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Kasz216 on 02 May 2013
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PDF said:
Kasz216 said:

Again though.. I showed why that wasn't the case, and a pointless arguement.

I mean, debt vs gdp isn't different from public and private debt.

For example.  It's why you get a Home Morgatge.

Your borrowing money... at interest, but what you save on rent, and the equity of the house makes it a good purchase.

 

Debt to GDP ratio's effecting growth really are relative to the size of the credit market you have... more importantly, the domestic credit market.  Again, if we were to look at Keynes.  He'd be HORRIFIED just how much of our creditors were foreign.   I doubt very much he'd actually want us to sell bonds and instead just fire up the printing press for EVERYTHING.

 

If you want to view WW2 as a success from a Keysnian perspective.  War Bonds play a huge part.  (Which... was Keynes idea FYI...)

You can't stay afloat in a leaky boat, and to try to before fixing the holes is madness.  This was the real heart of Keynes message.   One that was lost due to the fact that it wasn't really relevent to the powerful countries at the time.

 

This is why... desptie being cast as opposites.  Keynes and Hayek were great friends... and saw themselves as believing 98% the exact same thing.

yeah, all I am getting is that if we are to assume personal private debt is like public as in the case of a Mortgage.  It is still a good idea to go in debt now for the sake of the long run.

Even with that.  Saving money on not paying rent and making money from tax payers is not the same thing.   It would be a better comparison if you found a CD that had an incredible  APY rate that was higher than your loan APR.  Then it would be smart to take the loan and put the money in the CD but people cannot find options that good.  People cannot borrow at near 0%.  If I could I would borrow tons of money and just invest.

As I understand it, spending in times of recession is the simple idea that the market takes to long to self correct and it is possible to speed things up with stimulus.  Giving a a kickstart to the economy.  Would have the economy recovered from Banks going bankrupt and US car companies disappearing? yeah I think it would but it would taken a very long time.  We can save a whole generation of economic suffering by government intervention.

If I am still missing the point I am sorry maybe I am out of my league.  I am an eager learner but I am not sure what your point really is.

Oh, i'm just putting down a general basis belief of Keynsianism before i explain why.... it doesn't work now, even according to keynsianism.

 

First off.... the APY of the CD isn't as great as you think. 


US government bond interst rates are currently at ~1.5%.

 

US GDP growth is currenty at ~2.5... HOWEVER.   Goverment taxes ~16% GDP.   So the government only recoups 0.4% on it's investment.

 

Now you COULD argue that they are borrowing collectivly... for us all.  And that eventually the entire nation is growing enough in wealth to pay everything off.

 

However THAT doesn't track... because of the afore mentioned private debt. (and depreciation, and plenty of other stuff)  Also while GDP may increase a nations net wealth may stay static... or decrease.  (As has been the case with the United States.)

So if you look at it from a "The US Citizens will help the government pay it back later"   You need to take into account that rather then growing.  Average net wealth often shrinks, even when GDP is growing. 

The money Keynes would say, is being lost to "Leakage".  Going overseas due to the USA's huge trade deficit.  Stimulus to him today would make about as much sense as pumping a bunch of water out of a sinking ship.   Without the holes being fixed, all you are doing is exhausting your ability to swim to shore.