At the heart of the economic debate today is what I believe to be the myth that government spending creates economic growth. Government spending on "social good" can be the BY PRODUCT of economic growth but it is fundamental that government can not take a dollar from someone, give it to someone else, and THAT will create demand. It totally ignores the fact that that dollar is no longer available to the person who EARNED IT.
A given dollar creates nothing. A dollar redirected by political clowns rewards cronies ie,(Solyndra), encourages dependancy, and misallocates capital.
Europe is imploding and we are ignoring the warning signs.
http://www.youtube.com/watch?v=_BHLguFEN3M&feature=related
-- Modified on 9/17/2011 9:02:21 AM
-- Modified on 9/17/2011 9:11:33 AM
Per your theory, keeping money in a pillow case under the bed creates economic growth. Europe is imploding for exactly the opposite reason. How did the person earn it in the first place?
I am sure there are going to be many posts stating AF is an idiot, moron, etc., etc. C'mon.
A given dollar creates nothing. A dollar redirected by political clowns rewards cronies ie,(Solyndra), encourages dependancy, and misallocates capital.
Europe is imploding and we are ignoring the warning signs.
http://www.youtube.com/watch?v=_BHLguFEN3M&feature=related
-- Modified on 9/17/2011 9:02:21 AM
-- Modified on 9/17/2011 9:11:33 AM
misstating something is not the same as disproving.
a dollar in a pillow case is simply saved. a dollar in a bank can earn interest and the bank can lend 9 dollars to someone who wants to take on the risk, but by doing so he has pledged future earnings. how much of our nations futures earnings, both public and private has already been pledged? TRILLIONS.
There comes a time that those dollars MUST be earned.
a dollar taken from me to buy you cigarettes generates nothing.
let me own the cigarettes if that's what i want my dollar going to, you earn your cigarettes.
maybe i want to hire someone to wash my car for my dollar. then the dollar is his because we exchanged money for work.
it's not complex.
-- Modified on 9/17/2011 10:23:47 AM
Dude, you do not make any sense. You are arguing about very complex subject called Macro Economics in laymen's terms. Comparing hiring someone may be to wash your car with your dollar in your pocket is like comparing an Elephant to a Black Ant. Yes they both can be black, and have four legs.
You really don't know what the fuck you are talking about but repeating what some idiot put on the You Tube. Our national intelligence quotient is going down rapidly.
Do you know the main reason the Greek economy failed? People evading taxes. By your theory, the economy of Greece should be thriving, so should Italy, Spain and Portugal but none are but Germany's is. Why Genius?
giving it away for people to stay home and watch TV is the right way to run an economy.
As the King of Ridiculous Strawman Statements, I figured I'd match like for like.
but ants have six legs, not four. lol
Analogies are supposed to be analogous, of course in this case AF's analogy is every bit as accurate as the point he is trying to argue. I guess if you are trying to argue that 2+2 =5 then you might as well compare it to Elephants and ants both being black and having four legs. Both arguments are so incredibly stupid I guess at some deranged level it actually makes sense. lmao
is worldclass. Where did you study economics?
Hey, I'm getting the hang of this!!
And the same goes for this one. Yes, simply redistributing dollars creates nothing. But not all government programs do that. And some actually spur growth. Only the government could have created the interstate highway system, without which our economy could not function and grow. The space program created many new technologies that have spurred economic growth. Even defense programs can do this, viz. the computers born during WWII which were the seed of our ongong computer-based economy. And on and on.
100% accurate. So while you may be able to provide examples of exceptions to the rule, it does not render untrue the basic fundamental.
Besides, as I stated, things like highways and defense technology can be THE BY PRODUCTS of a growing economy, like the one we had in the 50's and 60's where the economy was not prpped up by borrowed dollars.
I guess we differ about the "rule" and the "basic fundamental." I'd say there are some things the gov't. does well that do create value, and some things it does poorly. In my examples, the programs were not by-products of a growing economy. Defense technology continues during war and peace, irrespective of the economy. The interstate highway system was created by Eisenhower, primarily as a defense measure, so war materiale could be moved more quickly than it was during WWII. Its creation had nothing to do with the economy either, but it ended up spurring economic growth.
This goes back to the Civil War, when Lincoln pushed for the Transcontinental Railway.
ok, for the sake of accuracy, i'll grant my statement was overly rigid. there are a few examples where government money has produced the seed for economic growth. but behind constant use of those few successes, TRILLIONS have been pissed away. We will be hearing about the $25 billion Eisenhower Highway Act and ARPNET for the next hndred years as the federal budget blasts past $4 trillion.
What would we do without a PissJesus?
or payback to Obama supporters.
To the contrary, as far as we know now the initial loan guarantee was a merits determination made by career employees in the Dept of Energy who simply made a terrible investment decision apparently because they did not understand the costs of Solyndra's product or foresee the drastic drop in silicon prices that made it impossible for Solyandra to compete.
