| Akvod said: So you don't believe that people spent less, due to their assets (home value) going down, even though they had the same exact annual income? And you don't think that keeping the economy at its potential output and preventing liquidization, freeze of credit, and unemployment will expediate the process at which people once again start to spend a greater fraction of their money? Baisically, I'm saying that people spent less when their wealth went down. They're not going to spend more faster, when we experience deflation. It'll be a lot QUICKER and a lot less PAINFUL, if we spend now. Then, once the consumers strart spending again, the government cuts back, but not too quickly and not too sharply. When employment goes back up to its natural rate, you start worrying about balancing the budget and inflation. At least economists use induction and statistics. You've yet to say why increasing the money supply can't stimulate the economy. You've yet to explain why having government spending cut the slack of consumer spending won't increase consumer confidence quicker. |
If economic activity were studied without the exclusion of money, they won't understand how economics work. At the core of economics is the exchange of goods and services for other ones. There has to be a genuine need or want at the bottom, or it doesn't work.
The problem that has been going on is the government has been running debt year after year after year, and has been taxed. It produced a housing bubble. There is no other place to get money from unless you keep taking from tomorrow, and they have been. Eventually the thing can collapse.
Study the numbers regarding employment post 2000. The job growth hadn't kept up with population growth at all. More tax cuts and spending and no jobs. A reason why is employers don't hire for the sake of hiring. They avoid hiring like the plague unless they have no choice. And with increased specialization, there was harder for them to find employees. What they did was make people salaries and increase their hours. You see this is how America had increased GNP. It was because Americans had to work harder and longer hours. With this, corporations felt it a trendy thing to lay people off, even when showing record profits.
If businesses are going to lay people off when they make record profits, how the heck does more money solve this? Do you have an answer?
Increasing government spending happens to temporarily cause increased economy activity, but there is no guarantee that it is sustainable. And that is the problem.
