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Thread: LA Times: Obama stimulus spending: $246,436 per new job

  1. #111
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    Re: LA Times: Obama stimulus spending: $246,436 per new job

    Quote Originally Posted by phattonez View Post
    1: Money isn't just saved irrationally. Saved money will eventually be spent.
    Key word - eventually. But we are in a crisis now.

    2: People save money for security. If you borrow against that and then some, you deplete their savings. When you do this, people will want that security back and they will find a way to do it.
    Borrowing money doesn't deplete savings.

    3: When money is loaned, the next loan automatically becomes harder to get. So when government gets loaned all of this money, it means that private companies will find credit harder to come by.
    Is money hard to come by right now?

    You may say then that we'll just loan more money, you know, a fractional reserve scheme. Well when you do this, you're basically creating capital out of thin air. Did that sound weird to you? Because it did to me.
    Yeah, so you're challenging the entire foundation of the banking system. Go outlaw banks if you want. But our banking system works fairly well, even if it sounds weird to you.

    You cannot create capital goods out of thin air. If you loan out capital that doesn't exist, you create a bubble, and is that really what we want right now?
    By that definition, the entire economy has and always is a bubble of some size. Like I said, if you oppose the entire banking system and fractional reserves, go propose we outlaw it.

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    Re: LA Times: Obama stimulus spending: $246,436 per new job

    Quote Originally Posted by phattonez View Post
    So often Austrians get labeled as too simplistic, but this question is too simplistic. It ignores that some firms do grow during a recession.
    Another fallacy?

    I never claimed they did not. The question(s) pertain to the aggregate Tony! Do try and keep up!
    It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
    "Wealth of Nations," Book V, Chapter II, Part II, Article I, pg.911

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    Re: LA Times: Obama stimulus spending: $246,436 per new job

    Quote Originally Posted by misterman View Post
    Borrowing money doesn't deplete savings.

    This takes a real suspension of ones belief system, and willing suspension of fact to take seriously. Look, when government borrows money to finance debt then that debt has to be paid back, and while it is being paid back the debt has to be serviced, (that's interest for those struggling to explain the obvious away). Now there is only a couple of ways that a government can do that, since they produce NOTHING to put on market themselves, and that is either,

    1. you stimulate growth in business by lowering the hindering taxation to incentivize individuals starting up businesses. Which is NOT happening now.


    2. You raise taxes on the people. And not just a segment of the population either, a debt this size will take everyone. Now what happens when you do that? people have less to spend, less to save, and in fact may have to use their prior savings to live on. Thus "Depleting savings."


    It ain't rocket science people!


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    Re: LA Times: Obama stimulus spending: $246,436 per new job

    Quote Originally Posted by Goldenboy219 View Post
    Another fallacy?

    I never claimed they did not. The question(s) pertain to the aggregate Tony! Do try and keep up!
    But you're missing the point when you talk about the aggregate. When only certain firms are succeeding and certain ones failing, you don't try to prop up the failing in order to raise aggregate demand. You allow production and investment to shift toward those firms that are succeeding. If it's failing then people don't want it as much as was previously thought.

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    Re: LA Times: Obama stimulus spending: $246,436 per new job

    Quote Originally Posted by j-mac View Post
    This takes a real suspension of ones belief system, and willing suspension of fact to take seriously.
    I dont' think so, but let's see.

    Look, when government borrows money to finance debt then that debt has to be paid back, and while it is being paid back the debt has to be serviced, (that's interest for those struggling to explain the obvious away). Now there is only a couple of ways that a government can do that, since they produce NOTHING to put on market themselves, and that is either,

    1. you stimulate growth in business by lowering the hindering taxation to incentivize individuals starting up businesses. Which is NOT happening now.

    2. You raise taxes on the people. And not just a segment of the population either, a debt this size will take everyone. Now what happens when you do that? people have less to spend, less to save, and in fact may have to use their prior savings to live on. Thus "Depleting savings."
    Your error is saying you have to raise taxes. No you don't. When the economy improves, tax revenue goes up at the same tax rates. More jobs and better paying jobs = more income tax revenue without raising taxes.

    That's what Reagan tried (but failed) to do, and Clinton succeeded in doing, bringing us the first government surplus in decades. (How's that for partisan! )

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    Re: LA Times: Obama stimulus spending: $246,436 per new job

    Quote Originally Posted by misterman View Post
    Key word - eventually. But we are in a crisis now.
    People are still spending money.

    Borrowing money doesn't deplete savings.
    Fractional-reserve banking certainly does.

    Is money hard to come by right now?
    Yes! When the US is so much in debt, it kind of makes the job of private companies to get money kind of difficult.

    Yeah, so you're challenging the entire foundation of the banking system. Go outlaw banks if you want. But our banking system works fairly well, even if it sounds weird to you.
    Fractional reserve banking doesn't work well, it always leads to bubbles. It is not the foundation of the banking system since you don't need a low ratio to earn a profit.

