

Obama’s Stimulus Plan Made Crisis Worse, Taleb Says - bd_at_rivenhill
http://noir.bloomberg.com/apps/news?pid=20601010&sid=atQQooOUty4c

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sunjain
WOW! As per this guys logic, US should be focused on reducing the deficit
right now rather than growth and jobs. With one of the deepest recession we
ever faced hardly over and unemployment still so high, not sure how more jobs
could have been created without help from govt stimulus(since consumer
spending is down and so is pvt sector profits as well as hiring). With the
kind of hole we were in and still are in, the biggest worry should be jobs and
growth which are not going to come back just simply by waiting on consumer
spending to pick up by itself(consumers are not going to spend, if there are
no jobs).

~~~
frognibble
Your analysis of the situation is incomplete because it does not consider the
source of the resources used in the government stimulus. The resources need to
come from someplace in economy. For the stimulus to be a net positive, the
government's allocation of resources must be more efficient than where the
resources were taken from.

~~~
cma
[http://www.cepr.net/index.php/blogs/beat-the-press/how-
large...](http://www.cepr.net/index.php/blogs/beat-the-press/how-large-a-debt-
level-is-qworrisomeq)

~~~
frognibble
The resources used in the stimulus come from someplace in the economy. The
resources do not magically appear out of thin air when the Fed buys government
debt.

~~~
cma
With an idled worker population it is obvious where the bulk of the resources
can come from.

~~~
frognibble
It is not obvious that the bulk of the resources come from the idled workers.
Resources are needed to pay the workers. Resources are needed to buy the
steel, concreate and other materials used in the projects.

~~~
cma
>It is not obvious that the bulk of the resources come from the idled workers.
Resources are needed to pay the workers.

The resources _are_ the idled workers. Yes, commodity-type resources are used
as well, but there is for example a lot of idled equipment out there as well.

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lzw
It is easy to understand. Government spending comes out of the economy via
taxes and inflation. Taxes reduce company and personal profits reducing
budgets for the next year, and thus reducing spending on purchases or
expansion that would create jobs. Inflation raises costs, having the same
effect.

Meanwhile, the government spending is often in non-productive sectors of the
economy, such as increasing government jobs at all levels of government, which
going forward add an additional spending burden on the economy.

Very little of the investment is even in areas targeted at building jobs.
Hiring a bunch of people to build a bridge or highway does not create
permanent jobs, and the positive impact of that highway or bridge is spread
over many years, while the job hit from the spending starts immediately. Most
government "innovation" efforts are misguided, poorly allocated or poorly
managed, and rarely produce any substantive industry creation or economic
growth. This is to be expected since politicians do not understand business
very well, and have an incentive to feather their own nests or build their own
political empires & burocratic fiefdoms. Thus the incentive is towards having
more cushy government jobs to hand out as favors, and more employees under
them... not to produce anything beneficial to society or the economy.

Further, it is not in government interest, really, to have a robust economy,
because it is the damage done to the economy-- by government-- that lets
government rationalize the power grab to have more control over the economy.
Thus government "profits" by doing damage to the economy. The 2008 collapse is
the result of government policies- clintons "you must loan to people who can't
repay the loans" housing problem, the moral hazard of fannie mae and freddie
mac, and bushs "we're gonna set interest rates below inflation"... stoked by
constant economic pronouncements from everyone from the president to the fed
chairman to Paul Krugman that there was no housing bubble and that if there
was it would be good for the economy (the latter a position krugman took in
one of his articles.)

~~~
Locke1689
_It is easy to understand._

This is the setup statement for why everything that follows in your post is
wrong. If everything were simple and easy to understand we would have a
straightforward, generally agreed upon solution. Instead, we have a complex
multivariate macroeconomic system which we cannot control or isolate, meaning
that reactions like these, as a whole, have about as much scientific backing
as voodoo.

I'm really getting tired of these pop-economic articles on Hacker News. They
never really inspire great debate, nothing gets settled, and everyone hits
their own straw man.

~~~
lzw
Actually, economics is not that complicated, and not that hard to figure out,
or to influence. The reason there's so much effort to pretend like it is
complicated is because it is profitable for those in government to do so, to
cover up the effects of their actions.

The idea that the crises in 2008 was unexpected, or that the bailouts were
necessary is absurd, and had been refuted decades before. But it is part of
the act government goes thru to keep people controlled. I knew there would be
a housing bubble in late 2000, before it really got started. I knew this
because I was told this by economists and hit made perfect sense. And all
these bubbles, being creations of government, result in the same kind of
government response. The effect of that response, having seen it so many times
before, is quite predictable. We've not seen the effect of the bailouts of
2008, and the bailout that just happened for credit unions... but I expect
we'll see it by 2012. And when it happens, they will all be on TV saying "this
could never have been predicted!" Just like they were in 2008.

I suggest you read "Economics in One Lesson" by Henry Hazlitt, or if you're
unwilling even though it is a short book, simply familiarize yourself with
Bastiat's Parable of the Broken Window

~~~
forkandwait
The _theory_ of economics _is_ easy to understand -- in this you are right.
Whether or not the theory has anything to do with actual processes has _not_
been established with any surety outside the field itself.

