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The Problem with Stimuluses

Lordknukle
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6/8/2012 6:03:06 PM
Posted: 4 years ago
The concept that a stimulus is good for the economy in the sense that it boosts aggregate demand is rooted in one of the most profound and recognized economic fallacies of all time: the Broken Window Fallacy.

A stimulus put into place by the government obtains its funds from one sole proprietor, the taxpayer. By getting taxed money, the taxpayer is giving funds to the government, which are then therefore used for government stimuluses, which are put back into the economy.

In essence, the money derived from the stimulus is obtained from the private sector, and then transferred to the public sector. From the public sector, the money is transferred back into the private sector under the pre tense of a stimulus.

As a result, a stimulus is simply the government distributing money from the private sector via putting it through a "filter" (the government), and back into the economy.

Now, since we established that stimulus money is from the private sector, how is the government, which cannot effectively and quickly respond to price signals and supply and demand, supposed to relocate money better than the private sector itself?
"Easy is the descent to Avernus, for the door to the Underworld lies upon both day and night. But to retrace your steps and return to the breezes above- that's the task, that's the toil."
darkkermit
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6/8/2012 6:06:29 PM
Posted: 4 years ago
the assumption is that the economy is at maximum possible production frontier. In a recession this is not true. Otherwise there wouldn't be an unemployment problem.
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Lordknukle
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6/8/2012 6:08:03 PM
Posted: 4 years ago
At 6/8/2012 6:06:29 PM, darkkermit wrote:
the assumption is that the economy is at maximum possible production frontier. In a recession this is not true. Otherwise there wouldn't be an unemployment problem.

This really has nothing to do with market equilibriums. I was merely stating that stimulus money is "private sector money," which begs the question of whether the government can better distribute money than the private sector?
"Easy is the descent to Avernus, for the door to the Underworld lies upon both day and night. But to retrace your steps and return to the breezes above- that's the task, that's the toil."
darkkermit
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6/8/2012 6:12:21 PM
Posted: 4 years ago
At 6/8/2012 6:08:03 PM, Lordknukle wrote:
At 6/8/2012 6:06:29 PM, darkkermit wrote:
the assumption is that the economy is at maximum possible production frontier. In a recession this is not true. Otherwise there wouldn't be an unemployment problem.

This really has nothing to do with market equilibriums. I was merely stating that stimulus money is "private sector money," which begs the question of whether the government can better distribute money than the private sector?

It has everything to do with market equilibrium. If markets are not in equilibrium, then there is an increase in unemployment. Government isn't taking from the private sector since the economy is in a liquidity trap. Increased government spending won't increase interest rates by a lot.
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Lordknukle
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6/8/2012 6:14:20 PM
Posted: 4 years ago
At 6/8/2012 6:12:21 PM, darkkermit wrote:
At 6/8/2012 6:08:03 PM, Lordknukle wrote:
At 6/8/2012 6:06:29 PM, darkkermit wrote:
the assumption is that the economy is at maximum possible production frontier. In a recession this is not true. Otherwise there wouldn't be an unemployment problem.

This really has nothing to do with market equilibriums. I was merely stating that stimulus money is "private sector money," which begs the question of whether the government can better distribute money than the private sector?

It has everything to do with market equilibrium. If markets are not in equilibrium, then there is an increase in unemployment. Government isn't taking from the private sector since the economy is in a liquidity trap. Increased government spending won't increase interest rates by a lot.

Then where is the government taking money from?
"Easy is the descent to Avernus, for the door to the Underworld lies upon both day and night. But to retrace your steps and return to the breezes above- that's the task, that's the toil."
Wnope
Posts: 6,924
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6/8/2012 6:16:15 PM
Posted: 4 years ago
At 6/8/2012 6:03:06 PM, Lordknukle wrote:
The concept that a stimulus is good for the economy in the sense that it boosts aggregate demand is rooted in one of the most profound and recognized economic fallacies of all time: the Broken Window Fallacy.

A stimulus put into place by the government obtains its funds from one sole proprietor, the taxpayer. By getting taxed money, the taxpayer is giving funds to the government, which are then therefore used for government stimuluses, which are put back into the economy.

