On Thursday, April 14, 2016 at 12:21:42 PM UTC+10, snipped-for-privacy@yahoo.com wro te:
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nning close to capacity.
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Keynes mantra is not "demand creates supply". It's more that if potential s upply is sitting on it's hands, waiting for the market to demand more produ ct, you can persuade them to produce more product by encouraging the market to buy.
You resolutely refuse to realise that Keynesian stimulus only makes sense i n a recession, because you refuse to realise that the market may be irratio nally unwilling to buy stuff in a recession. The all-knowing perfectly rati onal buyers and sellers are necessary for a mathematically tractable econom ic theory, but they don't exist, which makes the theory less than useful.
That's the whole problem. Tell them that the economy is in a recession, and they becomes irrationally unwilling to buy stuff, and the people who make the stuff have a slightly more rational unwillingness to make stuff that wo n't get bought.
Keynes thought that stimulus spending was such an obvious con-trick that it wouldn't work twice, but he over-estimated the rationality of the bulk of the population. Not as enthusiastically as you do, of course.
Where are these "payments on the new debt"? When has that *ever* happened? Keynsians don't even believe their claptrap. They just want to spend money (money = power).
Krw knows even less about what Keynesian economics involves than James Arth ur. Krw is just ignorant and incapable of learning, whereas James Arthur is brain-washed and forbidden to learn.
Keynesian stimulus spending is a specific technical trick to get an economy out of recession. It does involve spending money, where people who think l ike krw and and James Arthur want to see rather more money wasted as the ec onomy sinks further into recession and potentially viable companies go into liquidation.
Doing something sensible and having it work is a way of getting more influe nce and eventual political power, but Keynsian stimulus spending works best when the money goes to people who can be relied on to spend it, who don't have a lot of political power, so it's not actually a particularly effectiv e way of buying political clout.
it wouldn't work twice, but he over-estimated the rationality of the bulk o f the population. Not as enthusiastically as you do, of course.
And Keynes was pretty much correct. It did not work well during the last r ecession. There are a couple of problems. One is that it is too tempting for politicians to do deficit spending all the time. The thought is if it is good during a recession, why not do it now and make the economy hum. So the governmnent was already doing stimulus spending .
The second problem is that the Earth is Flat. Meaning that now the countr ies are interconnected by cheap shipping and the internet. So stimulus spe nding by the U.S. gets dissipated. The guy doing highway work buys stuff m ade in China.
So the multiplier which was maybe 2 or 3 during the depression is now close r to 0.95. Meaning the simulus hardly works.
If Obama had reassured people that things were going to work out, it might have been as effective as the stimulus spending. But there was too much te mptation to say that the economy was in terrible straits , but we are your wonderful government and the government is going to make every thing bett er. Nothing like screaming everything is going to hell, to make people thi nk it is okay to spend money , Not.
As a result we have had a weak recovery from the last recession, so weak th at some people think we are still in a recession.
t it wouldn't work twice, but he over-estimated the rationality of the bulk of the population. Not as enthusiastically as you do, of course.
recession.
In the US that was - in part - because the stimulus package wasn't as huge as it should have been because nobody initially recognised quite how much l iquidity the GFC had sucked out of the system, and subsequent because the R epublican majority in Congress treated the stimulus as a pork barrel which had to be directed towards their supporters, who didn't spend as much of it as the poor would have.
Scepticism doesn't seem to have come into it.
And your "didn't work well" is more "didn't work as perfectly as we would h ave liked". When the GFC first hit, the economy shrank at a rate equivalent to 6% per year for a whole quarter, then stopped shrinking as the stimulus kicked in.
During the Great Depression, the economy kept on shrinking at about 6% for year for several year, destroying 25% of the US production capacity before the New Deal turned the country around. It would have been nice if the econ omy had been kicked into expanding at 4% per year, but not shrinking is a r espectable result.
icians to do deficit spending all the time. The thought is if it is good d uring a recession, why not do it now and make the economy hum. So the gove rnment was already doing stimulus spending.
That's simple idiocy - not Keynsian economics. Try not to confuse the two. It makes you look foolish.
tries are interconnected by cheap shipping and the internet. So stimulus s pending by the U.S. gets dissipated. The guy doing highway work buys stuff made in China.
This particular earth was flat in the sense that everybody reacted to the G FC with stimulus spending. Europe cut back on it earlier than was ideal, bu t nobody actually slipped back into recession (except perhaps the Greeks, w ho had their own, home-grown problems).
ser to 0.95. Meaning the simulus hardly works.
Cite your authority for that claim.
t have been as effective as the stimulus spending.
That didn't work for Hoover in 1930.
straits , but we are your wonderful government and the government is goin g to make every thing better. Nothing like screaming everything is going t o hell, to make people think it is okay to spend money. Not.
Sadly, the economy was going to hell, at a rate equivalent to a 6% shrinkag e a year, and the stimulus spending stopped the shrinkage, and even drove a weak recovery.
Armchair commentators are free to claim wisdom after the event, but expert opinion was all for stimulus spending at the time. James Arthur wasn't, but he's blinded by ideology, like a lot of less clever right-wingers.
that some people think we are still in a recession.
There's a lot of difference between a weak recovery, a recession, and the k ind of outright depression that the GFC was on course to deliver without th e stimulus spending. More stimulus spending would have worked better, and t hus would have been cut off earlier (building up a smaller mountain of debt , and leaving the economy in better shape to start paying it off sooner) bu t the politicians in the administration figured that an even bigger spend w ould have driven the right wing of congress into even more rabid opposition .
Don't underestimate quite how terminally out of touch with reality the Tea Party Republicans are. Any body which can put up potential presidential can didates who are less attractive to the voters than Donald Trump is obviousl y dysfunctional.
Politicians *SHOULD* do some measure of deficit spending all the time, for the exact same reason your Mom bought you shoes one size too big when you were a growing child.
The government has mainly defaulted to regulating the economy down, for some reason nobody seems to understand - it's because banks live and die by balance sheets.
This matters less than we're led to believe, except that the Chinese have been subsidizing us with cheap goods fr going on 20 years now.
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