The General Economics Thread

They totally can. Macroeconomics money is like partially imaginary and exists only as numbers.

Oh really when?

Governments can spend money infinitely in a theoretical world, but in the real world there are obviously limits. However, in our current environment, we are nowhere near those limits, and could not get to them with any amount of spending that might be remotely politically feasible.

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

That's a way, way oversimplified view of things. Governments can't spend infinite money for as long as they want without consequences. Doing so would cause runaway inflation and basically make the currency worthless.

What they can do is spend newly-printed money at a reasonable rate to solve the problem of, essentially, there not being enough money in the economy. They can pay off any and all debts issued in their currency, so the idea of the national deficit bankrupting the country is literally nonsensical. They can invest when the private sector won't in order to spur economic activity during a downturn without having to worry about going broke.

Keynesianism isn't a magic wand to magically fix everything, but it's an actual thing that actually works, as opposed to austerity, which is like using leeching to treat someone for blood loss.

edited 29th Jun '16 1:46:53 PM by NativeJovian

Really from Jupiter, but not an alien.

EU's obsession with austerity still baffles me, the whole continent is stagnating and instead of expanding they decide to cut costs and spend even less on everything.

Inter arma enim silent leges

The EU's in a weird position because its individual nations are not in control of the currency they use, so the normal rules of Keynesianism don't apply. Since EU countries can't just print their own money, they can go bankrupt and government debt is a serious problem.

If the EU as a whole would agree to act in order to deal with an individual country's financial problems, then that would be different. But it's arguably not in other EU nation's best interests to rescue struggling countries since that would mean altering their monetary policy as well, and the struggling nations can't act unilaterally since they're part of the EU.

Really from Jupiter, but not an alien.

The whole thing is based on an unsustainable structure of conflicting interests: the member nations function economically like U.S. states, but lack any direct fiscal support from the central bank. Ergo, if one nation slips into a balance-of-payments crisis, it has no remedy but punitive austerity. It's a recipe for disaster.

edited 29th Jun '16 2:04:45 PM by Fighteer

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

As we are seeing^note  BTW, it looks like we have two (for the moment) Member States without a functioning Government — the UK and Spain.

Keep Rolling On

As an aside, it really bugs me that any government expenditure is labeled "Keynesian", evidently by people who never got the memo that Keynes was not for "spending one's way out of every problem"; quite the opposite, in fact.

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

X4 You're getting your EU and Euro Zone confused, there are EU countries outside of the Euro and they're just as obsessed with austerity (see the UK, where more austerity has just been announced), they have control of their own currencies yet remain part of the Austerity club.

“And the Bunny nails it!” ~ Gabrael “If the UN can get through a day without everyone strangling everyone else so can we.” ~ Cyran

"You get austerity, and you get austerity, and you get austerity! You all get austerity!!!"

"Why aren't you cheering?"

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

The way it works is that currently - and in general, during depressions and recessions - a whole lot of people (and a great deal of machinery) are not doing anything economically productive, despite being both willing and able to. The government can create money from nothing. It's just paper, or even more easily, just numbers in a computer. It can then use that money to pay for the people and machinery sitting idle to do something constructive. This increases the amount of value the economy is producing, so the fact that the amount of money increased is far, far less inflationary that you would expect. (.. likely not at all, actually) This keeps right on working until you either run out of people sitting around unemployed for no good reason or out of constructive things to put them to work doing. It does not work at all if the economy is at full capacity - and the primary reason for governments to run surpluses during full capacity times isn't, in fact, to pay of the debts, it's to free up labor for the private sector to use.

Given the insane size of the unemployment problem in europe overall, the size of the necessary projects is a bit.. wacked. We really are talking about something on the scale of tearing down all the coal plants and replacing them with reactors, while building a low pressure metro to connect every single city above 250k citizens with super sonic mag lev trains. But hey, it's a better idea than more bloody austerity.

edited 29th Jun '16 2:35:31 PM by Izeinsummer

Government deficit spending can also b a problem if the economy isn't very productive, that's why some under-developed nations could go bankrupt even if they do print their own money.

Well it doesn't help that for the last 14 years, the EU has been operated by a center right party with no real effective opposition, that follows Center Right policy.

And the last year or two, you know. Jean-Claude Juncker being too drunk all the time to give a shit. (It's regularly rumored the guy is about as bad as liquor as Churchill was, but without the charming personality.)

Correct, because then the stimulus is addressing the wrong problem. Propping up demand won't help you when the problem is lack of supply; in fact, it makes the problem worse.

edited 29th Jun '16 6:28:59 PM by Fighteer

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

By which is meant "domestic supply", i.e., the ability of the national economy to produce enough goods and services to satisfy local demand. More money doesn't help if there's nothing local to buy (it just fuels imports).

This all seems very repetitive, I'm pretty sure everyone posting here have made the exact same conclusions (on spending, debt, supply, demand, and how they work together with various variables), in the in the exact same discussions that have been had before.

edited 29th Jun '16 6:37:20 PM by Ekuran

Then add something original.

Alright then, how about something far less serious!

Supermodel claims that she needs $262 million to live on.

The British standard of living can't be that low, can it? I mean, only $262 million for the rest of her life? How will she ever stretch that out? I mean, only one two-week yacht rental every year? The economics just don't make sense!

Less sarcastically, can that much money be "financial hardship" for, um, anyone?

edited 29th Jun '16 8:39:07 PM by Ramidel

I tried to find a fuck to give but I have none.

Welcome to the worst nightmare of all, princes, reality.

Inter arma enim silent leges

That report is sourced to the Daily Mail. Sure that it isn't misrepresenting things?

"For a successful technology, reality must take precedence over public relations, for Nature cannot be fooled." - Richard Feynman

Yeah, the Daily Heil loves to push those kind of things to dig at welfare. I don't buy it.

Oh really when?

Part of why I keep harping on Keynesian theory is exactly because it's so widely misunderstood in the general public; I have to spend lots of time convincing people of its basic precepts in various places. (My wife hates it when I try in person, for obvious reasons. )

That said, I'm open to discussing whatever anyone feels like.

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

Italy was given the go-ahead by the European Commission to supply as much as 150 billion euros ($166 billion) in government liquidity guarantees for its struggling banks until the end of the year, according to an EU official.

Or:

"Please don't crash, please don't crash, please don't crash." 'cuz if Italy crashes, the EU and Euro are done.

Italy should have functional government again soon, so perhaps the EU is willing to cover what it thinks is a short term problem.

Italy does have currently a sorta functional government.

"For a successful technology, reality must take precedence over public relations, for Nature cannot be fooled." - Richard Feynman