Ahh ok, it's a better analogy then.

Still, I think the massive deficit is going to be merely disastrous as opposed to what I believe would have been catastrophic without the stimulus. The aim of the stimulus was basically to hold up the economy while it repaired itself - I'm fairly confident (and very hopeful) that the economy won't go back into freefall once it's removed (though doubtless the effects will be felt). I really don't know how America is going to dig itself out of the hole though, I mean neither party seems to really feel like actually having a balanced budget.

Also I find it amusing that Mao is attacking the idea of a perestroika out of an ideal for capitalism when a large part of the perestroika was introducing capitalism.

I would argue that the economy on the whole is no more complicated than personal finance; and the only reason people believe the economy is more complicated is because (moronic) economists use unproven economic models to make predictions that don’t come true about the economy to support actions which will have a negative impact on the economy.

The well-being of the economy on the whole is just a representation of the well-being of the majority of individual’s (and company’s) finances within the economy. Actions that encourage individuals and companies to take the actions that will lead to improving their finances in the long run will improve the economy; and actions designed around short term gains with limited long term results will hurt the economy.

The government could take on debt to improve the economy but that would require them to spend the money making individuals and companies more competitive in the economy; and not on short term incentives to buy a house to re-inflate a speculative bubble, or to buy a car to try to save a powerful union. In what way does the stimulus help to make American workers worth 10 times as much as their Chinese counterparts, and how has the stimulus made the typical American business more competitive internationally? The answer is it hasn't ...

The truth is the economy is pretty simple to manage and there has been little decent management done in quite a long time. The best analogy of what is happening in this economy is what the government is trying to encourage individuals to do. Rather than encouraging individuals with limited job security to get improved training and skills, the government is encouraging them to take out massive loans at variable interest rates (that will soon rise) to buy homes and cars they can’t afford.

I agree with you, HappySqurriel.

The economic cycle of wealth between personal, business, and nations are not very different from eachother. Each follow similar practices to create wealth. Mis-management on any level can be disasterous, and we see many lessons from history on how nations build up and destroy their wealth and economic clout.

To me, economics restson 3 pillars for all levels of accountability:

• Productivity. If the economic plan of production is not built on being productive - producing goods and services and being efficient - then it will invariably fail as a better person, system or nation will overtake it. As a citizen, you earn income by working a job that results in the creation of something - a product at a factory, a service at a desk, a food in a farm, and so on. If a business does not create viable goods or services, then it ceases to be either productive, or as productive as possible (e.g. see the fall of horse farming when automobiles came about. Horses were great but not as productive as a car is). Likewise, governments can stifle productivity through high taxes, regulations, or anti-competitive behavior. Planned/Command economies are very good examples of government stifling productivity.
• Consumption. Consumption is a natural occurance of life. However, people, businesses, and governments can over-consume resources and wealth. People can take on too much debt in the name of a better lifestyle which can cause personal bankruptcy. Businesses can give cushy bonuses and squander the resources they have. Governments can over-provide costly services that are inefficent compared to free market practices. You can see over-consumption with the consumer debt load that's accrued recently, banker bonuses, and the trade imbalance that America has accrued as of recently.
• Distribution. Among all nations, you will find the distribution of resources being critical to the success of western nations. Privately, distribution is critical as it would not matter if dad made all the money if the wealth generated was not distributed among the family (therefore, if he horded it all and left no one any money, the family would disband leaving no ability to transfer wealth, ideas, or means by which to be productive). Likewise, businesses seek to maintain distribution of profits through shares and wages. Finally, governments distribute wealth by high taxation and repressive policies. There is much to be said for the correlation between high taxes and burdensome regulation, and the failure of many nations.

Having said all of that, my main problem with debt is this:

Unless you know how to use it to your advantage it is a very bad thing. Taking on debt does one of two things: Leverage good, productive ideas and people to become more productive through good business (for example, a business taking on a loan to expand their hotly-growing business or an inventor seeking venture capital for a revolutionary device), or enable very stupid people to do dumb things (buying a house or services that are not of value).

The government, by and large, has done a horrible job of leveraging its debt to create wealth within the past 40 years. Many argue that the deficit spending of WW2 helped boost the economy. I agree that it did help. However, the key is to understand what it was spent on: We funded large amounts of infrastructure, technology, and meaningful labor. The government debt we have today is far from that. It's mostly been spent through unfunded liabilities in Social Security (money in social security isn't invested by the government, only kept by the government for its' own purposes), Medicare (keeping the unhealthy, healthy) and pet projects (which are more focused on political favors than creating sustainable jobs that add value to a country).

That's why the debt America has is bad.

For my own personal, litteral example of the Economic Stimulus & Recovery Act of 2009:

We have an infrastructure project being built on State Route 23 which is a major roadway where I live. For the 3-4 months the project has been worked on (and millions of dollars have been spent), the only result has been that the grass has been cut. No new pavement or improvements to the actual road, just cut grass. I must ask: How is this improving our nation? Yes, it puts people to work, but unless the work has tangible value, it's really wasted effort that won't bring a return in any way, shape or form.

You guys actually think that the giant interlinked system that is the economy is just as simple as personal finance?

I really don't know what to say to that.

You can’t separate the personal finances of the people and companies that make up the economy from the aggregate statistics that we use to represent the economy; one is just a numeric representation of the other. As an example, you can’t have increased GDP per capita without seeing an increase in true-productivity of the average individual within the economy.

Now, you can’t have a healthy economy if the personal finances of the people who make up the economy are not healthy. For decades the US has encouraged unhealthy from individuals and companies within the economy, and the economy on the whole has grown to have analogous flaws within it. Basically, easy to access inexpensive credit has encouraged individuals to take on more and more debt that could bankrupt them if interest rates rise to historically normal levels to see short-term increases in wealth at the expense of their long term standard of living; and the US economy has grown to be a consumption driven economy that produces very little, which has given them a short term boost to GDP but has come at the expense of long term economic growth.

@Rath,

I think you are really missing the point. They aren't saying the economy is exactly as complicated as personal finance. They are saying that it is not some new beast unto itself entirely seperate from the basic principles of personal finance.

They are saying a nation's finances are sensitive to the same sort of managerial and financial environment factors that personal finances are. Perhaps to slightly lesser or greater degrees in specific cases but on the whole it responds and reacts in the same ways when similar strategies of spending/saving are applied.

Actually through some of the statistical trickery they pull you can.  Hedonics alone can produce this phenomenon in at least 2 ways.

Speaking in terms of the actual GDP you are correct, but in terms of the statistics reported by the government and some of the crap they pull you actually can see increased per-capita GDP without any real productivity gained at all on any level.

Actually, what HappySquirrel has been saying (that I saw) is that the economy is based on personal finance, i.e. the overall or average healthiness of individual people's and companies' finances (phrase butchery?) will determine or at least strongly affect the economy as a whole.  That's different from what mrstickball initially said IIRC, although it may have been what he meant. 

What HS said was what I meant...I guess I didn't phrase it properly.

The individual's finances as well as the businesses' finances are strongly tied to how the economy performs. If both the individual and business maintain low amounts of debt and high productivity, then the economy will invariably be strong. If the individual is laden with debt and lazy, as are businesses, then the economy will eventually decline and weaken.