The new stimulus package.

[Cloneboy92]

What will this mean for the economy in the future.  

[Lord Bitememan]

Not much. Brief spike in economic indicators dissipating by the next quarter. More debt, but what else is new. Debtload as a whole will begin to have an effect as debt interest grows as an expenditure, but this isn't going to have a significant effect in that respect. In total, like more government programs designed to control the economy, it will fail in the longrun.  

[The Healthy Cigarette]

Our economy is already on a down fall. I don't believe we will be able to recover until the "Anti-Christ" is in power. I also believe the one world currency is coming into play very shortly.  

[Lord Bitememan]

Quote:

I don't believe we will be able to recover until the "Anti-Christ" is in power.

Don't be silly. Heimdal is far from blowing his horn, and the day of Ragnarok will not come for some time. In the meantime, we have to adopt wise policies for our economy since the great day of Odin's last battle is far from coming.

Quote:

I also believe the one world currency is coming into play very shortly.

It already has been over the past 50 years. You might recognize it, odds are you've got one in your wallet right now. It's called the dollar, and more currencies around the globe are backed by this currency than any other in history.  

[Latopazora]

'Anti-christ' how many times has that been thrown around? My dad once told me that Thomas Jefferson was actually called the anti-christ by his political opponents, I haven't seen the propaganda from that time, but I don't doubt it.
I really think there's a lot more to this than meets the eye, and I think Obama is being led blind-folded. I'm sure Obama is a good guy and he's doing what he's been told to believe is right.
I like to listen to Coast to Coast with George Noory (its entertaning- what can I say?) I hear a lot of conspiracy theories- and I tend to take them with a grain of salt. The stimilus package the ones that will come after it has me on edge. That's going to hurt us bad because we don't have a solid foundation in which to pay for it. Taxing the rich isn't going to do it. I'm sure we can actually have a good socialist government like the scandinavian countries- Norway is drilling for oil like crazy! Its possible, but so many of our politicians are being being paid by activists to not certain things that could help us. And if we don't do what we need to do to help pay for that kind of government, like drill for oil for example- we'll fall deeper into dept and China will drop our dept.  

[gamerguy121]

Question. Other than creating a few temporary jobs, how exactly will washing and painting the bridges of New York City going to stimulate the economy?

And a $23 million price tag?  

[Lord Bitememan]

It won't. The theory is, you inject the money into the economy through these temporary government projects. People make the money, and then spend it, injecting it into the economy. Businesses then circulate the money by paying employees, etc.

The flaw with the stimulus is that the money is insufficient to alter business plans. Think of it this way. The stimulus opens a bridge project down the road. The bridge is scheduled to be completed in a month. The workers eat every day at the local diner. For a month, it's busy in the mornings and the waitresses are making fat tips. Then the bridge is built, and the crew moves on. Business settles back down to normal levels. The effect is nil.

Two scenarios alter business models long term; sustained mobilization of a sector of the economy through repeated government expenditures, and of course natural economic growth.

Scenario 1: Same town as the bridge. The government decides it wants to stockpile steel reserves. So, the government contracts the local steel works to start cranking out steel round the clock. This is scheduled as a 4 year program. So, the steel mill needs extra workers to fill the government contract. These workers eat at the local diner every day for 4 years. The waitresses not only make extra money for the next 4 years, but the diner needs to hire more waitresses to cover the extra business. The waitresses now have more disposable income and spend on consumer goods (in addition to all the steel workers doing the same). As a result, local commerce starts making money, expanding, adding more workers, etc. The 4 years is enough to alter economic patterns. However, barring any other external growth, once the four years are up everything will eventually settle back down to pre-government spending levels.

Scenario 2: Same town as the bridge several years after the steel mill contracts are gone. Jeff Widget invents a new thing, the Widget. He decides to open a factory in town and mass-produce widgets. The widgets are popular and so Jeff makes money. Jeff continues to build widgets, and introduce new lines. The subsequent economic patterns in the town are affected in the same way as they were in Scenario 1 with one important caveat; Jeff doesn't pull up shop after 4 years. Jeff continues to operate as long as he makes money with his operation. Therefore, the economic growth in the community is sustained without an externally occurring termination date.

So, the real hope is that we return to scenario 2 as the primary model of reviving our economy. Innovation, investment, and capitalist venture do not drain public resources create the longest term growth. The idea behind government stimulus is that hopefully spending with inject capital needed to trigger the sort of innovative growth that comprises scenario 2. The current stimulus is highly unlikely to do this since it cycles through the economy too quickly to alter economic patterns. Scenario 1 is much more likely to provide this sort of jump start, and indeed worked during the Reagan years when we underwent a protracted mobilization of the industrial base to fuel the military expansion. The stimulus ideas being tries now essentially failed under the Carter administration once already.  

[Latopazora]

I've been pretty curious about this, Lord Bitememan. Are you currently involved in politics or taking political science at a college? You seem really really informed on a lot of what's going on. I know a lot of this is common sense- i.e. the fact that the stimulus package won't work and probably make China drop our dollar.
What I'm most concerned about is where Obama going to get all this money in the first place? You can only take so much money from the rich until they 1) leave 2) hide their money 3) just flat out run out. Also, there are no good business models in the stimulus package- I'm sorry, but experimental green energy is not going to cut and forcing people to buy a certain car is going to backfire.
The best business model for us is to drill for our own oil. It'll get us off of foreign oil, it'll be enough to pay for a socialist government, and we can get out of our dept. But they're not even doing that. We're already on the brink of running out of money- California is already bankrupt and the unions refuse to cut from their end.  

[Lord Bitememan]

Well, most of what I was talking about was macroeconomics, which is more of a hobby of mine than anything else. I did extensive grassroots politics for a while, but most of what I did didn't pertain to economic policy. I was a double-major in history and poli. sci. Most of what applies in these cases is the historical track record of government intervention in the economy globally. Most of the time government intervention results in either no effect whatsoever or even unintended consequences.

As to the economic fallout of the bailout, the main causes for concern really have been pre-existing issues anyways. The Chinese have considered divesting in the dollar, but mainly that's because they've realized since the economic troubles that being so heavily invested in the dollar could burn them majorly. So yeah, they'll probably stop buying up debt sooner or later, necessitating either major tax increases in the US, huge budget cuts, or re-shopping our deficit funding to other willing financiers. Paying off our debt would be a great idea at this point. It would be a tough go, but it would free us up financially from the diplomatic burden of being so heavily indebted to an emerging power on the global stage.

As to the financing of the stimulus, it's not coming out of increased taxation. . . yet. Right now it's all through deficit spending. Sooner or later they will have to up revenue to cover the spending initiatives Obama is proposing. That will happen later down the road, though.