If the governemnt taxes from one group to give to another, I understand this is not stimulus.
If the government did print a little money and gave it to everybody, you cannot deny it would not kick start the economy.
If they did it every so often, people would spend a little more.
I am really keen on learning the Austrian theories and if this Keynesian theory is fallacious, please point them
out.
yes, you can give a cancer patient shocks of adrelanine so they walk around for a day all energetic and excited, but they still have cancer
do we get free cheezeburger in socielism?
What Fez meant to say is that by artifically printing new money [ inflating ] then you are devaluing the purchasing power of the dollar and rising the level in prices on goods and services. Consumption doesn't build a sound economy, savings does.
'Men do not change, they unmask themselves' - Germaine de Stael
Sure, nominally the economics numbers will go up, but not in real terms.
To paraphrase Marc Faber: We're all doomed, but that doesn't mean that we can't make money in the process. Rabbi Lapin: "Let's make bricks!" Stephan Kinsella: "Say you and I both want to make a German chocolate cake."
It would mislead people into making the wrong investment decisions because they think the pool of real savings is larger than it actually is. This works so long as the money supply keeps growing at an ever increasing rate. It ends when the capital base is completely destroyed (and as Mises said, people resort to eating the seed corn) or the rate of money supply growth slows -- only then do people realise they made a mistake and a lot of the projects they undertook did not in fact have the necessary capital to support them.
I suggest reading Bob Murphy's latest articles, particularly the ones about the current recession.
inquisitiveteenager: If the government did print a little money and gave it to everybody, you cannot deny it would not kick start the economy. If they did it every so often, people would spend a little more.
The most basic answer to this is, as another poster said, that an economy is not built on consumption but on savings. Also, money is only a medium of exchange; it is not wealth. Statements like the ones above are also non-sequitors. How does stealing from people via inflation make an economy grow?
inquisitiveteenager:If the governemnt taxes from one group to give to another, I understand this is not stimulus.
You are correct, but this is a policy advocated by Keynesians in recessions. As poor people spend a higher proportion of their income than rich people, then a redistribution of wealth from rich to poor may help recovery (according to Keynesians). Of course, this is all nonsense because an economy grows via savings, not consumption.
Irish Liberty Forum
inquisitiveteenager:If the government did print a little money and gave it to everybody, you cannot deny it would not kick start the economy.
You can deny it very easily because it simply isn't true. The printed money would simply cause inflation. At best, it could temporarily stimulate the economy by tricking entrepreneurs into producing more, even though their prices rose with the pace of inflation, making their production unprofitable. This would then require more money to be printed ad infinitum until hyperinflation (hence the failure of the Philips Curve).
Spending does not cause economic growth, saving does. When you spend money, nothing new is produced; you simply consume already existing products. However, when someone saves their money and/or invests it, they help increase production because:1. Less spending means that prices fall, making it easier for entrepreneurs to buy/produce additional capital goods and thus expand production.2. More money in banks and in the stock market means more money that entrepreneurs can borrow to buy/produce capital goods.3. Money directly invested by entrepreneurs by expanding the capital stock increases productivity and thus increases economic growth.
Political Atheists Blog
Increasing the money supply and lowering interest rates distorts market incentives and creates spending in areas there would not otherwise be and eliminates spending in areas where there otherwise would be thus creating malinvestments and also instituting a moral hazard because the time value of money in an inflationary setting is negative, thus eliminating the incentive to save and therefore starving markets in the future of real capital.
Taking money from productive sectors of the economy and giving them to unproductive sectors of the economy also clearly creates undesirable incentives that are unsustainable because production is the source of wealth. So if you penalize production and reward failure, you are clearly creating a system that will fail eventually. And failure is not effective.
Yep, and all you get is capital consumption in the end, as the means to expand production are non-existent or insufficient relative to the desired expansion.
Freedom of markets is positively correlated with the degree of evolution in any society...
Jon Irenicus:all you get is capital consumption in the end, as the means to expand production are non-existent or insufficient relative to the desired expansion.
Exactly. Consumption cannot stimulate economic growth, since all it does is use up the available capital stock. Economic growth comes from the expansion of capital, not the contraction of it.
To the OP, the examples that Krazy Kaju gave also refute the "Paradox of Thrift," as put out by Keynes.
But when people consume more this is an increase in demand and will meen that firms will produce more doesn't it? For example if the new money was used to buy cars then motor firms would see thi as an increase in demand and hence lead to more production
sammc699: But when people consume more this is an increase in demand and will meen that firms will produce more doesn't it? For example if the new money was used to buy cars then motor firms would see thi as an increase in demand and hence lead to more production
Like Krazy Kaju said, the consumption erodes the existing capital stock. Consumption isn't really a bad thing, implicity we are stating what Mises called in his theory, "overconcumption and malinvestment."
the question is , when people 'demand' more 'consumption' what are they demanding with? in your example, what do they offer motorfirms? if they are not producing more, then they have no more produce to bring to market to bid for motors with. the fallacy of keynesianism is to try to circumvent Say's law. but this is impossible, therefore people are 'consuming' more without producing more, and necessarily eroding the capital stock, or in other words, future productivity,
they are engineering poverty.
Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring
Once you understand that the federal government does not have the authority to print fiat currency and force its citizens to use it, then your other questions become irrelevant.