PDF said:
How is paying postal workers, teachers(state level), and the military fake money? They spend their money in the economy the same way anyone who works in the private sector does. Im also not just talking about consumer confidence but the markets confidence as a whole. Are lenders lending, are interest rates low? Consumer confidence is just part of the overall market confidence. I don't know how you think government spending affects the size of the pipe. A deficit shouldn't affect the size of pipe(economy) anymore than surplus aslong as the nation can continue to pay down its debt. I am in no disagreement that a trade deficit is generally bad. Once again im purely talking about during a reccession. I agree countries should not be overstimulating the economy, especially when things are going good. Countries should act more German. So the 08 global recession was not a bit enough to warrant deficit spending? Maybe we should have let all the banks collapse and send us into a depression. Then it would warrant running a deficit. Edit: and may I ask what is your profession? |
It's common sense... if the government wasn't using that money to pay people... other people would be using that money to pay people, buy and invest.
As for how it decreases the pipe. When you deficit spend you increase your debt right? When you increase your debt, you have to pay off that debt right? Who are you paying that debt off to in most cases? Foreign countries.
So instead of taking money out of the private sector and spending money within your own government... you end up taking money out of the private sector and end up spending it in other countries....
with interest. Your pipe is lowered, pretty much immediatly. (well within a year)
German's more or less don't stimulate their economy in any big way. It's due to the influence of the Freiburg school of economics on their version of Monetism.
Ordoliberalism is really the way to go. It's a shame it hardly ever even gets taught as something that exists.
as for letting the banks collapse? I can't speak for Europe, but it wouldn't of hurt the US much. The credit collpase that everyone feared happened anyway, and now we're stuck with the same too big to fail banks, and they're bigger, and even more likely to fail.
I would of deficit spent in that case... since we're talking about an actual structural system collpase, but NOT to save the banks. I would of instead, let the banks fail and use the money for humanitarian means / allow the rise of smaller banks to make the system more stable, while isnittuting progressive regulations to prevent the current situation where it's too easy for big banks to get big and stay big. Regulations should of broke up the big banks if they did survive and they should of recapitalized through the dilution of stock.
All we did was solve the symptoms, while letting the systematic disease remain. Like clearing out blocked arteries but not going on a low cholersterol diet.
As for my profession. It's nothing special, between me and my girlfriend only one of us could go to grad school to make it work. Though I studied Consumer Psychology, Economics and Sociology while I was in school... and still due thanks to my journal access.
