Rockindeano wrote:artist4perry wrote:
Personally, I don't see how spending China's money like it has no end is going to all of a sudden make us out of hock. Common sense, spend more, less in your pocket.
Take an Econ class at your local community college and you will see why it's good to spend during a recession.
I dont agree -there are numberous economic reasons for doubting whether govt spending does anything to turn around and economy heres a few reasons
1. Lack of a mechanism to allocate the spending effectively and put it where it will do the most good. This is because the allocators (central government) lacks the the knowledge to understand what choices to make. This is because government activiy skews the only effective method discerning of who should get what and where and how much - microeconomic laws of pricing
2. The temporary nature of stimus- If you hire a crew of guys to build a bridge, they usually have enough common sense to realise that when the bridge is built their job is over. So instead of buying a new color TV for the house, they pick up a few more six packs on Friday night, and save a higher percentage of that pay for their inevitable upcoming period of unemployment. This was by the way also the exact problem with the one of early one off GW Bush tax cuts. Folks see whats coming when there's no long term and plan accordingly.
3. rent seeking activities - some private beneficiaries will act less than ethically - sit back and take the stimulus cash , and not go out and use to reinvest hire people. To them its a a one off lucky hit - cash it in and shove it in the bank and then go lookinf gor the next rent seeking opportunity
4. government official buy votes - send the money to build a new chicken coop at the Omaha Zoo becauese the senator from Nebraska will pick up a few votes - it isnt goint go create that many jobs though.
5. Government deficit and runaway spending needs to be paid for . If you rack up debt you have to pay for it in a number of way 1) Raise bonds and to attract investments interest rates need t orise to attact investment. Eventually this gets difficult if you coumtries credit rating gets cut due to hight debt (eg. greee) 2) let inflation hit the roof. (a debt of 100 dollars goes down in real terms if you have a inflation rate of 100 percent.
6. Stimulus efforts DONT have a particular track record of success - for example the Japaneses recession in the 1990's early 2000's - year after year of stimuls only led stagnation. Same with the massive ford stimulus in the 1970's, the Hoover/Roosevelt stimulus' of the early 1930's