The KEYNESIAN FALLACY of Obamanomics

[SeedyROM]

http://www.vote.com/mmp_printerfriendly.php?id=1363
There are very few economists who really buy into Keynesian theory anymore. Instead, the idea of "rational expectations" has taken its place. The difference between the two approaches is essential to understanding why Obama's stimulus package won't work.

Keynes felt that people would react automatically to a few dollars in their hands. Consumers would run out and buy new products, and businessmen, seeing the uptick in sales, would rush to open new plants and hire new workers who would, in turn, generate more demand.

But that's not the real world. In reality, consumers, knowing there are hard times ahead, save any money they get either by salting it away or by paying down their debts and bills. That's why the personal saving rate in the last quarter of 2008 was the highest in six years and spending on residential construction was down 22 percent over the past year. And the savings rate rose from 2.8 percent in November 2008 to 3.6 percent in December as the storm clouds grew grayer. And, in the real world, banks hang onto their money for fear of making bad loans, no matter how many bailouts or stimulus packages Washington passes.

According to the Federal Reserve Board of St. Louis, the Fed is now holding upwards of $1.7 trillion for American banks, more than twice what it had in its vaults at the start of 2008. How did the Fed get the money? Congress voted the Troubled Asset Relief Program (TARP) package of bailout funds. The Fed purchased bank assets to get liquidity onto their balance sheets. What did the banks do with the money? They gave it right back to the Fed to hold in its vaults. They didn't lend it out. They didn't use it to stimulate the economy. They are using it for a nest egg to tap when times improve. Just like the theory of rational expectations says they would.

If banks, suddenly awash in capital, don't decide all is fine and rush to lend money; and consumers, given a tax cut or a pay raise, don't rush to buy a flat-screen TV, then what good will the stimulus package do?

Not much. It is not until there is evidence that the underlying problem -- massive personal and corporate debt -- is being solved that any degree of confidence will return. And, without confidence, the rational expectation theory means people sit on their money.

But the package will do a whole lot of harm by piling up capital that people won't spend, banks won't lend and businesses won't invest. When confidence rises and the money comes out of hiding, watch out for the massive inflationary pressures all that extra cash will unleash.

Obama's stimulus package won't stimulate much except inflation down the road, which will, in turn, mean the onset of another round of high interest rates and renewed recession to check the inflation.

Republicans should defeat the stimulus package and then negotiate a much smaller bill that emphasizes tax cuts and avoids the pork-barrel feeding frenzy Obama has unleashed. You can see the stimulus package rotting away before our very eyes.

People are turning against it as they see the things on which government will now be spending money, just as they turned against Clinton's more modest $35 billion stimulus package in 1993. Republicans should stay away in droves. On this issue, they can recapture something they have lost over the past eight years -- the mantra of less spending and smaller government.

[bairdi]

So now media whore Dick Morris is an expert on economics. Give me a freaking break. What does a real, honest to goodness Nobel prize winning economist have to say about the misguided idea that more trickle down tax cuts will turn everything around?


U.S. economy needs spending, not tax cut -Krugman
02.06.09, 01:48 PM EST


WASHINGTON, Feb 6 (Reuters) - Nobel Prize-winning economist Paul Krugman on Friday dismissed the notion that tax cuts would help the recession-hit U.S. economy and said government spending would be more effective in stimulating demand.

'There is no coherent argument that tax cuts should be effective. An additional dollar in public spending is going to do more for the economy than an additional dollar of tax, cuts,' Krugman said during a discussion on the impact of President Barack Obama's economic recovery plan.

The Obama administration's $937 billion stimulus package aimed at halting the economy's downward spiral has been bogged down by opposition from Republicans, who favor tax cuts rather than more government spending.

The U.S. economy has been mired in recession since December 2007, and evidence is mounting that the downturn is accelerating. The Labor Department reported on Friday that 598,000 jobs were lost in January, the biggest number in 34 years, as the unemployment rate soared to a 16-year high.

Krugman said the consumer-driven economy faces at least a $2 trillion short-fall in demand over two years and reiterated that the spending package was insufficient. What is needed, he said, is a stimulus package that is large enough to close the gap.

