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Does governnent spending produce economic growth?

Does governnent spending produce economic growth?


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No it is correct. It is correct because the net effect is the result.

:confused: that is.... not only blatantly incorrect.... it seems almost blatantly stupid.

If I run a political campaign that succeeds in getting the support of all members of the libertarian party (2%), but loses the support of everyone else (98%), that doesn't mean that the strategy that gained me the libertarian party (effect) support means I will win the election (net effect). The net effects are simply the aggregate of the individual effects ((100-2)<50).

If I tie you to a tire, and yet you still win a foot race, that doesn't prove that dragging a tire makes you faster. It simply demonstrates that your slower performance is still superior to your unencumbered opponents.

Similarly, if you increase the supply of dollars, but increasing demand outstrips the effect, that doesn't mean that increasing supply does not represent a reduction in the value of each dollar, it only means that the decreased value in a high demand atmosphere is still net higher than the per-dollar value was previously.

It's just like when I purchase inventory for my business, a superficial observation would be that I have lost money. But that observation is superficial only because what I have done is to profit from the difference in what I paid for the merchandise and what I sold it for.

....firstly, your model is incorrect because it simply assumes sale. Secondly, I do not see how your model is an effective analogy.

No there is no effect of devaluation when such activity is partly responsible for the greater effects. In other words if the government did not print the money and instead just let the entire economy collapse, which is what Hank Paulson scared the hell out of people with, then the money would have no value at all.

:shrug: you are referencing a particular incident in which the effect of printing may have been beneficial.

Which does not in any way whatsoever impact the point that we are talking about, where all government expenditures represent wealth that they have gotten from somewhere. That government expenditures of funds gained through printing may be beneficial is no different in that regard than the fact that government expenditure of funds gained through taxation can be beneficial. There Ain't No Such Thing As A Free Lunch.
 
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When the government spends money of stuff like the military, roads, etc.

That money ends up in the private sector.

Sure. Not, as you said, immediately, however.

But I asked you to define public expenditures. Are you saying it is "when the government spends money on stuff"?
 
Banks have leeway in determining who is credit worthy and who is not. As far as I know there are no laws that say what credit scores a person has to have to get a loan. Some corporations like Apple have plenty of cash, and I don't think they would have a problem getting financing if they wanted it. My point is that lending institutions have, in general, tightened the conditions under which they will grant credit. That is a decision they have made. That is why they hoard money at the Federal Reserve.

Aside from subprime mortgages, do you have any evidence (links) to prove this?
 
Sure. Not, as you said, immediately, however.

But I asked you to define public expenditures. Are you saying it is "when the government spends money on stuff"?

It's pretty darned immediate. We all either spend/save/invest our money just as fast as we get it.
 
The question is not whether it produces economic growth, the question is....is it the most efficient way to produce economic growth?

Exactly. because government expenditures are included in the measure of gdp, of course government expenditures produce growth. However the multiplier effect of a government dollar spent is substantially less that the multiplier effect produced by a private sector expenditure.

http://mercatus.org/sites/default/files/publication/MOP77_SBI_Spending Multiplier_web (2).pdf
 
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that is.... not only blatantly incorrect.... it seems almost blatantly stupid.

It would appear that way to you because you don't understand a simple point. That is an increase in supply the supply of money does not necessarily lead to a decrease in the value of money. So what you have said here is of no surprise. What you have done is to conjure up an imaginary model where there is some conservation of value that is like the conservation of energy and that simply is not so. Sorry, that is what is stupid.

If I run a political campaign that succeeds in getting the support of all members of the libertarian party (2%), but loses the support of everyone else (98%), that doesn't mean that the strategy that gained me the libertarian party (effect) support means I will win the election (net effect). The net effects are simply the aggregate of the individual effects ((100-2)<50).

If I tie you to a tire, and yet you still win a foot race, that doesn't prove that dragging a tire makes you faster. It simply demonstrates that your slower performance is still superior to your unencumbered opponents.

Look, I understood your stupid examples you gave before and all you have done here is give two more stupid examples that have little in common with the value of money. The value of money depends on people's perceptions. It is not like a foot race. Understand?

Similarly, if you increase the supply of dollars, but increasing demand outstrips the effect, that doesn't mean that increasing supply does not represent a reduction in the value of each dollar, it only means that the decreased value in a high demand atmosphere is still net higher than the per-dollar value was previously.

:lamo

Damn!!! That is a bunch of conjured up BULLS***! :lamo

Come on man, what the hell is this crap

it only means that the decreased value in a high demand atmosphere is still net higher

:lamo
 
Aside from subprime mortgages, do you have any evidence (links) to prove this?

