« BACK  |  PRINT

RS

MEMBER DIARY

Keynesianism Fail: Economic Growth and Consumer Spending

By: Ben Domenech (Diary)  |  December 9th, 2010 at 12:30 PM  | 

RESIZE: AAA

In the latest video from the Center for Freedom and Prosperity, AEI’s Hiwa Alaghebandian breaks down one of the most common mistakes made by sloppier members of the media in covering the economy: the difference between gross domestic product and gross domestic income, noting that “Consumer spending generally is a consequence of growth, not the cause of growth.”

Take five minutes to watch and learn.

Tags: ,
Get Alerts

COMMENTS

POSTING RULES  |  LOGIN TO COMMENT  |  REGISTER TODAY
  • NeoKong

    Ford took no bailout money. They hunkered down, cut expenses and rode it out. Now they have earned a real profit and are investing it in a new plant in Kentucky.
    All with their own money.

    GM on the other screwed over all it’s investors, stole their share of the company and gave it to the UAW.
    They exist only because of massive amounts of borrowed money.
    It is an artificial existence.
    Any “profits” are imaginary.
    They are no longer a true business as they could not have survived on their own and cannot today.
    They are the Amtrak of auto companies.

    • Common_Cents

      “Buy a chevy and we’ll plant a tree.” no joke.

      That’ll surely get me running out the door to buy a new chebby!

  • http://seekingliberty.wordpress.com fmaidment

    …as consumption grew by 2 points, so did government expenditures. Wanna guess why?

    It’s because that 2 points of consumption came from 2 percentage points of wealth transfer by government. Let’s say that the economy “grew” 1.5% that year (just for the sake of argument). By very simple math, we can see that the economy didn’t actually “grow”, but actually shrank by about 0.5%.

    Say there was no growth at all. In effect, that means that the economy actually shrank by 2%, because 2% of the private sector growth was actually duplicated by government expenditures.

    In other words, for every amount of money the government transfers as “stimulus”, the private sector must grow by a little better than double the transferred amount to make up the difference and remain “even”.

    Keynsian economics (in its modern application) not only doesn’t work, but even when we actually have growth it’s very inefficient growth.

    Also, that young lady needs a new green-screen editor.