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Originally Posted by Ethersync
So if Japan handled it like the US is now how you think things would have been better?
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Based on what we know from Japan's lost decade and the great depression....what we're doing now (quantitative easing of the money supply by the fed and deficit spending by the federal government) is the right thing....even if it offends someone's conservative sensibilities.
George Soros had a really good explanation for this.
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The bursting of bubbles causes credit contraction, the forced liquidation of assets, deflation and wealth destruction that may reach catastrophic proportions. In a deflationary environment, the weight of accumulated debt can sink the banking system and push the economy into depression. That is what needs to be prevented at all costs.
It can be done ? by creating money to offset the contraction of credit, recapitalising the banking system and writing off or down the accumulated debt in an orderly manner. They require radical and unorthodox policy measures. For best results, the three processes should be combined.
If these measures were successful and credit started to expand, deflationary pressures would be replaced by the spectre of inflation and the authorities would have to drain the excess money supply from the economy almost as fast as they had pumped it in. There is no way to escape from a far-from-equilibrium situation ? global deflation and depression ? except by first inducing its opposite and then reducing it.
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The republicans aren't pissed about the "spending", they're pissed about what the spending is for. If they were in charge, we'd still have a stimulus bill and it would be about the same size, but the money would go to building Army bases instead of building schools....and that's the flat out 100% truth.
Of course the money is being spent on things democrats like, the democrats have large majorities in the legislature and have the White House.
Complaining about what problems we might cause with these policies (i.e. inflation, devaluation of the dollar, rewarding irresponsible past behavior, etc) is like complaining about the known side effects of the heart attack medicine that's needed to save your life.
You can not take your medicine to avoid the side effects, but the end result would be much worse than taking the medicine and living with the side effects.
