What this Country Needs is a Helicopter Drop of Money

The economy does need people to spend more, but people are reluctant to do so. The velocity of money (money changing hands) drives demand and demand has been low for too long (and wages have been stagnant way too long.) Interest rates being so low should have prodded people to spend since saving it pays practically nothing, but with so much credit debt, people seem afraid to spend. The less people spend, the less demand there is, so fewer products are made, and fewer jobs are needed. The fewer jobs there are, the less money people have and the less they can spend. It's a vicious cycle. When W told people to take stimulus money and go buy something, he was attempting to raise the velocity of money and get the economy kick-started as it began to slow. It just wasn't enough to get the economy churning, so it sputtered and hasn't really ever kicked back in gear. When we crank up the war machine, velocity starts churning money through the economy, but after more than a decade of war, people are weary of war. We have to find a different way to get the velocity of money up without going to war to do it…. something like a new "moon shot."

 

Nonsense money doesn't create jobs people thinking they can make money create jobs. You can print all the money you need and as long as no one is willing to take the risk you won't increase the number of jobs bymuch more than the number need to replace retirees and the dead or disabled

 

You can think all you want. If the money isn't there, jobs aren't going to be created. What you're saying is illogical.

Lmao. So people would choose not create goods or services for this new money? You literally have no clue what you are talking about and nothing you say is logical. Demand creates jobs, not supply.

 

So waht are you going to do mail everyone a check for a grand every month for a couple of years?

 

I don't care how it's done. The money just has to be introduced in to the economy.

 

There is plenty of liquidity in the economy now. But people are leary of spending too much right now, and thanks to Dodd-Frank the Banks aren't loaning much either.

 

There is plenty of liquidity at the top. Not so much at the bottom. Banks aren't loaning much because people don't want debt right now. They want income/equity. The government can provide them that. Which is my whole point.

 

No. Humans have been coining money for 5,000 years, do you really think we are the first to say "Hey, let's just create a bunch of money!"? All money is, is a call on labor. It is the growth of labor and productivity that produces additional prosperity. We have increased the money supply like never before, but still the economy languishes.

 

We have not "increased the money supply like never before". If you're using nominal values then you probably shouldn't be talking economics. Relatively our money supply increase is of no significance. And the only way you can increase money is by "finding more of it". So obviously history has shown that people try to find more of it, lol. Your logic would show that economies should have $0, since increasing the money supply is bad, lol.

And yes, your graph shows that we should increase the money supply more as the current supply of money is not providing the growth we need. Thanks for that.

 

Your making up nonsense and imputing it to me. That's kinda of childish.

No. It shows that excessively increasing money supply isn't effective in returning to natural GDP.

Has anyone more thoroughly beclowned himself through this entire affair than Paul Krugman?

 

People who receive the the green paper buy goods and services. The people who supply these goods and services hire more people to keep up with increased demand. The employees of the people making these goods and services spend more money and still other people must be employed to supply this new demand. It's the classic vicious circle, but in reverse.

The limit on this process is inflation. Governments should always increase spending without limit until there is full employment. After full employment is reached, they should reduce spending, since it will have no effect on increasing prosperity.

 

This helicopter drop of money you're talking about. What you mean to say is that the government should be investing in the country.
I recon this can be explained with the GDP Formula: GDP = C + I +G + X

Simply dropping money for consumers would create a short term increase in GDP; but then some other factors need to be considered.
* Consumers cannot Export; more than likely they might import which hurts GDP (X)
* Increasing consumer demand without improving business ability to supply leads to price inflation based on supply-demand mechanics (C)
* Consumer spending does nothing to improve the nation's infrastructure (G)
* Business would simply raise prices to counteract increased demand instead of investing and creating jobs (I)

Look at it this way. Say you give the lower income brackets a wad of money.
They will increase their spending, yes.
But will they create jobs, no. They would not introduce newer consumers into the market.

Spending money on infrastructure and tech would create an environment for greater productivity and increase supply.
Businesses going for these contracts would then make more investments, and hire more people, have more capacity to supply and drive down costs.

An over simplification of economics I know. But Government spending is the right way to go about increasing our GDP. But governments these days seem more inclined to spend on social projects and welfare. Kinda like throwing money outta helicopters if you look at it a certain way.

 

What I propose doesn't have to be counted in GDP. It can be depending on how they categorize it, but just sending a stimulus check to people is not included in GDP.

So all these new consumers buying things they wouldn't have bought would not create new consumers into the market? This doesn't make much sense.

I honestly don't care about the government spending side or if it's included in GDP or not (transfer payments aren't), it's more the introduction of money to the economy. Which is necessary for economic growth.

 

No, that is your logic. You have not provided any evidence that increasing the money supply isn't effective in returning to "natural GDP". Another made up term as there is no such thing. The chart you provided did not show any "excessive" increases to the money supply. Gotta to be a little smarter to play my game.

I don't care too much for Krugman. He's right more than he's wrong but that's not where I get my economic knowledge from. You gotta come up with something more, because you're not providing me much entertainment.

 

There seems to be some legitimate points here, and some that are off base.

First, it's not about increasing investment (or increasing supply). We have a profound long-term overcapacity in the West. Increasing investment just compounds this problem. What is limiting us is not supply, but demand.

Secondly, businesses are not freely able to increase prices. They can only do so when there is a shortage of products available compared to demand. If no such shortage exists, people will just buy from other suppliers who don't raise their prices.

Thirdly, all new jobs come from spending, not investment. No business hires new employers unless he believes there is a strong market for his product. It takes people with discretionary cash to spend, before this strong market is feasible. Every dollar worth of new consumer spending will create secondary dollars in business-to-business spending, trucking, housing, food production, auto sales, etc.

You are correct for infrastructure spending, however. There is no direct consumer demand for infrastructure - it must be directly funded as separate policy.

 

Short term increases in quantity demanded only serve to increase prices. The only real way to consume more is to produce more.

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Everybody who is productive, demands. Demand without production gets you nowhere.

 

Demand in the economic sense has nothing to do with what people "want". Demand creates production and jobs, not the other way around.

 

Nonsense, every productive person demands, hence production creates demand.

 

You really shouldn't be talking about this. When we talk about demand it has nothing to do with what people "want". We have no shortage of supply right now. Producers can produce much more than they are right now in the United States. Only reason they're not is because we lack demand. Come on now, this is simple stuff.

 

This is not up for debate son. Productivity enables demand.

 

Lmao, you can produce all you want, if there is no one there to buy it, it's meaningless. You first have to understand what demand means.

 

Here is a sensible use of public debt financing.

http://www.zerohedge.com/news/2016-...in-tunnel-worlds-longest-deepest-train-tunnel

 

You still fail to understand the logic here. Nothing has to be financed. The government can simply just spend the money. I was trying to overemphasize the point that it doesn't matter who gets the money, the money simply has to exist, that's the only point.

 

The economic creationists are like Christian fundamentalists. They do not believe in the evolution of markets and production. They believe that the Holy Government creates wealth at the printing press and that apocalypse would occur should their God stop favoring us with economic central planning.

 

Some people are just normal and not crazy Austrians. The economy revolves around supply and demand. People use money to exchange for goods and services. Logically, you need money to do that, lol. It's very simple. Got to jump through a lot of hoops to make it something that it's not. That's why no developed country or academic institution teaches your crazy thoughts on economics that involves people just magically working together, lol.