Hopefully, there is someone on this forum who will explain the ''miracle of the fiscal stimulus multpilier''.

According to the stimulus advocates, the Govt spends $1 and, using the Obama team's numbers, you will get $1.5 in output. The multiplier is thus $1.5. Thus, not only will society get the initial $1 back, it will get 50 cents in addition.

I can see how that can work in the long term: roads, power plants, bridges,e.t.c can boost growth by lessening the infrastructural constraints on business activity. However, it takes a while to complete such projects and by the time they are built, America will be out of the recession. Unless you belong to the Roubini school of thought who think this recession will last a considerable lenght of time.

So does anybody know how spending $1 today will bring about $1.5 in output within the next few months?

This is the most hastily thought-out post I have ever seen from Mr Lawyer.

Firstly, Obama never put a date on when he expects to recoup the cash.

Secondly, even if this recession lasts only a couple of years, you cannot expect to recoup investment as soon as the recession is over.

4 Play:

Unless you belong to the Roubini school of thought who think this recession will last a considerable lenght of time.

I do.

4 Play:

So does anybody know how spending $1 today will bring about $1.5 in output within the next few months?

Again, an ill-posed question. Nobody is talking about months here, we are talking about years and maybe a decade or two.

Sweden just announced recently that they have made a profit from the "bad banks" they set up in 1992. So, any bailout or fiscal package will not see full returns for at least 10-15 years.

Firstly, Obama never put a date on when he expects to recoup the cash.

What? He says he will create or save, 2.5 million to 3 million jobs over the next 2 years. That is putting a time period on when the stimulus will start having effect.

Besides, how can a defense of Obama be that he has no time frame for his economic plans? That is not a defence of Obama but a denigration.

I do.

If a major part of your recovery programme won't start coming into effect until a couple of years' time, what happens to the economy in the preceding time? The likely outcome will be that in 2 years' time, the economic outlook will be much worse.

Again, an ill-posed question. Nobody is talking about months here, he are talking about years and maybe a decade or two.
Sweden just announced recently that they have made a profit from their "bad banks" which they set up in 1992. So, any bailout or fiscal package will not see full returns for at least 10-15 years.

Obama's plan has been sold by him, and the supporters of the plan, as the answer to today's problem. In a decade or two, the US's social security liabilities will be more acute so a borrowing and spending spree today is not going to solve the US's economic problems in the long term.

You are advancing a point that the stimulus advocates don't even share - that the fiscal stimulus is about the long term, not the short term. That is a bizarre argument.

Secondly, even if this recession lasts only a couple of years, you cannot expect to recoup investment as soon as the recession is over.

Sorry, I missed this part. You cannot defend something you don't understand. Let me summarise it for you.

America is suffering a major contraction of its economy. Most economists' solution to this contraction is a major Keynesian spending package. The question this thread is trying to get to the root of is how such spending deals with the present problem.

The people who support it, you being the exception, defend it mainly on the basis of what it's going to do in the short term.

4 Play:

What? He saves he will create or save, 2.5 million to 3 million jobs over the next 2 years. That is putting a time period on when the stimulus will start having effect.

Creating jobs and recouping investment fully are two different things with two different timescales.

4 Play:

Besides, how can a defense of Obama be that he has no time frame for his economic plans? That is not a defence of Obama but a denigration.

Again time-frame for the economic plans and time-frame for recouping investments are two different things. The Swedish economy has been going well for the last decade, but they only just recouped their investment.

4 Play:

If a major part of your recovery programme won't take start coming into effect until a couple of years' time, what happens to the economy in the preceding time? The likely outcome will be that in 2 years' time, the economic outlook will be much worse.

It is already in effect. Without it, there would be a total systematic collapse by now. Simply, the Government will not 'recoup' their investment in the short term. I don't know why this hard to understand. We do not judge the economy by the budgetary deficit, we judge it by GDP.

The market will not move in a positive direction for a year at least, even by the most optimistic estimate. Some such as myself believe it will take upwards of 3 years.

4 Play:

Obama's plan has been sold by him, and the supporters of the plan, as the answer to today's problem.

