Aggregate Demand? We don't need no stinking stimulus...

[Woolleybugger]

"The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, private inventory investment, and residential fixed investment that were partly offset by negative contributions from federal government spending, nonresidential fixed investment, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The deceleration in real GDP in the first quarter primarily reflected a deceleration in private inventory investment and a downturn in nonresidential fixed investment that were partly offset by accelerations in PCE and in exports."

GDP for first quarter at 2.2%, lower than expected but more than it could have been had the austerity hawks in the Tea Party got their way. What part of aggregate demand do you wannabe economists not understand? Here is it again for the economically illiterate:

AD= Personal consumption + Business investment + Government spending + (delta between exports and imports)

If one goes down, the other has to go up to balance it all out. Got math anyone?

 

[Lukey]

Yes, the old "Dennis Hopper has strapped a bomb to the economy and if we don't keep giving it enough 'stimulus' to keep it going we all blow up" economic argument.

 

[Woolleybugger]

I notice that you run out of material unless it's pure drivel, snark or misinformation, these you have in plenty of supply. Now kindly explain to us how austerity increases aggregate demand using numbers inserted into the equation...I realize this is a stretch for you but do try, its a simple equation.

 

[Lukey]

I notice that you run out of material unless it's pure drivel, snark or misinformation, these you have in plenty of supply. Now kindly explain to us how austerity increases aggregate demand using numbers inserted into the equation...I realize this is a stretch for you but do try, its a simple equation.

It doesn't (any more than going cold turkey would feel better than the junky's heroin high). What is does is return your aggregate demand to a more natural level that your economy's productive capacity can support. It's like you guys completely ignore that whatever the government "contributes" to aggregate demand isn't (somehow, someday) going to have to be paid for by the profits of someone's productive endeavor.

 

[fairsheet]

It doesn't (any more than going cold turkey would feel better than the junky's heroin high). What is does is return your aggregate demand to a more natural level that your economy's productive capacity can support. It's like you guys completely ignore that whatever the government "contributes" to aggregate demand isn't (somehow, someday) going to have to be paid for by the profits of someone's productive endeavor.

This is perhaps the most bizarre new economic theory I've ever heard. You seem to be suggesting that it's in our interest to reduce demand to meet reduced supply? That's not Keynes of course, but neither is it "supply side".

Maybe we can call it, "Austerity side economics"? It makes no sense to me, as I have trouble perceiving the upside. But then...it doesn't really matter, since such a scheme isn't tenable within a functioning Democrat politic. And any scheme that a democratic politic won't accept, is useless on its face.

 

[Lukey]

This is perhaps the most bizarre new economic theory I've ever heard. You seem to be suggesting that it's in our interest to reduce demand to meet reduced supply? That's not Keynes of course, but neither is it "supply side".

Maybe we can call it, "Austerity side economics"? It makes no sense to me, as I have trouble perceiving the upside. But then...it doesn't really matter, since such a scheme isn't tenable within a functioning Democrat politic. And any scheme that a democratic politic won't accept, is useless on its face.

The "upside" is that you never become Greece...

 

[fairsheet]

The "upside" is that you never become Greece...

If that's all you got, you ain't got nothin'. Rote diversions to "Greece", are for the wallowers in Fox's latrine, not actual sudents of economics.

 

[Lukey]

If that's all you got, you ain't got nothin'. Rote diversions to "Greece", are for the wallowers in Fox's latrine, not actual sudents of economics.

You mean like the lefty economics "experts" always saying we could become just like Sweden if we adopt socialism (despite all the obvious cultural and demographic differences)? And I like how you guys completely ignore the fact that the government can't spend us into prosperity and then act like WE'RE not "actual students of economics..."

 

[fairsheet]

You mean like the lefty economics "experts" always saying we could become just like Sweden if we adopt socialism (despite all the obvious cultural and demographic differences)? And I like how you guys completely ignore the fact that the government can't spend us into prosperity and then act like WE'RE not "actual students of economics..."

