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Forget Deficits and the Fiscal Cliff Scam

By James K. Galbraith

What do rich people do with money? They make the best use of it they can, and in times of high growth and strong confidence they take risks and – if they are good and lucky – reap the rewards.

But the situation is different when the outlook is bleak and when real estate (especially) will be cheaper next year than today. Under these conditions, money is safe and gains value even at zero interest. So the idle balances pile up in banks and in low-risk assets like Treasury debt.

Read the rest here.

Also, check the four part interview by the Real News Network on why the fiscal cliff is a scam here.

Comments

  1. "You have to believe in magic to think that private spending rises by more than a dollar in response."
    Yes indeed. For some work here I had done a small analysis by plotting growth in private spending against fiscal consolidation in European economies and some advanced economies. The figure here clearly shows a negative association between the two. https://docs.google.com/spreadsheet/ccc?key=0AtznqRj5O6-7dGJPVU9NM1NlTXROWEdjcDg4Tm9lcnc
    Also, the much talked about IMF's WEO box on fiscal multiplier points to quite the same thing.

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