He can either let the whole system collapse, with catastrophic short-term consequences which could lead to anarchy and even social unrest or he can limit the fallout by spending big in the short-term. Either way, his objective has always been to have strong fiscal governance and to produce budget-surpluses like we had in the Clinton years. Unfortunately, he is going to have to put that off until he takes care of this mess.

4 Play:

You are advancing a point that the stimulus advocates don't even share - that the fiscal stimulus is about the long term, not the short term. That is a bizarre argument. .

No, my point is exactly the same as theirs. The fiscal stimulus is intended to rejuvenate the economy in the medium term, and the Government will make back its investment in the long term. For example, you cannot hope to have quick returns on infrastructure projects, nor on the 'bad banks' which are created to take away toxic assets from the banks.

Guy, just think of it as a collaterised debt obligation.

Government buys the economy's bad assests, giving it a chance to recover.

The economy subsequently recovers in the medium term, paying Government back slowly and periodically over the longer term.

Hence, the time-frame for economic recovery and the time-frame for Government to recoup it's investment are two different entities.


Now, as to the Keynesian elements of the stimulus package such as infrastructure spending and computerised healthcare, these are even longer term strategies design to re-orientate the economy AND provide jobs for those who have been displaced in the short-term.

No, my point is exactly the same as theirs. The fiscal stimulus is intended to rejuvenate the economy in the medium term, and the Government will make back its investment in the long term. For example, you cannot hope to have quick returns on infrastructure projects, nor on the 'bad banks' which are created to take away toxic assets from the banks.

Firstly, your point has little resemblance with that of stimulus advocates. Their point is that the economy is contracting because of a fall in aggregate demand. The stimulus package is meant to replace lost private demand with public demand. In effect, it's meant to deal with the current situation.

If your house is on fire, your primary concern while the fire is raging is not who to take out a future home insurance policy with(long term) but what you can do now to quench the fire(short term).

Effectively, you are admitting that the major plank of the new administration's policy has little or nothing to offer for the current problem.

Creating jobs and recouping investment fully are two different things with two different timescales.

This is a distinction without a difference. If a President promises that the investments he is making is justified because the investments will lead to job creation, how will any normal understanding of English entail that the purported new jobs are anything other than a recouping of the investment?

Besides, its a red herring. Obama has in speech after speech defended his spending plans as a panacea for today's problems. That is the whole point of the stimulus in the first place.

It is already in effect. Without it, there would be a total systematic collapse by now.

The stimulus package yet to pass is already in effect? Retroactively or what?

Simply, the Government will not 'recoup' their investment in the short term. I don't know why this hard to understand. We do not judge the economy by the budgetary deficit, we judge it by GDP.

What is the point of a Keynesian stimulus which is not a stimulus but a long term investment programme?

Effectively, we both agree that the stimulus, at best, is beneficial in the long term and as such, is no panacea for today's problem. The key difference is that you claim the stimulus supporters also say this, which is like claiming that Christians worship Buddha. All the arguments by the Obama's team, the likes of Paul Krugman, Joseph Stiglitz, e.t.c that the stimulus is justified on the basis of its exapnsionary impact today is tossed aside for a bizzare claim that the stimulus is about the long term. They all claim that the multiplier is 1.5. 1.5 today, not in the long term. It seems you don't have any understanding of the what the debate is about in the first place.

He can either let the whole system collapse, with catastrophic short-term consequences which could lead to anarchy and even social unrest or he can limit the fallout by spending big in the short-term. Either way, his objective has always been to have strong fiscal governance and to produce budget-surpluses like we had in the Clinton years. Unfortunately, he is going to have to put that off until he takes care of this mess.

Why would he want to limit the fallout in the short term if he doesn't have a time frame for his plans like you asserted in your penultimate post?

You have now touched the crux of the debate after perambulating endlessly.

Can such a huge spending package have net beneficial effects in the long term? Yes. I made that point in the very first post.

Does it have net beneficial effects such as limiting fallouts in the short term? No evidence of that here.

Ibime:

Guy, just think of it as a collaterised debt obligation.
Government buys the economy's bad assests, giving it a chance to recover.

Please do me a favour, google ''what is the multiplier''.

