Quote: (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.
Your macro analysis forgets that people only sell what people can afford.
Thus it doesn't matter if people are only paid minimum wage. If this occurs then prices of goods and services must fall to price clearing levels or else inventory does not sell.
However, when you have artificially higher government salaries distorting the market, then companies can sell prices at levels they wouldn't be able to under free market conditions to the government classes and choke out the poorer classes.
Ergo, right now housing prices are reaching new highs despite the fact 85% of America cannot take out a loan to even buy one. Why?
Because the federal reserve artificially lowers interest rates and bails out big banks, allowing the mega rich to scoop up the housing and then rent it out to poorer classes.
This is a perfect example of how government policy distorts the market, kills the poor, and gives unfair advantages to the politically connected (bailouts for bankers, nothing for plebs).
So sparking demand is only half of the story. Demand must come organically and evenly across all income levels or else the poor will be priced out of the market while they starve to death.
However, the reason why you cannot merely give money to the poor and expect the economy to rebound is because of inflation; merely increasing the amount of money in circulation without a reciprocal increase in the volume of goods or services means that the added money into the market does not buy additional goods or services.
This is why Keynesianism is a failure and cannot ever work in the real world. This is also why government intervention in general always results in no increase of the standards of living.
Contributor at Return of Kings. I got banned from twatter, which is run by little bitches and weaklings. You can
follow me on Gab.
Be sure to check out the easiest mining program around, FreedomXMR.