you’ll laugh, you’ll cry, it’ll change your life

HOW SPENDING STIMULATES

As explained by Brad DeLong

The short reason is that spending works—eras in which some group or other gets excited about future prospects and starts madly spending money are eras in which production and employment are high and unemployment is low. And the government, in this respect, is just like any other group of starry-eyed optimists whose eagerness to spend pulls the economy into a high-employment, high-pressure boom.

He goes on to list several more “examples”. It seems that he is unable to differentiate money that is printed or taxed, versus money that is earned. In fact he says “The government’s money, after all, is as good as anybody else’s.” which is obviously incorrect on the face of it. First off, if it is printed it is devaluing all existing dollars, and second, if it is taxed, it has been removed from where the value creator would have used it. Dot-com money came from people that had done useful things. Spent foolishly perhaps, but at least it mostly wasn’t money that had been borrowed or otherwise devalued as soon as it was used.

So, perhaps spending does stimulate the economy, but only when it is the free exchange of wealth, and not the disruptive effects of devaluation or redistribution of stolen funds.

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