What you are talking here has nothing to do with this thread. I'm in favor of Govt spending to sanitise the banking sector. I would prefer capital injections and the ''bad bank approach'' in that regard, but that is not the issue here.

The question is how Obama's stimulus package, the programme of public works justified by some economists as having a multiplier of 1.5, is going to work. 2 separate issues entirely.

Now, as to the Keynesian elements of the stimulus package such as infrastructure spending and computerised healthcare, these are even longer term strategies design to re-orientate the economy AND provide jobs for those who have been displaced in the short-term.

Another example of mutilating the point of the original advocates. Keynesian theories on priming up aggregate demand, is exactly that, priming up aggregate demand. The idea is that as the economy contracts, private spending falls, public spending is increased to replace private spending. That, in a nutshell, is what the stimulus package is meant to acheive in the short term.

Does it have longer term benefits? Of course, but that is not the debate here.

Guy, all this rambling is not helpful.

Can you provide a link where Obama says his stimulus package will make 150% returns in the short-term?

I do not know the actual contents of the stimulus package until it is passed, but I believe some of it will be geared toward the banks¹, whilst other money will be allocated to the auto-industry, infrastructure, medicine², etc. On top of that we will be seeing middle-income tax cuts and no repeal of the Bush tax cuts³.

I believe the keynesian elements of (2.) is what you have a problem with as (1.) and (3.) do address the immediate crisis.

Hence, Obama is tackling the immediate problem whilst simultaneously protecting jobs and creating artificial demand through (2.).

All this talk of 150% returns in the short-term can only be substantiated if you provide us with credible http://.

Ibime:

Guy, all this rambling is not helpful.Can you provide a link where Obama says his stimulus package will make 150% returns in the short-term?

An easy way of rebutting this charlatanism is to ask where on this thread anyone says Obama has stated the above. Or presumably, I can as well ask for a single link of the Obama team saying their stimulus plan is in regards the long term and not the short term.

I do not know the actual contents of the stimulus package until it is passed, but I believe some of it will be geared toward the banks1, whilst other money will be allocated to the auto-industry, infrastructure, medicine2, etc. On top of that we will be seeing middle-income tax cuts and no repeal of the bush tax cuts3.

If you think the current debates about the multiplier in Keynesian spending is about supporting the banks or the auto-industry, that means you haven't got a clue what the subject is. It's like coming to a thread about the effects of communism to talk about the effects of Islamism.

What the hell is the banking rescue measures got to do with Obama's planned Keynesian spending?

I believe the keynesian elements of (2.) is what you have a problem with as

No sh*t! The topic is about Keynesian spending alone and you are yapping about everything including CDOs. What in Zeus' name does CDO have to do with the topic?

Hence, Obama is tackling the immediate problem whilst simultaneously protecting jobs and creating artificial demand through (2.).

That's all I'm interested in. How does the Keynesian spending increase demand?

All this talk of 150% returns in the short-term can only be substantiated if you provide us with credible http://.

Asking for weblinks of whether Keynesians think such spending has a multiplier of more than 1.0 is a bit like asking for weblinks to show monetarists believe in the quantity theory of money.

4 Play:

An easy way of rebutting this charlatanism is to ask where on this thread anyone says Obama has stated the above. Or presumably, I can as well ask for a single link of the Obama team saying their stimulus plan is in regards the long term and not the short term.

Simple question - please provide the answer!

You came on here spewing rubbish, irked at the fact that Obama's fiscal plans come with a proviso of 150% returns.

Oya, where is the link that says that the 1.5 multiplier holds for the short term?

Did Obama or any of his economic team make such an assertion or are these assertions that you manufactured in your head?

If it is in the public domain, surely CNN and the like would report on it, and we would be able to get a link from you. Methinks it is not in the public domain, only in your head.

4 Play:

(1.) If you think the current debates about the multiplier in Keynesian spending is about supporting the banks or the auto-industry, that means you haven't got a clue what the subject is. It's like coming to a thread about the effects of communism to talk about the effects of Islamism.

(2.) What the hell is the banking rescue measures got to do with Obama's planned Keynesian spending? .

My friend sharrap dia! I did not mention the banks as part of Keynesian policy. Dont insult my intelligence.