'We should be looking at around $1.3 trillion range for two years,' he said of what is needed in government spending.

Although the government is already running up debt 'we have substantial running room ... up to $4 trillion (in debt) for the next few years,' he said, adding that he would be concerned with a debt figure of $6 trillion.
Comment On This Story

Krugman said a spending bill of $820 billion would add less than $500 billion to the national debt, while a package of tax cuts would add substantially more. It is critical to ensure that the current downturn does not spiral into deflation, he said.

Krugman dismissed fears that steps by the Treasury and the Federal Reserve to boost liquidity in financial markets, including the reduction of the central bank's benchmark overnight lending rate to a range between zero and 0.25 percent, would stoke inflation pressures.

'Inflation does not happen if you print money and it just sits there. There is no imminent inflation threat from any of this. Inflation is not top of the agenda,' he said, adding he was confident the Fed would be able to withdraw excess money from the system once the economy recovers.

(Reporting by Lucia Mutikani; editing by Leslie Adler) Keywords: ladler USA ECONOMY/KRUGMAN

(lucia.mutikani@thomsonreuters.com: +1-202-898-9315; Reuters messaging: lucia.mutikani.reuters.com@reuters.net)

COPYRIGHT

Copyright Thomson Reuters 2009. All rights reserved.
http://www.forbes.com/feeds/afx/2009/02/06/afx6019551.html

[Moby]

Dick Morris on economic issues? :lmao2:

Don't ever call someone else programmed, a sheep or even consider Soros having an effect any where close to Murdoch.

You're buying Murdoch's bullshit hook line and sinker.

What's next? Joe the Plumber on the economy?

Don't you have any of your own thoughts left?

[SeedyROM]

Dick Morris on economic issues? :lmao2:

Don't ever call someone else programmed, a sheep or even consider Soros having an effect any where close to Murdoch.

You're buying Murdoch's bullshit hook line and sinker.

What's next? Joe the Plumber on the economy?

Don't you have any of your own thoughts left?

Liar, Morris is writing on his own, you drive by liberal raptured sheep are all alike. Morris is smarter than you, that's why Clinton hired him.

Morris happens to be correct. So what he's conservative. He helped Bill Clinton get back in the good graces of the GOP and moderate and centrist Dems with advice that aided Clinton in making the right decisions in 1995 and 1996 after a miserable first 2 years.

Do you ever enter threads and engage in intelligent conversation anymore? Lately all you do is bitch and whine like a freaking lunatic. You are afraid to discuss issues rationally. You disrupt this site constantly.

Thugbama is scamming you, read the full CBO Report I posted. If you don't comment there I'll know you lack the mental intellect to discuss economics and the Dem scam in a rational manner, let alone honestly!

http://www.dcjunkies.com/showthread.php?t=7817

You voted for this motherfucker who has lost control in his first two weeks the same way Clinton lost control to the far-left. Obama may have a hell of a fight to get bipartisanship as the CBO circulates.

You waste your time deceiving everyone and we all see right through you. You are a lousy moderator who can't even discuss issues in a rational manner anymore. All you do is harass members. You should be thrown off this site for destroying the membership base. People come here to discuss issues not to be harassed by irresponsible moderators who mis-manage the site constantly!!!

Once again you are violating the site rules pertaining to harassment!! Several posts in a row!![/

[SeedyROM]

So now media whore Dick Morris is an expert on economics. Give me a freaking break. What does a real, honest to goodness Nobel prize winning economist have to say about the misguided idea that more trickle down tax cuts will turn everything around?


U.S. economy needs spending, not tax cut -Krugman
02.06.09, 01:48 PM EST


WASHINGTON, Feb 6 (Reuters) - Nobel Prize-winning economist Paul Krugman on Friday dismissed the notion that tax cuts would help the recession-hit U.S. economy and said government spending would be more effective in stimulating demand.

'There is no coherent argument that tax cuts should be effective. An additional dollar in public spending is going to do more for the economy than an additional dollar of tax, cuts,' Krugman said during a discussion on the impact of President Barack Obama's economic recovery plan.

The Obama administration's $937 billion stimulus package aimed at halting the economy's downward spiral has been bogged down by opposition from Republicans, who favor tax cuts rather than more government spending.

