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We Can't Spend Our Way out of This Quagmire

hypocritexposer

Well-known member
In reality, excessive money growth drove asset prices up and drove interest rates down, making people feel richer than they really were and lowering the cost of borrowing money to facilitate more spending. Since the level of spending before the period of excessive money growth was just sustainable, the resulting level of consumption and business investment spending was unsustainable. The solution is to allow asset prices to fall to levels that accurately reflect what our economy can produce. This will make it clear to people that they are not as rich as they thought two years ago and thereby return spending to sustainable levels.

Still, virtually everyone agrees that we need to further stimulate the economy even though current attempts to solve our crisis by increasing spending is exactly the wrong thing to do. No one wants to bear the political cost for appearing to be uncaring by favoring a policy of "doing nothing." Out of political cowardice, the federal government is attempting to produce a solution that is penny-wise and pound foolish. You can't solve an excessive spending problem by spending more. We are making the crisis worse.

http://www.cato.org/pub_display.php?pub_id=9901

Video on Keynesian economics, and why it won't work.
http://www.cato-at-liberty.org/2008/12/15/are-we-all-keynesians-now/
 
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