Perhaps you're ashamed of your suggestion that we should endeavor to reduce demand to meet reduced supply? I've heard actual students of economics make a case for demand side (Keynes) or supply side (NeoGOP), but I've never heard anyone make the case for your theory.

This is your opportunity.

 

[Lukey]

Perhaps you're ashamed of your suggestion that we should endeavor to reduce demand to meet reduced supply? I've heard actual students of economics make a case for demand side (Keynes) or supply side (NeoGOP), but I've never heard anyone make the case for your theory.

This is your opportunity.

Allan Meltzer (among others) has done so:

http://online.wsj.com/article/SB10001424052970204777904576651532721267002.html

 

[fairsheet]

Allan Meltzer (among others) has done so:

http://online.wsj.com/article/SB10001424052970204777904576651532721267002.html

With all due respect for you and your Meltzer, his entire screed is but a series of baldfaced lies. Put more politely, he premises himself on one "fact" after another, that simply isn't fact.

Nevertheless....even IF he wasn't building himself a house of non-factual cards, nothing he spews, supports your theory as to reducing demand to meet reduced supply.

Now then...I THINK maybe you're suggesting that we need to convince people to just shut the hell up and get used to having less (reduce demand). But, there are two problems with that approach. One - as I suggested above - is that a Democrat society won't stand for it. And no theory - valid or not - is worth shit if society won't accept it. And second - directly related to the first - is that your theory doesn't posit any positive....except to the extent it suggests less negative.

Demand side suggests a way of growing the pie. Supply side suggests a way of growing the pie. Whether or not we ACCEPT one or the other suggestion, is one thing. But, we can't deny that they at least OFFER a suggestion. All your theory offers, is a smaller pie. I'm not exactly sure that a theory PROMISING to shrink the pie is so much an economic theory, as a social theory - and a social theory that's failed, wherever it's ever been tried.

 

[gabriel]

but there is a popularly held belief that if we dont FIND a way to shrink the pie, AND the number of diners, we will perish as a species.

 

[Woolleybugger]

Lukey is a great example of someone who knows things and is certain they are correct. But he really has no grasp of the material behind it. It is like knowing data points without the ability to use them to make a decision. I find his posts on economics to be totally devoid of any real understanding of the subject at all. He knows he is right without even attempting to understand the underlying principles themselves. In order to understand a subject like econ, you must understand the various arguments in play. He abjectly refuses to learn even the most basic economics, he runs straight to his desired answer and then spouts it like a triumphant dolt celebrating the collapse of his own house. If he could actually articulate economic theory with any respect for the various giant minds that have vainly attempted to make this into a science, I would respect him. Ignore him, he knows absolutely nothing about economics other than what he could learn from Glenn Beck.

 

[Lukey]

With all due respect for you and your Meltzer, his entire screed is but a series of baldfaced lies. Put more politely, he premises himself on one "fact" after another, that simply isn't fact.

Nevertheless....even IF he wasn't building himself a house of non-factual cards, nothing he spews, supports your theory as to reducing demand to meet reduced supply.

Now then...I THINK maybe you're suggesting that we need to convince people to just shut the hell up and get used to having less (reduce demand). But, there are two problems with that approach. One - as I suggested above - is that a Democrat society won't stand for it. And no theory - valid or not - is worth shit if society won't accept it. And second - directly related to the first - is that your theory doesn't posit any positive....except to the extent it suggests less negative.

Demand side suggests a way of growing the pie. Supply side suggests a way of growing the pie. Whether or not we ACCEPT one or the other suggestion, is one thing. But, we can't deny that they at least OFFER a suggestion. All your theory offers, is a smaller pie. I'm not exactly sure that a theory PROMISING to shrink the pie is so much an economic theory, as a social theory - and a social theory that's failed, wherever it's ever been tried.

Demand side "grows" the big government fake economy via smoke and mirrors while supply side grows the actual (private) self sustaining economy. Just look at the current situation - government debt is growing faster than the economy. How long do you suppose we can continue doing that?

