hahaha! Yes Shamus, quite alright that you don't have the book! Just look into legitimate sources writen by real economists. Although I myself am critical of an Austrian perspective, it serves as a much more solid economic reference than these pseudo theories.
Look into the two different groups of economist that we have today. The "saltwater" and "freshwater" economists. When we listen to what politicians promulgate as "good" for the economy, we find that their theories are more or less pernicious towards economic growth. These policies disregard years of economic theory and thought and surrender to the vicissitudes of fickle public opinion. But I suppose that's politics.
Tom Morgan. Let me respond to the very first post you made a time back which for some odd reason was actually about economics.
I believe that what we have experienced over the last four years qualifies as an economic depression. Not as severe as the 30's but still rather bad. A recesion is a simple contraction in the economy. The fed buys bonds and lowers the interest rate. Easy! The only side effects are some mild inflation and a few less than happy lenders but that's not bad. This has been the standard cure for decades! But what was different this time? The fed did the same things but we're still in a mess!
Provided below are two links that provide some interesting graphs.
http://research.stlouisfed.org/fred2/series/HDTGPDUSQ163N/ http://www.tradingstocks.net/assets/images/household_debt_to_gdp_ratio.jpg These data show that the average household debt to relation to rGDP has consistantly risen post WWII. Recently, however, people have been what's called deleveraging, or paying off debt. Not only have a few people been deleveraging, but also everyone else! This is known as the Minsky moment or movement if you prefer. People have become so infatuated with deleveraging that no matter how low the fed sets interest rate, people will refuse to take on more debt.
As you can also see, the only other time in recent history were we can find a Minsky moment is, you guessed it, the Great Depression! The Minsky moment creates what is called a liquidity trap. No amount of interest cuts or monetary policy can help now! No matter how much money is put into the system, people, en mass, won't take it! In part because they are already to far along in debt to take on more.
So now what must be done? According to a Keynsian ideology only one other thing can be done. Direct government stimulus. This is because of that damned circular flow thing I was talking about earlier. Consumption encourages production. To produce more you need more workers. When you hire more, more people have jobs. When more people have jobs, more people can go out and buy junk. When more people go out and buy stuff, companies are encouraged to make more stuff. When companies need to make more stuff, they hire more people. You get the picture.
Problem is no one is spending like they should. Everyone is deleveraging at the same damn time! Frustrating isn't it? Well good news. If the government can successfully mimic the actions of a regular consumer, the economy will begin to add jobs. Those workers in turn begin the circular flow cycle at which point the government can step out of the way.
This brings into question the stimulus bill passed several years ago.
http://upload.wikimedia.org/wikipedia/commons/3/36/Investmentbubble.jpg We can now see how the funds we divided up within the bill.
State and local fiscal relief, protecting the vulnerable, health care, and education and training all exist to help programs already in place continue to function. Tax relief does what it says it does and makes up the largest portion of the bill. We are now left with Energy and Infrastructure and Science.
So how much of this bill mimics a consumer? Not much at all. In fact only the Energy and Infrastructure and Science catagories come close to regular consumer spending. Cutting taxes while not bad is rather overated. Who cares if taxes are low for your store if nobody is buying things from you!
But we know that the Great Depression did end. And while the government programs of FDR did help, we all know that the knockout blow was from WWII. But why? That was the time when government spending most matched that of a regular consumer. Think who bought all the boats, fuel, radios, vegtables, fruit, meat, bread, milk, lard, boots, pants, shirts, jackets, socks, underwear, jackets, coats, glasses, helmets, cantines, shovels, bullets, M1s, carbines, pistols, bullets, artilery, shells, tanks, trucks, jeeps, fighter planes, bombers, bombs, radar, destroyers, aircraft carriers, subs, torpedoes, depth charges, and grenades? Even though regular consumers don't buy these things (except you all who complain about the end of civilization) most regular factories that can produce consumer goods are easily converted to produce weapons. I mean come on! You guys play sim country! Set up any corporation and see how many products need to go into that corporation until it can produce any product. Select at randon one of the many products that probably goes into what that corp makes. There are also input goods for this product. And even inputs for those inputs! As you can see this can go one for quite a long time.
So, in conclusion, I assert that the government should start to buy things that will improve our daily lives. Such as roads and schools. At the same time they could agressivly ramp up efforts to develop some scientific or technological achievment. Soon the private sector will take over and, with other changes to taxes (eventualy less) and regulation (not more or less just commonsense). The economy will be back on its feet, strong and powerful enough so that we can pay off our government deficit.
