The Politics/Religion/Conspiracies Deathmatch Thread

[The Dunster]

Dunster, I seem to recall you have some expertise in economics - couple of things I'm a bit curious about. Does the concept of trickle down economics have merit either in current implementation or in theory? On face value it seems counter intuitive but I have heard some good arguments for it.

Also am I correct in being frustrated that the current political preference with regards to the the economy is to "get the budget under control" and get a surplus happening ASAP. It seems to me a very primitive thing to try and push through, presumably with the aim of popularity rather than actual economic benefit. Am I wrong here?

Be interested to hear your thoughts

It's called trickle down economics for a reason. The income trickles down rather than flows. Does it have any merit ? Well, in the short term it places incomes in fewer hands which is obviously great of you are one of a select few.

In the long run it's not so great because it takes spending power away from those with the highest propensity to spend and gives it to those with the lowest propensity to spend [the rich].
The only way such a system is sustainable is via credit creation - namely, you force people to spend more than they earn by offering them access to credit at a scale never before witnessed throughout history. This allows for the financial capitalist to have their cake and eat it as well.

Eventually, though the average Joe gets to a point where they cannot service the debt - and that's where it all turns to shit.
Why. Because spending decreases, then income decreases, then investment decreases because entrepreneurs expect sales to decrease... which leads to unemployment... and hence the vicious cycle continues.

With respect to the budget it is what it is - a snapshot of the governments accounts at a point in time.

If the governments budget is in surplus then the non-governments accounts are in deficit [ rules of double entry accounting].

This would make sense when an economy is running beyond it's capacity but absolutely none in reality where few if any modern economies are running beyond their economic capacities.

The group that benefits most from a government running surpluses in the short term is those that either hold interest bearing alternatives to money or those that offer credit to those looking to spend more than they earn [which is the majority of people].

It's a brilliant plan to because when households can no longer service the debt the Government / Central bank steps in and props up the Banking / Finance industry with massive handouts to keep them from going under.

What you also end up with is a falling wages share of income and a rising profits share of income. The only way this can be sustained is through financial engineering such as providing easy credit to households that really can't afford it - but have little choice.

Without the credit spending, spending falls....and so on like I explained above.