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To your last response, I was asking HOW the stimulus will work. As in how will it function within the economy.
I'm not sure what you want to know about, the federal government would deficit spend on infrastructure projects and anything else that can effectively increased aggregate demand.
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Originally Posted by hskrfan2187
There is no way for it to work, without (using your logic) defying laws of math. Trying to defy the economic forces is very similar to trying to defy the laws of physics.
What are you talking about? Fiscal stimulus does not defy economic laws, rather it is derived from them!
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Originally Posted by hskrfan2187
You are wrong that it has happened over the last two years, it has only happened over the last year.
Just to let you know when someone says "2 years [b]or so[b]" they are not stating a specific date range. But this just distracts from the actual issue, you were talking about households going into further debt and that has nothing to do with fiscal stimulus or even what the government is currently doing.
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Originally Posted by hskrfan2187
The Great Depression wasn't V-shaped because there boom was so large in comparison to others that the government refused to let the free market function.
Hahaha...I love it. When the markets run wild and self-destruct its because the government and when the markets fail to self-correct its because the government as well. It seems the universal explanation with you guys is that "its the government". Never mind, that bubbles occurred before central banks existed, before Keynes ever thought of fiscal stimulus, etc.
Anyhow, what you are saying about the great depression does not reflect reality. Hoover acted very mildly and the economy crashed, the economy did not recover until FDR started to more aggressively stimulate the economy. But I guess it was just a crazy coincidence that the economy recovered shortly after the government started to aggressively stimulus the economy....
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Originally Posted by hskrfan2187
But what they failed to realize is that the recession must be as big as the boom. Because the recession is ridding the economy of the imbalances, poor investments, high debt loads, etc. That takes a contraction period because people have to consume LESS than they would during a NORMAL economy (normal as in NOT a artificial boom economy) to make up for consuming MORE during the artificial boom period.
They did not fail to realize this because its not true, its just more fake economic theory on your part. Why does a boom necessarily have to lead to recession? The Austrian theory, you are obviously drawing from, only explains investment cycles. A boom causes irrational investment and once reality strikes there is a decline in investment. But why would a decline in investment cause a recession? At first this may seem like a silly question, but its not if you think for a second. If businesses/individuals started to spend less on investments, then they should spend more on consumption. But wait...they could alternatively save their money right? Yep, and that is the real source of recessions, namely savings. If people did not increase savings, then there would actually be a consumption boom as people shifted income away from investment goods.
This is the precisely the insight that Keynes had and is the basis of fiscal stimulus. When people start saving the government can spend on their behalf by deficit spending.
By the way, the Austrians state that unemployment during a recession is an illusion, its simply the result of people moving from booming sectors to other sectors. Yet, if you look at unemployment today...do you see this. Nope. You see high rates of unemployment in most industries, even in those not related to the bubbles in finance and real estate.
Its amazing how many people believe in economic theory that is so easily refuted by our current predicament. Then again, most of the people that cite Austrian views have not even read Hayek, etc. Its just dogma.
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Originally Posted by hskrfan2187
These people had to consume less to replenish their savings (or pay off debt as many had margin accounts).
You see you're close, but you never seem to question why people "had" to replenish their savings. What necessitates this action? Absolutely nothing. What would happen if you should stop people from replenishing their savings or at the very least replenish it at a slow rate? No recession.....
So how exactly can a "jobs stimulus" in anyway create jobs that contribute to the economy? Census workers? HAHAHA
The government does not directly create jobs, rather it hands money over to companies to do certain tasks and the companies create jobs.
But the logic here is real simple, as you say people will start to save. This is the real source of the recession, the boom is just an indirect cause. The goal of fiscal stimulus is simply to take this savings and spend it on infrastructure type projects (i.e., projects that pay dividends in the future, not wasting spending on junk). Doing this will prevent the economy from reaching an equilibrium at a lower level and actually make it easier for people to save and will over time pay for itself.
And just to note, fiscal stimulus is not always a good solution to a recession. It depends on the nature of the recession, but this recession is a prefect time for fiscal stimulus.
It is interesting because in school they taught that Hoover did nothing and it was FDR who made the improvements. FDR was no better than Hoover, and both did more harm than good. A really good book about FDR and the "New Deal" is "New Deal or Raw Deal" by Burton Folsom. FDR walked all over the Constitution the same as President Obama is doing now.
Henry Morgenthau, FDR's Secretary of the Treasury, close friend, and had a big stake in the new deal even said, “We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong…somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises…I say after eight years of this administration we have just as much unemployment as when we started…And an enormous debt to boot!”
Your interpretation of history is very selective at best and blatantly wrong at worst.
Can you exlain how FDR or Obama as "Walked all over the Constitution"?
I think this year will look OK because people and business are selling off capital gains and declaring income now, once the taxes GET RAISED on Jan 1, 2011, it will slip backwards.
Not to nitpick, but you do realize that Obama/congress are not RAISING taxes on January 1, 2011, right? It's a temporary tax cut that Bush put into effect a few years ago that he set to expire on this date. All our current administration is doing is ALLOWING IT TO EXPIRE just as was originally intended.
Your interpretation of history is very selective at best and blatantly wrong at worst.
Can you exlain how FDR or Obama as "Walked all over the Constitution"?
Both usurped power not constitutionally given to the Federal Government. One of the most important parts of the Constitution is that power not specifically given to the Federal Government is supposed to remain with the states or with the people. By power remaining in the States, the government is directly accountable to the people. When power is concentrated in Washington, government is separate and disconnected from the people.
