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What makes people think cuts in government spending boost the economy?

I don't care about California. We're not debating Texas and California Fenton. We're talking about the effects of such a policy on the national level. And if you want to talk about states, look at Kansas, louisaniana.. Oh, did I mention Texas isn't even doing that great?

Ive already mentioned Spain, Japan, Venezuela, Greece, Italy but you people keep claiming those are " bad examples ".

And Kansas and Louisiana is in allot better shape than California is.

We've blown through a record amount of debt in the kast 8 years in the US and our economy is still on life support and thats with record low interest rates

Posting ANOTHER debt thread isn't going to make " stimulus to increase aggregate demand " a effective strategy for growing market economies
 
If government spending at the levels we are seeing helps the economy, then we wouldn't be teetering on the brink of recession after so many years of high government spending - nearly 16 years now.

If we got rid of the deficit right now, we'd immediately slip into a very bad recession.
I hate to say this, but the pathetic stimulus pushed by Obama and others was far to small in regards to the severity of the recession. Not enough to get demand to where it needs to be. You need to look at spending not in terms of raw numbers, but in relation to demand/supply. When we have plenty of excess capital, a supply side solution is nonsense. Demand drives supply after all. Get more money into the hands of the poor, drive up sales, jobs follow. You also have to look at what the spending is focused on, our leakages in relation to the deficit, such as the trade deficit and the private sectors net savings, etc..
I think you should check out this paper:
Destabilizing an Unstable Economy | Levy Economics Institute
Essentially, getting growth back to where people think it should be will require a massive increase in private sector debt. Economists ignore private sector debt though, except Steve Keen and a few others.
 
Why is this "lol". Please answer my questions as well.

Because he said investors were the ones who built all that new infrastructure in Spain.

Spain like Greece flooded European banks with worthless bonds trying to spend their way to prosperity
 
If government spending at the levels we are seeing helps the economy, then we wouldn't be teetering on the brink of recession after so many years of high government spending - nearly 16 years now.

Black and white fallacy. There's nothing to say that current levels of deficit spending are "just right". Further, to me this points to a dysfunctional private sector. Despite injections of up to 1T a year, the private sector isn't employing people. Why isn't the private sector, with it's record profits, adding more employment? How is cutting government spending suddenly going to fix that?
 
Because he said investors were the ones who built all that new infrastructure in Spain.

Spain like Greece flooded European banks with worthless bonds trying to spend their way to prosperity

His post did not say they built new infrastructure. If I had to guess he was referring to the real estate investment.

Still waiting for an answer to #15.
 
It isn't. It is the loss of confidence in the value of currency that hurts. We have money that holds value because people believe it is valuable. Nothing backs up the dollar other than that belief because it actually has no intrinsic value. If the belief disappears then the money no longer has value or at best has less value. If the money loses value fast enough you have serious inflation and serious inflation has destroyed many an economy. Just look at Brazil half a century ago or look at prewar Germany.

Good morning, fmw. :2wave:

:agree: Even though the American people still tend to believe in the dollar - what choice do we really have? - other countries around the world apparently don't share our optimism. I read recently that 57 nations, with more joining the group all the time, including some of our long-term allies - agree with the IMF that what is now needed is a basket of currencies which will replace the dollar as a "most favored" currency. That is very bad news for us, IMO, and most people are not going to like our new lower standard of living, but it's our out-of-control spending that has brought it on, saddling us with a $19 trillion debt that we are going to have to pay nearly half a trillion dollars in interest charges alone every year! We can't even afford us now, yet the spending continues! Craziness! :thumbdown:
 
But that is only a percentage. Debt service on the debt would have to exceed deficit spending for that to be true. In other words, if debt service is 200 billion, and deficit spending is 600 billion, there is actually a $400 billion dollar GAIN to the private sector.

Liberal math at it's finest. LOL. That 600 has to be paid some time, representing a LOSS to the private sector.
 