In essence, the money derived from the stimulus is obtained from the private sector, and then transferred to the public sector. From the public sector, the money is transferred back into the private sector under the pre tense of a stimulus.

As a result, a stimulus is simply the government distributing money from the private sector via putting it through a "filter" (the government), and back into the economy.

Now, since we established that stimulus money is from the private sector, how is the government, which cannot effectively and quickly respond to price signals and supply and demand, supposed to relocate money better than the private sector itself?

If the real interest rate is negative due to deflation, and the nominal interest rate is zero, you reach a liquidity trap where even if people have money to spend, they won't.

That's when a government stimulus is important. The increased consumption raises the real interest rate to positive sum which breaks the liquidity trap.

If there isn't some form of liquidity trap or the like which has to be rectified, I am generally not for government economic stimuli.

However, it is a necessary tool to have when fighting off imminent economic collapse.
darkkermit
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6/8/2012 6:16:35 PM
Posted: 4 years ago
At 6/8/2012 6:14:20 PM, Lordknukle wrote:
At 6/8/2012 6:12:21 PM, darkkermit wrote:
At 6/8/2012 6:08:03 PM, Lordknukle wrote:
At 6/8/2012 6:06:29 PM, darkkermit wrote:
the assumption is that the economy is at maximum possible production frontier. In a recession this is not true. Otherwise there wouldn't be an unemployment problem.

This really has nothing to do with market equilibriums. I was merely stating that stimulus money is "private sector money," which begs the question of whether the government can better distribute money than the private sector?

It has everything to do with market equilibrium. If markets are not in equilibrium, then there is an increase in unemployment. Government isn't taking from the private sector since the economy is in a liquidity trap. Increased government spending won't increase interest rates by a lot.

Then where is the government taking money from?

It's taking it from loans. The government is simply investing because the private sector won't.
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Oryus
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6/8/2012 6:16:42 PM
Posted: 4 years ago
At 6/8/2012 6:13:02 PM, darkkermit wrote:
The reason businesses aren't investing is due to:
a) Animal spirits
b) coordination failures

The answer is A, isn't it?
: : :Tulle: The fool, I purposely don't engage with you because you don't have proper command of the English language.
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: : The Fool: It's my English writing. Either way It's okay have a larger vocabulary then you, and a better grasp of language, and you're a woman.
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: I'm just going to leave this precious struggle nugget right here.
Wnope
Posts: 6,924
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6/8/2012 6:17:11 PM
Posted: 4 years ago
At 6/8/2012 6:16:15 PM, Wnope wrote:
At 6/8/2012 6:03:06 PM, Lordknukle wrote:
The concept that a stimulus is good for the economy in the sense that it boosts aggregate demand is rooted in one of the most profound and recognized economic fallacies of all time: the Broken Window Fallacy.

A stimulus put into place by the government obtains its funds from one sole proprietor, the taxpayer. By getting taxed money, the taxpayer is giving funds to the government, which are then therefore used for government stimuluses, which are put back into the economy.

In essence, the money derived from the stimulus is obtained from the private sector, and then transferred to the public sector. From the public sector, the money is transferred back into the private sector under the pre tense of a stimulus.

As a result, a stimulus is simply the government distributing money from the private sector via putting it through a "filter" (the government), and back into the economy.

Now, since we established that stimulus money is from the private sector, how is the government, which cannot effectively and quickly respond to price signals and supply and demand, supposed to relocate money better than the private sector itself?

If the real interest rate is negative due to deflation, and the nominal interest rate is zero, you reach a liquidity trap where even if people have money to loan, they won't.

That's when a government stimulus is important. The increased consumption raises the real interest rate to positive sum which breaks the liquidity trap.

If there isn't some form of liquidity trap or the like which has to be rectified, I am generally not for government economic stimuli.

However, it is a necessary tool to have when fighting off imminent economic collapse.

Fixed.
darkkermit
Posts: 11,204
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6/8/2012 6:20:28 PM
Posted: 4 years ago
At 6/8/2012 6:16:15 PM, Wnope wrote:
At 6/8/2012 6:03:06 PM, Lordknukle wrote:
The concept that a stimulus is good for the economy in the sense that it boosts aggregate demand is rooted in one of the most profound and recognized economic fallacies of all time: the Broken Window Fallacy.