The second question should have been the original title of your thread instead of harping on about some 1.5 multiplier bullshit. Your original question should have been "Are Keynesian policies the solution to the present crisis?" Like I said, the Keynesian element of Obama's fiscal package are simply to keep employment up, create artificial demand, as well as long term benefits to the economy through the creation of capital goods. You cannot talk about Keynesian multiplier in the short term without considering the Long Run Keynesian multiplier and the effect of the increase in capital goods. Any attempt to hash out a figure of 150% in the short-term is evidence of your own stupidity. Besides, we do not know if this 1.5 figure of yours is just a fable that you created. At least, until we get a credible url confirming your initial yarns.

http://otrans.3cdn.net/45593e8ecbd339d074_l3m6bt1te.pdf Page 13, from the head of Obama's Council of Economic Advisers, Cristina Romer.

Output effects of a permanent stimulus of 1% of GDP (percent)
Government Tax
Quarter                  Purchases                    Cuts
1                            1.05                            0.00
2                            1.24                            0.49
3                            1.35                            0.58
4                            1.44                            0.66
5                            1.51                            0.75
6                            1.53                            0.84
7                            1.54                            0.93
8                            1.57                            0.99
9                            1.57                            0.99
10                          1.57                            0.99
11                          1.57                            0.99
12                          1.57                            0.99
13                          1.57                            0.99
14                          1.57                            0.99
15                          1.57                            0.99
16                          1.55                            0.98

Firstly, let me preempt Ibime by predicting what he would have typed. ''I asked for short term but the multiplier doesn't hit 1.5 until Q5 so you are still wrong''  I've seen it all before, try a better line.    

Obama's multipliers is the hottest topic on the econo-blogs for the past couple of months. The idea that I have to provide a weblink for a topical and blindingly obvious matter shows you are clueless about the debate.

Ibime:

Simple question - please provide the answer! You came on here spewing rubbish, irked at the fact that Obama's fiscal plans come with a proviso of 150% returns.
Oya, where is the link that says that the 1.5 multiplier holds for the short term?

Did Obama or any of his economic team make such an assertion or are these assertions that you manufactured in your head?If it is in the public domain, surely CNN and the like would report on it, and we would be able to get a link from you. Methinks it is not in the public domain, only in your head.

Look at this long discredited charlatan. I purposely waited for you to go out on a limb before addressing the issue. ''Obama's multipliers'' are a well known matter.

You are waiting for CNN to raise it in its ''Breaking News''.

Did the Obama team claim that their spending is about the long term or did you manufacture it in your head, like the Ijaw warriors who swim with one hand and fire AK47 with the other?

My friend sharrap dia! I did not mention the banks as part of Keynesian policy. Dont insult my intelligence.

You have to have intelligence for it to be insulted. This is a thread exclusively about Keynesian spending and you are spewing utter bollocks about everything from CDOs to the Swedish banking rescue model.

The second question should have been the original title of your thread instead of harping on about some 1.5 multiplier bullshit. Your original question should have been "Are Keynesian policies the solution to the present crisis?"

You're a blithering idiot. Anybody who knows the issue and is not reeking of sciolism like you would know that this is about Keynesian spending.

If you don't know about a topic, don't try to come here and impress me. You are offering your opinion and you don't know your head from your a*se. Imagine, you're telling me how to phrase the thread so that your bovine brain can grasp it, ode.

Like I said, the Keynesian element of Obama's fiscal package are simply to keep employment up, create artificial demand, as well as long term benefits to the economy through the creation of capital goods. You cannot talk about Keynesian multiplier in the short term without considering the Long Run Keynesian multiplier and the effect of the increase in capital goods. Any attempt to hash out a figure of 150% in the short-term is evidence of your own stupidity. Besides, we do not know if this 1.5 figure of yours is just a fable that you created. At least, until we get a credible url confirming your initial yarns.

Look at this charlatan yapping. The Keynesian precept here is about priming demand and it starts with the assumption that the multiplier is at least, or more than, 1.0. If you have learnt anything today, please learn this or shut the hell up.

