There may be a trend here...from Prof. DeLong

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Phaedrus76
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YES, STIMULUS SPENDING IN A LIQUIDITY TRAP WORKS

Paul Krugman:

Spending and Growth: First-quarter growth results are now in for the major advanced economies; they look like this. Wait, what? Japan as star performer? What’s that about? Actually, no mystery. From Bloomberg:

Japan’s economy expanded faster than estimated in the first quarter, boosted by reconstruction spending that’s poised to fade just as a worsening in Europe’s crisis threatens to curtail export demand. So Japan, which is spending heavily for post-tsunami reconstruction, is growing quite fast, while Italy, which is imposing austerity measures, is shrinking almost equally fast.

There seems to be some kind of lesson here about macroeconomics, but I can’t quite put my finger on it …

 

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Phaedrus76
Phaedrus76's picture
If you go to the link, it has

If you go to the link, it has a clear graph, showing what they are talking about. In a liquidity trap, cutting govt spending seems to result in fewer jobs, and lower revenues, which leads to more deficits, which the Austerians view as the need for more cuts...

Choco
Choco's picture
Spending money into

Spending money into circulation is much better than putting money as debt into circulation. The latter is the way the private Federal Reserve does it. It prints money from paper and ink and then lends it at a certain interest to member banks which in turn lend it to people at an increased interest rate. So for every dollar created, and proportion must be added for interest payback. That's why our home in Southern California was less than $25.000 in the early 1960s and now a new Chevy dressed out pickup is over $49,000. There's no way to ever climb out of a debt when money is created and lended as debt. Japan is creating wealth from spending on infrastructure which has many ways of netting back even more returns via effecienies.

Karolina
Karolina's picture
Choco wrote:Japan is creating

Choco wrote:
Japan is creating wealth from spending on infrastructure which has many ways of netting back even more returns via effecienies.

Clearly the FDR pattern that I have been screaming about since I got to this web site is the way to go:

1. Glass-Steagall

2. United States National Bank. The Fed will never agree to the...

3. ....Hamiltonian credit system. This can, however, be run from the new U.S.National Bank

4. Immediate projects, funded by the Hamiltonian credit run from the new U.S.National Bank, reenergizing US production industries, modernizing and progressing our country, and providing unlimited great employment for all.

Happy people. Successful economy. Sovereign Nation. 

Update: And a great example for the rest of the nations of our world. 

antikakistocrat
antikakistocrat's picture
The American Dream Film-Full

The American Dream Film-Full Length
 
https://www.youtube.com/watch?v=tGk5ioEXlIM

The Money Masters.

http://video.google.com/videoplay?docid=-515319560256183936&q=The+money+changers&ei=Zd4QSMjvB47YqAKQtJmzBA

It's called debt free money and a proactive government regulating the banks a la Glass-Steagle and other regulations.

antikakistocrat
antikakistocrat's picture
We could have had this under

We could have had this under a Chuck Baldwin Administration but no America had to have its first near black-President at the cost of everything sensible and Constitutional.

Thank You ignorant American voter.

Karolina
Karolina's picture
antikakistocrat wrote:It's

antikakistocrat wrote:
It's called debt free money and a proactive government regulating the banks a la Glass-Steagle and other regulations.

It sounds like Hamilton's credit plan in a National Bank, after the re-enactment of Glass-Steagall. Finally.

Here is a radio discussion for you:  Origins of Today's Economic Problem.

J DAILEY
J DAILEY's picture
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http://www.youtube.com/watch?feature=player_detailpage&v=IxAKFlpdcfc


chilidog
Phaedrus76 wrote: Japan’s

Phaedrus76 wrote:

Japan’s economy expanded faster than estimated in the first quarter, boosted by reconstruction spending

We can only hope for a tsunami and a nuclear disaster here.

Breaking windows does indeed produce short-term economic activity.

Phaedrus76
Phaedrus76's picture
The point is, when the world

The point is, when the world economy is stuck in a deflationary trap, govt spending will boost GDP. And instead of a tsunami + a nuclear disaster of epic failure by engineers and corporations, we could just get busy building high speed rail, mass transit, de centralizing energy with rooftop solar, and better building codes.