short takes

[cellio]

Words that are often misused #1: "periodic". To be meaningful, this word needs to be accompanied by some indication of the period. "Daily" is "periodic", but probably not what is meant in a recipe's direction to "stir periodically". :-)

Two facts that seem to be at odds with each other: (1) a lot of medieval Islamic recipes call for vinegar; and (2) Islam forbids the consumption of wine.

Our baron (who lives in a castle) shared one way to get your castle past the zoning board. I wonder how that's going to work out for the owners in the end, now that the neighbors have noticed. (Who would have thought you could build a castle on the sly in a populated area?)

Two interesting posts that showed up on my reading list within a few hours of each other, serendipitously: whom do you friend? (from cahwyguy) and who owns the conversation? (from jducoeur). Both have lots of comments that I haven't yet digested.

Words that are often misused #2: "rebate". A rebate is a refund of monies paid. If you give money to someone who didn't pay any (or as much as is being given out), the correct word is "gift" (or "grant", if you want to be more governmental about it). Just sayin'.

Query: can anyone reading this point me to a neutral high-level discussion of economics, that I can consume in an hour, that explains how merely pushing small amounts of money into the economy helps fend off a recession? What does the mere act of one-time spending accomplish, and does it matter whether it's splurge-buying or spending you would have done anyway? My knowledge of macro-economics is, as you can tell, a little on the spotty side. I don't care enough to read a tome, but I'd like to read something shorter, particularly if it doesn't come with an agenda. And yes, I realize that the rhetoric and the real reasons behind the stimulus package probably differ; I'm exploring the stated reason here.

Comments

[goldsquare.livejournal.com]

Let me try.

An economy is the *motion* of money. What gets spent, and what does not. An economy grows and gets bigger if more money is moving around, and retracts if there is less.

Some of that is emotional/prognostication, where businesses and consumers, in the aggregate, spend or plan to spend in expectation of the general market.

A recession is when an economy actually contracts, two quarters in a row. If we are in a recession, we'll find out afterwards. Technically.

Businesses, however, have been planning for slower quarters, and planning to hire less, and to spend less. If everyone does that, the economy will regress/recede, just as they thought it would.

A fast injection of cash THAT WILL BE SPENT AND NOT SAVED into the economy, right now, will force businesses to prepare to compete and earn a share of that money. And that money is not just "I gave it to Joe, he spent it on X", because whoever got it spent it, and they spent it, and that's a wave moving through the economy.

The trick is that it be money you were not "going to spend anyway" (which is no big deal), but money you weren't going to spend, that you now spend. Giving it to the poor (which would have been the right thing to do) works: because they'll spend every dime they have, including the dimes they didn't expect.

Is that simple enough?

[cellio]

Thanks. This helps but, naturally, raises more questions. The biggest one is: if the government didn't distribute that money for spending by the people, it would spend it in other ways. Our government doesn't have the "saving" idea. Is spending by Joe Taxpayer inherently different from spending by Uncle Sam?

The trick is that it be money you were not "going to spend anyway" (which is no big deal), but money you weren't going to spend, that you now spend.

So this succeeds if we encourage splurge buying and fails if people use it to pay down their existing credit-card debt? Is that likely to happen? It will happen at the margins, such as the poor person living paycheck to paycheck (who can't get credit or has maxed it out); is that enough to make the difference?

[goldsquare.livejournal.com]

Well, in this case, it is spending that would not have occurred, since the Government had to pass a special bill to send that money around. Spending my the tax payer is different from the government, for myriad reasons.

Exactly right about the buying. Paying down debt does not "make a wave", it stops after one step. And since paying down credit does not ease credit terms, and does not generate new credit, it wouldn't help.

From what I have read, the package that was created gets a grade of C- for whether the money distributed is timely enough, or likely to get spent.

(Let's not talk about inflation - which this action, and the Fed, will also promote.)

[grouchyoldcoot.livejournal.com]

Do I understand correctly that the multiplier effect is supposed to be greater if consumers spend the money on 'stuff' than if the government spends it on roads or invasions or whatever? Or is it that government spending doesn't hit the economy promptly enough?

[goldsquare.livejournal.com]

I am not an economist. I just read a lot.

To push an analogy too hard, consumer spending is like rain, while government spending is like suddenly emptying a bunch of swimming pools - and the sorts of things that a government would suddenly purchase are things that do not properly simulate a natural economy. If you ask me why, though, you'll start to hit the limits of my knowledge.

Basically, it is the consumer and business sectors that are flagging, and so it is the consumer and business sectors that should do the spending. The US Government hasn't quite exactly curtailed its spending, despite the President's first election campaign promises to the contrary. (Consider the size of Homeland Security, and the off-book expenditures for the Iraq Peradventure.)