Posted on 10/04/2014 6:46:44 AM PDT by Kaslin
You’re probably surprised by the title of this post. You may even be wondering if President Obama had an epiphany on the road to Greece?
I don’t mean to burst your bubble, but the leader we’re talking about isn’t the President of the United States.
Instead, we’re talking about the Prime Minister of Finland and he deserves praise and recognition for providing one of the most insightful and profound statements ever uttered by a politician.
He explained that the emperor of Keynesian economicshas no clothes.
As reported by Le Monde (and translated by Open Europe), here’s what Alexander Stubb said when asked whether European governments should try to “stimulate” their economies with more spending.
We need to put an end to illusions: it’s not the public sector that creates jobs. To believe that injecting billions of euros [into the economy] is the key to growth is an idea of the past.
Amen.
You don’t make a nation richer by taking money from one pocket and putting it in another pocket.
Particularly when the net eff
ect is to redistribute funds from the productive sector to the government.
I’m glad Mr. Stubb has figured this out. I just with some American politicians would look at the evidence and reach similarly wise conclusions.
The Obama Administration, for instance, still wants us to believe the faux stimulus was a success.
And speaking of our President’s views, this Gary Varvel cartoon isn’t new, but it’s right on the mark.
Any “job” created by government spending necessarily comes at the expense of the private sector.
And since I’m sharing old cartoons, here’s one that also is a nice summary of what happens when government gets bigger.
That’s crazy talk! Everyone knows that numbers in a computer are far more important than actually creating things!
Well, I have noticed that the economy is not quite as bad now as it was during Obama’s first term. The further we get from the economic “stimulus”, the better the economy gets, it seems.
We’re still saddled with debt, however, and I doubt the economy will be able to fully recover without real cuts in spending. All of those people on welfare, food stamps, etc., are a permanent drain, and they receive the bulk of government spending.
Another thing that no one mentions is the gov’t expenditures multiplier versus the private sector multiplier. The multiplier is based on the idea that consumers try to spend part of their income and save part. The “spend” part is called the Marginal Propensity to Consume (MPC). The private sector multiplier is:
Kp = 1 / (1 - MPC)
So, if people spend 90% of their income, the multiplier is 10. Without going through the proof, the gov’t expenditures multiplier is:
Kg = MPC / (1 - MPC)
If you do the math, the same MPC gives a gov’t multiplier of 9. The result: for every $1 the private sector spends generates an income flow of $10, while the same dollar by the gov’t is $9. The gov’t multiplier is always one less than the private multiplier. If you want spending to causes economic growth, let me spend my money rather than the gov’t.
The thing about redistribution through taxation is that there is always a cut for the guy who takes the money, the guy who counts the money, and the guy who gives out the money.
Bump
Keynesian econ relies on Gov spending. I prefer classical econ as the Gov had to live with the $’s it taxed for the most part. Macro theory is actually National Income Accounting. The old money and banking course in classical econ would wake anyone up against what this Fed is doing.
If you look at something call the LM/IS Curve, you can see that the intersection of the monetary curve (LM) and the fiscal curve (IS) is in what is called the Keynesian Liquidity Trap. The short answer is monetary policy is going to be totally ineffective in affecting real growth. The correct policy now is reduced taxes for both business and individuals. However, politicians prefer buying votes with the money from productive members of society and then giving it to non-productive members. If you doubt this, try to explain free cell phones. The whole idea of punishing the rich and give to the poor makes no sense on so many levels. Have any of you been hired by a poor person? Why can Obozo realize a rising tide lifts all boats? Idiot...
Monetary policy like we currently have is creating trillions in debt and this mortgage buy back to print more money is extremely foolish. National Income Accounting was not accurate as it is impossible to value government spending. Thus GDP and even GNP is often misleading. We have a FED that is trying to spend us out of debt. It never works. What is a road or bridge worth? We have to cut Gov spending, and; we have to lower corporate tax rates. This socialist idea that the Gov can manage anything is a joke. EBT cards are inflating retail sales as they can be used on items never intended in many states. Obamacare has taken over a huge chunk of what was in the private sector. These are huge costly mistake. We have never seen anyone spend his/her way out of debt.
Agreed. Since Obozo took office, welfare payments have risen just over 30%. Social Security payments during the same time rose .1% of one percent. Wonder why that is?
bump
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