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Obama Will Take Us Backward By Channeling Keynes: Amity Shlaes

Discussion in 'The Economy' started by Tropo, 20th Nov, 2008.

  1. Tropo

    Tropo Well-Known Member

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    Obama Will Take Us Backward By Channeling Keynes: Amity Shlaes

    Every crisis has its heroes. For months now we've all been hearing about Walter Bagehot, whose 19th-century injunction to lend ``freely'' in a panic was cited by the Federal Reserve in its bailouts.

    Now another Englishman, John Maynard Keynes, has been pulled on the stage. Keynes taught that spending, especially spending by consumers, is the way out of a slowdown.
    From last summer's small stimulus checks to the infrastructure projects under consideration by President-elect Barack Obama and congressional Democrats, almost everything the government has done or wants to do is justified by Keynes.
    more.... Bloomberg.com: News
     
  2. Chris C

    Chris C Well-Known Member

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    I'm not exactly sure what Obama's stimulus package involves (if anyone can post a link that outlines it that would be nice) but I'm confident in saying that he can't destroy the US economy anymore than the Bush family has done. Between the tax cuts that Bush Snr offered to stimulate the economy and the two tax cuts that Bush Jnr gave out in 2003 & 2007 may prove in the future to be mistakes that cost tip the US over the edge to start the slide it now can't stop.

    I'm pretty sure I read somewhere that at the time of 2003 Bush tax cuts there were hundreds of leading US economist, many of them noble prize winners petitioning that Bush should not cut tax rates to stimulate the economy. Yet because he's a hillbilly from Texas and likes winning votes he did it anway.

    Now the US sits in a precarious position where it is already running massive budget deficits and as I understand it their national debt is already maxed as it is capped by congress giving them little option from a fiscal perspective unless they increase revenues (raise taxes) or divert current expenditure (give up on the Iraw and Afgan wars). Then on top of all that their monetary policy responses are now limited with their interest rates sitting at 1%.

    Ironically, I think the best thing the US could do right now would be to increase taxes, because if consumer are saving their money rather than spending it because they are nervous about the future then government needs increase taxes and spend their money for them. The alternative is running themselves into more debt, but in the current climate I highly doubt congress will be raising the national debt cap considering it just through $700 billion at a problem that isn't abating. Not to mention I don't think the world would look kindly on the US continuing to try borrow their way out of trouble.

    By increasing tax revenues to start financing massive government expenditure may prompt a slow recovery, but more importantly it will also prepare the US citizens for what is about to become an economy that needs high taxes to survive.
     
  3. Chris C

    Chris C Well-Known Member

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    Well it looks like Obama is planning to throw $800B - $1.3T at the uS economy in his stimulus package, which I will probably will result in the US government racking up a nice deficit of close to $2 Trillion.

    I'm really starting to think that the whole, spend in recession policy is starting to be a somewhat flawed model considering it is a country that is already living off credit.

    I'm betting textbooks will be rewritten in 10 - 20 years much like they were after the great depression.
     
  4. AsxBroker

    AsxBroker Well-Known Member

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  5. Chris C

    Chris C Well-Known Member

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    Most of that comes from the FED (who are accountable to no one) not Obama.

    Nonetheless the FED is throwing everything including the kitchen sink at the problem. Though unfortunately it always come backs to conspiracy theories as to what the FED is really doing with the money, whereas the Obama government needs to be transparent about their plans regardless of their insignificance.

    The FED will either go down as the heroes that managed to float the sinking titanic or as the villains that engineered the ships faulty design and let politician steer it into numerous icebergs.