What do you suppose would have happened had you mot spent and why ?
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Joseph Stiglitz: Australia should not follow the American path to inequality
- Thread starter Walter
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Have you studied this yourself ? I believe some portion if your education was economics. Would you be surprised to learn that on those occasions when nothing was done that it made no diffetence in outcone relative to countries that believes Keynes ? It is quite possible that it has more to do with the nature of your economy as to how you weather these things. With your abundance of natural resources and its domination of your economy you are.naturally insulated as femand really cannot stop. It just makes othets scramble and borrow to pay you.
Australia did have resources but their prices fell as well. We also have a surplus so we were lucky. But we did spend, so did much of Europe and the USA. This did not prevent a recession in some countries but it did prevent a world Depression. What countries did not spend in the recession. I do not think we got much back from the rest of the world sand their recession effected us.
The world's economy is interlinked certainly and there was surely a pullback of some extent. But show proof that deficit spending averted anything please. But before you do recognixe that keysian spending has never worked.
The Proof is that we never had a great Depression since Keynes methods were used. Some countries had a recession but this was not as bad as a depression.
When the economy enters a recession private companies stop spending and the government must take up the slack otherwise there will massive unemployment.
"In the early nineteenth century it was argued that the most economic system was one in which the government refrained from interfering. In the present century as a result of unstable international relations and major development in economic theory an enormous change has occurred in the importance of the government sector in the economy. since government assumed responsibility for maintain full employment and regulating the economy more closely, the budget has assumed a new and vitally significant role.
Sine 1945 Keynesian theory has been translated into practical government policy in many countries. For Keynes showed that the level of production ,which in turn provided employment and produced income, depended on the overall level of effective demand for goods and services" ( Descriptive Economics by Gregory Nankervis.
During the last recession the Australian government increase production by subsidising installation of solar panels. This increase demand and therefore production so our unemployment rate never got about 5%. In other countries too little was spent but unemployment has not approached the 1930;s level.
When the economy enters a recession private companies stop spending and the government must take up the slack otherwise there will massive unemployment.
"In the early nineteenth century it was argued that the most economic system was one in which the government refrained from interfering. In the present century as a result of unstable international relations and major development in economic theory an enormous change has occurred in the importance of the government sector in the economy. since government assumed responsibility for maintain full employment and regulating the economy more closely, the budget has assumed a new and vitally significant role.
Sine 1945 Keynesian theory has been translated into practical government policy in many countries. For Keynes showed that the level of production ,which in turn provided employment and produced income, depended on the overall level of effective demand for goods and services" ( Descriptive Economics by Gregory Nankervis.
During the last recession the Australian government increase production by subsidising installation of solar panels. This increase demand and therefore production so our unemployment rate never got about 5%. In other countries too little was spent but unemployment has not approached the 1930;s level.
GBFan
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Given that the government has become the single biggest consumer of product, it is only natural that their actions should have a commensurate impact on the economy.
The lack of a Depression does not prove the validity of an economic theory - in fact, it's a damn poor measurement.
So you have no proof.
Australa does not have a cookie cutter economy and us insulated from many market forces that impact other states. People NEED what you export. They can live without a notable share of ours and with our reliance on service sector we are far more effected than you which is why we are still mired. Same goes for Japan.
It is very hard to prove a hypothetical context that if we did not do something things would be worst. However an example from the USA In 2009 the Federal Reserve cut interest rates by 1.75% but lags of monetary policy delays its effects. The solution was for the US Treasury to mail out $100 billion worth of checks to working households .If past experience is any guide, at least $59 billions of this funds will be spent. (consumers have a high propensity to consume)- which together with multiplier effects will add 3% to the annualized growth rate in the third quarter of the year. if extended unemployment insurance or food stamps measures are added in the senate the macroeconomic benefits would be somewhat larger. We will eventually need to pay back the money but the extra year of lower unemployment and higher out put will put us in a better position to do so, (brookings)
Of course the senate control by the Republicans might stop some of this, But enough might get through to increase employment in the USA as present figures indicate,
Of course the senate control by the Republicans might stop some of this, But enough might get through to increase employment in the USA as present figures indicate,
Extending unemployment cannot increase employment. US has demonstrated that. Shipping out checks proved to have no effect. May as well acceot it, keynian does not work. Never had never will.
GBFan
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Interesting - borrowing $100 billion will supposedly create 3% annualized growth rate?
So, when it comes time to pay the $100 billion back, how much does it cost (including interest)? Short term solutions without considering long term consequences is a fool's game.
Keynian economics has been used in many countries including Australia and has not failed. It has been adopted by many governments world wide.
GBFan borrowing money in the past will increase growth rate in the future. That is because GDP is rising. When it has to be paid back GNP is much higher so paying back is a lesser burden.
GBFan borrowing money in the past will increase growth rate in the future. That is because GDP is rising. When it has to be paid back GNP is much higher so paying back is a lesser burden.
Whats insane is including government spending as a positive in GDP but nit counting taxation/birrowing as a negative (or omitting ut altogether).
FDR tried it and it failed. Japan tried ut and ut failed. The best its done is not much harm as with your country. But you admit you were in a surplus status so I argue thatyou could have done nothing and had a like result.
GBFan
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Sorry - that's categorically untrue. To assume that, because the GDP has gone up, paying it back will be a lesser burden assumes a lot of things - oh, let's say, that the cost of government has not increased (thus, freeing up the money to make the payments), that the tax rate has, at a minimum, stayed the same, or, more likely, increased (because you need that money to make the payments - however, increasing the tax rate actually lowers the money available), that the inflation rate has stayed the same (a virtual impossibility), and that the people are motivated to pay off their debts rather than just passing them on to the next generations (an ABSOLUTE impossibility).
As for Keysnian economics working, perhaps you can give us one example - just one - that makes that statement true.
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It is difficult to give complex answers here >one book that looks at the practice of Keysnian economics is "The Political province Economic ideas , Keysianism across nations. "Keysnian economics has been used at various time among many nations. Even conservatives like Nixon used it.
The example I gave was Australia between 2007 and 2010.
Increasing Tax on the rich does not necessary lower the money available. The very rich tend to wast their money by saving without increasing production .Governments can use the money better by investing in productive enterprises.
The example I gave was Australia between 2007 and 2010.
Increasing Tax on the rich does not necessary lower the money available. The very rich tend to wast their money by saving without increasing production .Governments can use the money better by investing in productive enterprises.