The U.S. economy has been mired in recession since December 2007, and evidence is mounting that the downturn is accelerating. The Labor Department reported on Friday that 598,000 jobs were lost in January, the biggest number in 34 years, as the unemployment rate soared to a 16-year high.

Krugman said the consumer-driven economy faces at least a $2 trillion short-fall in demand over two years and reiterated that the spending package was insufficient. What is needed, he said, is a stimulus package that is large enough to close the gap.

'We should be looking at around $1.3 trillion range for two years,' he said of what is needed in government spending.

Although the government is already running up debt 'we have substantial running room ... up to $4 trillion (in debt) for the next few years,' he said, adding that he would be concerned with a debt figure of $6 trillion.
Comment On This Story

Krugman said a spending bill of $820 billion would add less than $500 billion to the national debt, while a package of tax cuts would add substantially more. It is critical to ensure that the current downturn does not spiral into deflation, he said.

Krugman dismissed fears that steps by the Treasury and the Federal Reserve to boost liquidity in financial markets, including the reduction of the central bank's benchmark overnight lending rate to a range between zero and 0.25 percent, would stoke inflation pressures.

'Inflation does not happen if you print money and it just sits there. There is no imminent inflation threat from any of this. Inflation is not top of the agenda,' he said, adding he was confident the Fed would be able to withdraw excess money from the system once the economy recovers.

(Reporting by Lucia Mutikani; editing by Leslie Adler) Keywords: ladler USA ECONOMY/KRUGMAN

(lucia.mutikani@thomsonreuters.com: +1-202-898-9315; Reuters messaging: lucia.mutikani.reuters.com@reuters.net)

COPYRIGHT

Copyright Thomson Reuters 2009. All rights reserved.
http://www.forbes.com/feeds/afx/2009/02/06/afx6019551.html

The CBO is smarter than the Nobel shill for the party

http://www.dcjunkies.com/showthread.php?t=7817

[bairdi]

The CBO is smarter than the Nobel shill for the party

http://www.dcjunkies.com/showthread.php?t=7817
So what part of the CBO report did you not understand. My bet is maybe this part?

Thus, the forecast does not reflect the impact of any fiscal stimulus package or other elements of the new Administration’s economic program. Instead, the forecast is an assessment of the economic outlook without such a package.

[Moby]

The CBO is smarter than the Nobel shill for the party

http://www.dcjunkies.com/showthread.php?t=7817
:lmao2: Check my thread where the CBO reports that tax cuts bring about 20% of the GDP as spending. I don't give them as much credit as you do but you just offered support against your cause - again :lmao2:

[SeedyROM]

Bairdi, you and sirmoby lack the educational background to fully understand the full ramifications of Keynesian economics. The stimulus will hurt more than they care to admit. We could cut taxes and fund the crooked banks and avoid the other 58% of the TARP and bounce back with less debt and more confidence going forward.

I understood the large print quite well, today is the second time I've seen it you Obamamoron! You two lack the intellect to discuss something beyond your education level. Study Keynesian and get back to me when you actully understand the facts. The CBO is always written without impending legislation for obvious reasons. You two need to study Keynesian Theory, it is, has been and always shall be a money pit idea that fails to boost the economy. The Rep Tarp proposal is better and cheaper for taxpayers. The Dem Tarp is 58% scndalous pork waste. Why would you want to support deeper debt????

Fact is, the economy shall bounce because of market forces, lower consumer prices for energy and food as well, home sales shall pick up in the second half as will other industries. I'm buying some stocks and a lot of LEAPS to take advantage of the market runup. I expect a brief bounce up following the pass of the terrible TARP followed by profit taking and portfolio realignment by risk adverse investors.

[foxbaron]

Somebody explain something to me.

If people used their money to pay down debt wouldn't that also stimulate the economy?

If I pay you what I owe you what are you gonna do with it, pay your debt, save it, buy stuff, hire people.

If I pay what I owe then you have made your profit whatever it is and what you do with it, short of burning it, goes back into the ecomomy somehow doesn't it?

