It doesn't just randomly fall, aggregate demand can rise or fall based on these factors
Exchange Rates
Distribution of Income
Consumer expectations
Imports/Exports
Government fiscal policy.
Why did it fall so suddenly in this case?
Anecdotal evidence! You can find an opposing example of anything, but one example isn't statistically meaningful.
Why did it fall so suddenly in this case?
explain to you how a piece of antecdotal evidence may not be a perfect match for the story nationwide?
my pay went up quite a bit this year; obviously the economy is booming!!!
Individual and corporate debt, and a lack of faith in the market for consumers.
We are talking about aggregate's here, aka macroeconomics, not micro.
we have always had individual and corporate debt. why should it all of a sudden cause a crash of such seismic proportions?
There was a ****load of individual and corporate debt, that's why :lol:
gosh, you mean, someone had stimulated demand artificially high?
well gee, i suppose the only cure for that is to do it again. :lol:
:lol: you said it. something had caused the amount of personal and corporate debt to skyrocket way out of historical proportion and far beyond our capability to continue to maintain.
now. what was that something?
It depends on how far you feel the economy should fall ( due to demand reduction).
If you feel the negatives of having economic activity drop off a cliff are less then having government artificially sustain demand for a period of time, then you would feel that such action is not a good idea. In you calculation would you include potential social costs, rather then just purely economic ones though. Imagine if the government actually tried to balance the budget next year. You would see 33% of federal government spending being cut. Drastic cuts to the military, social security, and medicare would be in order. Along with any potential human costs from those actions. Not to mention an increase in the economic slowdown as demand drops off a cliff.
:lol: you said it. something had caused the amount of personal and corporate debt to skyrocket way out of historical proportion and far beyond our capability to continue to maintain.
now. two questions:
1. what was that something?
2. what was the debt for?
The housing bubble.
Idiocy was the cause, from the people taking on too much debt, governments taking on too much debt (Reagan admin, Bush2 and now Obama being the worst)
As for what the debt was for,
Homes people could not afford, cars they could not afford, new tvs they could not afford, wars they could not afford, expensive miltary fighter jets they could not afford, medical procedures they could not afford ( overall consumption they could not afford)
:lol: yes, because if there is one thing that politicians are noted for, it's their maturity in accepting responsibility for falling economies.
well, let's see. what happened the last time in American history that the Federal government drastically cut spending and taxes in response to a recession?
oh, that's right; unemployment dropped rapidly and we saw amazing economic growth.
gosh, well, we don't want to repeat that again, now do we
And which time was that?
Certainly not the Reagan admin.
A depression not only harms millions of people. It leads to intense political pressure for more government spending, higher taxes and other assaults on economic liberty. So it’s important to get through a depression as quickly as possible. Which U.S. president ranks as the best depression fighter?
Not the fabled Franklin Delano Roosevelt, who came to power in 1933, since the Great Depression persisted until the federal government conscripted some 12 million men into the armed forces. Biographers and political historians hail FDR’s charismatic personality, his "Fireside Chats" and his political genius, but his tripling of taxes, his laws making it more expensive for employers to hire people, his anti-discounting laws, his large-scale destruction of food, the 700 industrial cartels he enforced, the monopolies he established, the frivolous antitrust lawsuits he authorized against big employers – these and other measures throttled recovery and prolonged unemployment averaging 17%.
America’s greatest depression fighter was Warren Gamaliel Harding. An Ohio senator when he was elected president in 1920, he followed Woodrow Wilson who got America into World War I, contributed to the deaths of 116,708 Americans, built up huge federal bureaucracies, imprisoned dissenters and incurred $25 billion of debt, for which he has been much praised by historians.
Harding inherited the mess, in particular the post-World War I depression – almost as severe, from peak to trough, as the Great Contraction from 1929 to 1933, that FDR inherited and prolonged. Richard K. Vedder and Lowell E. Gallaway, in their book Out of Work (1993), noted that the magnitude of the 1920 depression "exceeded that for the Great Depression of the following decade for several quarters." The estimated gross national product plunged 24% from $91.5 billion in 1920 to $69.6 billion in 1921. The number of unemployed people jumped from 2.1 million in 1920 to 4.9 million in 1921...
One of Harding’s campaign slogans was "less government in business," and it served him well. Harding embraced the advice of Treasury Secretary Andrew Mellon and called for tax cuts in his first message to Congress, April 12, 1921. The highest taxes, on corporate revenues and "excess" profits, were to be cut. Personal income taxes were to be left as is, with a top rate of 8% of incomes above $4,000... Federal spending was cut from $6.3 billion in 1920 to $5 billion in 1921 and $3.2 billion in 1922. Federal taxes were cut from $6.6 billion in 1920 to $5.5 billion in 1921 and $4 billion in 1922. Harding’s policies started a trend. The low point for federal taxes was reached in 1924. For federal spending, in 1925. The federal government paid off debt, which had been $24.2 billion in 1920, and it continued to decline until 1930...
With Harding’s tax cuts, spending cuts and relatively non-interventionist economic policy, the gross national product rebounded to $74.1 billion in 1922. The number of unemployed fell to 2.8 million – a reported 6.7% of the labor force – in 1922. So, just a year and a half after Harding became president, the Roaring 20s were underway! The unemployment rate continued to decline, reaching a low of 1.8% in 1926 – an extraordinary feat. Since then, the unemployment rate has been lower only once in wartime (1944), and never in peacetime.
"The seven years from the autumn of 1922 to the autumn of 1929," wrote Vedder and Gallaway, "were arguably the brightest period in the economic history of the United States. Virtually all the measures of economic well-being suggested that the economy had reached new heights in terms of prosperity and the achievement of improvements in human welfare. Real gross national product increased every year, consumer prices were stable (as measured by the consumer price index), real wages rose as a consequence of productivity advance, stock prices tripled. Automobile production in 1929 was almost precisely double the level of 1922. It was in the twenties that Americans bought their first car, their first radio, made their first long-distance telephone call, took their first out-of-state vacation. This was the decade when America entered ‘the age of mass consumption.’"
Lord Tammerlain said:If spending was cut drastically federal government deb would not have increased as much as it did during his administration. Government debt is just as stimulative to the economy as private debt is. It is all good until the debt needs to be paid back of course
and even that private consumption was fed nitrous oxide via government policy, on top of their own spending problems they helped turn the private sector into a nation of debtors too, did they not. ?
No one put a gun to the heads of the private sector saying borrow or I will kill you. They made their choices willingly, with just incentive from the fed (Greenspans fed by they way) that made borrowing an attractive propostion
absolutely not; reagan was betrayed by congress and didn't have either the strength or ability to stand up to them.
no, that was in the Harding and Coolidge administrations:
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