Taken from another thread:
According to basic economic theory, in a business slowdown or recession fiscal stimulus is a useful tool to jumpstart the economy. Monetary stimulus (Fed interest rate cuts) has about shot its wad.
Keynes would be rolling over in his grave to hear this claim. It isn't even true classically. I'll ignore the nonsensical "jumpstart" which is a term popular among 'crat illiterates when they seek to address a problem that only exists in the media collective conscious.
The traditional method used by governments to increase GNP growth is monetary policy. By that I mean increasing the money supply which in this era has little to do with interest rate changes or levels. There must be significant loan creation to have the two kinds of policy coordinated. We don't have that now in that lowering rates doesn't increase loans. If FED wants to make GNP (forget GDP, it's a measure of academic bs) rise, they would have to engage in permanent creation. Fortunately they can't do that now.
Like I've been saying for a year and a half(me,me me) attempting to use monetary policy to stimulate GNP increases prices more than output. Thus, FED can do nothing and shouldn't try. That's what they're doing and this lack of action is the most bullish factor I've seen in decades. If FED can stay with this recognition, I'll join with Friedman and say they're doing a great job.
Last year's tax cuts, which some see as creating a current deficit, are also a fiscal stimulus and that should be and has been used to fuel the economy.
This is pure nonsense. The effect of the emergency installment of the tax cut had little effect. Why should it? It only imperceptibly pumped up final demand. YOU NEVER NEED TO PUMP FINAL DEMAND. That's what seven recessionary cycles since the '30s should have taught FED and academicians. Maybe some of them have learned. When AG goes though those who haven't learned will come into power. It's the roller coaster then.
As for this "fuel the economy" gibberish, there is no such thing. Nothing fuels economy except maybe gas. What this author should have said is incentive to action. A growing GNP comes from incentives to action. Bush's tax cut doesn't do that. It just wastes money. You have to cut taxes on capital, not on final demand, to provide incentives to action.
Federal spending should be viewed positively as long as we are on the brink of a double dip recession.
This is a Keynesian type of position. The idea is to preclude what would happen naturally to correct the excesses in order to protect an imagined few, but only protects those who engaged in excess. As for this "double dip" stuff that seems to be a major part of the illiterati's lexicon, when you see someone use it, you know that person is a "double dipshit".
However, Fed spending should not be a license to pass new entitlement programs that permanently affects the budget.
He means government spending. This statement contradicts his previous statement. How does one separate the deserving of government largesse from the pigs?
New spending should be one time shots in the arm to various weak industries
Pure 'crat socialism of the worst kind. Prop up the inefficient so that they can raise prices unabated to the poor people. I guess the guy thinks that the weak industries are only weak because of some extraordinary calamity(becoming unionized?). I wonder if he includes the buggy whip industry in his list of needy, or is it, list of greedy? |