OK. Check this out on small business credit

...
Industry participants, including small business owners, bankers, and regulators have offered differing reasons for the decline in lending. However, recent analysis by the Federal Reserve Bank of Cleveland shows that there is no single explanation, but rather a number of factors driving this trend. Fewer small businesses are interested in borrowing than in years past, and at the same time, small business financials have remained weak, depressing small business loan approval rates. In addition, collateral values have stayed low, as real estate prices have declined, limiting the amount that small business owners can borrow.

Furthermore, increased regulatory scrutiny has caused banks to boost their lending standards, resulting in a smaller fraction of creditworthy borrowers. Finally, shifts in the banking industry have had an impact. Bank consolidation has reduced the number of banks focused on the small business sector, and small business lending has become relatively less profitable than other types of lending, reducing some bankers' interest in the small business credit market.
.....

https://www.clevelandfed.org/en/Community%20Outreach/Community%20Development/Congressional%20Testimony.aspx

I'm not going to bother looking for a link unless you ask, but I think that with respect to mortgages, creditworthy borrowers could take out a second mortgage for a down payment at one time, in other words you didn't need to have a down payment to buy a house. I don't think that is the case now.

I bought my house in 2003. At that time I was really amazed at how easy it was. I literally walked into Chase bank, in a few minutes they ran my credit and the loan officer said, "OK how much do you want?" Then she threw out a figure that was way higher than I needed and thought that I could afford. I remember at that time thinking that it was amazing that they would give me so much money to buy a house. Really it was that easy. I don't think it is that easy now. I heard even Bernanke recently saying that he was turned down on trying to refinance his home.

That said, I honestly don't know about large businesses. That is something I have no experience with. You may know more about that.
 
It would appear that way to you because you don't understand a simple point. That is an increase in supply the supply of money does not necessarily lead to a decrease in the value of money. So what you have said here is of no surprise. What you have done is to conjure up an imaginary model where there is some conservation of value that is like the conservation of energy and that simply is not so. Sorry, that is what is stupid.

Look, I understood your stupid examples you gave before and all you have done here is give two more stupid examples that have little in common with the value of money. The value of money depends on people's perceptions. It is not like a foot race. Understand?
:lamo
Damn!!! That is a bunch of conjured up BULLS***! :lamo
Come on man, what the hell is this crap
:lamo

Right, so, once you descend to ad hominem you become worthless as a debater (which is unfortunate, because you are intelligent), so before you start again with the ageism or sexism as a means of bypassing your inability to overturn a rather simple point with a lamo smiley, I think I'm simply going to reiterate:

That fact that increasing the supply of X has a negative effect on it's price is not annulled by the fact that increasing the demand for X has a positive effect on its' price. Thus, when you are looking at the ways in which government raises finances, printing money does indeed represent a tax on all the current holders of dollars, as it decreases the value of their wealth from what it otherwise would have been. There Aint No Such Thing As A Free Lunch.

:) Enjoy your day
 
It's pretty darned immediate. We all either spend/save/invest our money just as fast as we get it.

..... I think you could spend some more time studying government finances, if you think it is immediate.

That being said, the problem remains - government has reallocated money from more productive uses to less productive uses.
 
Right, so, once you descend to ad hominem you become worthless as a debater (which is unfortunate, because you are intelligent), so before you start again with the ageism or sexism as a means of bypassing your inability to overturn a rather simple point with a lamo smiley, I think I'm simply going to reiterate:

That fact that increasing the supply of X has a negative effect on it's price is not annulled by the fact that increasing the demand for X has a positive effect on its' price. Thus, when you are looking at the ways in which government raises finances, printing money does indeed represent a tax on all the current holders of dollars, as it decreases the value of their wealth from what it otherwise would have been. There Aint No Such Thing As A Free Lunch.

:) Enjoy your day

OK, I apologize for the insult.

Seriously though. I understand what you are trying to say. What I honestly think you are ignoring is the important point that the value of money depends on people's perceptions of what that value is. Therefore when you say something like the decreased value in a high demand atmosphere, honestly, that makes no sense whatsoever when we are talking about the value of money. A high demand atmosphere means that the value of money will be high, there is no decreased value. Yes increasing the supply of money CAN in certain circumstances decrease its value. But really don't think that you can prove that is necessarily the case. I say that because the printing of money in itself can cause people's perception of the value of the money to increase because in certain circumstances it can be a signal of optimism for the future.
 
OK, I apologize for the insult.

:) Fair enough.

Seriously though. I understand what you are trying to say. What I honestly think you are ignoring is the important point that the value of money depends on people's perceptions of what that value is. Therefore when you say something like the decreased value in a high demand atmosphere, honestly, that makes no sense whatsoever when we are talking about the value of money

See, now, that's interesting, given that you have highlighted multiple reasons why demand for dollars increased in the past few years. Another I would point out is the flight to safety that occurred in 2008/2009, and then again during the (repeated) euro crises.

A high demand atmosphere means that the value of money will be high, there is no decreased value.

