How Government Crowds out Private Investment

[bullshit3118]

oh oh a doctor in economics with a British accent..look out! More bullshit ahead! he forgets to mention that when lobbyists can pay off government officials and some officials in government have a nice job for them in the corporation that hires the lobbyist after their tenure in office..it is not the government, but the corporation running the show! Go and buy government bondsthe corporations and the Fed only use it for fools who want to fund their profit making schemes. Take your PhD andshoveit

[ElJefer]

@bullshit3118

"a doctor in economics with a British accent..look out! More bullshit ahead!"

Ad Hominem Fallacy

"he forgets to mention that when lobbyists can pay off government officials and some officials in government have a nice job for them in the corporation that hires the lobbyist after their tenure in office..it is not the government, but the corporation running the show!"

>>This is irrelevant to the argument that the government misuses money

You missed the whole point.

[TWSceptic]

@bullshit3118 What a pathetic personal attack from probably a retarded American. And you're stupid enough to not understand that the origin of the problem is always government, since they bring the moral hazard where it otherwise wouldn't have been there. Free market > government. British economist > random idiot on YT with dumb username.

[VaginosaurusRex]

the world would be a better place if this would get millions of views, while "Kitten Fights Apples" got 2,000.

[joecow12]

@VaginosaurusRex Kitten Fights Apples! Holy crap, I'm missing it...but I agree.

[keithradamsstatus]

Seems like a weak argument that ignores the fact that companies, especially publicly traded ones main goal is turn a profit, efficiency and productivity usually fall by the waste side as a company grows in size. What is also ignored is that government typically invests in projects that would be to expensive and not bring back a fast enough return on investment (eg. infrastructure).

[shutuprafa]

I don't think he can say "always". How efficient government really depends from government to government. Certain governments are grossly inefficient when producing public goods while others have bureaucracies that are well-positioned to efficiently produce such goods.

Also, crowding out is a totally different animal when interest rates are near zero and/or in a liquidity trap, but that strays from the point he's trying to make

[bdg323]

@TheUSSRWillRiseAgain False. The government, in both times, caused the Great Depression and the current recession. Hoover tried bigger government spending, higher taxation, and government intervention in the market to make the market better, and the market then crashed! The Fedreal Reserve also made things much worse. Government has hurt businesses and the nation.

[keithradamsstatus]

That is a myth pasted along by libertarian revisionists. The great depression occurred because the Hoover and FDR acted to slowly to prevent the runs on banks that help to spread panic through the nation. The new deal essentially saved capitalism in America.

[itachi705]

@keithradamsstatus It is not a myth, it is a fact. Intervention caused the Depression. Accept it, bitch. Even one of FDR's aides said that spending money wasn't working and was in fact making things worse.

[keithradamsstatus]

@itachi705 I see you can't have an adult discussion without calling ppl out of their name. I will leave you with this . On March 4, 1933, the unemployment rate was 25% and higher in major industrial in 1937 unemployment was 14.3%. Under the new deal and NRA agreements which lasted from 1933 to 1934, industrial production was 45% higher in March 1934 than in March 1933 and increased from 55% from 1933 to 1935. Please do your research, Hayek and Mises were wrong about how to fix the problem.

[bdg323]

@keithradamsstatus You might want to recheck your research as well. Of course industrial production would increase that much during this time, since the crash had occured, industry had massively fallen to a fraction of its original size. Also, while unemployment was 14.3% in 1937, it rose to about 20% by next year, in 1938. It did not shrink until WW2 began. (When the unemployed were essentially forced into the army) FDR's own treasury advisor, in 1939, admitted it was all a failure.

[keithradamsstatus]

@bdg323 You are over looking a few things, by 1937 unemployment had fallen to 14.3%, thenthere was a recession where unemployment rose to 19%--which some economists argue was due to the decision by Morgenthau and Republicans to curtail stimulus and balance the budget. By 1939 unemployment had dropped down to 17%, certainly better than 24.3% and the trend had been downward except for 1938.

[bdg323]

@keithradamsstatus They only shrank military and some small amount of other spending. Also, spending was lowering from 1939 til 1941 (when the USA joined in WW2, around the end of the year) and unemployment was lowering faster than it was before. Also, the government started lowering spending in 1937, and unemployment also lowered quicker than before! Also, every other country was over the Great Depression for years, yet we were still in it!

[keithradamsstatus]

@bdg323 Weak argument, America was not a major holder of colonies like the european countries - proving them with cheap labour and cheap resources. Also how did these countries come out of their depressions? Public works and government spending .

