Anyway there is just one point I wish to pick apart...
"While unemployment is still high, it would be dangerous to reduce the Government's contribution to aggregate demand beyond the cuts already planned for 2010-11," they said.
How is it so many "economists" fail to grasp the following, very simple, fact? There is no such thing as a "government's contribution to aggregate demand".
It is us. We the people, who produce the aggregate demand. We pay the taxes, and we back the debt.
All that's happening here is a bunch of politicians are forcing us to spend beyond our means. And until more people grasp this simple point we are well and truly...
All of us.
9 comments:
Absolutely. Perfectly true. Unfortunately, most people simply don't seem to "get it"...
The comment made perfect sense. It makes perfect sense to talk of the G component of AD. This is a pretty poor basis for a blogpost.
when consumer spending falls away and and it is imperative for AD not to fall away, government spending is one way in which it can be maintained.
ideology is one thing, but economic facts of the matter are quite another.
Seriously guys. Government spending is not seperate from consumer spending. They're exactly the same thing.
Government spending is just consumer spending forced in a certain direction -- with a large amount of it syphoned off by troughers.
The Russian dictator V.I. Lenin once remarked that if geometric axioms affected human interests then attempts would surely be made to disprove them.
The 60 useful idiots have careers that are conditional on their acceptance of either Keynesian or Monetarist doctrine.
If any of them broke ranks they might find it difficult to get a job.
The current status quo works very nicely for government and the corporate interests attached to it.
Lenin also pointed out that in order for a political system to be overthrown it is not enough for people to simply desire its overthrow.
The old regime will only crumble when it is literally unable to govern in the old way.
Rob W,
"Seriously guys. Government spending is not seperate from consumer spending. They're exactly the same thing.
Government spending is just consumer spending forced in a certain direction -- with a large amount of it syphoned off by troughers."
- But it's helpful to separate them in terms of doing economics. They're not making some deep philosophical point about property or whatever, they're just doing economics.
@Peter: those "economists" refuse to see what is right in front of their noses.
Namely that government cannot spend any money without taking it from someone else first.
How on Earth is that going to "boost aggregate demand"?
Sounds like an example of the "broken window" fallacy.
Smash a window. Make work for glaziers. Then those glaziers will spend money on things that they want and the recipients of that money will spend money and so forth...
Let's declare war on Iran. Think of all the jobs that will create!
If the Govt spends it, it must either
Tax first, so reducing demand in the voluntary sector and delaying any spending
Borrow it, which raises the cost of borrowing for everyone else, depressing expansion
In both cases it only shoves it into the coercive/"pubic" sector or its parasites. Only once it has passed through that intestinal passage can it affect demand in the real, voluntary sector.
Tax is never a "good", only, at best, a necessary evil, a least worst way of doing or funding something.
p.s. the above suddenly makes me think that companies like Capita are the tape worms in the gut of the State.
I like the Capita analogy Roger!
When statists say "more money for this..." we need to ask them how they would RAISE the money for it and THEN point out the unintended consequences.
We will soon be in a position where sovereign debt can no longer be sold on the open market.
If the central bank has to monetize 100% of all new sovereign debt (or the tresury prints money directly) the inflation tax will be completely transparent.
I feel sorry for anyone who doesn't own physical gold/silver.
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