So okay, I knew this would happen if I opened with that sentence -- I just lost 87% of my readers.
Let's see if I can contain myself enough to have one or two make it to the really excellent economics lesson that comes in the form of a joke at the end of today's blog.
I thought I'd talk a moment about what, in economics, is called a multiplier effect. Let's forget the fed cranking out billions of increasingly worthless dollars that have been a boon to the ink and paper industries but comes more and more with each passing month at the expense of gross devaluations in your personal savings accounts, your retirements, and your futures. That's division, not multiplication.
And we can forget the ordained ministers of economics with their multiplier-accelerator examples like the "Hansen-Samuelson" model that utilizes a multiplier mechanism from a "simple Keynesian consumption function with a Robertsonian lag" replete with its Ct = c0 + cYt − 1 and It = I0 + I(r) + b(Ct − Ct − 1 equations, formulas, or whatever.
So, wait, "Where's everybody going?!"
Instead, how about the government laying a couple trillion dollars on us out here with the only requirement being we use that money to retire our debts to our debtors and our debtors do the same to their debtors as a wonderful example of a multiplier effect for an economy dying from years and years of debt, the result of Americans over living their means.
So here's a nice example of an economic multiplier in the following piece entitled "Economic recovery." It just leaves Dada giddy, drooling over how we could resolve our nation's soul killing debts, leaving us then able to expand our wars on anybody, anywhere that we damn well please without being thrown into debtor's prison by our foreign creditors. (Of course, with making war on the entire rest-of-the-world, we still won't be able to afford health care for all Americans, i.e., that's just plain good Economics for Dummies!)
It is a slow day in the small Minnesota town of Marshall , and streets are deserted. Times are tough, everybody is in debt, and everybody is living on credit.
A rich tourist visiting the area drives through town, stops at the motel, and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs to pick one for the night.
As soon as he walks upstairs, the motel owner grabs the bill and runs next door to pay his debt to the butcher.
The butcher takes the $100 and runs down the street to retire his debt to the pig farmer.
The pig farmer takes the $100 and heads off to pay his bill to his supplier, the Farmer's Co-op.
The guy at the Farmer's Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her "services" on credit.
The hooker rushes to the hotel and pays off her room bill with the hotel owner. The hotel proprietor then places the $100 back on the counter so the rich traveler will not suspect anything.
At that moment the traveler comes down the stairs, states that the rooms are not satisfactory, picks up the $100 bill and leaves town.
No one produced anything. No one earned anything... However, the whole town is now out of debt and now looks to the future with a lot more optimism.
And that, ladies and gentlemen, is how the United States government is conducting business today.