The Mechanics Of Fiscal And Monetary Stimulus

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It’s now undisputed among economists that Obama saved the global economy from financial ruin following the financial crisis of 2007-08, which was created by the excesses of capitalism under Bush. But how exactly did Obama and Bernanke achieve this seemingly impossible feat? The answer is that they used their superior understanding of economics to hack the economy into growing, even though its natural trajectory at the time was to crash.

At it’s root, the economy is driven by spending. When you spend a dollar, you are handing that dollar to a business, who will in turn spend it and hand it to someone else. This transfer of dollars from person to person is what generates economic growth. We measure this growth with metrics like GDP, which measure the spending directly, so when spending rises, by definition, GDP (i.e. economic growth) rises too.

Fringe right wing economists argue that economic growth should actually be measured by things like technological advancement, and how many consumer goods like fuel and food the average wage can buy. They also argue that savings and careful investment are needed to get capital into the right hands and fund innovation. But this has been thoroughly discredited by accredited economists, who have proven that wild, indiscriminate spending on anything and everything is far more effective.

So, empowered by this knowledge, Obama and Bernanke embarked on a range of well informed fiscal and monetary stimulus programs, designed to get people borrowing and spending as much as possible. And it worked wonders. The stock market recovered from one of its worst crashes in history and went on to make new all time highs, all thanks to this new money flowing through the economy.

Conservative economists argue that encouraging short term spending simply encourages the economy to put all of its resources into producing non-durable consumer goods, instead of investing in new technologies, and that this, along with the bloated financial industry, is eating the real economy alive. But smart economists like Paul Krugman point to how spending sprees like the one during World War II have historically lead to incredible innovation and technological advancement.

Now that we understand the root of economic growth, consumer spending, we need to do everything in our power to promote it as much as possible, including negative interest rates, government-backed credit cards, and bigger-than-ever student loans. Spending makes the world go around, so let’s party and spend like there’s no tomorrow!

richandrenee

The only possible down side to deeply negative rates would be for selfish people to start hoarding cash. This can simply be remedied by removing cash from the system – which will have the added benefit of stopping terrorist funding.

On a more personal note – I’ve downloaded the picture of Paul to put in my special file. I hope that’s OK?

trav777

It’s important to BORROW and SPEND.

Debt = wealth according to top accredited economists.

Pbier

Just got home and read this excellent article. Today’s LGBTQIAMA rally was especially long as we had to give equal time to each community within LGBTQIAMA. The LGBTQIAMA community voted overwhelmingly for the Asexual ACE community to join their ranks but the asexuals politely declined, asking to be left alone as they were not interested in anything really and certainly not ‘stimulus’ which is the topic of this article.

Black Flies Matter
Black Flies Matter

O/T – Well bugger me sideways…

richandrenee

It’s mostly racist and misogynist ideas about beauty that distort the equal distribution of sex BFM. You should already know this – it’s 101!!!

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