Quote Originally Posted by Centurion1 View Post
Government spending is like band aid infected with AIDS
Vivid!

Quote Originally Posted by Xiahou View Post
[D]eficit spending means the government must sell bonds to spend the money. To sell bonds, someone has to be buying bonds. Buying treasury bonds ties up money that could otherwise have been invested elsewhere in the economy.
Sure, this is something economists have been arguing about for decades. Remember when it looked like we'd be buying back all of them government bonds in the '90s? There was a lot of panic about what effect not having government debt would do. Seems so naive and quaint at this reserve.

Absolutely, government debt gobbles up some investment capital. What effect does this have? Who knows? People buy bonds for stability, so I would imagine that a lot of that money would pour into other "safety" investments. Commodities would probably shoot up, as would muni bonds.

If I had to choose between deficit spending intended to prop up the economy vs. doing nothing (or worse, a 44% unplanned constriction in fed funds), I'd pick the deficit. For now. Long-term it's unsustainable, of course, but nobody in their right mind is arguing that we should continue deficit spending indefinitely. Short term problem: growth. Long-term problem: debt.