Even if you save it, don't the banks now have more money to loan out? If you pay off debt doesn't that give someone else money to spend on stuff? If you spend it doesn't that mean more profit for some business? If they are making more profit does that mean they will hire more people?

If you pay down your debt doesn't that mean you will now have more money to spend on other stuff?

What is an economy other than moving money around?

Give the money to us, not the banks and the corporation's CEO's.

[bairdi]

Bairdi, you and sirmoby lack the educational background to fully understand the full ramifications of Keynesian economics. The stimulus will hurt more than they care to admit. We could cut taxes and fund the crooked banks and avoid the other 58% of the TARP and bounce back with less debt and more confidence going forward.

I understood the large print quite well, today is the second time I've seen it you Obamamoron! You two lack the intellect to discuss something beyond your education level. Study Keynesian and get back to me when you actully understand the facts. The CBO is always written without impending legislation for obvious reasons. You two need to study Keynesian Theory, it is, has been and always shall be a money pit idea that fails to boost the economy. The Rep Tarp proposal is better and cheaper for taxpayers. The Dem Tarp is 58% scndalous pork waste. Why would you want to support deeper debt????

Fact is, the economy shall bounce because of market forces, lower consumer prices for energy and food as well, home sales shall pick up in the second half as will other industries. I'm buying some stocks and a lot of LEAPS to take advantage of the market runup. I expect a brief bounce up following the pass of the terrible TARP followed by profit taking and portfolio realignment by risk adverse investors.
I majored in economics for two years before I switched my major. I think I have as good, if not better, understanding of Keynesian economic theory than most people on this board. I also think you are full of shit.

[Moby]

Bairdi, you and sirmoby lack the educational background to fully understand the full ramifications of Keynesian economics.
If you understand anything then why are you posting articles that come from a man that is employed by Rupert Murdoch? That doesn't make any sense.

What is your educational background? Sheepness?

[SeedyROM]

I majored in economics for two years before I switched my major. I think I have as good, if not better, understanding of Keynesian economic theory than most people on this board. I also think you are full of shit.

Switched majors to what? Its a good thing you changed majors, no doubt you would have flunked out, that's why everyone switches majors. Keynesian theory is a failure waiting to happen, US economists agree it is a dangerous path. Double major here, Economics and Finance from Penn State.

You didn't read the full CBO report, you cherry picked on paragraph from my
post and you could even make a convincing arguement. All you did was blow a little smoke that faded quickly.

fyi, the paragraph below spells it out, the economy is expected to bounce back, stimulus excluded. That means Obama, Pelosi and Reid are lying to Americans as are all Dems in the House and Senate, excluding the 10 patriots who voted against TARP.

You boys need to grow up and try to get along and participate. You don't impress me with childish attacks and the daily harassment. I do find it amusing though!:D


Under those assumptions, CBO anticipates that the current recession, which started in December 2007, will last until the second half of 2009, making it the longest recession since World War II. (The 1973–1974 and 1981–1982 recessions both lasted 16 months; if the current recession continues beyond midyear, it will have lasted at least 19 months.) It could also be the deepest recession during the postwar period in terms of the difference between actual and potential output. By CBO’s estimates, economic output over the next two years will average 6.8 percent below its potential. The unemployment rate will increase to 9.2 percent by early 2010, up from a low

[Bill]

Well, the chicago school failed like a motherfucker, and crashed the american economy.

You guys had your turn, and you blew it, bigger than anybody has blown anything since ww2.

So cry all you want fwgs.

[SeedyROM]

Hey LRSFWG, let me know when you come up with a cheaper plan or agree no plan is better than the current plan???:hi: Too bad Biardi and SM can't openly discuss issues and a rational and intelligent manner, lol! :hi:

Liberal Raptured Sheep Angry White Guys :D :lmao2:

[mwillman]

Come on Seedy your arguments are as old as Hoover and they werent right then.

The truth is the right wing argument has nothing to do with whats best for our economy and everything to do with personal greed.

[SeedyROM]

Come on Seedy your arguments are as old as Hoover and they werent right then.

The truth is the right wing argument has nothing to do with whats best for our economy and everything to do with personal greed.


You are full of it, you have no facts to support your assinine accusations. You don't even understand Keynesian do you dipshit? Get your head out of the fog or is your head in Bong?