My friend sharrap dia. . . how many people are aware of this debate here in Britain. . . or even in Yankee sef?. . . .of course, I had to certify that the initial info was correct before jumping into the debate. . . just like you, I did not believe that Obama could achieve 1.5 multiplier in the short-term, that is why I questioned the validity of the initial info. . . . if I thought those figures were correct, I wouldn't question them. . . . so like you said it really is "the miracle of the fiscal stimulus multiplier". . . . I believe this recession is going to last long and five quarters is too short a period.

Let me leave before these men start physically fighting.

spoilt:

Let me leave before these men start physically fighting.

Come hia, do you think the multiplier is 1.5 or 0.8? Answer the question before I slap you

4 Play:

Look at this long discredited charlatan. I purposely waited for you to go out on a limb before addressing the issue. ''Obama's multipliers'' are a well known matter.

You have to have intelligence for it to be insulted. This is a thread exclusively about Keynesian spending and you are spewing utter bollocks about everything from CDOs to the Swedish banking rescue model.

You're a blithering idiot. Anybody who knows the issue and is not reeking of sciolism like you would know that this is about Keynesian spending.

If you don't know about a topic, don't try to come here and impress me. You are offering your opinion and you don't know your head from your a*se. Imagine, you're telling me how to phrase the thread so that your bovine brain can grasp it, ode.

Look at this charlatan yapping. The Keynesian precept here is about priming demand and it starts with the assumption that the multiplier is at least, or more than, 1.0. If you have learnt anything today, please learn this or shut the hell up.

My friend sharrap dia!. . . . is it today that I have been discussing Keynesian economics on Nairaland?. . . that I do not know about the debate on 'Obama's multipliers' says nothing about my knowledge of Keynesian economics. . . . your original post was very unclear to those not in the loop. . . you came in talking about Obama's fiscal stimulus and how much society gets back and bla bla bla. . . . since Obama's stimulus contains both keynesian and non-keynesian elements, I talked about Sweden etc thinking that you were referring to returns on government spending (both Keynesian and non-Keynesian elements of the fiscal package). . . . how was I to know that you were referring to Keynesian multipliers if I am not abreast of the debate in Yankee?. . . .it was only about 3 posts in that I deciphered that you were talking about Keynesian multipliers, a topic I have not covered since 2nd year Macro-Econs. . . . . I just thought you were having your usual rant against Keynesian economics as you love to do. . .

4 Play:

Come hia, do you think the multiplier is 1.5 or 0.8? Answer the question before I slap you

who me? .
I have no idea about the metrics. I just need my check cheque in the mail.

4Play,

You are wasting your time with a sheep.

He will ask you to produce links and source. When you do he will depart from the topic and try other tactics to project brilliance but he is shallow. He is a sheep!

Amongst sheep there are classes, he is of the lower class. The lead sheep is Davidylan. Often Ibime does not speak his mind until the lead sheep has spoken.

Some people are trapped. . .they exist within imaginary boundaries and they are timid and not adventurous or willing to take assertive steps and pioneer thought trails. Ibime will not initiate discussion that has not already been reported by CNN, Google or that cannot be found on the web. Neither will David. He is intimidated by Shepherds.

The question you ask is valid and does not need a web source or link to generate civil discussion. But sheep must be led, they lack initiative to self navigate.

@ Topic,

Hopefully, there is someone on this forum who will explain the ''miracle of the fiscal stimulus multpilier''.

That's the key word for it! Stimulus advocates themselves have no clue how it will work but they are hoping for a MIRACLE under President Obama.

According to the stimulus advocates, the Govt spends $1 and, using the Obama team's numbers, you will get $1.5 in output. The multiplier is thus $1.5. Thus, not only will society get the initial $1 back, it will get 50 cents in addition.

Back in September, Lehman and Merryl were hanging on a thin strand of hope, they were either going to get a rescue or fall by the way side. Treasury had told them it could not help and they had to seek a way out in the market. Both Lehman and Merryl approached Bank of America. Bank of America turned away from Lehman and embraced Merryl. One weekend late September Treasury told Lehman's Board of Directors that "you are faced with grave responsibility and you know what to do". Lehman filed bankruptcy the next morning.

