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21 August 2011

Random Economic Thoughts

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Keynesian thinking suggests that the government can increase spending to make up for a shortfall in private spending to prevent a fall in GDP. The theory is based on the well known "paradox of thrift": some times, individuals have fears and increase saving. Although individually this may be desirable, in the aggregate it is undesirable and may generate a recession.

The question is: if the decrease in household saving is caused by excessive debt and by feeling poorer (the value of their stocks and their houses has collapsed), then they rationally choose to consume less. My question for economists and politicians: SHOULD POLITICIANS BE ALLOWED to increase public spending and finance it with debt that will ultimately be paid by the very individuals who want to do exactly the opposite? Should democratic governments who represent their voters offset the individual decisions of the citizens and FORCE increase their indebtedness when thise very individuals do not want to do that?

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Starting January 30, 2012, I decided to put the random (economic) thoughts that I was posting on Facebook, in a blog. In this site you will be able to read all Facebook notes going back to 2008, (without my Friend’s comments, unfortunately), but we will only maintain the new thoughts. If you want to check out the old comments, they are still posted on Facebook. If you want to comment on them, you have two options (1) Become a Facebook Subscriber. Since all the posts will also appear in Facebook, you will be able to comment there. (2) Comment on Twitter, as each post will also be announced in Twitter.