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wallisd366

1,080 Posts.

172

02/02/22

12:38

Post #: 59299358
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Originally posted by Infose: ↑

"Current economic growth is not being caused by typical market forces. What do you think happens when the stimulus support, rates suppression bond buying gets wound back? "

Firstly, the effects of a fiscal stimulus last for years to come. It does not disappear as soon as the money is spent. It has a multiplier effect. Government may spend $100.00 but at the end of a four or five years period the total spending in the economy may have expanded not by $100.00 but by $150.00 or even more depending on the multiplier.

Look, lets imagine that the Government gives me $100.00, which I immediately spend. Because my expenditure is somebody's else income, somebody else has now an extra $100.00 to spend, or $70.00 after tax. If he or she spends that then a third person would have $70.00 or $49.00 after tax to spend. And this chain of events can go on and on until the last cent. This, of course, is a simplified exaggeration, but it serves to give you an idea.

Secondly, when a goverment spend a trillion that money ultimately flows to business people leading them to change their expectations about the future and to invest in extra capacity and hire unemployed workers.

The purpose here is to jump-start the economy, exactly as in the case of a vehicle whose battery is not working by connecting its battery to that of another source of power, normally to the battery of the NRMA road assistance car.

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Oh really? How's that working out for you more than a decade after the GFC? Tepid growth. Massive asset bubbles. Wealth divide growing. And now inflation. All the while wages went nowhere. All it did is enrich the wealthy even more. Your trickle down theory is a joke.

Last edited by wallisd366: 02/02/22
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0 Great analysis

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