 

[OldGaffer]

He abjectly refuses to learn even the most basic economics, he runs straight to his desired answer and then spouts it like a triumphant dolt celebrating the collapse of his own house.

rofl

 

[Lukey]

Lukey is a great example of someone who knows things and is certain they are correct. But he really has no grasp of the material behind it. It is like knowing data points without the ability to use them to make a decision. I find his posts on economics to be totally devoid of any real understanding of the subject at all. He knows he is right without even attempting to understand the underlying principles themselves. In order to understand a subject like econ, you must understand the various arguments in play. He abjectly refuses to learn even the most basic economics, he runs straight to his desired answer and then spouts it like a triumphant dolt celebrating the collapse of his own house. If he could actually articulate economic theory with any respect for the various giant minds that have vainly attempted to make this into a science, I would respect him. Ignore him, he knows absolutely nothing about economics other than what he could learn from Glenn Beck.

LOL! This isn't rocket science. The "high minded" economic thinkers you revere go to great lengths to maintain the chimera of smoke and mirrors economic theory that supports the big government demand side progressive agenda. The fact of the matter is you guys have been predicting the end of the economic malaise and a return to fat city ever since Obama got his first stimulus bill passed while I have been consistently predicting that the economy has entered a (more or less) permanent slow growth high unemployment phase that mimics the Euro-zone and Japanese experiences, since Bush put the federal budget on steroids (and that Obama has just continued Bush's failed policies) - and who has been more on the money? Me! And I came up with the concept that big government could "crowd out" the private economy without affecting the availability of credit/borrowing rates independent of Robert Lucas, and also that it isn't a supply side economic policy if you lower tax rates and increase spending (deferred taxes) independent of Meltzer. And then both of those concepts subsequently showed up in the thinking of very prominent economists. Coincidence? I think not. It's just that I possess an innate understanding of economics that transcends that of the "sophisticated" lefty ideologues selling demand side economic snake oil.

Lets face it - you have to denigrate my grasp of economics because otherwise you'd be forced to admit that my economic theories have a much better track record of accuracy and success than yours.

 

[degsme]

LOL! This isn't rocket science. The "high minded" economic thinkers you revere go to great lengths to maintain the chimera of smoke and mirrors economic theory that supports the big government demand side progressive agenda.

Hmm Ad Hominem fallacy and nothing else.

The fact of the matter is you guys have been predicting the end of the economic malaise and a return to fat city ever since Obama got his first stimulus bill passed while I have been consistently predicting that the economy has entered a (more or less) permanent slow growth high unemployment phase that mimics the Euro-zone and Japanese experiences, since Bush put the federal budget on steroids (and that Obama has just continued Bush's failed policies) - and who has been more on the money? Me!

Except that you are leaving out a whole lot of relevant facts here. Facts inconvenient to your claims

• GWB did not put "the federal budget on steroids"
• The federal spending GWB did engage in MOSTLY was economically increadibly inefficient compared to what Keynes and others suggested was the right approach
  
  • Tax cuts primarily to the LEAST EFFICENT spenders (one's who reduce GDP growth by 30%+ for every $1 in tax cuts received) IE FM of 0.7 or less
  • Defense realted spending that has a Fiscal Multiplier of 0.5 or less
  • cuts in long term capital gains tax rates when such rates were already below the level in which stimulative effect takes place
• Obama got ONE stimulus and that worked. The rest has been a reversion to Reagan policies of lower tax rates for Cap Gains and the Wealthy
• There is zero evidence of any government "crowding out" of private economy.
  
