"Now if i can only spend 95% of what i used to spend, and everyone else is the same, there is ANOTHER 5% drop in GDP and you can see how it actually snowballs if there is no new job growth anywhere." Multiplier effect, this is only temporary. True economic performance depends on productivity level. The 95% (or 93% because of multiplier effect) remaining people with jobs are not going to slack off. These people will produce the same amount they used to, and they will want to give it to the 5% unemployed as well, but want something back from them. This is when demand from the 95% employed, and supply from the 5% unemployed come together. In the end, the economy will produce the same, minus the cars (they are free already), plus something new. So, unless the government will take measures like shortening the workweek to bring employment levels to 100% quicker than they naturally should, the people in this economy will be better off overall in the long run. In the short run there will be some stress, agreed. No, I don´t agree you shot enough holes ;-)
If you are saying that US$ tend to "dissapear" on a regular basis, the FED can just print some new ones without adding any inflation. Solved.
I am saying that a $100 bill can go outside the US, and its entire life, never be spent in the US. The US can print it, but it is not true that it must be spent in the US. Our humongous deficit and external debt are mind-bogging.
Nice try...you almost threw that one by me. First lets shoot hole number 1 thru your first statement. "They will want to give it to the 5% unemployed..." Yeah, i see so many people today saying "lets give more money to welfare recipients" But ok...lets say we live in a very loving country where we do want to give people the help until they get back on their feet. Now lets say me and 18 other friends want to help that guy buy stuff and not change his standard of living. Me and my 18 friends make 5,000 dollars per month each. Now we all chip in 5% to help the unemployed auto worker. ($250 dollars per month each) Now...thats 250 dollars per week that me and 18 others are not spending. That 250 dollars (which is 5% of our income) is not being spent on things we normally spend. Its being given to the auto worker. He is also spending 250 dollars less than he is used to because 250 x 19 is 4,750. Either way, $5,000 dollars has just been taken out of the economy every month. And if you were in a town of with a workforce of 100,000 people, 5% of them autoworkers, your town has just now lost 25 MILLION dollars per MONTH! Or $300,000,000 per year! Thats just in a town of 100k people. The american economy has a workforce of 155 million. Doing that math and your economy just lost 38.75 BILLION dollars per MONTH or $465 billion per year. The taxes the government would lose on that ALONE could fund - United States Department of Homeland Security - United States Department of Energy - United States Department of Agriculture and have change left over. Theres a few more holes for you to patch =D
No problem. "... they will want to give it to the 5% unemployed as well, but want something back from them. This is when demand from the 95% employed, and supply from the 5% unemployed come together." By these phrases I didn´t mean giving as wellfare. I meant, these 95% of people have 2 choices: A) work less and get the same amount of goods they are used to, or B) work the same as they did, and spend the money they save (by getting cars for free) on additional goods, thereby employing more people (the exact same amount of people who got layed off, if wage per capita stays the same). The now unemployed people have 2 choices as well: A) change their lifestyle from proud (probably) producers to wellfare recipients, or B) get a new equally paying job so they can continue their old lifestyle. I would say for both groups answer B) applies. Patched.
External debt. That means that somebody external invested (deferred spending) in the US. So the dollars came back home afterall. And I didn´t know money had a lifespan.
A) Please explain to me how if i work less, i can get the same amount of goods because last time i checked, if i worked less, i got paid less and prices didnt really come down because the stores saw that i was working less. or B) I still dont see how people are saving money if they get a car for free, because everyone already had a car that if they were making payments on, they couldnt just stop making payments. They couldnt sell their new car because who wants to pay for a new car if they just got the exact same one for free. And they cant sell their old one because everyone is driving new cars. Like i said in the first statement, if people stopped making payments, then the finance companies would go under, thereby cutting out another 5% of the workforce. Even if the people didnt have payments, where is the saved money coming from? And i havent even addressed the fact of who is paying for the building materials and labor of these "free cars" Maybe thats why the autoworker doesnt have a job anymore because his employer gave away all the cars for free! Your patches didnt work, they are still leaking. =P
Regarding B): Car payments are temporary, I don´t know of any permanent ones. I am talking about long term conditions, not short term. Where the saved money is coming from? They don´t have to pay for cars anymore, so they have more disposable income. A) You could work less and get payed less and still maintain your lifestyle, because you don´t have to pay off your car anymore after a while. But this a moot point, at least if we both agree that people would not change their working hours, unless they are totally satisfied with what they have, which is against human nature ;-)
Ok...so basically what your saying is that after a few YEARS people will have more disposable income. You say long term, but cars dont last forever and people dont keep them more than a few years anyway, so you can really say those people will have disposable income once their car payments are up. Anyway...i dont see to be getting thru with you with the car analogy, so lets use something a little more real (since cars will never drop out of the sky and be free) Lets use jobs that are permantly lost. Lets look at the mail. How many postal workers were there 20 years ago vs today. 100s of 1000s of jobs have been lost because its now free to send mail (email) Those jobs are PERMANENTLY lost! They are never coming back. that is permanent job loss. The only way those people will ever get jobs again, is if there is economic growth. When there is economic growth there are more jobs and those people will have to learn a new trade. But the days of those people working at the post office are gone because its a permanent job loss. Those positions are gone.