A stimulus put into place by the government obtains its funds from one sole proprietor, the taxpayer. By getting taxed money, the taxpayer is giving funds to the government, which are then therefore used for government stimuluses, which are put back into the economy.

In essence, the money derived from the stimulus is obtained from the private sector, and then transferred to the public sector. From the public sector, the money is transferred back into the private sector under the pre tense of a stimulus.

As a result, a stimulus is simply the government distributing money from the private sector via putting it through a "filter" (the government), and back into the economy.

Now, since we established that stimulus money is from the private sector, how is the government, which cannot effectively and quickly respond to price signals and supply and demand, supposed to relocate money better than the private sector itself?

If the real interest rate is negative due to deflation, and the nominal interest rate is zero, you reach a liquidity trap where even if people have money to spend, they won't.

That's when a government stimulus is important. The increased consumption raises the real interest rate to positive sum which breaks the liquidity trap.

If there isn't some form of liquidity trap or the like which has to be rectified, I am generally not for government economic stimuli.

However, it is a necessary tool to have when fighting off imminent economic collapse.

real interest rate = nominal interest rate - inflation

If deflation is occuring, and nominal interest rate is zero, then real interest rate is positive.

http://en.wikipedia.org...
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darkkermit
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6/8/2012 6:22:49 PM
Posted: 4 years ago
At 6/8/2012 6:16:42 PM, Oryus wrote:
At 6/8/2012 6:13:02 PM, darkkermit wrote:
The reason businesses aren't investing is due to:
a) Animal spirits
b) coordination failures

The answer is A, isn't it?

LOL.
Animal spirits is from old keynesian school originally created via John Keynes.
Coordination failures are neo-keynesian. It holds the view that people are most rational. Coordination failures are a phenomena in which businesses fail to coordinate, leading to a sub-optimal equilibrium.
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Oryus
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6/8/2012 6:34:19 PM
Posted: 4 years ago
At 6/8/2012 6:22:49 PM, darkkermit wrote:
At 6/8/2012 6:16:42 PM, Oryus wrote:
At 6/8/2012 6:13:02 PM, darkkermit wrote:
The reason businesses aren't investing is due to:
a) Animal spirits
b) coordination failures

The answer is A, isn't it?

LOL.
Animal spirits is from old keynesian school originally created via John Keynes.
Coordination failures are neo-keynesian. It holds the view that people are most rational. Coordination failures are a phenomena in which businesses fail to coordinate, leading to a sub-optimal equilibrium.

hehe I figured it was a term that actually meant something pertinent.

It was funny to hear economic woes blamed on animal spirits though XD
: : :Tulle: The fool, I purposely don't engage with you because you don't have proper command of the English language.
: :
: : The Fool: It's my English writing. Either way It's okay have a larger vocabulary then you, and a better grasp of language, and you're a woman.
:
: I'm just going to leave this precious struggle nugget right here.
darkkermit
Posts: 11,204
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6/8/2012 6:37:31 PM
Posted: 4 years ago
At 6/8/2012 6:34:19 PM, Oryus wrote:
At 6/8/2012 6:22:49 PM, darkkermit wrote:
At 6/8/2012 6:16:42 PM, Oryus wrote:
At 6/8/2012 6:13:02 PM, darkkermit wrote:
The reason businesses aren't investing is due to:
a) Animal spirits
b) coordination failures

The answer is A, isn't it?

LOL.
Animal spirits is from old keynesian school originally created via John Keynes.
Coordination failures are neo-keynesian. It holds the view that people are most rational. Coordination failures are a phenomena in which businesses fail to coordinate, leading to a sub-optimal equilibrium.

hehe I figured it was a term that actually meant something pertinent.

It was funny to hear economic woes blamed on animal spirits though XD

Oh animal spirits just means that people invest in good times and don't in bad times. This is known as the "bull". In "bad times" people don't invest. This is known as the "bear".
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Oryus
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6/8/2012 6:49:11 PM
Posted: 4 years ago
At 6/8/2012 6:37:31 PM, darkkermit wrote:
At 6/8/2012 6:34:19 PM, Oryus wrote:
At 6/8/2012 6:22:49 PM, darkkermit wrote:
At 6/8/2012 6:16:42 PM, Oryus wrote:
At 6/8/2012 6:13:02 PM, darkkermit wrote:
The reason businesses aren't investing is due to:
a) Animal spirits
b) coordination failures

The answer is A, isn't it?