[bdg323]

@keithradamsstatus Then why was our economy bigger with less colonization, should it not have been the opposite? If our growth was without much colonization, why was it so slow during the depression in comparison to England and other countires, who paid less in government spending in comparison to FDR? Also, on a note about the recession of 1936, the Federal Reserve had decided to tighten the money supply after its large expansion, which economists also argue caused the recession.

[keithradamsstatus]

@bdg323 Interesting argument I will do some research on various countries during this period and see what policies they used to get out of the depression, I'm pretty sure they followed are lead - for the most part.

Goodnight

[bdg323]

Henry Morgenthau, FDR's Treasury Secretary, in 1939, to the House Ways and Means Committee " We have tried spening money, We are spending more than we have ever spent before and it does not work"

"We have never made good on our promises, I say after eight years of this administration, we have as much unemployment as when we started..."

Who should I believe, Henry, FDR's own Treasury Secretary, or you?

[keithradamsstatus]

@bdg323 "Smile"

Mr Morgenthau was early deficit hawk and not keynesian economist. He was also a critic of parts of the new deal and supported balanced budgets, stable currency, and reducing the nat dept. Interestingly enough he supported raising on the rich to pay down the dept.

"We have never begun to tax the people in this country the way they should be..... I don't pay what I should. People in my class don't. People who have it should pay."

[bdg323]

@keithradamsstatus Yes, he was a critic of it, and rightly so. I am just showing an example of someone in the FDR administration who saw that the New Deal didn't work.

[bdg323]

@keithradamsstatus Hoover passed a massive stimulus that was 13% of his budget, he passed laws restraining businesses and banks, and increased taxation on the rich. FDR continued the action by increasing government spending. The New Deal made the problem worse. Hoover did nothing until the stock market crash, which the market was easily recovering from, and then because of actions by Hoover and the Federal reserve, the market completely crashed.

[keithradamsstatus]

@bdg323 Hoover did nothing, what laws did he implement that retrained banks and businesses, the banks were in a free fall after the crash? The problem was and still is that the market is inefficient. What problem did FDR make worse when employment fell from 25% in 33 to 18% in 37?

[bdg323]

@keithradamsstatus /watch?v=7QLoeehMw0w&feature=r­elmfu

Most other economies were much better while we were still dealing with the great depression. That explains the 25% to 18% fallacy you named.

/watch?v=nRPTrNvqB-Y&feature=m­fu_in_order&list=UL

While I would recommend watching the entire video, if you want a response to your Hoover related question, skip to minute 5.

Happy? Now please, stop telling lies, such as "Hoover did nothing".

[doobersmanster]

I believe that this assertion of "quality of government spending" as opposed to private spending can be linked to a moral question of the condition of Society as a whole. I believe truthfulness and integrity are the main issues here. Self intrest can be altruistic or it can be subjectivly egotistical. Unfortunatly I would have to admit that the "safe " position is to assume that all mankind as a catagory are intrinsically subjective egoists in regaurds to self-intrest. Prudence pushes altruism.

[myeyesarebored]

When a government spends money where does it go?

[daobagua]

@myeyesarebored Well I guess that depends where the government is spending the money. When the government supports bailouts, the money goes to support companies and industries who have structures that inefficiently use precious resources. When the money goes to subsidies it is used to support businesses that produce goods that would not normally be demanded for the cost it takes to make them. When the government spends it on the military, it goes to creating the destruction of wealth.

[megamaniac76]

in the video he mentions that there and many examples of government spending inefficiently and I've heard this repeated before but I never see anything site that supposedly extended list of failed government spending

now with our obvious failed government spending in recent history in the US and Europe, where else in history has inefficient government spending occurred? I ask this so that I can't site these instances in history when I debate anti-capitalists not rhetorically to refute this vid.

[whoo689]

This is ridiculous. So... private investment is "crowded out" by the fact that gov't sells bonds to finance debt, even THOUGH the investors themselves MADE THE DECISION TO BUY THE BONDS??? Well, if the investors and capitalists are so smart, why not just say, "Fuck the bonds and invest in business"? come on...

Libertarians LOVE to make excuses for other people's bad behavior and put the responsibility on gov't, instead. It's always done for the welfare state, for instance.

[whoo689]

This 'crowd out' nonsense seems to ASSUME that those investors who buy gov't bonds WERE FORCED TO DO IT! But they weren't! They voluntarily bought the bonds. So what's being "crowded out"? You expect me to believe that IF THERE WERE NO GOV'T BONDS, they'd just decide to start new businesses or create new jobs? Please..

