting on the largest chunk of buying power in history, and they're sitting idle because they are waiting for jobs to happen. The irony is that jobs won't happen until something is done with that money. So they're stuck.
Every recession in US history has ended with government spending - every single one. FDR is the most obvious choice, but Reagan and Bush, Jr. did it as well. The closest approach to a "supply side" ironically was Clinton who generated 8 years of expansion with carefully planned spending and the encouragement of high tech.
Another problem is that we have the trade agreements which have proven that a democracy cannot compete with slave labor, and we have lost much of our industrial base. Bush's recovery was essentially jobless in this respect.
Taxes which would pry the money out of idle hands and invested in infrastructure, or even digging useless holes (kind of what Reagan did with the military industry - lots of spending with inflation kept in check because it was capital intensive rather than labor intensive), there would be a consumer base for the "productive class" to chase after. It's what prevented an all out depression in 2009. I just wish more money had been spent in restructuring the economy towards industries which require skills most of the third world can't yet provide. Alternative energy for instance.
Originally posted by sh76 Wasn't it Keynes who said that the government could give people money to dig holes and refill them and it would stimulate the economy?
No one believes that we could have an effective economy by just paying people indefinitely to build and fill holes. Otherwise we would have municipalities pay everyone a billion dollars to do just that and we'd all be rich. For any governmental spending to be effective there has to be value in what is produced. Perhaps new infrastructure or somthing that has real use. The unfortunate reality of natural disasters is you often have to spend money just to get back to what you had before, but in now way does that add value.
Originally posted by quackquack No one believes that we could have an effective economy by just paying people indefinitely to build and fill holes. Otherwise we would have municipalities pay everyone a billion dollars to do just that and we'd all be rich. For any governmental spending to be effective there has to be value in what is produced. Perhaps new infrastructure or somthing th ...[text shortened]... ave to spend money just to get back to what you had before, but in now way does that add value.
But value isn't a fixed sum. The money from insurance companies pays contractors, materials suppliers, etc., who then have to replenish their inventories, which is money to the wholesalers and producers. Money, or more specifically spending power, exists as a fixed finite value, but it's really not that simple.
Learning about the multiplier should be mandatory for high school graduation.
Originally posted by Kunsoo But value isn't a fixed sum. The money from insurance companies pays contractors, materials suppliers, etc., who then have to replenish their inventories, which is money to the wholesalers and producers. Money, or more specifically spending power, exists as a fixed finite value, but it's really not that simple.
Learning about the multiplier should be mandatory for high school graduation.
http://en.wikipedia.org/wiki/Keynesian_economics
If the multiplier was always greater than one, than the government could improve the economy by increasing spending by spending infinitely. Perhaps some wrongfully believe this is true (based on the debt ceiling needing to be raised above the 14.3 trillion dollar limit). There are real costs of government spending and taking money away from private investment and spending. But apparently you were absent in high school (if you got that far) when they taught you to think.
Originally posted by quackquack If the multiplier was always greater than one, than the government could improve the economy by increasing spending by spending infinitely. Perhaps some wrongfully believe this is true (based on the debt ceiling needing to be raised above the 14.3 trillion dollar limit). There are real costs of government spending and taking money away from private in ...[text shortened]... t apparently you were absent in high school (if you got that far) when they taught you to think.
We could also spur the economy by making counterfeiting and thievery perfectly legal. Why do we need QE2 when private counterfeiters would be willing to print more money for free -- no charge even for their labor? Imagine the stimulus effect. Also, tens of thousands of thieves could "free up" billions in supposedly-idle cash, at no charge for their efforts. A bonus stimulus would be created by the resulting expenditures on door locks, security guards, guns, etc.
Such is the voodoo economics of Paul Krugman and his ilk.
Originally posted by quackquack If the multiplier was always greater than one, than the government could improve the economy by increasing spending by spending infinitely. Perhaps some wrongfully believe this is true (based on the debt ceiling needing to be raised above the 14.3 trillion dollar limit). There are real costs of government spending and taking money away from private in ...[text shortened]... t apparently you were absent in high school (if you got that far) when they taught you to think.
No, even Keynes warned that you can generate inflation if you deficit spend indefinitely. It's really only intended to be a jump start, not a permanent structure of the economy.
As for the stimulus effect there is nothing magical about a privately spent dollar as opposed to a public one. The effect is the same, except that fiscal policy may be aimed specifically at jobs creation - labor intensive rather than capital intensive spending.
But again, it's not an option right now. The rich are sitting on their money because there is no consumer base of spending power. And there won't be until money is spent. And since the Republicans have effectively tied government's hands, we can do nothing except hope there's a gradual turnaround. Of course, they know this. If they beat Obama in 2012, you can bet they'll become reformed spenders. Just like Reagan.
Originally posted by Kunsoo No, even Keynes warned that you can generate inflation if you deficit spend indefinitely. It's really only intended to be a jump start, not a permanent structure of the economy.
As for the stimulus effect there is nothing magical about a privately spent dollar as opposed to a public one. The effect is the same, except that fiscal policy may be aimed specifically at jobs creation - labor intensive rather than capital intensive spending.
That's why we should hand all earned money over to the government. It makes no difference to "the economy" whether we citizens spend it or a huge government spends it, except of course that huge central governments are not only much wiser than we citizens are but also infinitely more benevolent. They KNOW exactly how to spend every bit of the available money (and then several trillion more) for maximum benefit to the populace. Just ask them; they'll tell you.
Every prosperous community, state, nation, etc. has become so through the ingenious activities of government. Just ask any dictator or bureaucrat you encounter.
Originally posted by Metal Brain So why not just give people money and skip the unproductive work?
That's right, we already do that with the welfare state and the economy is great!
Do yourself a favor and ignore Keynes and Krugman.
I don't know what you mean what you call welfare, but there are work requirements and it is no longer a lifetime benefit. I doubt if you'd like to be in a position to quailify for 'welfare'.
Originally posted by AThousandYoung That fallacy assumes that the money will be spent one way or another. If the disaster gets money out of banks and into circulation it's a little different.
Although this is true, it would still be better if the money was spent on something useful rather than repairing damage. That's not to say repairing damage is not useful, but it would be better if the hurricane had not occured and the means currently invested in repairs would be used for e.g. constructing new (useful) infrastructure.
Originally posted by AThousandYoung That fallacy assumes that the money will be spent one way or another. If the disaster gets money out of banks and into circulation it's a little different.
The money getting spent isn't the issue. It most likely will eventually be spent or invested, but productively, not just to return to the same place.
Originally posted by ElmoreB That's why we should hand all earned money over to the government. It makes no difference to "the economy" whether we citizens spend it or a huge government spends it, except of course that huge central governments are not only much wiser than we citizens are but also infinitely more benevolent. They KNOW exactly how to spend every bit of the available mon ...[text shortened]... the ingenious activities of government. Just ask any dictator or bureaucrat you encounter.
Well, you're making an emotional argument, not an economic one. As far as economics are concerned, it doesn't matter who spends the money. That you prefer that individuals spend the money instead of government is a philosophical argument, not an economic one.
Is hurricane damage bad for the economy?
30 Aug '11 13:471 edit
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