LOL.
Animal spirits is from old keynesian school originally created via John Keynes.
Coordination failures are neo-keynesian. It holds the view that people are most rational. Coordination failures are a phenomena in which businesses fail to coordinate, leading to a sub-optimal equilibrium.

hehe I figured it was a term that actually meant something pertinent.

It was funny to hear economic woes blamed on animal spirits though XD

Oh animal spirits just means that people invest in good times and don't in bad times. This is known as the "bull". In "bad times" people don't invest. This is known as the "bear".

The "bull" should be the "frog." Makes more sense. And I know you, of all people, appreciate the finer points of frog culture.
: : :Tulle: The fool, I purposely don't engage with you because you don't have proper command of the English language.
: :
: : The Fool: It's my English writing. Either way It's okay have a larger vocabulary then you, and a better grasp of language, and you're a woman.
:
: I'm just going to leave this precious struggle nugget right here.
Lordknukle
Posts: 12,788
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6/8/2012 6:50:48 PM
Posted: 4 years ago
How do you respond to the fact that a) most large stimulus extend or have no effect on recessions/depressions (Great Depression, Great Recession)

b) money from the stimulus is obtained usually during good economic times from the private sector....So how do you know that the losses of the private sector during good economic times are less than the "gains" during bad economic times?

c) stimuluses prop up artificial and unsustainable demand, which quickly expires, therefore leading to a double dip recession.
"Easy is the descent to Avernus, for the door to the Underworld lies upon both day and night. But to retrace your steps and return to the breezes above- that's the task, that's the toil."
darkkermit
Posts: 11,204
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6/8/2012 7:02:10 PM
Posted: 4 years ago
At 6/8/2012 6:50:48 PM, Lordknukle wrote:
How do you respond to the fact that a) most large stimulus extend or have no effect on recessions/depressions (Great Depression, Great Recession)

Empirical data shows that fiscal policies were effective:
http://ideas.repec.org...

Many economist believed that WWII got us out of the great depression, which is evident through the high GDP growth that occurred during those years and that employment remained high after it. The problem with FDRs policies is that they were based on economic stupidity which used basic wage and price controls that made problems worse

The problem with the fiscal policy of today's Great Recession is that the US economy is already facing a debt crisis. If the US government had less debt or a long term debt fiscal solution, then it would've been more effective. Furthermore it should be noted that a great depression was actually avoided. Unemployment is still high but nothing like the great depression.

b) money from the stimulus is obtained usually during good economic times from the private sector....So how do you know that the losses of the private sector during good economic times are less than the "gains" during bad economic times?

You don't. But that's not necessarily the point of keynesian economics. The point is to smooth out the bumps of the business cycle rather than to create economic growth. It could theoretically increase economic growth since it provides a stable economy.

c) stimuluses prop up artificial and unsustainable demand, which quickly expires, therefore leading to a double dip recession.

What's considered "artificial" about it? The point of keynesian economics is that you increase spending during a bust, and decrease spending during a boom.
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Wnope
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6/8/2012 7:12:20 PM
Posted: 4 years ago
At 6/8/2012 6:20:28 PM, darkkermit wrote:
At 6/8/2012 6:16:15 PM, Wnope wrote:
At 6/8/2012 6:03:06 PM, Lordknukle wrote:
The concept that a stimulus is good for the economy in the sense that it boosts aggregate demand is rooted in one of the most profound and recognized economic fallacies of all time: the Broken Window Fallacy.

A stimulus put into place by the government obtains its funds from one sole proprietor, the taxpayer. By getting taxed money, the taxpayer is giving funds to the government, which are then therefore used for government stimuluses, which are put back into the economy.

In essence, the money derived from the stimulus is obtained from the private sector, and then transferred to the public sector. From the public sector, the money is transferred back into the private sector under the pre tense of a stimulus.

As a result, a stimulus is simply the government distributing money from the private sector via putting it through a "filter" (the government), and back into the economy.