It means it will be higher than it would be if there was steady demand, it does not mean that increased supply does not decrease price off of that increased baseline.

Yes increasing the supply of money CAN in certain circumstances decrease its value. But really don't think that you can prove that is necessarily the case. I say that because the printing of money in itself can cause people's perception of the value of the money to increase because in certain circumstances it can be a signal of optimism for the future.

That is one possible way in which it can do so, yes. But you are continuing to confuse individual effect with net effect. If the demand for dollars were to rise without an increase in supply, then the value of the individual dollar would be even higher than were demand to rise in tandem with an increase in supply. That is (basically) what happened to the Swiss, who then decided to print more money....... to decrease the value of the individual swiss franc.
 
See, now, that's interesting, given that you have highlighted multiple reasons why demand for dollars increased in the past few years. Another I would point out is the flight to safety that occurred in 2008/2009, and then again during the (repeated) euro crises.

The flight to safety has indeed been another factor. However, I think where we disagree is that you appear to think that printing money NECESSARILY causes its value to decline. Again, that may be the case under certain circumstances, but that is not necessarily true.

It means it will be higher than it would be if there was steady demand, it does not mean that increased supply does not decrease price off of that increased baseline.

OK. But my response is that it also does not mean that increased supply does decrease price from the higher demand baseline.

That is one possible way in which it can do so, yes. But you are continuing to confuse individual effect with net effect. If the demand for dollars were to rise without an increase in supply, then the value of the individual dollar would be even higher than were demand to rise in tandem with an increase in supply. That is (basically) what happened to the Swiss, who then decided to print more money....... to decrease the value of the individual swiss franc.

I agree that if the demand for dollars rose without an increase in supply then the demand for dollars would indeed be higher IF in addition to that, an increase in supply caused demand to increase as well. No problem with that. But my point is that, because of the fact that an increase in supply can cause the value to rise, it is not NECESSARILY the case that printing money causes its value to decrease. And that it where I perceive that we differ. Now perhaps I have misunderstood what you are saying, but that's how I see it. I understand what you mean by net effect. I understood that when you first put the idea forward. And actually I understood what you where saying when you said all that stuff about high demand atmosphere. But my contention is that it makes no sense because an increase in supply does not necessarily result in a decrease in the value. Now if that were the case, then I would agree with you. But I don't think you can prove that, and that is why I said what I said. I guess I did it in a nasty way tho, and again I apologize for that.
 
The flight to safety has indeed been another factor. However, I think where we disagree is that you appear to think that printing money NECESSARILY causes its value to decline.

It does, although the effect may be mitigated and it may not dominate (net).

OK. But my response is that it also does not mean that increased supply does decrease price from the higher demand baseline.

I agree that if the demand for dollars rose without an increase in supply then the demand for dollars would indeed be higher IF in addition to that, an increase in supply caused demand to increase as well. No problem with that. But my point is that, because of the fact that an increase in supply can cause the value to rise, it is not NECESSARILY the case that printing money causes its value to decrease.

This is incorrect. Printing more money does not cause it's value to rise, it is simply possible to occur in tandem with a net rise in valuation. Increases in supply reduce prices, demand remaining equal. Increases in Demand can cause an increase in Supply by increasing the valuation (as happened in Switzerland), but an increase in Supply does not cause an increase in price and an increase in Demand. There remains No Such Thing As A Free Lunch.

And that it where I perceive that we differ. Now perhaps I have misunderstood what you are saying, but that's how I see it. I understand what you mean by net effect. I understood that when you first put the idea forward. And actually I understood what you where saying when you said all that stuff about high demand atmosphere. But my contention is that it makes no sense because an increase in supply does not necessarily result in a decrease in the value. Now if that were the case, then I would agree with you. But I don't think you can prove that, and that is why I said what I said. I guess I did it in a nasty way tho, and again I apologize for that.

No worries on the last :)
 
Increases in supply reduce prices, demand remaining equal.

OK. I see where we are going off base. Yes that is true.

To be more precise, what I am saying is that an increase is QUANTITY SUPPLIED MEANING MOVEMENT TO THE RIGHT ALONG THE SUPPLY CURVE, can in certain circumstances induce a shift of the DEMAND CURVE to the right, thus resulting in an increase in the value of the dollar. And so that there is no confusion going forward, demand is the demand curve consisting of quantity demanded and value, where value means the purchasing power of the dollar. Supply refers to the supply curve consisting of quantity supplied and value as before.

Now maybe we can discuss clearly without confusion.
 
I was thinking, Obama may have saved the dollar with that little stunt the U.S. just pulled in Ukraine. If Putin had been able to unite Europe and Russia it would have certainly meant a decline in the dollar, although it still would have retained some of it's power. Now it may well be that the dollar will retain it's status for years to come simply because of lack of a better alternative. That Eurasian Union thing is off the radar for a good while now. China does not want to subject itself of the burden of hosting the world's reserve currency. As far as the Special Drawing Rights thing goes, I think that, like the EU, it won't work because of competing interests. Looks like the world may be stuck with the dollar for a while now. Perhaps Obama is a hero, for the U.S. Of course he won't get any thanks for it. They will still beat the hell out of him.
 
