Originally posted by FUNKED1
I tried. When you say things like "GDP does also take into account capital investments and that is really the only measure that we need to look at to determine grow, so we might as well just toss the GDP." I can't follow you. I can think of many ways that business can grow without capital investment.
I'm probably using a more generic definition of capital investment. By capital investment I mean any investment that increases production.
I apologise for my poor explanation, I tend to make it over simplistic because I know what I'm thinking.
The GDP measure takes several indictators into account, most of them are meaningless as far as a measure of production increase is concerned. Because the GDP has meaningless indictators in it, the measure of GDP is itself meaningless. The only meaningful indicator that is used to calucate GDP is capital investment.
Capital investment increases production, wether it be producing goods or services. When people invest in increase in production more goods and services more of these are available at cheaper prices and the standard of living goes up, the country becomes wealthier, and the economy increases.
One of the meaningless (as far as increase in production is concerned) is speed of currency circulation. People spending a little or alot of money in and of itself does not mean the economy is growing. It might mean that companies increase their profits, but if those profits aren't invested back into the company or elsewhere, the economy doesn't grow. If they are invested than the economy grows, but there is no garauntee that they will be. That is why speed of currency circulation is a poor indicator of economic growth.
People spend more money---> companies make more profit---
--> (assumption!)companies invest profit---> economy grows.
People spend more money---> companies make more profit---
--> (assumption!)companies pay dividends---> sharholders
spend money, not invest it.
Both cases are likely. In the first case the economy (production) has grown because of captal investment. But we would measure that anyway and just cut out the preceeding steps. In the second case production capacity hasn't been increased, the economy hasn't grown.
Consumption bad, captial investment good. Consuption does lead to a growing economy, that just leads to increase in speed of currency circulation. Capital investment leads to wealth and increase in production.
No it's not. The "supply side" idea attributed to Reagan was that reducing tax rates would create so much income growth that tax revenues would increase.
You're right, I don't know where he got the idea of spending tons of public cash. According to supply-side economics, "To the supply side economist, reallocation away from consumption to private investment, and most especially from public investment to private investment, will always yield superior economic results".
The macroeconomic concept I am referring to is that the definition of GDP means that government spending will increase it and taxation will decrease it.
I think I have shown that government spending won't increase the economy, but in fact hurt it. If the government spends money, that means either the taxpayer and/or the banks have less money to spend or invest on viable production increaseing ventures that meet demand, or on goods and services market actually demands.
lasersailor184, NP. I'm just being a dick about asking for your response because your, "It's called Economics bud. Study it.", statment pissed me off. Of course I could have not been and ******* and told you it pissed me off at the beginning. My apologies.
It sounds like I'm not explain my arguements very well to you eitherwise you wouldn't say, "However, with my basic stuff, all the things you said you want to do will kill this economy. You want to put a gun to it's head and pull the trigger.".
I urge you to pick up the book I linked above as it explains these issues much more clearly. If you have any specific questions regarding my position, feel free to ask.