Now, since we established that stimulus money is from the private sector, how is the government, which cannot effectively and quickly respond to price signals and supply and demand, supposed to relocate money better than the private sector itself?

If the real interest rate is negative due to deflation, and the nominal interest rate is zero, you reach a liquidity trap where even if people have money to spend, they won't.

That's when a government stimulus is important. The increased consumption raises the real interest rate to positive sum which breaks the liquidity trap.

If there isn't some form of liquidity trap or the like which has to be rectified, I am generally not for government economic stimuli.

However, it is a necessary tool to have when fighting off imminent economic collapse.

real interest rate = nominal interest rate - inflation

If deflation is occuring, and nominal interest rate is zero, then real interest rate is positive.

http://en.wikipedia.org...

Ah, my bad, rusty on the ol' Fisher equation. General point is stimulus should be preserved for use in case of liquidity traps when lending between and from banks has frozen to the point where employers can't pay their employees and their employees can't pay their rents, and so on. Basically, what we almost had in 2008 but narrowly avoided. The Obama "stimulus" was largely wasted.

The problem is that a stimulus will be largely ineffective without a mechanism to ensure banks and other loanees actually lend the money instead of simply shoring up their own reserves.
mongoose
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6/8/2012 7:13:40 PM
Posted: 4 years ago
At 6/8/2012 6:20:28 PM, darkkermit wrote:
At 6/8/2012 6:16:15 PM, Wnope wrote:
At 6/8/2012 6:03:06 PM, Lordknukle wrote:
The concept that a stimulus is good for the economy in the sense that it boosts aggregate demand is rooted in one of the most profound and recognized economic fallacies of all time: the Broken Window Fallacy.

A stimulus put into place by the government obtains its funds from one sole proprietor, the taxpayer. By getting taxed money, the taxpayer is giving funds to the government, which are then therefore used for government stimuluses, which are put back into the economy.

In essence, the money derived from the stimulus is obtained from the private sector, and then transferred to the public sector. From the public sector, the money is transferred back into the private sector under the pre tense of a stimulus.

As a result, a stimulus is simply the government distributing money from the private sector via putting it through a "filter" (the government), and back into the economy.

Now, since we established that stimulus money is from the private sector, how is the government, which cannot effectively and quickly respond to price signals and supply and demand, supposed to relocate money better than the private sector itself?

If the real interest rate is negative due to deflation, and the nominal interest rate is zero, you reach a liquidity trap where even if people have money to spend, they won't.

That's when a government stimulus is important. The increased consumption raises the real interest rate to positive sum which breaks the liquidity trap.

If there isn't some form of liquidity trap or the like which has to be rectified, I am generally not for government economic stimuli.

However, it is a necessary tool to have when fighting off imminent economic collapse.

real interest rate = approximately nominal interest rate - inflation

If deflation is occuring, and nominal interest rate is zero, then real interest rate is positive.

http://en.wikipedia.org...

I argued with my economics teacher many times over that equation. He never admitted he was wrong.
It is odd when one's capacity for compassion is measured not in what he is willing to do by his own time, effort, and property, but what he will force others to do with their own property instead.
darkkermit
Posts: 11,204
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6/8/2012 7:16:00 PM
Posted: 4 years ago
At 6/8/2012 7:12:20 PM, Wnope wrote:
At 6/8/2012 6:20:28 PM, darkkermit wrote:
At 6/8/2012 6:16:15 PM, Wnope wrote:
At 6/8/2012 6:03:06 PM, Lordknukle wrote:
The concept that a stimulus is good for the economy in the sense that it boosts aggregate demand is rooted in one of the most profound and recognized economic fallacies of all time: the Broken Window Fallacy.

A stimulus put into place by the government obtains its funds from one sole proprietor, the taxpayer. By getting taxed money, the taxpayer is giving funds to the government, which are then therefore used for government stimuluses, which are put back into the economy.

In essence, the money derived from the stimulus is obtained from the private sector, and then transferred to the public sector. From the public sector, the money is transferred back into the private sector under the pre tense of a stimulus.

As a result, a stimulus is simply the government distributing money from the private sector via putting it through a "filter" (the government), and back into the economy.

Now, since we established that stimulus money is from the private sector, how is the government, which cannot effectively and quickly respond to price signals and supply and demand, supposed to relocate money better than the private sector itself?

