2010-06-18, 05:11 | Link #7841 | |
Senior Member
Join Date: Feb 2007
Location: USA
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If you want an explanation why, consider this: when a poor person has some extra money they spend it. When a middle class person has extra money, they can use it to start a business so they can "be their own boss". When you already have billions of dollars you put the extra money into speculation on commodities, and shares of financials (e.g. Goldman Sachs) and energy companies.
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2010-06-18, 06:21 | Link #7842 | |
Senior Member
Join Date: Jan 2009
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But here lies the problem. The middle class did not become their own boss. Instead they acted like the poor or the rich in your example. They either consumed the extra income, or saved/invested it but they did not start new companies. I wonder what the reason for that is. Some examples I can think off: Housing market: House prices kept rising, so it may have been more attractive for the middle class to speculate on real estate instead of starting your own business. Financial security: Safer to be a professional with fixed income when you have to service a mortgage, car loans and pay tuition fees for the kids Health Insurance: Employees get subsidized health care so it may be unattractive to become self employed as insurance could be too costly. Credit Crunch: Banks refuse to lend to small businesses due to high risk of default and their own weak financial positions. Middle class may have too high debts to self finance a firm. I'm just curious as it is completely counter-intuitive from an economic perspective that lowering taxes and reducing regulation would lead to less incentives for self employment. |
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2010-06-18, 07:47 | Link #7844 | |
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Join Date: Oct 2004
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2010-06-18, 08:35 | Link #7845 | ||
NYAAAAHAAANNNNN~
Join Date: Nov 2007
Age: 35
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Or at least it does for majority of the upper-middle or middle class.
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2010-06-18, 09:43 | Link #7846 |
廉頗
Join Date: Feb 2004
Location: Massachusetts
Age: 34
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I'm a fiscal conservative who believes Keynesian economics are the worst thing to happen to the United States in its history from an economic point of view. Our current spending policies under Bernanke have a high probability of causing hyperinflation. We should have had a recession in 2008, but because of his artificial propping up of the market by lowering the interest rate to zero, our national debt is now over $13 TRILLION dollars and... the Keynesian solution? Keep spending, keep printing more FIAT currency. Look up Bernanke's views on deflation, he feels that a sensible solution to that problem is just printing more, worthless money.
This is not about democrats vs. republicans. Bernanke served under both Bush and Obama. The two major political parties are one in the same where it counts, economically, and it is only a matter of time before our country starts feeling the unfortunate ramifications. |
2010-06-18, 09:43 | Link #7847 | |
Senior Member
Join Date: Oct 2004
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2010-06-18, 10:03 | Link #7848 |
Senior Member
Join Date: Mar 2007
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Also, another thing to consider about 'trickle' down economics is the relative minor amounts of tax decrease for middle class income ranges. The amount they get back is not significant enough to alter spending/investing habits. It's mostly the super rich/corporations that get the benefit. Hence, middle class sees very little benefit from the extra cash, and the government loses out on a lot of money they could be using to build infrastructure and social programs.
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2010-06-18, 10:07 | Link #7849 | ||
On a sabbatical
Join Date: Nov 2008
Location: Wellington, NZ
Age: 43
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I agree with that. Look at Japan! Porkbarelling in the '80s didn't work for Japan. It was Kakuei Tanaka who started throwing money in that second-most god-forsaken area of Japan, Niigata. (Of course, Yukio Hatoyama's current electoral district, Hokkaido-9 is really out of the way, the only place where Ainus still live as Ainus.) So Shinzo Abe, Fukuda Jr, Rozen Aso and Hatoyama all had to cut cut cut, like mad. So let's see what Yes we KAN does.
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2010-06-18, 12:18 | Link #7850 | |
Aria Company
Join Date: Nov 2003
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2010-06-18, 12:25 | Link #7851 | ||
NYAAAAHAAANNNNN~
Join Date: Nov 2007
Age: 35
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Apparently we don't, so Keynesian economics is the next best solution we have after the WWII devastation and damage.
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2010-06-18, 12:55 | Link #7852 | ||
廉頗
Join Date: Feb 2004
Location: Massachusetts
Age: 34
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You can't just avoid a recession by printing more money. That's not how economics works. There are up cycles and down cycles that are unavoidable. The big businesses should have failed according to true free market capitalism due to their own inefficiencies, instead the inefficiencies will remain; the free-market is apparently an illusion now. But that's the least of our worries because we have a possibility of becoming the next Wiemar Republic in terms of hyperinflation, due to the said overprinting of money and massive debt... Quote:
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2010-06-18, 13:03 | Link #7853 | |
Not Enough Sleep
Join Date: Nov 2003
Location: R'lyeh
Age: 48
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I work as a Insurance agent and at the end of 08 and start of 09, i had client losing their homes left and right. Some of those shouldn't have bought in the first but some of those clients had good solid jobs that disappear on them. I saw how bad the recession has been on the middle class, i can't even begin to imagine how bad it would be if there had been a depression instead of a recession.
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Last edited by Xellos-_^; 2010-06-18 at 13:24. |
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2010-06-18, 14:09 | Link #7856 | ||
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Join Date: Jan 2009
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What Bernanke's Fed did was based largely based on monetarist theory and has little to do with the Keynesian trade off between inflation and employment. Still, Bernanke (and Greenspan) were rightly criticized (for example by Anne Schwartz) on allowing the interest rate to drop to low after the dot-com recession in 2002-2003 allowing a bubble to form in the housing market. Also he was rightly criticized for the lack of transparency of the criteria under which the Fed would bailout failing banks. Quote:
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2010-06-18, 15:09 | Link #7857 |
廉頗
Join Date: Feb 2004
Location: Massachusetts
Age: 34
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It still isn't an even trade off. I'm not denying the potentially catastrophic consequences of the financial collapse (I'm not convinced the entire sector would go out of commission, but I'll leave that aside as it is irrelevant). It is actually quite Keynesian in that the goal is to prevent any economic downturns through interest rate regulation. And the US certainly is going to pay that 'small price' if the dollar collapses. That doesn't sound too equal to me.
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2010-06-18, 15:52 | Link #7858 | |
Director
Join Date: Feb 2010
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Somali pirate cook saves hostages, then disappears
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2010-06-18, 16:03 | Link #7859 | ||
I disagree with you all.
Join Date: Dec 2005
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2010-06-18, 17:04 | Link #7860 | |
Aria Company
Join Date: Nov 2003
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Also, the dollar isn't going to collapse anytime soon. Too many countries rely on it to let that happen, and while the euro was looking like an attractive alternative for a time, it's showing potential weakness too.
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current affairs, discussion, international |
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