Just bc Solyndra investors and executives made contributions to Obama does not mean there was a quid pro quo here. The decision to subordinate the government's security interest to the new money contributor investor this year likewise is simply sound business practice - to get new money into the company rather than taxpayer money, the gov had to subordinate its interest.
Looks to me like the Dept of Energy just made a bad investment decision.
And government spending most certainly can generate economic growth just like any investment. But it has to be a good one. If the government had provided loan guarantees for Apple, you would be singing a different song indeed.
-- Modified on 9/17/2011 7:57:51 PM
"not ready for prime time" came from DOE. In fact, their analyst called 9/2011 as the time this project would run out of cash. emails indicate DOE wanted more time to do their DD. the white house simply would'nt be denied their "greenjob flagship".
but maybe you're right. maybe the head of the DOE is willing to step up and say, "yes, WE fucked up"
don't hold your breath waiting for that....
I'm not so sure as well that you can make a case that the subordination was "sound busines practice". if the business model was sound, why did the new money contributors NEED the subordination? the bankrutcy judge will iron this out, the few people i know that have gone thru BK tell me BK judges cast awary eye at transactions that occur in close proximity to the filing and do not look kindly on less than full arms length transaction...particularly in this case where it is taxpayer $$$ being subordinated to significant campaign donors.
This deal has crony capitalism written all over it and demostrates the mischief that occurs when someone (government in this case) is allowed to control "other peoples money". There is usually 1 good reason private capital cant be raised for projects like this. The business model SUCKS.
BTW, the above observation is NOT limited to government. I have seen similar abuse of capital in franchised business models where franchisor makes capital expenditure requirements of franchisees that dont pass the laugh test but because the new CEO has a wet dream about his "vision" he drags everyone else thru the exercize.
It even manifested itself somewhat in the refi boom. People cashed out bubble equity and lavsihed themselves with bigscreens, boats, and boobjobs. how'd that work out? The difference here is that the borrower and spender were one in the same and are the ones who ate the shitsandwich. Government never has the sandwich and so we go and so we go.
-- Modified on 9/18/2011 9:52:28 AM
What's wrong with the three B's? Bigscreens, boats, and boojobs, I am especially fond of good boobjobs. lol
As for government subsidizing losing industries and poor business models. Obama is hardly the first to be guilty of this, just look a the entire ethanol industry, talk about a boondoggle. Or have you ever seen the business model for those idiotic wind farms? The return on investment calls for a payout in about 30 years IF everything goes according to plan and "On budget", IOW in fantasyland.
and "hurry up and make the loan." The Post article said the WH urged only the former as they wanted to schedule a VP appearance.
So I have not read anything saying DOE "didn't want to do the loan" as your caption states but only that they wanted more time to do their due diligence, as the bod of your post states - but those are tow very different propositions.
With respect to the subordination, the choice was no private investor money at all to pump into the struggling company vs private money if the government would subordinate their security interest. If the former, then the gov would either have to invest more taxpayer money or let the company collapse. At this time the company was insisting that its propsects were rosy. That is what I deemed a sound business decision based on what the gov knew at the time.
Please don't tell me some stockbroker told you that you would miss the boat if you didn't buy BAC "right now" lol
What you describe is the farthest thing from a sound business decision that I have ever heard. Someone was certainly played for a fool, and it sounds like that someone was high enough up on the food chain to know better. Unless it was Obama who pushed for it, he wouldn't have had the experience to have made a decision like that, but now he is running the entire fucking country, and doing every bit as well at it as to be expected from a "community organizer"
with the decision in January of this year to subordinate the government's security interest in order to induce a private investor to pump money into the company.
I described the initial loan guaranty decision as a bad investment decision.
as opposed to the idiots that signed off on this boondoggle.
and to describe the initial loan guaranty decision as a bad investment decision is like describing WW as having a "slight problem" in dealing with the truth.
A concept Mari should be quite familiar with. lol
If the deal was so great the investment bankers would have been all over it. Their rejection of the deal should have sent huge red flags up during the most casual due diligence efforts.
You presume that each dollar of government spending is offset by a dollar of taxation. That is only the case in the long-run when the debt is eventually paid off. In the short run, borrowing money (vs taxation) to spend on consumption is stimulative. Go back to econ 101.
The problem today is that the multiplier effect is broken. In a balance sheet recession (like the great depression, and Japan's lost decade), too much money is saved (pay down loans), and not enough is reinvested in some type of consumption. People are saving in order to pay down the negative equity in their homes.
One economist says the government must keep stimulative spending in order to offset the multiplier constriction until the negative equity is corrected.
Another economist says we should help directly the negative equity.
Some economists say that reducing government expenditures further restricts the economy and exacerbates the problem.
I say, if the government is going to spend, it should spend wisely on capital projects (get some long-term benefit), and not operating expenditures.