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Originally posted by Lebezniatnikov It's simple - tax refunds don't get spent. Employing people, even through temporary government-funded infrastructure projects does. What's likely to generate more demand in the economy, a tax refund or a new cohort of workers receiving paychecks?

First off, I am not for "tax refunds" in the form of a stimulus check. I didnt agree with what bush did last year, borrowing billions to give us all $600. All I am advocating is lower taxes. There is a difference. However I just happen to think that tax payer dollars being spent in washington will not go as far as consumer dollars being spent by consumers. Spending on our part will create more demand and jobs in the markets then spending on the goverments part dollar for dollar, i dont doubt that.

Can you elaborate on how the IRS brought in more tax revenues under the Bush adminsitration with lower tax rates, than under the Clinton administration with higher tax rates?

Additionally, government funded infrastructure projects are not fixing anything, at best they will provide a false sense of ease. I wouldnt continuously throw oral gel on a tooth if it needs a root canal. Yea the pain may go away temporarily, but you still need the root canal.

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Originally posted by Capitalizt My thesis has always been that world governments and central banks are going to succeed in going through one final period of massive reflation..throwing everything they have at the problem to prop things up again...and once debt levels get completely unmanageable and become impossible to pay down with a sound currency, they will finally be forced to let go and inflate them away.. At that point people will lose all faith in their money..and since faith is the only thing backing paper money these days, that is when the shit will really hit the fan and we will probably see circumstances like the article mentions.

well, im glad that you keep making these ridiculous predictions because most of us cant wait to come back and laugh at these notions in a few years from now

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Originally posted by Lebezniatnikov That's never been the insinuation - tax cuts didn't create the crisis, but they sure as hell won't solve it. I've yet to see a single person address the one empirical fact that ruins the tax cut argument. The fact that only 16% of money transferred back into the hands of taxpayers last year by George W. Bush was spent. What sort of stimulus does that make if only 16% actually stimulates the economy, and the rest goes to pay down debt or evaporate into the bowels of the stock market?

How about the return to normal consumption levels after people get out of the debt that's holding back their current purchasing power? When you say "evaporate into the bowels of the stock market", what do you mean? I honestly don't know how stocks work, I thought companies could use that money invested in their stock to make improvements to their business, so doesn't it work the same as stimulus?

Anyway, my main thought is this: People can only 'spend' money that they have... we're in the middle of a credit-correction right now, ie. Too much credit has been handed out to people who can't afford to pay it back (isn't that what eventually triggered the Great Depression?), and now that they can't buy things anymore with their borrowed money, worse, they've defaulted on their debts and the banks are getting NOTHING in return, the economy has tanked.

I responded directly to your question on people paying down their debt with stimulus money in another thread, here:

http://www.tranceaddict.com/forums/...15&pagenumber=7

Can you please check out my post (ignore the sentence where I blame Clinton, lol, I now realize there's much more to it than that), and respond to my thoughts? I'm not an economist, nor have I done any research on economic policy, I'm just thinking out loud using my own sense of financial logic.

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I'm all for personal liberty, but this has nothing to do with it. We need to stimulate consumer demand, and tax cuts don't cut it.

The best way to stimulate consumer demand, by my own personal, non-economist logic, is to help get them out of debt so they can afford to purchase things. We need to get consumers out of debt (and better yet, educate them on prudent financial management) so that they can afford to purchase things again.

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Captain Planet is gey.
Water, Fire, Earth, Wind, Heart???
These forces are supposed to combine to create Captain Planet?
Bullshit.
Those forces combine to create a soaking, boiling mudstorm on Valentine's Day.

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Originally posted by Spam The best way to stimulate consumer demand, by my own personal, non-economist logic, is to help get them out of debt so they can afford to purchase things. We need to get consumers out of debt (and better yet, educate them on prudent financial management) so that they can afford to purchase things again.

but who is saying that consumers aren't buying because of all their debt??

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Originally posted by pkcRAISTLIN but who is saying that consumers aren't buying because of all their debt??