Here's how dirty Wall Street and Treasury is and a clear message that all their rhetoric is designed to impress clueless minds like Ibime and David that have insisted in their juvenile view of the world that the bailout is working and Treasury and Wall street are on the right track. . . When the first half of the bailout was dished out, Bank of America got a share and so did Merryl. Earlier Treasury told Lehman and Merryl to find solution in the market and not depend on it for rescue. So why should Merryl get bailout money? Merryl - Bank of America deal was not due to close till January 2009. Bank of America approached Treasury in January that closing the purchase of Merryl is impossible without some financial bailout to ease the debts on Merryl's books. Treasury gave the money out to Bank of America and the deal closed. Now we hear that Merryl's problems was far worse than was earlier understood. WTF!

The point, in response to your question, is nobody knows for sure that such an outcome in a 50% return on investment is attainable. At best, they are forecasting based on historical data. The problem is, as everyone else has attested to including the President, this is a new territory and we must learn as we go along and discover new humps on the road ahead.

I can see how that can work in the long term: roads, power plants, bridges,e.t.c can boost growth by lessening the infrastructural constraints on business activity. However, it takes a while to complete such projects and by the time they are built, America will be out of the recession. Unless you belong to the Roubini school of thought who think this recession will last a considerable lenght of time.

Exactly, attributes from zoning laws, location based tax incentives and so on and so forth that for example benefit business districts distributed along metro transit grid and has positive result on carbon footprint or some other public interest policies.

So does anybody know how spending $1 today will bring about $1.5 in output within the next few months?

It's voodoo economics. President Reagan said it, not me. . .

Negro_Ntns:

The point, in response to your question, is nobody knows for sure that such an outcome in a 50% return on investment is attainable.  At best, they are forecasting based on historical data. The problem is, as everyone else has attested to including the President, this is a new territory and we must learn as we go along and discover new humps on the road ahead. 

Look at this idiot talking about Shepherds and Sheep, yet you fell into the same trap, even after having it explained to you that this is about "Spending Multipliers" not about a "return on investment".

I may have miscomprehended the original question because of the way it was asked, but you just proved that you are a downright spastic.

BTW, even if the fiscal stimulus package is worth $400bn and $600bn is spent throughout the economy over the next 5 quarters, it may not be enough to get us out of the recession. Besides, the only way Obama can achieve 1.5 multiplier on all of the $400bn over the next 5 quarters is if the $400bn is spent immediately. By 4Play's assertion, infrastructure projects take a long time to complete so the $400bn cannot be spent immediately, it must be spent over a long period, hence the 1.5 multiplier looks bogus if applied to the full sum. It could well hold for any monies spent immediately, however, 4Play is trying to say that the $400bn does not provide an immediate solution to the problem as you can only spend the money over a long period of time.

"Spending Multipliers" not about a "return on investment

Semantics! When you give out money to an entity and you expect in return that amount of money plus a service fee or cost fee, then you have in principle, established a ROI. The stimulus is an investment in society and for public interest and your expected gain at the end of the term becomes your returns.

Google and CNN have systematically over the years engineered your mind through news marketing and today you are a conditioned consumer. You now associate certain terms with a limited field of applications. Don't get stuck on ROI as a term applicable only to bank loans or corporate capital investments, it's application is expansive to include Stimulus spending.

Read through my entire response to 4Play and you will understand my point. If you chop my response into segments that you want to score point on, then you are not critiquing my view responsibly. But of course, what else is to be expected of a sheep? This is not a linked or sourced discourse, it is a freelance idea for discussing and collecting intellectual opinions from free-thinking minds, the class of which Ibime and David is excluded.

Beside, you still have not answered the Post, now that your confusion about the original question is cleared. Or are you still befuddled about the question?

Look at this idiot. . . .you launched a full-page diatribe about Merill Lynch and Lehman bros and you are here grinning teeth like you know what you are talking about. . . . after that, you started talking about Carbon footprints and God knows what else. . . .your befuddled brain cannot stay on a single topic. Do you think this is a bailout debate which you opposed and which 4Play supports as evidenced by his support for the "bad bank" approach. You have no clue what we are talking about here. I had no clue because I live in Britain and was not abreast of the debate in Yankee. That does not mean I do not know the theory. I do not have to know the intricate details of everything being discussed in minor-stream media in Yankee. It is not my country. As for you, you are completely clueless about economic issues, full stop.

