Widespread economic myths destroying the economy

This is an excellent article (longer than average) that explains some key economic myths which have been widely held and used to our demise over the past several years. These include:

Military spending stimulates the economy

The banks are acting more conservatively now than before the financial crisis

We’ve got to prop up the big banks

We’ve got to protect the bondholders against suffering big losses.

The government has prosecuted the financial fraud which it has discovered, but it’s hard to make out a case against most of Wall Street’s acts.

The economy always returns to equilibrium and stability by itself.

Obama’s belief that unemployment is good for the economy, and Greenspan’s belief that too little debt is bad for the country are also ridiculous.

But the most dangerous myth – because a lot of economic policy is based upon it, and because so few know that it is false – is the myth about how banks make loans…

Read the whole article here for some sanity and enlightenment.

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7 Responses to Widespread economic myths destroying the economy

  1. JW says:

    Textron to deliver 500 Tactical Armoured Patrol Vehicles to Canadian Forces. We need to protect our Canadian soldiers. I have no problem with that. I sincerely hope this is just a political stimulus. We don’t really have to use them. The unthinkable, is that we might need them to defend our borders. Or, even worse, to be used within our borders. What do they know that we don’t? JW, Langley BC

  2. Attila Balazs says:

    Keynesian economists think if they suck the water from the deep end of the pool to the shallow one, then the water level will rise there.

  3. Robert says:

    Government spending does not stimulate the economy but should be properly viewed as an expense. In the case of the armoured vehicles JW mentions that is an expense for the security of the nation and although it provides jobs for some people the money is actually taken out of productive use. It is not used to generate any further wealth. All government job creation programs are a waste of money and are the equivalent of putting a garbage can full of money on a street corner. What’s the sense of spending a dollar to get twenty-five cents back?

  4. William says:

    Foreign US military spending is paid by foreigners. Surprise, Surprise.

  5. taxpayer says:

    Quite sensible if I can spend your dollar to obtain my 25 cents.

  6. Kenny says:

    Is it better to let it drain, then?

  7. Kenny says:

    I wonder if infrastructure spending is really such a waste, the benefits are enduring & the jobs are needed worse than the banks need blank cheques. Maybe europe could adopt a 25 hour workweek to soak up the 50% of youth that are unemployed. Not everyone would be able to hold down 2 jobs, & I think there would be less despairity.

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