From the New Yorker this answer here (article originally from the Economist): Read on, if you dare ...
Once the economy "goes south", it's often too late. Unfortunately politicians' and society's response to any problem is often a knee-jerk reaction after the problem has already happened. Everyone lives in their own little bubble and the mainstream people don't see things until the evidence is already overwhelming.
I think there's way too much focus put on the Fed as the main solution to solving economic issues. In some ways it's distracting people. The Fed has a few tools to smooth out small ups and downs in the economy, but it can not really solve underlying economic problems, or long-term economic downtowns that result from problems that are not just bubble-induced (or all bubble-induced, maybe I should more specifically state). We've seen time and time again that just holding interest rates down is not a panacea for all a country's economic ills. (may have some negative effects too, especially when it's for a long period of time, as that tends to result in inflationary pressures and distortion in the economy)
It sounds like another excuse to throw out free money. Are we going to have regressive taxes during the good times to pay for these "automatic stabilizers" ?
That gets you what? Who will clean your car? Who will take out your garbage? Who will ... anyway, it's a long list of jobs at less than the Minimum Wage and paid cash that the Mexicans do in America! Look, you are in an economics forum here! The solution to any economy in free-fall is sustained Government expenditure. (Just like Obama did when Bush-the-nerd let a useless war over in the Iraqi sandbox push America into near recession. Which Obama fixed by having a Dem Congress pass the ARRA-bill that spent around $700B. So, in the mid-terms, we-the-sheeple, thanked him by turning over the HofR to Replicant control. And what did they promptly do? They nixed all further spending that would have stimulated jobs in order to get Americans to dump Obama in the 2011-elections. Did they ever get that one wrong! Finally, after four long years of zero-job creation (2010 to 2014), the economy struggled to finally create jobs by putting people back to work. History Employment-to-population Ratio (from here): Note that from 2010 to 2014 no jobs were created. Because dimwit Replicants in charge of the HofR would not allow the government to increase spending in order to create jobs! Why? To defeat Obama in 2012! But, it didn't work out that way - did it!
We don't do what they did in 1929 and exacerbate the crisis into a full-blown worldwide depression. Thanks to Keynes we know what works and what doesn't.
I thought the problem isn't unemployment, it's not enough of the good paying jobs relative to the population. By saying we need low wage people to do the jobs, you've effectively defeated your own original argument. I don't want to derail this thread and turn it into an immigration debate.
Keynes' original suggestion was to raise taxes and save during the good times, and then spend that saved money during the bad times. Since almost every country is in deep debt, it's not possible to do that. What people these days are trying to pass off as Keynesianism is not Keynesianism. It's throw out lots of money like wealth redistribution, while adding to the national debt. Then eventually, somewhere down the road, maybe the rich will have to be taxed to pay for it, is the unstated hope.
Yes, yI agree. The Fed is only one element in a very complex market-economy dynamic. But it is also a Key Element to be considered ...
The Fed can help prevent bubbles, or gradually deflate them. But it can't really so much solve other economic problems. The Fed does not even have a good track record preventing or deflating bubbles.
Study the Worgl, Austria local money experiment, especially how rapidly it succeeded in the USA during the Great Depression is one option! http://www.whatcomwatch.org/php/WW_open.php?id=717
As a matter of curiosity, since you are giving the ARRA credit for fixing the economy, could you explain how a bill that was passed in Feb 2009 managed to fix the economy in only 4 months before it had really begun spending much money? We were out of a recession by June of 2009 yet probably no more than $200 billion was disbursed (and probably not even spent) in that 4 months.
ARRA indirectly "fixed the economy" by reducing runaway unemployment! Apparently, you fail to understand WHY the unemployment-rate was reversed mid-2009. The ARRA expenditure-bill (of more than $800B) was successful in arresting a dangerous Unemployment situation in the US that had begun in the Bush2 administration. The Unemployment-Rate statistic from the Bureau of Labor Statistics (here): Need more be said? Tell me how ...
Yes, more needs to be said. You ignored the time frame from the time that the ARRA was passed until the end of the recession: 4 months. So how could 800 billion fix the economy when it took years to disburse and spend that money?
So what? It was a necessity in the Worst Recession since the Great Depression. Something had to be done, and that was government spending. It was an absolute necessity and timing is irrelevant. What was important was to "change negative mentalities" of American consumers. ARRA helped to do this. And yes, there was also the Time Factor - Americans were sick-and-tired of the Great Recession, which mentality boosted them into "spend mode". And that was triggered by ARRA as well as a new PotUS. Which we promptly chained by voting the HofR into Replicant hands, which refused any further spending. (In order to help unelect Obama in 2012. But that didn't work, did it! But it is telling of Replicant Mentalities, which were prepared to NOT HELP more Americans to get back to work quicker simply to unseat a Democrat PotUS!
Sounds like you gave up on your economic argument for the ARRA. I guess I should be teaching your economics class.
If you were taking my course on economics you'd get an "F" for effort and an "A" for Silly Word-games ...
I'm sure anyone who shows up the teacher gets an F in your class. But I would like for you to explain how a stimulus program that had only been in existence for 4 months managed to pull the US economy out of a recession with very little of the money having actually been spent.
