I post this with grreat trepidation-lol. But I want to challenge your logic as it regards your disdane of Krugman's idea of burying the money in a coal mine.
He says, it would be better if we built bridges, but if politics gets in the way, then the coal mine is better than nothing.
So think about it. What was WWII? No political road blocks to spending huge amounts of money. Enough money to effect super OVER full imployment. Even women worked for the first time in factories. Two income families for the first time.
So money flowed like wine into the pockets of everyone and they paid down their debt and lots of taxes and so the government also paid down its debt and people bought lots of stuff which produced lots of business and set the foundation for the economic miracle of the 50's.
Krugman posted graphs which showed this is exactly what happened.
WWII was excactly the same as burying money in the coal mine i.e. nothing productive produced, but WWI really sucked us out of the depression overnight because there was no political road blocks to spending huge amounts of money.
That is Krugmans point. I think-lol.
Everyone knows money spent on war, is he worst way to spend money. Unless you capture booty-lol.
<<If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again, there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.
What that would do (assuming it could be carried out on a marco scale) is promote malinvestments in digging equipment, and cheapen the dollar while doing so. The stimulus would wear of as soon as the notes were retrieved and the digging tools business would crash. Those who were lucky enough to retrieve the cash might be marginally better off, but at the overall expense of everyone else. Those who borrowed money for digging equipment only to come up empty handed would be back out of work and in worse shape than before. Those who sat on the sidelines uninvolved had to fund this mad proposal with their tax dollars or the dollars had to be conjured up out of thin air causing either inflation now or some massive problem down the road (such as paying interest on the national debt).
In reality, the mine digging proposal is nothing more than another variation on the idea of paying people to do nothing (i.e paying people to dig holes and paying more people to fill the holes back in). Yes, if someone was stupid enough to propose that, and apparently Krugman is, we can indeed have 100% employment (until the economy totally blows up of course). The only real difference that I can tell is the mine digging idea only rewards those who find the money while ditch digging rewards everyone. |