Black and white fallacy. There's nothing to say that current levels of deficit spending are "just right". Further, to me this points to a dysfunctional private sector. Despite injections of up to 1T a year, the private sector isn't employing people. Why isn't the private sector, with it's record profits, adding more employment? How is cutting government spending suddenly going to fix that?

19 trillion in debt suggests rather strongly that current levels of deficit spending are not just right. If the private sector is dysfunctional, as you say, you might ask yourself exactly what has changed recently that has made it dysfunctional. It isn't greed, because there's far more money to be made in an expanding economy than there is in one stuck in neutral, as we are now.
 
Ive already mentioned Spain, Japan, Venezuela, Greece, Italy but you people keep claiming those are " bad examples ".

And Kansas and Louisiana is in allot better shape than California is.

We've blown through a record amount of debt in the kast 8 years in the US and our economy is still on life support and thats with record low interest rates

Posting ANOTHER debt thread isn't going to make " stimulus to increase aggregate demand " a effective strategy for growing market economies
Spain experienced real gdp growth with an increase in its fiscal deficit.
Japan? They continue to do stupid stuff like negative interest rates, believing that banks can loan reserves, and on top of that, they focus on monetary policy, corporations are hoarding, savings are way to high, not enough sales/can't get inflation..
Venezuela? Jesus, I've addressed this way to much already. Decimated supply.
Greece? LOL. Greece uses the Euro. They aren't a currency issuer!
Italy? What about Italy?
LOL. Kansas is an absolute disaster. Same with Jindal's little experiment.
Yeah, when looking at numbers, the increase in government bonds seems to be worrying. But really, every other country on earth continues to increase private sector/government debt. Why? Because money is debt and debt isn't a bad thing.
A Stimulus increases aggregate demand, this isn't debatable. And a stimulus does indeed grow economies, this is a fact, it's not a hypothesis.
 
Black and white fallacy. There's nothing to say that current levels of deficit spending are "just right". Further, to me this points to a dysfunctional private sector. Despite injections of up to 1T a year, the private sector isn't employing people. Why isn't the private sector, with it's record profits, adding more employment? How is cutting government spending suddenly going to fix that?

Hmmm......maybe investors are reacting to something

Foolish progressive policies that tax investment capital and even more foolish policies that seek to redistribute are most likely.
 
Claiming the public sector robs from the private sector is a silly claim when t.

How else does the public sector get fed than by taxes?
 
How else does the public sector get fed than by taxes?

The government doesn't need taxes to spend. In fact, the government has to run a net deficit for the private sector to have taxable dollars in the first place.
 
Good morning, fmw. :2wave:

:agree: Even though the American people still tend to believe in the dollar - what choice do we really have? - other countries around the world apparently don't share our optimism. I read recently that 57 nations, with more joining the group all the time, including some of our long-term allies - agree with the IMF that what is now needed is a basket of currencies which will replace the dollar as a "most favored" currency. That is very bad news for us, IMO, and most people are not going to like our new lower standard of living, but it's our out-of-control spending that has brought it on, saddling us with a $19 trillion debt that we are going to have to pay nearly half a trillion dollars in interest charges alone every year! We can't even afford us now, yet the spending continues! Craziness! :thumbdown:
I wouldn't be to worried Polgara. People have been screaming we're doomed and that we're going bankrupt for decades. Did you know that every single country on earth is in debt? Even if the dollar isn't the favored currency, so what? Other countries like Australia aren't the worlds favored currency and they're doing just fine, their problems don't come from their debt either. Private sector debt is the real issue. And we all seem to ignore it. Private sector liabilities.. We can't all live off of bank created money forever. This is why governments run a net deficit, whether they choose to or not. "Lower standard of living." What will cause this?
"Out of control" What makes you think this?
"19 trillion debt." This number represents cumulative annual deficits, bonds are a net financial asset. Without the national debt, we'd collapse. "Half a trillion." Keystrokes to the accounts of bond holders. Political decision to make it a big deal.
 
Heh. Of course not. They never do, until they do.

It's a political decision to not refill the reservoir. The government can never run out of dollars, since the government is the currency issuer.
 
