[Samseau]

(05-20-2014 02:04 PM)Sp5 Wrote:  

(05-20-2014 01:55 PM)berserk Wrote:  

(05-20-2014 01:37 PM)Sp5 Wrote:  

Macro 101:

An economy grows through demand. If people have no money to buy things, there is no demand. If there is demand, factories increase output, more people get hired, more stores open, more repairmen get hired, etc.

A rich guy can only eat so much and usually only has one, two or three cars. He might have three houses with the ovens, TVs, furniture, etc.

One rich guy is not going to stimulate as much demand as 1000, 100 or maybe even 10 middle class people.

That is why low private sector wages depress demand and why good government sector wages increase demand. The government itself also buys things and creates demand.

One problem with the USA right now is that the skew of GDP away from wages towards profits has depressed demand for goods and services. That means less growth.

1) Demand

Where do you think demand comes from? From sitting on your ass saying you want a television? SUPPLY creates demand. Someone goes out and does work, digs something up from the ground, makes a cabin out of three, makes a sword or an iphone. Then we have supply, which he can use to satisfy his demand by trading in the open market. Supply comes first, through WORK, then demand.

Lol, leftist economics is just like children thinking their parents make money materialize from the sky.

2) Consumption vs Investment

Investment through savings create growth, not consumption. Busines owners can't expand their business if they don't have liquidity and they get that from borrowing money from those who have saved that money - the 'rich'. Again, leftists have no clue about business. Let's say I make a nice little trinket in my basement. They become wildly popular. I have 1000000 orders, but I can't produce because I have no capital to build a factory. Consumption demand does fukk all if I can't get investment seeking capital, that comes from savings - from the 'rich'.

3) Private vs Public demand

Private demand is driven by market demand. It produces what people want. Public demand is driven by politics, it produces what voters (think) they want. It's the true Keyneian spending, lets hire one guy to dig a hole and then another to fill it up. See how we are all richer.

Economics 101.

It's not even debatable that "money can materialize from the sky." Of course it can.

What do you think the Fed and the ECB have been doing the last seven years or so?

They have been creating liquidity - the banks can get money from the Fed and ECB at about 0%. They were supposed to lend it out to businesses, as you say, but they are also bidding up asset prices.

It might have had a better effect if the money had just been "dropped from helicopters" as Ben Bernanke once mused about, to create consumer demand.

The Fed and ECB have been printing money and giving it out to select banks, since 2008. That's all. Easy to find out this info online, just look at who is buying at POMO's.

And again, the reason it was done this way was in order to avoid creating massive inflation. Inflation is

(Total Money Supply) x (Money Velocity) = (Totally Supply of Goods and Services)

So even though they are creating massive amounts of fresh new cash, the money is only given out to a select few who then get to spend it slowly or quickly as they want, which is why money velocity is at all time lows right now. This is how inflation is being contained.

99.9% of people do not realize this.