A theory of fiscal policy

Self-sustaining stimulus

Larry Summers says fiscal stimulus can pay for itself

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Readers' comments



sanjait in reply to Pompatus

"Yeah, unfortunately, when we shove the dirt back in the diggers won't still be in the pit."

Now you've scrambled your own analogy ... which I think illustrates my point well.

1. Japan has been very inconsistent about applying stimulus, and have a lot of other rigidities in their system that haven't been cleared out.

2. Japan's unemployment rate is a fraction of ours. While their GDP hasn't grown very much, neither has their population. So while not booming, they haven't suffered nearly as much as we have from our recession.

2. After 20 year of at least inconsistent stimulus and consistently low interest rates, the government is still easily able to borrow, and they're still in deflation rather than inflation. So much for your theories also.


Fear mongering about the debt of a Gov that issues its own currency.... and believing in the non existant "bond vigilante" is getting tiring. How many years must Japan go above the magical bond vigilante level of debt and still retain low interest rates? Or the U.S. If they really existed, where are they? Ahh, but we're not Greece or Italy because we didn't give someone else the right to issue our currency. We aren't beholden to others. And in general, the Gov debt isn't a problem unless or until there is too much savings in the private sector. US Gov debt = Private sector savings. So... is there too much savings???? Is that what you're trying to tell us? That the Gov has issued too much money... and they need it back???


I think the whole concept of the multiplier changes when we consider investment goods rather than consumption goods.

If we can derive one dollar worth of investment goods, then the future outputs could be much more higher when compared to a consumption good.

During serious financial problems Governments should seriously consider more focus on investment goods & services which can obtain higher returns.

With regard to the consumption goods industries, if anticipated future incomes are higher, consumers are likely to react early and improve their consumptions.



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