[bairdi]

Hey LRSFWG, let me know when you come up with a cheaper plan or agree no plan is better than the current plan???:hi: Too bad Biardi and SM can't openly discuss issues and a rational and intelligent manner, lol! :hi:

Liberal Raptured Sheep Angry White Guys :D :lmao2:
You wouldn't know rational and intelligent if they both jumped up and bit you in the ass. You cannot be serious in your implied response that the testimony in the CBO is making a case that the economy will bounce back in six months without any action by the government. Only a lunatic would draw that type of conclusion from the testimony presented.

[Moby]

So Seedy, now that you have criticized the educational background of others, why are you refusing to share yours?

[Moby]

Liar, Morris is writing on his own, you drive by liberal raptured sheep are all alike.[/
Where is my lie? Why do you believe that a man that gets 2 pay checks from Rupert Murdoch, a billionaire that has dumped gobs more money then Soros into politics, not write what Murdoch wants him to write?

You're the one complaining about billionaires being involved with politics without being able to draw the actual connection to anyone that gets as much face time as Morris does and not only are you listening but you are reproducing the information.

Pot calling the kettle black.

[Moby]

You are full of it, you have no facts to support your assinine accusations. You don't even understand Keynesian do you dipshit? Get your head out of the fog or is your head in Bong?
Statistics kind of show that when a Republican is in the white house that things aren't exactly good for the average American. Unemployment is a great example and I've posted it many times.

Would you like me to post it again?

[bairdi]

So Seedy, now that you have criticized the educational background of others, why are you refusing to share yours?
He wrote in a post above that he had a double major in Economics and Finance from Penn State. If you ask me, he should have taken a few English comprehension courses.

[SeedyROM]

You wouldn't know rational and intelligent if they both jumped up and bit you in the ass. You cannot be serious in your implied response that the testimony in the CBO is making a case that the economy will bounce back in six months without any action by the government. Only a lunatic would draw that type of conclusion from the testimony presented.

You can't rationalize why we should spend less now can you?

[SeedyROM]

Where is my lie? Why do you believe that a man that gets 2 pay checks from Rupert Murdoch, a billionaire that has dumped gobs more money then Soros into politics, not write what Murdoch wants him to write?

You're the one complaining about billionaires being involved with politics without being able to draw the actual connection to anyone that gets as much face time as Morris does and not only are you listening but you are reproducing the information.

Pot calling the kettle black.

The article comes from DickMorris.com not FOX, Jesus, you knew who wrote the article because you clicked on the link and saw the mans name and webaddress. fyi, both billionaires are tearing this country apart, both men want Europe to be the leading superpower, that's thier goal even though they work separately. Crooked bastards yes they are!

[SeedyROM]

Statistics kind of show that when a Republican is in the white house that things aren't exactly good for the average American. Unemployment is a great example and I've posted it many times.

Would you like me to post it again?

The economy can't go up forever. I read the thread, I'm disappointed that you did not comment on my long reply on that thread. I posted on Sunday about how the Fed and politicians use tools to slow the economy.
http://www.dcjunkies.com/showthread.php?t=7814 Post #7

Dems have been lucky to take the whitehouse in up cycles more than reps. Fact is, 6 months from now the markets will be higher but not great and Obama will get some credit for Bush policy and his last minute quarterbacking. The economy shall bounce, the market is already gearing up. o read your other thread, economic theory is already working because the bottom is closer than most want to admit. 58% pork is still pork no matter what they say, most of that waste will not creat many jobs. I also find it ironic you abandoned this thread! Funny how you dodge silverbullets.

Explain how you see no waste? For someone who admitted the Bush stimulus last spring was foolish, you sure seem to be all on board for laying debt on your unborn grandchildren. :banghead:
http://www.dcjunkies.com/showthread.php?t=7794

[SeedyROM]

He wrote in a post above that he had a double major in Economics and Finance from Penn State. If you ask me, he should have taken a few English comprehension courses.