Spain collapsed due to austerity and experienced real gdp growth with an increase in its fiscal deficit.
Japan? They continue to do stupid stuff like negative interest rates, believing that banks can loan reserves, and on top of that, they focus on monetary policy, corporations are hoarding, savings are way to high, not enough sales/can't get inflation..
Venezuela? Jesus, I've addressed this way to much already. Decimated supply.
Greece? LOL. Greece uses the Euro. They aren't a currency issuer!
Italy? What about Italy?
LOL. Kansas is an absolute disaster. Same with Jindal's little experiment.
Yeah, when looking at numbers, the increase in government bonds seems to be worrying. But really, every other country on earth continues to increase private sector/government debt. Why? Because money is debt and debt isn't a bad thing.
A Stimulus increases aggregate demand, this isn't debatable. And a stimulus does indeed grow economies, this is a fact, it's not a hypothesis.

Japan blew through 10 fiscal stimulus's in the 90s and blew through 4 more during its " Abenomics " initaive.

Japan stuck by the Keynesian play book to the letter, it is a GREAT example of the failures of Fiscal stimulus.

Its Monetary initaives are there to save it from defaulting on its debt......PERIOD.

Growing the GDP isn't the same thing as growing economies. If that were the case every Nation would simply borrow and print its way to positive GDP.
 
It's a political decision to not refill the reservoir. The government can never run out of dollars, since the government is the currency issuer.

It seems to be a political decision now, and of course you see nothing wrong with that at all. The government may never run out of dollars, but those dollars could easily become wall paper or kindling. It's not the number you have that counts. It's the value of them.
 
Liberal math at it's finest. LOL. That 600 has to be paid some time, representing a LOSS to the private sector.

Actually 600 - 200 = 400 is just regular math.

The only "loss" is the interest, which is not any different than how any other business chooses to borrow money to expand. They borrow money because the interest cost is less than the potential growth from their new productivity. Can you explain the difference?
 
Good morning, fmw. :2wave:

:agree: Even though the American people still tend to believe in the dollar - what choice do we really have? - other countries around the world apparently don't share our optimism. I read recently that 57 nations, with more joining the group all the time, including some of our long-term allies - agree with the IMF that what is now needed is a basket of currencies which will replace the dollar as a "most favored" currency. That is very bad news for us, IMO, and most people are not going to like our new lower standard of living, but it's our out-of-control spending that has brought it on, saddling us with a $19 trillion debt that we are going to have to pay nearly half a trillion dollars in interest charges alone every year! We can't even afford us now, yet the spending continues! Craziness! :thumbdown:

This entirely ignores the other half of the triffin dilemma. Pulling back your currency will likely loose your reserve currency status just as fast.

https://en.wikipedia.org/wiki/Triffin_dilemma
 
Hmmm......maybe investors are reacting to something

Foolish progressive policies that tax investment capital and even more foolish policies that seek to redistribute are most likely.

Still waiting for #15.
 
I'm not sure people think reduced government spending helps the economy. What they fear is that the temporary advantages of government overspending will finally come to an end and the ensuing crash will be miserable. It doesn't matter who prints the money. You cannot pick money from trees forever. It is not a sustainable activity. Just look at the what has happened to countries who have seen a loss in confidence in their currency.

What does help the economy is a reduction in taxation because it leaves more money in the hands of taxpayers who can spend in a sustainable way. The left wing economics will eventually hurt us badly. It can't be otherwise.


Yet it has always been so ....
 
Question for discussion. Where has this idea come from?
C+I+G+(E-I)
How does cutting G when the economy is experiencing slow growth help anything?
For example, here is Australia:
Australia enters the deflation league of sorry nations | Bill Mitchell – billy blog

View attachment 67200707
Pathetic.

Meanwhile, in Spain:
Spanish government discretionary fiscal deficit rises and real GDP growth returns | Bill Mitchell – billy blog

I don't even need to discuss the failure of Austerity and the horrific actions of the IMF.

Why do you want to see countries destroyed? OR is it just too much work to differentiate more? So you just tell an over simplified story that describes a dysfunctional economic model.
 
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