Home
In this issue
December 2, 2014

Jonathan Tobin: Defending the Right to a Jewish State

Heather Hale: Compliment your kids without giving them big heads

Megan Shauri: 10 ways you are ruining your own happiness

Carolyn Bigda: 8 Best Dividend Stocks for 2015

Kiplinger's Personal Finance editors: 7 Things You Didn't Know About Paying Off Student Loans

Samantha Olson: The Crucial Mistake 55% Of Parents Are Making At Their Baby's Bedtime

Densie Well, Ph.D., R.D. Open your eyes to yellow vegetables

The Kosher Gourmet by Megan Gordon With its colorful cache of purples and oranges and reds, COLLARD GREEN SLAW is a marvelous mood booster --- not to mention just downright delish
April 18, 2014

Rabbi Yonason Goldson: Clarifying one of the greatest philosophical conundrums in theology

Caroline B. Glick: The disappearance of US will

Megan Wallgren: 10 things I've learned from my teenagers

Lizette Borreli: Green Tea Boosts Brain Power, May Help Treat Dementia

John Ericson: Trying hard to be 'positive' but never succeeding? Blame Your Brain

The Kosher Gourmet by Julie Rothman Almondy, flourless torta del re (Italian king's cake), has royal roots, is simple to make, . . . but devour it because it's simply delicious

April 14, 2014

Rabbi Dr Naftali Brawer: Passover frees us from the tyranny of time

Greg Crosby: Passing Over Religion

Eric Schulzke: First degree: How America really recovered from a murder epidemic

Georgia Lee: When love is not enough: Teaching your kids about the realities of adult relationships

Cameron Huddleston: Freebies for Your Lawn and Garden

Gordon Pape: How you can tell if your financial adviser is setting you up for potential ruin

Dana Dovey: Up to 500,000 people die each year from hepatitis C-related liver disease. New Treatment Has Over 90% Success Rate

Justin Caba: Eating Watermelon Can Help Control High Blood Pressure

The Kosher Gourmet by Joshua E. London and Lou Marmon Don't dare pass over these Pesach picks for Manischewitz!

April 11, 2014

Rabbi Hillel Goldberg: Silence is much more than golden

Caroline B. Glick: Forgetting freedom at Passover

Susan Swann: How to value a child for who he is, not just what he does

Cameron Huddleston: 7 Financial Tasks You Should Tackle Right Now

Sandra Block and Lisa Gerstner: How to Profit From Your Passion

Susan Scutti: A Simple Blood Test Might Soon Diagnose Cancer

Chris Weller: Have A Slow Metabolism? Let Science Speed It Up For You

The Kosher Gourmet by Diane Rossen Worthington Whitefish Terrine: A French take on gefilte fish

April 9, 2014

Jonathan Tobin: Why Did Kerry Lie About Israeli Blame?

Samuel G. Freedman: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Jessica Ivins: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Kim Giles: Asking for help is not weakness

Kathy Kristof and Barbara Hoch Marcus: 7 Great Growth Israeli Stocks

Matthew Mientka: How Beans, Peas, And Chickpeas Cleanse Bad Cholesterol and Lowers Risk of Heart Disease

Sabrina Bachai: 5 At-Home Treatments For Headaches

The Kosher Gourmet by Daniel Neman Have yourself a matzo ball: The secrets bubby never told you and recipes she could have never imagined

April 8, 2014

Lori Nawyn: At Your Wit's End and Back: Finding Peace

Susan B. Garland and Rachel L. Sheedy: Strategies Married Couples Can Use to Boost Benefits

David Muhlbaum: Smart Tax Deductions Non-Itemizers Can Claim

Jill Weisenberger, M.S., R.D.N., C.D.E : Before You Lose Your Mental Edge

Dana Dovey: Coffee Drinkers Rejoice! Your Cup Of Joe Can Prevent Death From Liver Disease

Chris Weller: Electric 'Thinking Cap' Puts Your Brain Power Into High Gear

The Kosher Gourmet by Marlene Parrish A gift of hazelnuts keeps giving --- for a variety of nutty recipes: Entree, side, soup, dessert

April 4, 2014

Rabbi David Gutterman: The Word for Nothing Means Everything

Charles Krauthammer: Kerry's folly, Chapter 3

Amy Peterson: A life of love: How to build lasting relationships with your children

John Ericson: Older Women: Save Your Heart, Prevent Stroke Don't Drink Diet

John Ericson: Why 50 million Americans will still have spring allergies after taking meds

Cameron Huddleston: Best and Worst Buys of April 2014

Stacy Rapacon: Great Mutual Funds for Young Investors

Sarah Boesveld: Teacher keeps promise to mail thousands of former students letters written by their past selves

The Kosher Gourmet by Sharon Thompson Anyone can make a salad, you say. But can they make a great salad? (SECRETS, TESTED TECHNIQUES + 4 RECIPES, INCLUDING DRESSINGS)

April 2, 2014

Paul Greenberg: Death and joy in the spring

Dan Barry: Should South Carolina Jews be forced to maintain this chimney built by Germans serving the Nazis?