Admit it, you use spell check don't you. Econ drop out!!:lmao2:

Do you want me grading your mistakes, I'v seen plenty. Noone says he twice in the same sentence!!!
I'll be glad to pointout others in more posts or you can drop it since you obvioulsy didn't check you post either. Sometimes I type and go. Big deal! I know you guys have weak arguements when you start and end a thread with insults, LOL!

fyi, the bill is not a stimulus, 58% is an entitlement bonanza aka welfare for the rich and freeloaders

[bairdi]

Admit it, you use spell check don't you. Econ drop out!!:lmao2:

Do you want me grading your mistakes, I'v seen plenty. Noone says he twice in the same sentence!!!
I'll be glad to pointout others in more posts or you can drop it since you obvioulsy didn't check you post either. Sometimes I type and go. Big deal! I know you guys have weak arguements when you start and end a thread with insults, LOL!

fyi, the bill is not a stimulus, 58% is an entitlement bonanza aka welfare for the rich and freeloaders
I didn't say English composition, I said English comprehension. Thanks for once again confirming my point. :lmao2: :lmao2:

[SeedyROM]

I didn't say English composition, I said English comprehension. Thanks for once again confirming my point. :lmao2: :lmao2:

I was making fun of your post, get over it. Do you always proofread, no you do not. I've seen it and ignored it because it is childish to pointout such nonsense. You went there because you are afraid to agree with me.

Asroc did the same shit pointing out spelling errors, yet he couldn't take it when I caught him. Asroc is a liar btw. He never served in the Navy because the ship claimed he was a crew member of was sold to the Turkish many years before he allegedly joined the Navy. And he went around poking fun at typos and shit.

Let me know when you find a Socialist Country that actually works without destroying worker income, thus far you have failed to address the question so I'll take it as another dumbass mistake of comprehension of facts and world history!!! :lmao2:

[Captain Obvious]

The economy can't go up forever. I read the thread, I'm disappointed that you did not comment on my long reply on that thread. I posted on Sunday about how the Fed and politicians use tools to slow the economy.
http://www.dcjunkies.com/showthread.php?t=7814 Post #7

Dems have been lucky to take the whitehouse in up cycles more than reps. Fact is, 6 months from now the markets will be higher but not great and Obama will get some credit for Bush policy and his last minute quarterbacking. The economy shall bounce, the market is already gearing up. o read your other thread, economic theory is already working because the bottom is closer than most want to admit. 58% pork is still pork no matter what they say, most of that waste will not creat many jobs. I also find it ironic you abandoned this thread! Funny how you dodge silverbullets.

Explain how you see no waste? For someone who admitted the Bush stimulus last spring was foolish, you sure seem to be all on board for laying debt on your unborn grandchildren. :banghead:
http://www.dcjunkies.com/showthread.php?t=7794

What is the primary source of the growing debt?

[SeedyROM]

What is the primary source of the growing debt?
democrats, republicans and corrupt business practices.

[Moby]

The article comes from DickMorris.com not FOX, Jesus, you knew who wrote the article because you clicked on the link and saw the mans name and webaddress. fyi, both billionaires are tearing this country apart, both men want Europe to be the leading superpower, that's thier goal even though they work separately. Crooked bastards yes they are!
How many jobs does Dick Morris have where he collects pay checks from Rupert Murdoch?

Think Seedy. Think real good. Someone of you vast intellect should know the answer long before this thread even started.

[SeedyROM]

How many jobs does Dick Morris have where he collects pay checks from Rupert Murdoch?

Think Seedy. Think real good. Someone of you vast intellect should know the answer long before this thread even started.

The article comes from Morris's website, get over it. So what he contributes to Fox, CNN, ABC and MSNBC. Does he work for all media companies or is he paid per appearance. Think about it! People get paid for thier time, people get paid to go on Jay Lenno too. Does Will Smith work for NBC??

[mwillman]

Poor seedy

Spewing hate, your ideology lost the election so get over it.

[SeedyROM]

Poor seedy

Spewing hate, your ideology lost the election so get over it.
Do you care to debunk the aritcles with some intellect or more Frisco Fog
nonsense. Your state is a ward of the Federal government thanks to all you foggy bottom brains who let demofcrats give away billions to free loaders and illegal aliens. You clearly can't hold a conversation and stay on topic, there is a reason why you don't understand the ramifications on Obama's mistakes.