Trillions for Obamanomics

Why does money create demand?

These bailouts don't create demand. If you give people money then either that money has to come from somewhere else in the economy or you have to increase the money supply as a whole and all you have done is to inflate the currency (in which case the wealth is still coming from somewhere else in the economy).

There is never a scarcity of demand. Economies are limited because of scarcity in resources and in the limitations of technology to utilize those resources to create supply. Economies expand always and everywhere because of improvements on the supply side--increased capitalization, improvements in technology, discovery of new resources, increases in the workforce, increased trade, and greater protection against threats to these things.

Bailouts avoid shifting resources from those people who have been poor stewards to other people who have made wiser choices. Demand-side stimulus diverts resources from capital expansion (where it would increase supply and increase wealth) to demand-side consumption. We are feasting on our seed corn.

The shift in 2007 from supply-side to the voodoo of demand-side economics is a lesson in how to wreck an economy. I doubt Obama will continue it, because the whole purpose in wrecking the economy was to get a Democrat elected president. The Democrats have no reason to continue this nonsense now. They will likely go back to Clinton-style supply-side policies (e.g. Clinton's adoption of NAFTA, GATT, welfare reform, his reduction in after-tax Social Security benefits, reduction of the capital gains tax, etc.)

There is may be justification for maintaining some stability in the banking system, and there is even justification for demand-side welfare programs, but the cost of these bailouts is widespread economic weakness. As with Katrina relief--we do it in order to spread the burden to the nation as a whole, but there is nothing intrinsically beneficial to the economy as a whole about taking money from those who have used it wisely to send it to people who (in retrospect) have taken on risk unwisely.

Mazzula of VA @ Dec 01, 2008 11:36:26 AM

all they think about is "stabilzing the financial system and getting the economy moving."

Until the next terrorist attack, natural disaster, or foreign unrest, then what?

What kind of person really wants this job?

Larry of CA @ Dec 01, 2008 11:08:34 AM