  • Corporations have some $1.84 Trillion in retained profits. And yet none of it is being invested. That's not a "crowding out" that's a "demand slump"
  • Government is not spending in areas that have traditionally been the area of private sector investment - productization of technological discoveries. Government is spending in areas that traditionally have been ignored by private sector: Basic Research, social services
  • Corporations have been increasing productivity, That means that rather than government crowding out delivery of goods and services, corporations have simply been shedding jobs, exacerbating the Demand Trap.
  • Places where government spending has been more active- WA, Silicon Valley, NY - have seen more reinvestment by the private sector
• Eurozone is not in "permanent slow growth" - Germany, Finland, Sweden, Norway etc. ALL outgrew USA's GDP Growth during the "oughts".
• Lowering tax rates IS SUPPLY SIDE because the argument is that increasing capital to the suppliers will increase investment. AND THAT HAS NEVER EVER HAPPENED except when marginal rates have been in excess of 90%.

So your claims here are contradicted by observable facts.

Lets face it - you have to denigrate my grasp of economics because otherwise you'd be forced to admit that my economic theories have a much better track record of accuracy and success than yours.

Not in the least. Your "economic theories" are "accurate" the same way a stuck clock is accurate twice per day. They don't actually predict the observable set of economic facts in toto. and when called on that, you invariably engage in ad hominem.

 

[jammer]

Fairsheet, I just finished reading a new book by author Sam Winston called "What Came After" and it pretty much paints the future the US can look forward to if Lukey and the republicons get their way. Big corporations running everything, no central government, the wealthy protected by the privatized military and the rest of the Americans living hand to mouth. A good read if you want to glimspe what life would be like if Romney wins.

 

[Woolleybugger]

Let's just put this supply side theory to bed right now. Demand theory says that the economy grows because there is a demand for goods and services. That demand can be paid for by the wages and earnings of the customers or by allowing for credit which gives customers the ability to purchase more products and services than their income or assets could buy in a cash only type market. When people do not have jobs, are in massive debt themselves and are insecure about job safety or are being paid very low wages, they naturally hold back and start to hoard cash and assets. This brings personsal consumption down, personal consumption drives our economy, it is the key economic factor in job creation and demand. If we were savers and thrifty like say the Japanese or Chinese, personal consumption would take a back seat to asset accumulation and debt reduction. This also decreases personal demand but can be offset by either fiscal policy (stimulus) or exporting to markets like ours that spend every nickel they earn and then some. Our nation would fall into a massive hole if we started to focus solely on lowering domestic consumption because we cannot export our way into replacing that loss of demand with exports. Free trade has made that almost impossible in a consumer driven economy where the wealthiest family on earth made it there by buying cheap, paying cheap and selling cheap (Walmart). If you advise a supply side economy then what you are really saying is for credit to dry up both at the federal and personal level to allow for savings to accumulate. Once those savings get to a point where people feel safe again, they then start to spend those savings creating new demand. This could take decades as we see in Japan. Do you want to have 10-20 years of massive savings and debt repayment at the personal and federal level? Do you have any idea what that would do to our GNP?

This argument is about one side saying we use all the tools available to us to increase aggregate demand now to avoid such a death spiral. This side says that if we invest in things that create future demand, we can work our way out of the mess and miss a lost decade or two. The other side says to pay the price no matter what the cost. In a nation that needs upwards of 130 million paychecks, that advice will drive the number of jobs down into the sub-100 million range. Are you starting to understand the quote "in the long run, we are dead"?

 

[degsme]

Demand side "grows" the big government fake economy via smoke and mirrors while supply side grows the actual (private) self sustaining economy. Just look at the current situation - government debt is growing faster than the economy. How long do you suppose we can continue doing that?

Government debt is growing faster than the economy because of BAD FISCAL ALLOCATION POLICIES OF THE CONSERVATIVES.

• Tax Cuts that primarily benefit the least efficient sectors of the economy (Defense and upper quintile earners) with Fiscal Multipliers of 0.5 or less
• cuts in Capital Gains taxes that are below rates that stimulate private sector investment IOW Fiscal Multiplier of 0%.

That's going to grow the debt exactly the way you suggest it is.

Yes and?



As for how long can the USA continue to do that? At least another 10 years given the precedents offered historically by other nations.