There is no more dangerous economic concept than this business of "Economic Stimulation". I don't think that it has seriously been revisited since the whole concept was "invented" about 100 years ago. Did you ever wonder, "why not"? I think it is because of our college and university system that are "looking backwards" type institutions. The new professor teaches the way they were taught more than 25 years before. This is almost a guarantee that much of the social area teaching will be well behind the times. You only have to look a psychology and the work of Sigman Fraud to see what I mean. Fraud was just an earlier Benjamen Spock. These two guys cooked up a bunch of bull shit that was passed on from one professor to the next until, like the Bible, people accepted it as "truth". This is what we are talking about when it comes to the concept of "economic stimulation". The fact that Obama has zero experience in any kind of business mean that he has to rely on college professors who suffer as I have described above.
As I have blogged in the past, all economic stimulation does is to reduce the head ache like an aspirin does. The aspirin does not cure the cause of the aspirin, it only gets rid of the pain until what ever caused the head ache goes away. If a person keeps on getting head aches, they should not rely on just aspirin, they should figure out what causes the head aches in the first place. It is the same with economics. What caused the economic down turn in the USA? Stupid government policies, like spending our tax money on homes people could not afford, student loans for kids who were poor students in the first place or took easy major where they could not earn enough to pay back the loan. Add in here the inflation in homes prices, education and medical services. In all three of the above, the USA has the highest cost in the world.
The history of economic stimulation needs to be reviewed first. Historically, the guys with the money had almost total control of the means of production and thus the generation of wealth. If you look at just two factors, money and intellect, you will see that these are the two main ingredients that have caused the creation of wealth. Historically, money was much more important than intellect. It did not matter how smart you were, if you did not have the money, you could not play. When that was the case, if the government threw some big money into the game, the generation of wealth took off. There was always some unused intellect around that was not being utilized that the money could "buy". Out of this came the concept of "economic stimulation" and a case could be made that it used to worked. The problem is that "times have changed", but the educational community has not. If it has changed at all, it has been much slower than the facts of life have changed.
Now, if money has become less significant and intellect more significant, how has that affected the principle of economic stimulation? Today, there is a lot more wealth in the world than a 100 years ago when the concept of economic stimulation was formulated and thus the impact, if it was ever valid, is now much watered down. Historically, there was enough intellect in the world to meet the demands, but not any more. As the world has changed, intellect has become the limiting factor, not money. Now if we flip or turn the money knob, not as much happens as it did in the old days. This is the fact. I could go into all kinds of examples of how money is less significant in the generation of wealth today than it used to be, but I don't have time here to go into those details.
If economic stimulation worked, it would not take much to have a significant affect. If it worked, we would easily have the means to pay it back. Now, if it did "not" work, it would take a lot more money to have a significant affect. If it did "not" work very well, it would be that much more difficult to pay back the money. This latter is just what has happened and I think that you can see the results. It is clear to me that what Obama and his advisers have done was the worst thing that they could have done for the economy. Obama is rounding up all the geese and giving the eggs to his friends to eat. When the geese finally die off and all the eggs have been eaten, there will be no more geese. It takes a while for this cycle to play out, but it is a cycle that can not be denied.
PS-----Why did "new math" die so fast and "economic stimulation" is still alive? One was in our neighborhood schools where we have some control and the other was in our colleges and universities where we have "no" control..
