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

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

    Quote Originally Posted by drz-400 View Post
    Saving is good for the individual, but not for the economy as a whole.

    People try to save more and therefore they spend less. Investment in the economy decreases.

    This would not be a problem if credit was flowing smoothly, since saved money would be reinvested by the bank, however, credit has become harder to come by because of circumstances already described, this means there really is money being saved that is not being reinvested in the economy.

    The economy as a whole is trying to sell more to save money and buy less, this creates a drop in demand. The drop in demand leads to a drop in revenues for comanies, downsizing, and unemployment. This means lower incomes, lower prices (deflation), and in turn less economic activity and even more saving. Possibly why banks are even more warry to lend right now.
    You realize the fault in this don't you? It would mean that if one person gets fired, that demand would drop, so pay would go down by that amount. This would start a spiral whereby at the end no one works. But it doesn't work this way. Why?

    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

    Quote Originally Posted by phattonez View Post
    You realize the fault in this don't you? It would mean that if one person gets fired, that demand would drop, so pay would go down by that amount. This would start a spiral whereby at the end no one works. But it doesn't work this way. Why?
    I suppose there is always foriegn investment. We don't live in a box. The government could take on defecits because of this. Companies will be invested in from abroad. Also people will take risks, and some may pay off.

    I am sure that a growth in productivity during most recessions, or the invention of new technologies would also work against the creation of a never ending spiral.

    Certain products will not have the demand drop as much as others as well. Certain commodities, mostly necessities, I am sure will not have a drop in demand regardless.

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

    Quote Originally Posted by phattonez View Post
    Then what is the problem with the increased savings?
    Increased savings is not the problem.......

    Increased savings during times of decreasing incomes is a problem.
    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

    A lot has to do with our current situation. Not all recessions will result in a paradox of thrift. Not all are liquidity traps. It just happens to be that this one does fit those descriptions.

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

    Quote Originally Posted by drz-400 View Post
    I suppose there is always foriegn investment. We don't live in a box. The government could take on defecits because of this. Companies will be invested in from abroad. Also people will take risks, and some may pay off.

    I am sure that a growth in productivity during most recessions, or the invention of new technologies would also work against the creation of a never ending spiral.

    Certain products will not have the demand drop as much as others as well. Certain commodities, mostly necessities, I am sure will not have a drop in demand regardless.
    Some things actually see an increase in demand during recessions. You have to stop looking at aggregates because it blinds you to what is actually going on: shifting demand.

    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

    Quote Originally Posted by Goldenboy219 View Post
    Increased savings is not the problem.......

    Increased savings during times of decreasing incomes is a problem.
    Because when credit is hard to come by we should stop saving and make credit even harder to come by?

    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

    Quote Originally Posted by drz-400 View Post
    A lot has to do with our current situation. Not all recessions will result in a paradox of thrift. Not all are liquidity traps. It just happens to be that this one does fit those descriptions.
    So then a liquidity trap is responsible for the recession, and we should increase liquidity to get out of it? Explain then the early 1920s recession and why we got out of it even though we did the opposite of what we're doing now.

    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

    Quote Originally Posted by phattonez View Post
    Because when credit is hard to come by we should stop saving and make credit even harder to come by?
    Another typical time frame error. Increased savings broadens long term credit availability. As dictated by reality... increased rates of savings during periods of decreasing income does not boost short run credit availability.
    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
    So then a liquidity trap is responsible for the recession, and we should increase liquidity to get out of it? Explain then the early 1920s recession and why we got out of it even though we did the opposite of what we're doing now.
    The 1919 recession was an after effect of WWI. A bad comparison if you ask me; a much more quality comparable one would arise only 9 years later (and central bankers adhered to the bold). What was the end result?

    P.S.

    The Keynesian remedy to a liquidity trap is to boost demand, as monetary policy is rendered ineffective FWIW....
    Last edited by Kushinator; 12-27-09 at 06:06 PM.
    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
    Some things actually see an increase in demand during recessions. You have to stop looking at aggregates because it blinds you to what is actually going on: shifting demand.
    The bold signifies some pretty harsh language. Ignoring economic indicators is never a good idea regardless of whether or not they adhere to your particular liking.
    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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