Spending is the Problem

Discussion in 'Economics' started by oldtime, Jun 17, 2012.

  1. I was watching Krugman give a lecture about his new book, End this Depression Now

    He claims the problem is not enough spending

    The way I see it there are three kinds of spending

    1. Consumer

    2. Government

    3. Corporate

    Of course, he claims the consumer is tapped out and corporate is greedy so the government must spend

    The way I see it is, the consumer is overtaxed

    The government is tapped out

    Corporate has no incentive

    If what he claims is true, what is the best way to get somebody, I don't care who, either the government, the consumer or corporations to start spending again?
  2. Opulence


    I'm no economist, but if everyone is tapped out, the only way I can see getting everyone to spend again is by loaning money. But that would increase our already massive level of debt.
  3. Plenty of people bought Face Book, a tasty IPO that got people spending. ....:cool:

    The Obama dinner raffles is spending.


    Got me to thinking about casino's and how they get those bsd to spend more. They comp them.

    Well, we have 1/2 of the population of food stamps (free food, that's a comp) then we comp housing for the food stampers (woo hoo, just like vegas).

    Now I see they want to change the rules, no lotto, beer or smokes with food stamp money. This is not good for spending.

    Tough shit.e.ation..there...krugman
  4. nutmeg, I always like your posts, they crack me up, I'm not a casino guy, what's a "bsd"?
  5. When I was five years old, I woke up one morning after sleeping all night on the floor and wondered what happened to our wonderful home and all my toys and why was I living in a 4th floor walk up in Hell's Kitchen. Then I walked out to the window and looked to see if there was any food on the fire escape because that is where we kept our food because we had no icebox. Then I went up to my mother and and asked what happened?

    She replied, "The rich now have all the money and they are not going to spend it" and she was right.

    Well the same thing has happened again and this time the politicians have seen to it that there is no lawful way to get money back into circulation.

    Do something about that and things will get back to normal.
  6. Capital formation. This is the core of USA dilemma.
  7. well this is the crux of the matter. Krugman says spending, you say capital formation.
  8. one person's spending is someone else's income ( and savings). It's hard to fathom how decreasing income will help. Europe is finding this out the hard way. %40 of Germany's Euro surplus is a direct result of the pigs running a deficit.

    Only an increase in aggregate demand will turn the economy around. Unknown to most people in this forum ( and almost every economist0. The U.S. Government operates a non-convertible floating currency (NCFC). No country with this type of currency, with it's debts denominated in it's own currency has went bankrupt. In the last 10 years the treasury has redeemed 347 trillion in treasuries. $47 trillion just in 2012 look it up. When the Government spends it increases the amount of reserves in the banking system by the same amount. (creates money)Collecting taxes or selling bonds does the opposite, it takes reserves from the banking system (destroys money). This is why countries that have a NCFC like japan, U.S., UK can have higher debt to GDP and not face the bond vigilantes. The assumption of neo classics is that there is a fixed pool of money and that governments compete with the private sector for this limited pool. However this is not the case for a NCFC it creates reserves when it spends( provides it's own liquidity).

    In fact net private sector savings is equal to government deficit to the penny.
    or to put it another way.

    When a government is the monopoly supplier of a currency (i.e., monetarily sovereign), its [fiat] "deficits" supply savings, not the other way around.

    If the government ran a surplus like a lot suggest than the private sector would have to run a deficit in order to supply the government's surplus. Hard to see how decreasing private savings will help either. In fact those that advocate balancing the budget and also increasing private savings have no idea that it is impossible. Look at the Clinton surplus during the same period the private sector had to take on unusually more debt to sustain itself.


    In the western world every financial asset has a corresponding financial liability. The most liquid form of liabilities are called money. You can't increase savings without increasing liabilities only the distribution can change. The private sector can't stand to be in deficit very long, but as the issuer of currency (the government) can. The U.S. Government can meet any obligations denominate in it's own currency as Greenspan said.
  9. TGregg


    It would be the same BSD as is used in trading.
  10. ok, so now that's two new things I don't know

    1.What is a BSD?

    2.What is a "Capital Account"?
    #10     Jun 17, 2012