Where in your post did you address anything to do with spending multipliers?

I responded fully to the question when I isaid its all miracle and nobody knows. I don't know how they will attain that objective. The question was not about the theory of stimulus multipliers but rather about the "policy" being pushed by Obama administration. But you were confused so your coaching of what its about is not viable.

You act as if outside of Google and CNN and links and sources, original ideas espoused from indivdual minds have no merit. Until you change that view and in fact begin to practice it yourself, you are a sheep.

@topic,

You guys need to start speaking english. All these keynesia, Queenisia, Malaysia and Quintisia economic jargons does not make sense. I ones learned that unitl a concept can be explained and understood by a six year old, it probably isn't well thought through yet.

My take on the whole mess the world is in is this. The market, just by definition cannot fail. The market reacts to situations and circumstances to bring about a balance. All these govt intervention screwed up the market in the first place and it is still screwing it up today. Until the market is allowed to adjust by itself and attain a sustainable balance, we will not only be on this problem for long, but we will be laying the foundation for the future wahala.

On another point however, can anyone explain to me how Obama plans to maintain the infrastructures he is planning to build? Currently, our highways are maintained through the revenue from gas taxes. He is advocating less use of gasoline and increased use of mass transit. If the use of gasoline declines, so will the revenue from taxing it. meanwhile, the infrastructures that need maintenance will increase and mass transits are always subsidized from gasoline taxes. How will these infrastructures be sustained? Where will the money come from? Are we not setting up a future bailout of not just our financial industries but our entire infrastructure in the near future? More questions than answers I tell yah.

2009: 29.0
2010: 115.8
2011: 105.5
2012: 53.6
2013: 26.5
2014: 13.0
2015: 6.9
2016: 3.0
2017: 1.6
2018: 0.9
2019:0.4

Total: $356.0 billion


See what I was saying about the slowness of the appropriation process. That's the projected time frame for the spending, got the summary from Greg Mankiw's blog.

http://gregmankiw..com/2009/01/cbo-on-fiscal-policy-lags.html

Intelligent debate Please carry on, don't let me stop you



^{Hmmn, why am I going weak at the knees} _{pull yourself together busy_body}

4 Play:

2009: 29.0
2010: 115.8
2011: 105.5
2012: 53.6
2013: 26.5
2014: 13.0
2015: 6.9
2016: 3.0
2017: 1.6
2018: 0.9
2019:0.4

Total: $356.0 billion


See what I was saying about the slowness of the appropriation process. That's the projected time frame for the spending, got the summary from Greg Mankiw's blog.

http://gregmankiw..com/2009/01/cbo-on-fiscal-policy-lags.html

Methinks Obama knows he is in it for the long haul, hence the drawn-out nature of the spending.

Saw Roubini on Bloomberg talking about an Asian-style recession. May not be right, but we are certainly in it for the long haul.

Even a Saysian approach of tax-cuts for producers will take months to go through the system, and comes with no guarantees at all. The problem in the West is that real wages have been going down for a few decades, and only cheap credit has kept consumption at an appropriate level for the economy to progress, so it is vital to stimulate main street. Obama's approach is not with disregard to Paulson's bailout. Supply has been stimulated, it is now time to stimulate demand. A 'bad bank' approach is still in the offing for Obama, as well as other measures, so this is not a unidirectional Keynesian approach

There is no instant fix unless you dash everybody money and force them to spend. The Keynesian approach at least leaves you with capital goods when the crisis is over.

Saw Roubini on Bloomberg talking about an Asian-style recession. May not be right, but we are certainly in it for the long haul.

I have tremendous respect for Roubini because he's one of the few to predict this crisis. He too supports a stimulus spending package. I believe his only quarrel with the Obama package is whether its big enough.

Even a Saysian approach of tax-cuts for producers will take months to go through the system, and comes with no guarantees at all.

Enacting tax cuts is always faster than major spending measures. I believe the key drawback with taxcuts is that there is little guarantee the tax savings will be spent, thus, rendering the tax cuts useless.

