Cardio

Who Is Really to Blame for the Deficit?

Putting the fiscal mess entriely at Bush's feet is, of course, overly simplified.He is just the most recent of a long line of politicians spending other peoples wealth (by using their credit, no less). Bush had the misfortune to be in office during 9-11, which was the result of years of mismanaging the terrorist threat. His response of invading two countries, while admirable in its intent (free millions from tyranny, deal death blow to extremism), was tacticly flawed and expensive.

I, like axelrod68, agree that these deficits are a manifestation of the way politics is, and has been, played in America for the last 75 years or so. Career Washington politicians know how the game is played. Give away enough of "other people's money" and you can buy yourself a long, respected, and lucrative lifestyle. There is simply no way for them to get elected and re-elected by saying "we're all going to need to cut back a little".

The Amreican people recently received a dose of economic reality with the collapse of the housing bubble. The borrow and spend mentality was no longer viable for individual households or businesses.To their credit, they made the necessary adjustments in their spending habits and lifestyle and the economy has reverted to the mean (i.e. shrunk) and the national savings rate is apprecaibly above zero for the first time in over a decade. Yet, at the very same moment, when history is screaming for frugality, Obama and the other "Statists" are accelerating the increase in the national deficit at an unprecedented pace. How can it be that the solution for overleveraged citizens or businesses is to tighten the belt and make do with less, but for the overleveraged "State" the answer is to borrow more and continue to spend money you don't have?

We will never see change for the better until we do one simple thing; Make Washington smaller. Pointing fingers at one party, then the other, is simply a diversionary tactic perpetuated by those spendthrift demagogues we call our represenatives. A pox on the lot of 'em.

John Hussman: Based on Okun's Law Obama's Stimulus Plan May Fall Short

In practice savings are invested. Very few people "save" by stuffing hard currency in pillow cases. So, saving only becomes a "drag" on economic activity if the savings cannot find a productive investment outlet within the economy from which the savings is drawn, true?

If so, then if savings actually causes drag it is because those savings are being invested in foreign markets, as an example, where it is deemed to be more productive.

I'm not an expert, but it seems logical that saving does not evaporate money from circulation, it simply redirects it from consumer spending to business investment. True? Or am I full of nonsense?


On Jan 26 01:37 PM hefaistos wrote:

> Regarding the last paragraph, that consumers change their preferences
> for more savings in times of crises is a well known pattern. The
> most famous example is Sweden, which at the end of 1980's had a slightly
> negative savings rate. Then a banking crisis erupted, and over the
> course of only two years, the savings rate rose to a whopping 8%.
> That of course put an enormous drag on the real economy, since what
> is saved, isn't consumed. We now see a similar development in the
> US.