Why Government Stimulus Doesn't Work

Transcript: http://latewire.com/1027

Category:

News & Politics

Tags:

• gold
• standard
• ron
• paul
• peter
• schiff
• jim
• rogers
• inflation
• currency
• collapse
• printing
• money
• federal
• reserve
• alan
• greenspan

[fewsilly]

Wow this guy completely misses the point. Does anybody really think it would have been good for that many companies to go out of business at the same time. People do not realize how close we came to a complete fail of our system.

Also at one point he says banks make smart investments. What a joke. The only reason we are in this mess is that banks made really bad investments.

[latewire]

This was more about STIMULUS than bailouts, though it's pretty close to the same thing: when government bails out business, that misdirects resources from the surviving parts of the economy to the ones who made bad investments. In the words of this video, from the wealth producers to the wealth destroyers.

Moreover, government heavily manipulated the housing market which made it look like housing was a great investment.

But, again, this video wasn't about that.

[fewsilly]

Why do you only mention the Obama stimulus and not the Bush one?

[latewire]

TARP is the Bush stimulus

[jimbobubbadj]

Usury(The Fed) is the biggest cause of the debt problem in my view. Good vid.

[latewire]

Good point. Alan Greenspan wrote an essay in 1967 about how no government could have huge deficits without a strong, complicit central bank. Essay was reposted at inflationhell (dot) com/1006

[Tracywithafacey]

@Lobos222 The profit motive is what makes businesses perform better. If i'm a customer, i want the business to make as much profit as possible, because they only do this by best serving the customer. Monopolies today are usually empowered by government, they would not exist in a free market

[Tracywithafacey]

@fewsilly Economic stimulus has not and never will work. Look at Japan, they have been trying it for decades! Also, another key point. Fanny and Freddy were guaranteeing sub prime mortgages. It was law that they had to take in a certain percent of sub prime mortgages. So banks lent to anyone, because the government guaranteed them. Again, this resulted in the housing bubble. The banks would never have made those investments. The government eliminated risk.

[Tracywithafacey]

@fewsilly Secondly, why did banks make bad investments? The fed kept interest rates artificially low following the dot com crash, which caused alot of malinvestment within the economy. Resources were misdirected, and the low rates made projects the market would have dismissed, look profitable. This led to the inflation of the housing bubble. Interest rates are a very key signal to the economy, just like prices are. When these are manipulated artificially, everything goes out of sync.

[Tracywithafacey]

@fewsilly Firstly, why are you making the assumption that the country would go down the toilet if the stimulus was not put forward? History shows us that a hands off approach has lead generally to shorter recessions. Take the depression of 1920. The US experienced severe economic conditions, but took a hands off approach, and the economy was back to strong growth in just over a year. And yes, those companies should have failed, we need to allow for the correction.

[Gamezero05]

So government bonds are a bad thing?

Also, one more question... How would foreign investors who buy treasury bills help the U.S. economy if he instead invested his money elsewhere? What if his alternative to buying T-Bills was to invest in a Chinese company? Couldn't borrowing from those kinds of people help to "stimulate" by using that untapped money to fund infrastructure projects?

I like what you're saying, but I just have those questions that I lack understanding about.

[Lobos222]

In macro economics massive lay offs would affect the economy really badly and pay outs via social programs might cost more.In some case "bail out" is the lesser of two evils.

Not all markets work best with only private interest because some markets do not realistically get more than a few competitors. Some even have monopolies. In these cases there have been many examples where the Gov dose a better job (lower user cost) because its not mainly oriented on profit. Eg, water or waste management

[skyding8962]

Good video. I was having trouble understanding the concept until you explained every bit at the end in detail.

[lightningjohnny77]

Five Stars for Kitteh! Yay!