Even tax rebates aimed at the poorest, as was tried in '01 and '08 , have proven to be of limited value as most of the savings were saved.

Obama's approach is not with disregard to Paulson's bailout. Supply has been stimulated, it is now time to stimulate demand. A 'bad bank' approach is still in the offing for Obama, as well as other measures, so this is not a unidirectional Keynesian approach

There is no instant fix unless you dash everybody money and force them to spend. The Keynesian approach at least leaves you with capital goods when the crisis is over.

I don't think they have injected enough capital into banks, so I won't say the banks have nearly enough to lend.

The key problem with the ''bad bank'' approach is asset valuation,i.e the assets that will bought by the ''bad bank''. Unless the Govt nationalises these banks and has unlimited access to their books, which they should strongly consider,you can't trust the banks' disclosure of their balance sheet.

The rescue measures have been haphazard so far. Geithner needs to settle on a comprehensive and consistent approach that will encourage private investors to participate in the recapitalisation of these banks.

My take on the whole mess the world is in is this. The market, just by definition cannot fail.  The market reacts to situations and circumstances to bring about a balance.  All these govt intervention screwed up the market in the first place and it is still screwing it up today.  Until the market is allowed to adjust by itself and attain a sustainable balance, we will not only be on this problem for long, but we will be laying the foundation for the future wahala.

Govt intervention in the past did not help but unless the banks can save themselves without Govt aid, this is not the time to rail against Govt intervention.The banks cannot privatise the profits and nationalise the losses without bringing about greater Govt intervention.

On another point however, can anyone explain to me how Obama plans to maintain the infrastructures he is planning to build? Currently, our highways are maintained through the revenue from gas taxes. He is advocating less use of gasoline and increased use of mass transit. If the use of gasoline declines, so will the revenue from taxing it.  meanwhile, the infrastructures that need maintenance will increase and mass transits are always subsidized from gasoline taxes.  How will these infrastructures be sustained?  Where will the money come from? Are we not setting up a future bailout of not just our financial industries but our entire infrastructure in the near future?  More questions than answers I tell yah.

Govt spending, unless it comes from printing money, has to be paid for by higher taxes either today or in the future. The Obama argument is that the infrastructural spending will lead to higher GDP growth, viz, it will pay for itself. That is where the multipliers come in.

4 Play:

I don't think they have injected enough capital into banks, so I won't say the banks have nearly enough to lend.

They can only inject enough capital if the banks honestly tell us what they have lost.

4 Play:

Geithner needs to settle on a comprehensive and consistent approach that will encourage private investors to participate in the recapitalisation of these banks.

I don't see what more Geithner can do except force the banks to declare their true exposure to CD's and put out accurate balance sheets. That is nigh on impossible without Nationalisation, so how can we recapitalise the banks when investors are unable to assess the risk? Shebi that is why Gordon Brown and Fred Goodwin were fighting about, until a little dose of reality struck last week.

If Govt declare amnesty on all CD losses, you go see gold-rush. 

All those calling for free-market solutions should think again. This is not the time for ideology. A true free-market solution will change the way we live forever. I mean standards of living, social unrest and all that.

Ibime,

It's worthy of mention to refer you to this news link and debunk your free-for-all theory on economics. Here is a passage in the article, compare it my response which you dismissed as nonsense. Hopefully, now you will believe the news pundit and give him the merit you denied the free thinker.

"Most of the rest of this project spending will go to such things as renewable energy funding ($8 billion) or mass transit ($6 billion) that have a low or negative return on investment".

The passage is the fifth paragraph and sits next to the illustrated chart "Political Stimulation". While you are there, study that chart. In our discussion on bailout I said the government could subsidize social programs sufficiently to a point where it defeats the desire to be gainfully employed and just sit at home and earn unemployment insurance, Scoial Security Income, medicaid, food stamp. . .etc. This chart supports my projection back in September/October when we discussed these things. As I have always admonished, free thinking has its place and news articles has its place, don't let Western values dictate to you that news articles is the sole source for knowledge.

http://online.wsj.com/article/SB123310466514522309.html