American Madness

Intelligent Criticism in the Service of a Better Nation




“Stimulus” is a meaningless term

Posted by Josh Friedlander | No Comments

My reply to David Brooks (who now fancies himself an economist):

If economists had a clue most of them would work real jobs producing something. This is REALLY simple.

If you had a friend who was in debt to his eyeballs and had just lost his job and he asked for a loan to spend the weekend drinking bourbon and snorting cocaine, you’d turn him down, right? If he came to you and said, “I’ve gotten into this degree program to learn some stuff that will help me find work” it would be a different story.

The term “stimulus” is useless. Either a debt is incurred to invest in productive capacity or to blow on useless unproductive activity. That’s it. Really. There are no other reasons to incur debt. When private enterprise stops borrowing and spending, and individuals stop borrowing and spending–because they CAN’T borrow and spend any more–the only entity left that can borrow is the government (and even then there will eventually be a limit to what the USGovt can borrow).

The ONLY question that matters is whether the government borrowing and spending has been an investment in future productivity. Has the borrowing been to invest? Well, let me answer this for you: No. No, it hasn’t. We print money, spend it to import from other countries, they take our dollars and have no choice (realistically) but to reinvest those dollars with us.

We get cheap goods, they get IOUs on future US productivity that won’t materialize, and we get inflated asset prices resulting from petro-dollar and import-dollar recycling. Ultimately, they decide to buy their own stuff, stop selling to us at such cheap prices, stop denominating energy commodities in our ponzi currency, and we STILL win because they’ve created too much productive capacity while we’ve merely spent too much of our own monopoly money. We are therefore forced to cut back (eventually) and so are they. In the meantime, try to pretend this is easy to understand, because it is.

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