Mayra Bitsko: Save me! An alien took over my child's personality

Frank Clayton: Get happy: 20 scientifically proven happiness activities

Susan Scutti: It's Genetic! Obesity and the 'Carb Breakdown' Gene

Lecia Bushak: Why Hand Sanitizer May Actually Harm Your Health

Stacy Rapacon: Great Funds You Can Own for $500 or Less

Cameron Huddleston: 7 Ways to Save on Home Decor

The Kosher Gourmet by Steve Petusevsky Exploring ingredients as edible-stuffed containers (TWO RECIPES + TIPS & TECHINQUES)

Jewish World Review Feb. 4, 2009 / 10 Shevat 5769

Keynesian Stimulus Won't Work

By Dick Morris & Eileen Mc Gann


Printer Friendly Version
Email this article

http://www.JewishWorldReview.com | There are very few economists who really buy into Keynesian theory anymore. Instead, the idea of "rational expectations" has taken its place. The difference between the two approaches is essential to understanding why Obama's stimulus package won't work.


Keynes felt that people would react automatically to a few dollars in their hands. Consumers would run out and buy new products, and businessmen, seeing the uptick in sales, would rush to open new plants and hire new workers who would, in turn, generate more demand.


But that's not the real world. In reality, consumers, knowing there are hard times ahead, save any money they get either by salting it away or by paying down their debts and bills. That's why the personal saving rate in the last quarter of 2008 was the highest in six years and spending on residential construction was down 22 percent over the past year. And the savings rate rose from 2.8 percent in November 2008 to 3.6 percent in December, as the storm clouds grew grayer.


And, in the real world, banks hang onto their money for fear of making bad loans, no matter how many bailouts or stimulus packages Washington passes.


According to the Federal Reserve Board of St. Louis, the Fed is now holding upward of $1.7 trillion for American banks, more than twice what it had in its vaults at the start of 2008.


How did the Fed get the money? Congress voted the TARP package of bailout funds. The Fed purchased bank assets to get liquidity onto their balance sheets.


What did the banks do with the money? They gave it right back to the Fed to hold in its vaults. They didn't lend it out. They didn't use it to stimulate the economy. They are using it for a nest egg to tap when times improve. Just like the theory of rational expectations says they would.


If banks, suddenly awash in capital, don't decide all is fine and rush to lend money and consumers, given a tax cut or a pay raise, don't rush to buy a flat screen TV, then what good will the stimulus package do?


Not much. It is not until there is evidence that the underlying problem — massive personal and corporate debt — is being solved that any degree of confidence will return. And, without confidence, the rational expectation theory means people sit on their money.


But the package will do a whole lot of harm by piling up capital that people won't spend, banks won't lend and business won't invest. When confidence rises and the money comes out of hiding, watch out for the massive inflationary pressures that all that extra cash will unleash.


Obama's stimulus package won't stimulate much except inflation down the road, which will, in turn, mean the onset of another round of high interest rates and renewed recession to check the inflation.


Republicans should defeat the stimulus package and then negotiate a much smaller bill that emphasizes tax cuts and avoids the pork-barrel feeding frenzy Obama has unleashed. You can see the stimulus package rotting away before our very eyes. People are turning against it as they seek the things on which government will now be spending money, just as they turned against Bill Clinton's more modest $35 billion stimulus package in 1993.


Republicans should stay away in droves. On this issue, they can recapture something they have lost over the past eight years — the mantra of less spending and smaller government.

Every weekday JewishWorldReview.com publishes what many in the media and Washington consider "must-reading". Sign up for the daily JWR update. It's free. Just click here.


JWR contributor Dick Morris is author, most recently, of "Fleeced: How Barack Obama and Hillary Clinton, Media Mockery of Terrorist Threats, Liberals Who Want to Kill Talk Radio, the Do-Nothing Congress, Companies ... Are Scamming Us ... and What to Do About It". (Click HERE to purchase. Sales help fund JWR.) Comment by clicking here.



Dick Morris Archives


© 2009, Dick Morris

Columnists

Toons

Lifestyles