That's a fair question. I suppose it would be said that people have stopped spending money because those who had credit, but couldn't pay it back began defaulting and going bankrupt. Which led to the subprime crisis. Which led to the banks tightening up their credit, leading to the media's "sky is falling" headlines causing consumer confidence to erode, and leading to the consumer tightening their purse strings to save money/pay down debt, to prepare for the impending doom and gloom of the coming recession. Which of course led to businesses making less money and having to contract. Which of course leads to a recession ACTUALLY happening.

I would argue that if people have no/low debt, they would have the confidence to purchase things with money they would otherwise allocate to debt repayment/saving. I maintain that if the credit market was simply regulated, that these types of credit-bubble recessions would be much better prevented, if not stopped outright from ever occurring, if or until, of course, someone can show me that my opinion is wrong.

___________________
Captain Planet is gey.
Water, Fire, Earth, Wind, Heart???
These forces are supposed to combine to create Captain Planet?
Bullshit.
Those forces combine to create a soaking, boiling mudstorm on Valentine's Day.

quote:

Originally posted by djjoshuaallen Additionally, government funded infrastructure projects are not fixing anything, at best they will provide a false sense of ease. I wouldnt continuously throw oral gel on a tooth if it needs a root canal. Yea the pain may go away temporarily, but you still need the root canal.

So you'd rather we do absolutely nothing?

Fucking hell talk about paper thin arguments...

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Originally posted by ******** Seplling don't demonstrate intelligence and educatoin - knowing does.

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Originally posted by Clovis So you'd rather we do absolutely nothing? Fucking hell talk about paper thin arguments...

I wouldnt say do nothing, but im all for getting to the inevitable rock bottom asap so we can start a recovery, no sense in drawing this out another few years. Im for a stimulus plan primarily focused on much needed infrastructure, but not one that is thrown down our throats and rushed through congress with fearmongering tactics.

If they are not sure that this will even work, then what the fuck is the rush? Rather then borrowing from foriegn investors and indebting our kids, lets work out the real problems with the financial system so our recovery will be maximized. I have heard nothing about solutions to the actual problems that lye in our financial system

Why dont we start with helping out a broke ass CA so I can get my 1k they owe me on my tax return.

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Originally posted by Spam How about the return to normal consumption levels after people get out of the debt that's holding back their current purchasing power?

the problem with the current economic situation is that the 'normal consumption levels' are not what we have experienced. People were making purchases based on paper wealth. when people think disposible income = personal income + unrealized assest appreciation, there is a major problem when assets don't actually appreciate. we are about to enter a decade in which credit will be evaluated based on actual income and not potential income. consumption levels are returning to a more 'natural state' (at least a long term sustainable level).

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Originally posted by Spam When you say "evaporate into the bowels of the stock market", what do you mean? I honestly don't know how stocks work, I thought companies could use that money invested in their stock to make improvements to their business, so doesn't it work the same as stimulus?

The only time a company gets money from investments in stock is in an IPO or when the company directly sells an interest. When an investors purchases a stock in the stock market the investor is purchasing the stock from another investor. the money from that exchange doesn't make it to the company. The company does benefit from these transaction, however, in that the company can use it's treasury stock as a means to purchase other companies, and as collateral to borrower funds. So, the company indirectly benefits from higher stock prices.

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Originally posted by Spam Anyway, my main thought is this: People can only 'spend' money that they have... we're in the middle of a credit-correction right now, ie. Too much credit has been handed out to people who can't afford to pay it back (isn't that what eventually triggered the Great Depression?), and now that they can't buy things anymore with their borrowed money, worse, they've defaulted on their debts and the banks are getting NOTHING in return, the economy has tanked. I responded directly to your question on people paying down their debt with stimulus money in another thread, here: http://www.tranceaddict.com/forums/...15&pagenumber=7 Can you please check out my post (ignore the sentence where I blame Clinton, lol, I now realize there's much more to it than that), and respond to my thoughts? I'm not an economist, nor have I done any research on economic policy, I'm just thinking out loud using my own sense of financial logic. The best way to stimulate consumer demand, by my own personal, non-economist logic, is to help get them out of debt so they can afford to purchase things. We need to get consumers out of debt (and better yet, educate them on prudent financial management) so that they can afford to purchase things again.