If the real interest rate is negative due to deflation, and the nominal interest rate is zero, you reach a liquidity trap where even if people have money to spend, they won't.

That's when a government stimulus is important. The increased consumption raises the real interest rate to positive sum which breaks the liquidity trap.

If there isn't some form of liquidity trap or the like which has to be rectified, I am generally not for government economic stimuli.

However, it is a necessary tool to have when fighting off imminent economic collapse.

real interest rate = nominal interest rate - inflation

If deflation is occuring, and nominal interest rate is zero, then real interest rate is positive.

http://en.wikipedia.org...

Ah, my bad, rusty on the ol' Fisher equation. General point is stimulus should be preserved for use in case of liquidity traps when lending between and from banks has frozen to the point where employers can't pay their employees and their employees can't pay their rents, and so on. Basically, what we almost had in 2008 but narrowly avoided. The Obama "stimulus" was largely wasted.

The problem is that a stimulus will be largely ineffective without a mechanism to ensure banks and other loanees actually lend the money instead of simply shoring up their own reserves.

Why would the banks not lend in the first place though? They get money from lending. The only way they'd want to voluntarily want to have excess reserves If they are super nervous about a bank run. In which case the mechanism to stop people from taking money out from their bank accounts.
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Wnope
Posts: 6,924
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6/8/2012 7:18:41 PM
Posted: 4 years ago
At 6/8/2012 7:16:00 PM, darkkermit wrote:
At 6/8/2012 7:12:20 PM, Wnope wrote:
At 6/8/2012 6:20:28 PM, darkkermit wrote:
At 6/8/2012 6:16:15 PM, Wnope wrote:
At 6/8/2012 6:03:06 PM, Lordknukle wrote:
The concept that a stimulus is good for the economy in the sense that it boosts aggregate demand is rooted in one of the most profound and recognized economic fallacies of all time: the Broken Window Fallacy.

A stimulus put into place by the government obtains its funds from one sole proprietor, the taxpayer. By getting taxed money, the taxpayer is giving funds to the government, which are then therefore used for government stimuluses, which are put back into the economy.

In essence, the money derived from the stimulus is obtained from the private sector, and then transferred to the public sector. From the public sector, the money is transferred back into the private sector under the pre tense of a stimulus.

As a result, a stimulus is simply the government distributing money from the private sector via putting it through a "filter" (the government), and back into the economy.

Now, since we established that stimulus money is from the private sector, how is the government, which cannot effectively and quickly respond to price signals and supply and demand, supposed to relocate money better than the private sector itself?

If the real interest rate is negative due to deflation, and the nominal interest rate is zero, you reach a liquidity trap where even if people have money to spend, they won't.

That's when a government stimulus is important. The increased consumption raises the real interest rate to positive sum which breaks the liquidity trap.

If there isn't some form of liquidity trap or the like which has to be rectified, I am generally not for government economic stimuli.

However, it is a necessary tool to have when fighting off imminent economic collapse.

real interest rate = nominal interest rate - inflation

If deflation is occuring, and nominal interest rate is zero, then real interest rate is positive.

http://en.wikipedia.org...

Ah, my bad, rusty on the ol' Fisher equation. General point is stimulus should be preserved for use in case of liquidity traps when lending between and from banks has frozen to the point where employers can't pay their employees and their employees can't pay their rents, and so on. Basically, what we almost had in 2008 but narrowly avoided. The Obama "stimulus" was largely wasted.

The problem is that a stimulus will be largely ineffective without a mechanism to ensure banks and other loanees actually lend the money instead of simply shoring up their own reserves.

Why would the banks not lend in the first place though? They get money from lending. The only way they'd want to voluntarily want to have excess reserves If they are super nervous about a bank run. In which case the mechanism to stop people from taking money out from their bank accounts.

I guess it's a bit situation specific, since in the 2008 crisis, banks had lost a lot of their reserves. If banks had full reserves when a stimulus took effect, then we wouldn't have to worry. However, I'm not sure how you could get into a situation dire enough to warrant stimulus while having banks running at their full capacity.
Lordknukle
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6/8/2012 11:08:26 PM
Posted: 4 years ago
At 6/8/2012 7:02:10 PM, darkkermit wrote:
At 6/8/2012 6:50:48 PM, Lordknukle wrote:
How do you respond to the fact that a) most large stimulus extend or have no effect on recessions/depressions (Great Depression, Great Recession)

Empirical data shows that fiscal policies were effective:
http://ideas.repec.org...