Increases in supply reduce prices, demand remaining equal.

OK. I see where we are going off base. Yes that is true.

To be more precise, what I am saying is that an increase in QUANTITY SUPPLIED MEANING MOVEMENT TO THE RIGHT ALONG THE SUPPLY CURVE, can in certain circumstances induce a shift of the DEMAND CURVE to the right, thus resulting in an increase in the value of the dollar. And so that there is no confusion going forward, demand is the demand curve consisting of quantity demanded and value, where value means the purchasing power of the dollar. Supply refers to the supply curve consisting of quantity supplied and value as before.

Now maybe we can discuss clearly without confusion.

I am going to further clarify my response. When I say value, I mean the value of the dollar relative to other currencies like the Japanese yen and the Euro. Now I think I have clarified in the proper economic jargon, what I am trying to say. Please forgive my mumbo jumbo.
 
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I can think of three major government spending programs that did in fact boost the economy.

1. Tragically WWII and the spending of money on weaponry created a lot of jobs and lifted us out of the depression.

2. The interstate highway system. Prior to the interstate highway grid it took forever to travel across the country. The construction of it created jobs but that's not all. Shipping was revolutionized. Private transportation was revolutionized. I cannot calculate the economic benefits of the interstate highway system in the time I have this morning.

3. NASA. I especially look to all of the spinoff innovations that came about due to the government spending on the space program. Satellite communications that made the cable tv industry possible. Ball point pens. Gps navigation. Advances in water filtration and food preservation. Disposable diapers and feminine hygiene products. Advanced weather forecasting.
 
I can think of three major government spending programs that did in fact boost the economy.

1. Tragically WWII and the spending of money on weaponry created a lot of jobs and lifted us out of the depression.

2. The interstate highway system. Prior to the interstate highway grid it took forever to travel across the country. The construction of it created jobs but that's not all. Shipping was revolutionized. Private transportation was revolutionized. I cannot calculate the economic benefits of the interstate highway system in the time I have this morning.

3. NASA. I especially look to all of the spinoff innovations that came about due to the government spending on the space program. Satellite communications that made the cable tv industry possible. Ball point pens. Gps navigation. Advances in water filtration and food preservation. Disposable diapers and feminine hygiene products. Advanced weather forecasting.

Very good examples!
 
To be very clear, actually when the government takes treasuries to the Fed and gets money in return, it is taking money from the future. So in some sense the money is coming from somewhere. The thing is this however, the money that the Fed used to buy those toxic assets, that will never be repaid, actually came from nowhere. No one is going to buy them so that is where they will die. And as long as people worldwide accept U.S. dollars, which will be the case for a long time, the Fed can go on about its business and it will mean very little, if anything at all in practical terms. Like I said, the Fed does not have anyone knocking on its door demanding payment.
 
No its not a childish assessment. The problem is that you have had a right wing lobotomy that does not permit certain things to register in your brain. What is not registering in this case is the fact that THE MONEY IS THE EXCESS RESERVES OF PRIVATE BANKS THAT THEY HAVE VOLUNTARILY CHOSEN TO PARK AT THE FEDERAL RESERVE INSTEAD OF LENDING IT. THAT IS A FORM OF HOARDING. Now I pity that because of your lobotomized condition you cannot understand that. But don't worry, even the lobotomized can be useful in that their behavior serves as a negative example that should be avoided.



Dodd Frank says that banks can only lend to people who can repay the loan, something they should have been doing in the first place.


Nonsense. You seriously need to educate yourself beyond these simplistic left wing plattitudes.

Prior to 2008 how much in dollars did Banks park at the FED reserve ?

And Dodd Frank re-re-intsalled the very standards that the Democrats stripped away from private lenders under the pretense of " discrdiscrimination ".

Unfortunately, Dodd Frank regulations didnt apply to the two most corrupt Financial entities involved in the Subprime mortgage crisis.
 
Nonsense. You seriously need to educate yourself beyond these simplistic left wing plattitudes.

Prior to 2008 how much in dollars did Banks park at the FED reserve ?

And Dodd Frank re-re-intsalled the very standards that the Democrats stripped away from private lenders under the pretense of " discrdiscrimination ".

Unfortunately, Dodd Frank regulations didnt apply to the two most corrupt Financial entities involved in the Subprime mortgage crisis.

Again, Dodd Frank says that banks should only lend to people who can pay the money back. Again, that is what they should have been doing anyway.

How come you didn't throw is an Obama hate line? I guess you forgot about that.
 
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