Saturday, October 16, 2010

Stimulating more problems….

As Bernanke gets ready for another round of “stimulus” in a vain attempt to push recovery in the U.S. it is worth recalling these absolute basics:

  1. Stimulus plans must be financed.
  2. If the financing takes the form of additional government debt, the added debt displaces other uses of the funds.
  3. Thus, stimulus plans only enhance incomes when they move resources from less productive to more productive uses.

Nowhere that I am aware has he identified what the current “unproductive uses” are let alone the “more productive” uses.

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