Empirical data shows that fiscal policies were not effective:

http://newsroom.ucla.edu...

Many economist believed that WWII got us out of the great depression, which is evident through the high GDP growth that occurred during those years and that employment remained high after it. The problem with FDRs policies is that they were based on economic stupidity which used basic wage and price controls that made problems worse

It's a misnomer to say that the war, even though it ended the Depression, actually made things better. Despite more resources being produced, nearly all of these were sent overseas and wasted, hence the shortages back at home. This is a classic (yet rare) example of economic growth not coordinating with quality of life growth.

The problem with the fiscal policy of today's Great Recession is that the US economy is already facing a debt crisis. If the US government had less debt or a long term debt fiscal solution, then it would've been more effective. Furthermore it should be noted that a great depression was actually avoided. Unemployment is still high but nothing like the great depression.

I have statistics that prove otherwise. I just did a debate with Contra on this and Obama's stimulus came after the economy starting recovering from the bottom peak and the stimulus did little to actually help it. There would have definitely been no "great depression."

b) money from the stimulus is obtained usually during good economic times from the private sector....So how do you know that the losses of the private sector during good economic times are less than the "gains" during bad economic times?

You don't. But that's not necessarily the point of keynesian economics. The point is to smooth out the bumps of the business cycle rather than to create economic growth. It could theoretically increase economic growth since it provides a stable economy.

No risk calculations? How appetizing.

c) stimuluses prop up artificial and unsustainable demand, which quickly expires, therefore leading to a double dip recession.

What's considered "artificial" about it? The point of keynesian economics is that you increase spending during a bust, and decrease spending during a boom.

It's artificial because after the spending (demand) expires, it goes away. Unlike consumer behaviour, which is a somewhat constant, a stimulus is like a cliff. This huge decrease in spending often causes a double dip recession.
"Easy is the descent to Avernus, for the door to the Underworld lies upon both day and night. But to retrace your steps and return to the breezes above- that's the task, that's the toil."
darkkermit
Posts: 11,204
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6/8/2012 11:20:35 PM
Posted: 4 years ago
At 6/8/2012 11:08:26 PM, Lordknukle wrote:
At 6/8/2012 7:02:10 PM, darkkermit wrote:
At 6/8/2012 6:50:48 PM, Lordknukle wrote:
How do you respond to the fact that a) most large stimulus extend or have no effect on recessions/depressions (Great Depression, Great Recession)

Empirical data shows that fiscal policies were effective:
http://ideas.repec.org...

Empirical data shows that fiscal policies were not effective:

http://newsroom.ucla.edu...

I already explained the failures of FDR policies.

Many economist believed that WWII got us out of the great depression, which is evident through the high GDP growth that occurred during those years and that employment remained high after it. The problem with FDRs policies is that they were based on economic stupidity which used basic wage and price controls that made problems worse

It's a misnomer to say that the war, even though it ended the Depression, actually made things better. Despite more resources being produced, nearly all of these were sent overseas and wasted, hence the shortages back at home. This is a classic (yet rare) example of economic growth not coordinating with quality of life growth.

However it did decrease unemployment. And the economy continued to expand after the war. There wasn't a recession after the war.

The problem with the fiscal policy of today's Great Recession is that the US economy is already facing a debt crisis. If the US government had less debt or a long term debt fiscal solution, then it would've been more effective. Furthermore it should be noted that a great depression was actually avoided. Unemployment is still high but nothing like the great depression.

I have statistics that prove otherwise. I just did a debate with Contra on this and Obama's stimulus came after the economy starting recovering from the bottom peak and the stimulus did little to actually help it. There would have definitely been no "great depression."

I'm not in favor of Obama's stimulus. I'm referencing the TARF program and bank bailouts under George Bush.

b) money from the stimulus is obtained usually during good economic times from the private sector....So how do you know that the losses of the private sector during good economic times are less than the "gains" during bad economic times?