    By that definition, the entire economy has and always is a bubble of some size. Like I said, if you oppose the entire banking system and fractional reserves, go propose we outlaw it.
    I do propose that we outlaw fractional reserve banking, but the Fed actively promotes it, so it's not going anywhere anytime soon.

    Who shall ascend the hill of the Lord? And who shall stand in his holy place? He who has clean hands and a pure heart, who does not lift up his soul to what is false, and does not swear deceitfully. Psalm 24
    "True law is right reason in agreement with nature . . . Whoever is disobedient is fleeing from himself and denying his human nature [and] will suffer the worst penalties . . ." - Cicero

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    Re: LA Times: Obama stimulus spending: $246,436 per new job

    A couple of points:

    MisterMan, in your reply to my posting on economics you replied that the dollar that went to the government was spent over and over again - something that later in my post I admitted it would. HOWEVER, it still loses the 'out of thin air' money growth that is created in the private sector through production of finished goods. This is where keeping money in the private sector is better than giving it to the government first.

    You also stated that since the recession is a failure of the private sector to spend money then the government needs to. This drives up government debt, an investment into a non-productive sector of the economy. Once again, reducing the ability for money to make more 'out of thin air'.

    phattonez - the FED is ALL about fractional reserve banking. In fact the entire banking industry is dependent on the existence of fractional reserves. Without that concept, our economy would not be anywhere near what it is and many more people would be poor and un-employed.

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    Re: LA Times: Obama stimulus spending: $246,436 per new job

    Quote Originally Posted by phattonez View Post
    But you're missing the point when you talk about the aggregate. When only certain firms are succeeding and certain ones failing, you don't try to prop up the failing in order to raise aggregate demand.
    Until spillover occurs. Not all banks were failing this time last year, however if we were to let more banks fail, that would have caused even healthy institutions to become insolvent. Ever heard of the term "animal spirits"? I am a little bit confused in your "prop up" statement as i am unsure if it pertains to bailouts or fiscal stimulus (no they are not the same).

    What we do know is this: spending decreases, hiring decreases, and job losses increase. This fall in spending sends ripple effects throughout the economy leading to even greater job loss until economic sentiment improves. Economic sentiment is largely psychological and can be steered by improving demand.

    You allow production and investment to shift toward those firms that are succeeding.
    What? Production and investment does shift to the acute percentages of business (who are weathering the storm). Your error comes in the form of proportional expectations. You are assuming that the fall in "others" production is made up proportionally by the "succeeding". It does not work this way. The "aggregate fall" exponentially exceeds the productive capacity of those who succeed. You are using static analysis to explain dynamic economic cycles.

    If it's failing then people don't want it as much as was previously thought.
    But why? Even if income remains the same, there is a serious demand gap of which can be illustrated by increased saving. Therefore the "fail" is not due to consumer sentiment, but fear of future economic expectations.


    Here is the issue Tony: You might be unaware, but your idea draws from the classical case, in which in the LONG RUN markets self correct. I agree, they do self correct in the long run.

    However in the short run, they do not self correct. As we wait for the self correction, many people will suffer in the form of job losses, poverty, poor health (stress), failed marriages, declining birth rates, falling wages, diminished human capital (in the form of skills), etc....

    The question then shifts to: how much suffering are you willing to allow for the economy to self correct? Remember, in the long run we are all dead.
    It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.
    "Wealth of Nations," Book V, Chapter II, Part II, Article I, pg.911

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    Re: LA Times: Obama stimulus spending: $246,436 per new job

    Quote Originally Posted by phattonez View Post
    People are still spending money.
    Not enough.

    Fractional-reserve banking certainly does.
    Well, no, it doesn't. But hey, do you oppose fractional-reserve banking?

    Yes! When the US is so much in debt, it kind of makes the job of private companies to get money kind of difficult.
    Are private companies having trouble borrowing money now?

    Fractional reserve banking doesn't work well, it always leads to bubbles. It is not the foundation of the banking system since you don't need a low ratio to earn a profit.
    Of course it's the foundation of the banking system!

    I do propose that we outlaw fractional reserve banking, but the Fed actively promotes it, so it's not going anywhere anytime soon.
    So no banks would ever be able to make loans. And you're complaining about difficulty borrowing money?

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    Re: LA Times: Obama stimulus spending: $246,436 per new job

    Quote Originally Posted by carlkay58 View Post
    phattonez - the FED is ALL about fractional reserve banking. In fact the entire banking industry is dependent on the existence of fractional reserves. Without that concept, our economy would not be anywhere near what it is and many more people would be poor and un-employed.
    You seem to have a pretty good grasp of economics. What happens when the interest rate does not correspond to savings?

    Who shall ascend the hill of the Lord? And who shall stand in his holy place? He who has clean hands and a pure heart, who does not lift up his soul to what is false, and does not swear deceitfully. Psalm 24
    "True law is right reason in agreement with nature . . . Whoever is disobedient is fleeing from himself and denying his human nature [and] will suffer the worst penalties . . ." - Cicero

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