[whoo689]

Crowd-out is speculative bullshit. It's basically just says, "Well, what if the gov't DIDN'T spend this money, and private individuals spent it instead", and it DOES NOT take into account so many other factors in the economy. Crowd-out is counterfactual nonsense. You can't prove a negative.

[PhantomFedora]

@whoo689 What he does include is logical. The government does not spend money efficiently, at least right now. But the government is not crowding out other investors. He just assumes that point. They made the choice to invest there.

[evandonghue2]

@PhantomFedora "But the government is not crowding out other investors. He just assumes that point. "

Think of investment capital as one big pie, the more the govt consumes the less there is for everyone else_ If govt did not borrow the money, it stands to reason that the money would still be available for someone else to borrow_ Of course our govt has the option to counterfeit money, which steals from anyone holding dollars_

[jetboyJ22]

@whoo689 Government bonds are only a rational investment because of the nature of government- namely, the investors think they will get a good return because the government has the power to tax and print money to repay them. Private companies must be productive to repay bonds, while the government need only raise taxes or fire up the printing press. It's like asking investors to choose between investing in a company that could fail, or a company that can force everyone around it to pay you back.

[arphipps]

@jetboyJ22 Even though you're right mechanically, you fail to remember that if fewer government bonds are issued, the price of purchasing a bond by an investor will be greater (or they'll get a lower interest rate) which means they'll be more likely to put the money into some other investment that provides a greater yield. Thus, the less government spends, the more money investors will put their capital elswhere.

[keithradamsstatus]

@arphipps Or during a recession they can sit on the money and invest in nothing in order to protect their bottom line.

[bdg323]

@whoo689 Actually, it does not need to assume that. The benefit to the investor is greater by investing in the government, while not socially optimal. Think of the prisoner's dilemma. The socially optimal choice is for all to cooperate, but the optimal individual choice is for all to defect, known as the Nash Equilibrium of the prisoner's dilemma, which makes a worse outcome than the socially optimal choice. Also, yes, what would investors do with the money other than invest in businesses?

[bdg323]

@whoo689 Its called game theory. The investors expect the utility, the return of the bonds, to be greater than investment in the private sector. The problem is that the taxpayer is now expected to pay for the bond, because of interest, which is a negative utility to us. The money spent on the bond may be used to pay for past bonds, which would accompish nothing in utility for the taxpayers, or useless programs. The amount of money expected to go to the private sector lessens because of this.

[bdg323]

@whoo689 The market has a finite amount of investable money at any one point in time. Some investors see government bonds as a more valuable investment, and believe the expected utility to be better. The more money to the government, the less there is for the private sector. It's basic algebra and game theory.

[myeyesarebored]

Government maybe inefficient, but this simple zero sum game explanation of how bonds diverting investment capitol away from private industry is absurd. Investors choose where to put their money based on their own needs, and the private sector is certainly not suffering for lack of capitol.

[bdg323]

@myeyesarebored This is not a zero sum game. Don't confuse game theory terms. Something is to be gained from the investment of the money, whether new jobs, goods, or services. The people giving the money will probably always score positively, since they get paid back with interest. However, as explained in the video, government would not be as efficient with the money as the private sector, so the net benefit to society is expected to be less with the government with the money.

[kbdkbd99]

@myeyesarebored you say "the private sector is certainly not suffering for lack of capitol". Where is your empirical evidence for this. One obviously place to look is the job market. We have high employment which would be reduced with investment in the private sector. That simple fact shows that your statement is very wrong.

Before deciding whether you are qualified to hold such opinions or make such judgements - take a look at the clues in your life - your own employment and education.

[Fusionx916]

Your video makes no sense. If private investors though investing in private companies was a better investment than the government, then they would do that. The US government isn't forcing investors to buy bonds, they are choosing to do so.

[HvZ08]

@Fusionx916 I believe he is referring more to money (and the corresponding capital) taken through taxation, rather than investment in government bonds. You are right that the private purchase of government bonds is a choice made by investors, but it is not the same as payment of taxes, which (I believe) is the primary source of government revenue and thus the capital that government allocates.

[adulby]

@Fusionx916 you are correct, but thats the problem. The investors are choosing to buy bonds because the government can just print the money to give guaranteed returns. The bonds are safe investments because the burden is placed on the backs of the people. A real investment doesnt have that security. The bonds provide artificial reassurance because they can always be liquidated at the sacrifice of purchasing power. Good for Government and bond holders, bad for everyone else.

[Wesker1982]

These short videos are GREAT! Very good for passing around.

[carcabe]

The more government spending, the less prosperity, The less money sucked into the bureaucracy, the more prosperity and economic growth.

[Hegurt4114]

Indeed :)