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Kidicious
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Diety of Kidiverse
Mar 2003
time: 21:24
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xp
Last edited by Kidicious on 16-02-2005 at 08:41
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Ned
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of Aptos, CA
Oct 1999
time: 21:24
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quote:
Originally posted by Lawrence of Arabia
the problem with keynes is that G can only go so far, and there are very few ways to get G high enough to move the economy forward.
the more G, the more crowding out of the private sector, and the more you need to spend to cover that crowd out.
and then theres trade, which goes to hell since no one can afford your exports anymore, so everyone in the export sector gets fired.
research shows that if the federal bank had dropped the interest rates or increased the money supply, the whole depression could have been avoided/ cut short. i dont remember if they were still using gold at the time as a standard, but if they were, that woulda made it harder to decrease the value of money.
all the classic reasons for the great depression that you hear in classrooms across america are usually from the persepective of someone who hasnt studied economics. 'oversupply' 'stock market drop led to failure of banks.'
as all those banks closed and as less money was avaiable to the public, the government simply had to increase the supply in other banks to counteract this effect.
problem solved. |
Spot on.
van Buren did the same thing to turn a downturn into a great depression. He tried to balance the budget! Tight money in a deflationary environment was his policy.
Hoover did the same thing.
The problem with Roosevelt was that he too tried to balance the budget. When he did, the economy tanked.
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Oerdin
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of Internet Music.
Sep 2001
time: 21:24
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quote:
Originally posted by Ned
Come on. The problem was caused by the balance budget. FDR caused the problem, which indicates that he share with his Republican colleagues a complete ignorance of economics. |
Ned, FDR kept saying the government should spend more to "prime the pump" it was conservative Republican controlled Congress that kept insisting on balancing the budget. Deficit spending in the form of public works, the CCC, the Tennessee Valley Water Authority, etc.. was part of FDR's plan but the conservative Republican controlled Congress kept insisting on Hoover like Balanced Budgets.
Last edited by Oerdin on 17-02-2005 at 05:01
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Ned
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of Aptos, CA
Oct 1999
time: 21:24
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quote:
Originally posted by Oerdin
Cutting government spending does lower growth but if the economy is healthy it should survive it and in the long run it isn't good to continually have large debts to repay. You don't want to balance everything in a recession but once the economy is growing then balancing it is just good economics. |
I remember Kennedy saying that one really wanted about about 3% inflation. Why? To keep demand up and strong and to prevent deflation, which is a killer. Deficits directly add to the money supply and to inflation to the extent that the growth in money supply exceeds the growth in the economy. But this is good to the extent that inflation stays in the 3% range. It keeps demand up and the business engine running.
The problem is that people always want a balanced budget. So we get tax increases through bracket creep or direct tax hikes that slowly bring the budget back into balance (or the economy simply grows faster than the budget). This sucks a lot of demand out of the economy. This has always led to a recession and in some cases to a depression.
Last edited by Ned on 18-02-2005 at 13:59
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shawnmmcc
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When speaking about Japan, you are also talking about Consumer Confidence. When people are suddenly nervous about their jobs, savings, etc. and they stop spending, a consumer driven economy can tank no matter what the other stimuli. This has been a field of some debate in economics, and in fact was the subject for one of the two winners of the Nobel Prize in Economics in 2002 given to Daniel Kahneman - from the Nobel website.
quote:
"for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty" |
This was shown in the recent holiday spending, or lack thereof, in the United States. Even though the economy is recovering, consumer spending is not up an equivalent amount. When people are concerned about outsourcing and layoffs, then they will not spend to the same degree as when they perceive they have security. Note that Japan's recession may have been prolonged by this effect, as well as various other factors.
Under the Bush adminstration job growth has been largely balanced by layoffs. This has led to people having a fair degree of uncertainty about their jobs, and thus consumer spending is not recovering like other indicators say it should. Until the Neocons stop their worship of a misapplied Laffer curve, and look at some of these other factors, the US economic growth is going to be negatively affected as these factors are not addressed.
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shawnmmcc
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Kidicious, it depends on the economists. Many also blame wage stagnation with the increase in certain necessary sectors that reduces spending on other things, i.e. housing, medical, and college costs are all on the rise much faster than average (mean) salaries. Add in that middle class workers could be outsourced or layed off at any time, and they do funny things like delay purchasing a new car, or puchase used or smaller, they don't have that first or second child, they purchase a smaller house, etc. It both items - confidence and erosion of real purchasing power of necessities - that produce these affects.
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16-02-2005 07:19
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