We're going to talk about carburetors.
The carburetor is an ancient device used before the days of fuel injection to mix gasoline and air in order to make a car engine run.
Now, when a foolish country boy would run his car completely out of gas, even after he put additional gas in the tank, the car still would not start. First, he was required to splash a little gas in the carburetor and that would provide enough mixture to fire the engine which would then begin drawing fuel from the tank and keep the engine running.
You had to put the gas in the carburetor to make the engine turn over. Putting it anywhere else, say up the tailpipe, was useless.
Keynesian economics states that to get a sluggish economy started again, you have to "prime the pump" or use government spending to stimulate private sector spending. But personally I prefer the carburetor analogy.
Now here's your question. I'm not interested whether you believe in Keynesian theory or not, but, do you think the current "stimulus" package is putting gas in the carburetor or the tail pipe?
Wednesday, February 11, 2009
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6 comments:
This is what I get for talking to people too young to remember a proper motor.
LOL.
This bill isn't even Keynesian. It's just a pork-fest.
I think it's like a shot of that spray ether starting fluid.
I like the analogy, but many people these days think carbs are in your food and should be avoided. :-)
Some of both, but not much of anything anytime soon. Most of the spending hits 18 to 24 months from now.
Removal of payroll taxes would cost less and be like ether in the carb, an instant surge. It would also guarantee the pols would end the stimulus as quickly as possible, rahter than just ratcheting up baseline spending. It also removes power from the pols, so it won't happen. If they can't take credit, forget it.
One problem - too much ether in a gas engine can snap a crankshaft main journal in half, so it must be used very sparinlgy and carefully.
I think they've managed to pour gas into the tires.
Two interesting things I've seen so far:
a) Rail grants. $250M in direct grants to states, $850M to Amtrak, $2B for high-speed rail. I believe those numbers explain GA-DOT's renewed interest in that topic.
b) I rather like U.S. Treasury's tactic of keeping interest rates low, by adding/maintaining uncertainty (and probably allowing further bank and fund failures).
I like the analogy.
Here's your problem:
It doesn't matter how much fuel you pour into the carburetor if the fuel pump is broken. Continuing your analogy, the financial sector is the fuel pump.
The problem isn't that we're out of gas, it's that we're not pumping it through the economy.
And as PeachPundit readers know, I think there are much better ways to fix the financial sector than to keep throwing money at Wall Street and hope the "do something".
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