You don't. But that's not necessarily the point of keynesian economics. The point is to smooth out the bumps of the business cycle rather than to create economic growth. It could theoretically increase economic growth since it provides a stable economy.

No risk calculations? How appetizing.

Don't know what your point is.

c) stimuluses prop up artificial and unsustainable demand, which quickly expires, therefore leading to a double dip recession.

What's considered "artificial" about it? The point of keynesian economics is that you increase spending during a bust, and decrease spending during a boom.

It's artificial because after the spending (demand) expires, it goes away. Unlike consumer behaviour, which is a somewhat constant, a stimulus is like a cliff. This huge decrease in spending often causes a double dip recession.

Once the economy is in a boo then the goverenmnet reduces and increases taxation, the private sector comes into play and increases spending.
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Lordknukle
Posts: 12,788
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6/9/2012 10:23:32 AM
Posted: 4 years ago
At 6/8/2012 11:20:35 PM, darkkermit wrote:
At 6/8/2012 11:08:26 PM, Lordknukle wrote:
At 6/8/2012 7:02:10 PM, darkkermit wrote:
At 6/8/2012 6:50:48 PM, Lordknukle wrote:
How do you respond to the fact that a) most large stimulus extend or have no effect on recessions/depressions (Great Depression, Great Recession)

Empirical data shows that fiscal policies were effective:
http://ideas.repec.org...

Empirical data shows that fiscal policies were not effective:

http://newsroom.ucla.edu...

I already explained the failures of FDR policies.

There is empirical data on both sides.

Many economist believed that WWII got us out of the great depression, which is evident through the high GDP growth that occurred during those years and that employment remained high after it. The problem with FDRs policies is that they were based on economic stupidity which used basic wage and price controls that made problems worse

It's a misnomer to say that the war, even though it ended the Depression, actually made things better. Despite more resources being produced, nearly all of these were sent overseas and wasted, hence the shortages back at home. This is a classic (yet rare) example of economic growth not coordinating with quality of life growth.

However it did decrease unemployment. And the economy continued to expand after the war. There wasn't a recession after the war.

Broken Window Fallacy.

It's easy to increase employment when you are sending men over to die one thousand miles from home and there is a trap. Real growth demands an increase in productivity.

The problem with the fiscal policy of today's Great Recession is that the US economy is already facing a debt crisis. If the US government had less debt or a long term debt fiscal solution, then it would've been more effective. Furthermore it should be noted that a great depression was actually avoided. Unemployment is still high but nothing like the great depression.

I have statistics that prove otherwise. I just did a debate with Contra on this and Obama's stimulus came after the economy starting recovering from the bottom peak and the stimulus did little to actually help it. There would have definitely been no "great depression."

I'm not in favor of Obama's stimulus. I'm referencing the TARF program and bank bailouts under George Bush.

Hundreds of billions of taxpayer dollars were sent on securing vested interests and not making companies that deserve to fail, fail.

b) money from the stimulus is obtained usually during good economic times from the private sector....So how do you know that the losses of the private sector during good economic times are less than the "gains" during bad economic times?

You don't. But that's not necessarily the point of keynesian economics. The point is to smooth out the bumps of the business cycle rather than to create economic growth. It could theoretically increase economic growth since it provides a stable economy.

No risk calculations? How appetizing.

Don't know what your point is.

If you don't make tradeoff calculations, there is no way that you know that X balances out Y.

c) stimuluses prop up artificial and unsustainable demand, which quickly expires, therefore leading to a double dip recession.

What's considered "artificial" about it? The point of keynesian economics is that you increase spending during a bust, and decrease spending during a boom.

It's artificial because after the spending (demand) expires, it goes away. Unlike consumer behaviour, which is a somewhat constant, a stimulus is like a cliff. This huge decrease in spending often causes a double dip recession.

Once the economy is in a boo then the goverenmnet reduces and increases taxation, the private sector comes into play and increases spending.

Once a boom is happening you increase taxes and hope to therefore increase private spending, all while trying to recuperate from the artificial demand? lol.
"Easy is the descent to Avernus, for the door to the Underworld lies upon both day and night. But to retrace your steps and return to the breezes above- that's the task, that's the toil."