Tuesday, August 14, 2012

Want to Create Jobs? Spend Money

Rich people don't create jobs; they take their tax cuts and sock it away in Switzerland and the Cayman Islands.

Corporations don't create jobs; they take their subsidies and profits and hand it to shareholders and executives, who sock it away in Switzerland and the Cayman Islands.

You know who creates jobs: You do. Every time you go to the store and buy groceries. When you buy a car. When you go on vacation.

Ordinary working people buying everyday stuff from local businesses is what creates jobs.

We're missing 20 million jobs in this country because ordinary working people aren't spending money. We're not spending money because we don't have any money. We don't have any money because we don't have good jobs.

How to break out of this economy-killing circle? Easy. Give people money.

Via Atrios, I see that the idea of just printing money and handing it out is gaining some elite traction. Here’s Anatole Kaletsky in Reuters:
Last week I discussed in this column the idea that the vast amounts of money created by central banks and distributed for free to banks and bond funds - equivalent to $6,000 per man, woman and child in America and £6,500 in Britain - should instead be given directly to citizens, who could spend or save it as they pleased. I return to this theme so soon because radical ideas about monetary policy suddenly seem to be gaining traction. Some of the world’s most powerful central bankers - Mario Draghi of the European Central Bank last Thursday, Eric Rosengren of the Boston Fed on Monday and Mervyn King of the Bank of England this Wednesday - are starting to admit that the present approach to creating money, known as quantitative easing, is failing to generate economic growth. Previously taboo ideas can suddenly be mentioned.
The nice thing about this is it wouldn’t rely on some second-order effects through the expectation channel. With a big cash windfall a major fraction of the population are sure to spend it or use it to pay down some debt. When you’re in a depression, as we are, that’s just what the doctor ordered. This is as opposed to normal quantitative easing, which relies on pushing on the economy through the rotten banking system. Like a sponge, the banks absorb most of the money before it seeps out into the real economy.

Probably the biggest obstacle with this is how ridiculous it sounds. “The money has to come from somewhere,” people say. Actually, no it doesn’t. That’s the whole idea behind fiat money. Nothing behind it. “It’ll create hyperinflation,” conservatives will say. Nope. Right now we’re in a depression: we have very low inflation from too few people with jobs and money buying not enough goods and services to run the economy at potential.

Therefore, more spending will just pull in more idle people and resources. Only when the economy is at capacity is serious inflation a possibility. If it starts to happen, the Fed can easily act to restrain it.

The least convincing counterargument is the moral hazard one. “Can’t give people free money,” people say, “otherwise they’ll lose their moral fiber. Success must be earned.” I suppose all other things equal that’s the case, but that argument sure didn’t stop the Treasury from stuffing $700 billion down the rotting throats of the banks back in 2008, and it hasn’t stopped the Fed from stuffing God knows how many more trillions in cheap loans after it.

Nothing I haven’t said before, and still probably little chance of happening, but here’s hoping. Regular people could use a bailout every bit as much, if not more, than wealthy elites.
This is why the single most effective economic stimulus is food stamps. Every dollar the government pays out in food stamps gooses the economy by $1.70. Because unlike corporate subsidies or tax cuts for the rich, government spending on food stamps gets spent immediately right in the community.

Even Smirky understood this. Remember when, after 9-11, he urged everybody to "go shopping?" Yeah, he was pushing commie Keynesianism.

Give us the money.


Victor said...

Oh, giving money to bankers and finacial @$$holes is ok - bankers and financial @$$holes know what to do with money.

Actual people might do things like pay down their, or their kid's, college debt. And that will affect the bankers interest money and profits.

Or put the money towards a deposit on a more fuel-effient car, or make their home more energy efficient. And that will affect the oil/gas company profits.

Or, worse yet, "some people" will go out and buy T-bones and malt liquer, and we'll have riots, since "those people" don't know how to behave if you give them some money.

Just look at the @$$hole financial wiards in Europe. NO amount of economic decline will/can convinvce them that austerity is NOT the solution to their problems, and/or that it's at least a contributing factor in the further decline in their economies.


"We must punish the many, for the sins of the few!"
Must be in the Bible, and I misread that lesson.

Maybe it's in the same section where Jesus went to the Money-lenders Temple and beat the living sh*t out of the borrowers for not wanting to pay even higher interest rates, or not paying fast enough, to help the ancient economy.

It was probably right after he said that a poor person has a better chance of passing through the eye of a needle, than of getting into Heaven.

That Christ was such an @$$hole!

Libby Spencer said...

I've been pushing the "helicopter drop" on the people instead of the banksters since they invented TARP. Always made more sense to me.