Consumers don't change behaviors as rapidly as you may think. If a consumer went from 200,000 in debt to 0 in debt, that person isn't likely to spend all 20K he is now saving because he doesn't have to pay a mortgage. A good percentage of that is likely to stay in a bank account. Since banks aren't lending, money in the banks isn't necessarily being caught up by the multiplier effect. The result of helping consumers pay down their debt in the current economic situation is as follows:

1) Banks receive the payoff increasing their balance sheet (trading good assets (cash) for questionable assets (loans in todays market);
2) banks maintain strict lending policies and much of the funds from the payoffs are hoarded by banks;
3) consumers save more because they don't have as much debt, which results in more money being held by banks not willing to lend except to the most credit worthy consumers (consumers worried about losing their jobs aren't likely to spend in case of layoffs).

In addition, directly paying off consumer debts is simply a transfer of a specific debt of an individual to a collective debt of society. I'm sure there are plenty of people on this board that either (i) don't pay taxes or (ii) don't pay a significant amount of taxes. If you don't pay taxes, it's much easier not to care as much about how the funds are used or from where the money originates. For those of us who pay taxes that amount to a teacher's salary in alabama (or more), I can say without hesitation, we don't want to pay our own debt, plus 1/150,000,000 [the amount of taxpayers] of the debt of every other person.

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Originally posted by djjoshuaallen I wouldnt say do nothing, but im all for getting to the inevitable rock bottom asap so we can start a recovery, no sense in drawing this out another few years. Im for a stimulus plan primarily focused on much needed infrastructure, but not one that is thrown down our throats and rushed through congress with fearmongering tactics. If they are not sure that this will even work, then what the fuck is the rush? Rather then borrowing from foriegn investors and indebting our kids, lets work out the real problems with the financial system so our recovery will be maximized. I have heard nothing about solutions to the actual problems that lye in our financial system Why dont we start with helping out a broke ass CA so I can get my 1k they owe me on my tax return.

I dunno if you noticed, but unemployment is skyrocketing and people aren't buying anything. When people don't buy things, companies do badly. When companies do badly, the stock market does badly.

As for "helping out broke CA" I guessed you missed the part in the stimulus bill with a couple billion dollars in aid for struggling states that is sorely needed.

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Originally posted by ******** Seplling don't demonstrate intelligence and educatoin - knowing does.

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Originally posted by Clovis As for "helping out broke CA" I guessed you missed the part in the stimulus bill with a couple billion dollars in aid for struggling states that is sorely needed.

I guess you missed the part where i wanted my tax refund, I lent CA 1k last year and I need it back now so i can go spend it in miami and create jobs. The 22 Billion they are getting is most likely spoken for already, for whatever the wasteful beauracrats in sacramento have decided on.

WAKE UP OUR GOVERNMENT IS FAILING US, AND BANKRUPTING US!

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Originally posted by Lebezniatnikov It's simple - tax refunds don't get spent. Employing people, even through temporary government-funded infrastructure projects does. What's likely to generate more demand in the economy, a tax refund or a new cohort of workers receiving paychecks? Furthermore, who do you think the government is contracting to do all of these projects? The answer is the private sector - government isn't spending for the sake of spending - it's spending to inject money directly into the private sector through contracts and wages (that will go toward payments on food, rent, etc.). The issue here is finding a semi-efficient way of increasing demand so that the private sector doesn't continue to contract - contraction leads to corporations failing, layoffs, etc. Stimulating demand ensures that these companies can succeed and that taxpayers can play around with their $50,000 salaries instead of their $600 tax refunds.

Government can't create demand without offsetting demand somewhere else.

Plus the solution above is just a temporary one. Those infrastructure jobs are all short term and not career type jobs. When the individual construction project is complete, bye bye employment... get back in the job search line.

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Originally posted by Spam I honestly don't know how stocks work, I thought companies could use that money invested in their stock to make improvements to their business, so doesn't it work the same as stimulus?

Companies only receive money for stock issuance in an IPO or a secondary offering from their own coffers of treasury stock. Otherwise, all stock is just publicly traded back and forth between millions of people making directional gambles for one reason or another.