The government does not directly create jobs, rather it hands money over to companies to do certain tasks and the companies create jobs.
But the logic here is real simple, as you say people will start to save. This is the real source of the recession, the boom is just an indirect cause. The goal of fiscal stimulus is simply to take this savings and spend it on infrastructure type projects (i.e., projects that pay dividends in the future, not wasting spending on junk). Doing this will prevent the economy from reaching an equilibrium at a lower level and actually make it easier for people to save and will over time pay for itself.
And just to note, fiscal stimulus is not always a good solution to a recession. It depends on the nature of the recession, but this recession is a prefect time for fiscal stimulus.
I can agree with this. If we are going to have a stimulus package, at least spend it on something like infrastructure that pays "dividends" and improves the standard of living. Although I don't agree with a lot of what FDR did, at least he spent to build infrastructure, and he put people to work instead of just giving them handout checks to sit at home. You should never get something for nothing, if you are going to get a handout check from the government, the government should at least put those people to work in some productive way.
Your interpretation of history is very selective at best and blatantly wrong at worst.
Can you exlain how FDR or Obama as "Walked all over the Constitution"?
Don't get me wrong other presidents and politicians like to use the Constitution when they need it, but also like to make their own rules as they go along.
I mentioned reading that book and your opinion of FDR will competely change.
Ok, so where has my history gone wrong? You give no facts or evidence to refute anything I mentioned.
Location: Sitting on a bar stool. Guinness in hand.
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Quote:
Originally Posted by hskrfan2187
Now of course, he and Paulson had a point, there would have been a huge panic and run on the banks but over a short period of time (less than a year or so) things would have worked out. But they took the short-term gain for long-term pain route instead, which is always a bad move whether it's in your personal life, business, investments, economy, etc.
Agreed. I been saying this for sometime and in past posts. But I would add we as a people not just the President or congress were willing to trade short term "gain" for long term gain. Remember when congress was voting on some of the bailouts the first time. It failed because the Constituency of those congressmen called and emailed them and said "NO BAILOUT FOR BANK!" Then the spin doctors came in and said...Small businesses will not be able to get loan and you kids won't be able to get loans for college...etc...etc. Eventually this got into the American people heads and they decided to allow congress to vote for the bailouts. Granted you can blame the spin doctors but really at the end of the day the American people caved in. So we are to blame for our ignorance as well.
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Originally Posted by JazzyTallGuy
Your interpretation of history is very selective at best and blatantly wrong at worst.
Can you exlain how FDR or Obama as "Walked all over the Constitution"?
Quote:
Originally Posted by LeavingMA
Don't get me wrong other presidents and politicians like to use the Constitution when they need it, but also like to make their own rules as they go along.
I mentioned reading that book and your opinion of FDR will competely change.
Ok, so where has my history gone wrong? You give no facts or evidence to refute anything I mentioned.
To be somewhat fair to FDR. Remember that time in history Communism was a powerhouse across the world and the Communism party was growing here in the U.S. Especially during the depression in '30s. This growth in Communism scared the $h!t out the capitalist and the quote on quote "elites" of our society. So to counter this FDR basically began a bunch of socialist programs. Now did FDR trample over some of the America people rights? Yes. But again it was to check the communist/labor party's advance. Now maybe this was wrong but....I think that his programs and violations of the constitution while hurting the economy shaking our rights to the core....in the longerterm kept the threat of losing our way our life to Communism.
Agreed. I been saying this for sometime and in past posts. But I would add we as a people not just the President or congress were willing to trade short term "gain" for long term gain. Remember when congress was voting on some of the bailouts the first time. It failed because the Constituency of those congressmen called and emailed them and said "NO BAILOUT FOR BANK!" Then the spin doctors came in and said...Small businesses will not be able to get loan and you kids won't be able to get loans for college...etc...etc. Eventually this got into the American people heads and they decided to allow congress to vote for the bailouts. Granted you can blame the spin doctors but really at the end of the day the American people caved in. So we are to blame for our ignorance as well.
To be somewhat fair to FDR. Remember that time in history Communism was a powerhouse across the world and the Communism party was growing here in the U.S. Especially during the depression in '30s. This growth in Communism scared the $h!t out the capitalist and the quote on quote "elites" of our society. So to counter this FDR basically began a bunch of socialist programs. Now did FDR trample over some of the America people rights? Yes. But again it was to check the communist/labor party's advance. Now maybe this was wrong but....I think that his programs and violations of the constitution while hurting the economy shaking our rights to the core....in the longerterm kept the threat of losing our way our life to Communism.
That is an interesting point. Also the progressives started getting popular in the late 1800's and continued on into the 1900's. It is just interested when you read researhed history compared to the history you learn in high school which can really be off the mark.
You should never get something for nothing, if you are going to get a handout check from the government, the government should at least put those people to work in some productive way.
You seem to be talking about unemployment, but do you realize that unemployment is more or less an insurance program? Whenever you get a job you pay a small amount into unemployment (usually your employer is doing it for you so you never see it). Putting people to work while they look for a new job would be extremely inefficient and it is only recently that they have extended benefits.
Anyhow, creating a jobs program instead of unemployment benefits (like was done during the depression) would be politically difficult. You would be admitting to structurally high unemployment, I think things would have to get worse before the government would do this.
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