stockingfull wrote: jpete wrote:
stockingfull wrote:Answer: Reaganomics.
Aren't you one of the people running around trying to discredit Reaganomics? Besides, while I agree with cutting taxes(tax rates) it means nothing without an equal cut in spending. And Reagan certainly didn't do that. He expanded the debt and put us in a deeper hole. That answer=FAIL.
So you agree that Reaganomics was bunk? That's a start.
The thesis behind the stimulus is that the economy is an engine that, when operating at a high level, creates wealth, employs people and generates tax revenue. If it is allowed to "cool off," all those things will be lost and we'll have a worldwide Depression. So the stimulus is exactly the same as stoking your fire when it's going out. We're spending tax money to keep the fire going until the weak housing/banking sectors start coming back.
Except when I stoke my fire, I don't have to steal the air from some one else, or print it out of, well.....thin air.
stockingfull wrote: Reaganomics was a similar deficit approach, only from the other direction. It was based on the assumption that first cutting taxes would bring more investment by leaving more capital in the hands of the "investor class," which they'd then invest, with the result that new businesses would be started or existing ones enlarged and the benefits of that expansion would "trickle down" to the working class in the form of employment and wages. And the gov't would be richer in the end due to the higher tax revenues generated by a bigger economy, even at lower rates.
What Reagan actually grew, of course, was the deficit.
Now tell me, how does Ron Paul's "tiny gov't" approach stave off a World Depression?
The problem now is, everything is overvalued. To return to normalcy, everything must be allowed to find it's correct level. Yes that involves pain now. But it's either take the pain now, or continue to borrow/spend which props up the abnormally high value of everything, but sets you up for a bigger crash in the end.
The common definition of inflation is rising prices. But that is incorrect. Inflation is literally, the "inflating" of the money supply. The more dollars there are, the less each of them is worth. So it requires more of those devalued dollars to buy the same thing. That's why prices rise.
So, to answer your question, the "tiny government" approach doesn't necessarily have to result in a world depression but it would probably result in at least a recession. The answer to too much money supply is to pull dollars out of the economy. The Federal Reserve can do this by raising interest rates. Again, I know it's unpopular, but it is required. Less dollars equals more value for each dollar.
We used to be able to track the money supply, first by M1(total number of dollars) then M2(which adds in checking/savings accounts and other types of accounts) and now the total amount of money is M3. The Fed doesn't publish M3 because that number would scare the hell out of most people.