Quote:
Originally posted by wolf
The whole system is BASED on debt.
Without debt, the system collapses.
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System is based upon liquidity. Debt is simply another way of creating short term liquidity at the expense of long term wealth. When debt is used constructively, liquidity provides cash and therefore resources to new, innnovative ideas and products. The resulting adverse effects are more than compensated by productive jobs, innnovative products, and whole new industries.
When debt is used destructively, it becomes the money game to make short term wealth at the expense of long term inflation, lower standards of living, and no new innovative product development. What results is consolidation, job losses, no new industries and innovative products, and inflation.
It was called stagflation. Theoretically not possible according to economists. But exactly what happened when another Republican president decided to fix the economy by throwing money at it AND running massive military operations all over the world - including VietNam. He did other stupid things such as wage and price freezes - because he refused to acknowledge that his administration was the reason for US economy faltering. His administration made things worse by trying to make America productive. Destruction of the American economy because the naive believed increased debt was not a problem. Government can not make a better economy. Government cannot create innovation. Government can only make things possible to get better OR directly make things worse.
Again referring to the so opaque comments by Warren Buffet. The only tax cut is one that lowers taxes by reducing spending. George Jr's tax cut does none of this; so necessary to long term growth and wealth. His is a classic money game made possible because - and referring back to discussion in the Cellar two years ago - many people foolishly think that throwing money like a grenade will actually solve economic problems. Money is a scapel to build an economy when in the hands of innovators. A scapel that must be used only where it can be most effective. A scapel made ineffective by too much money or government intervention to 'fix' the economy.
Myopia. Solving problems by throwing money at it failed catastrophically 25 years ago. Increased government debt is simply another way of throwing money, wildly, as if it were a solution. Why then would something that failed 25 years ago do any better today? Because too many people actually believe rhetoric by a mental midget president who could not even run a successful company.
How did the US become the world's richest and most economically powerful nation after WWI? European nations ran up great debts in wars and other international boondoogles. US simply got rich and powerful by avoiding all that silly nonsense. How did Europe and Japan grow richer at the expense of the US when George Sr was president? They bought US bonds and other debtors instruments while the US so increased government spending that even George Sr could not meet his promise - no new taxes.
Ironic that only Democratic presidents make governement more efficient - reduce expenses without reducing services - less costs - reduce government debt. Republicans are good at running up debt and making the wealthiest richer at the expense of both middle and lower classes. They are also good at promoting lies that debt is not a problem - even contrary to what David Stockman warned about 20+ years ago.
With military adventure all over the world - including a new slate of military based across the Middle East and up to China's borders, then the US economy will only short term boom followed by the resulting economic downturns. Anyone who thinks government increasing debt is productive is only acting like an ostrich - ignoring the lessons of 1970s and 1980s - and pre WWII Europe - and many third world nations.
