Arkolon wrote:Your notion of it is false since the trend curves itself on a "U". :-)
I never argued for "the smaller the better". I said that US performed better under small(er) government, and I was right as you can see. :-)
Arkolon wrote:"the trend line indicates nothing changes in a change from x=0 to x=1" is a ridiculous statement, precisely because the trend-line has such a low degree of correlation.
As if the polynomial curve was flat.
Arkolon wrote:The crowding out effect is a myth.
Oops:
Contrary to Keynesian expectations, not only is fiscal stimulus through government budget deficits ineffective, as reported by Barro and Redlick (2009), it was found to be counter-productive for the US economy (Sy, 2016b). Fiscal stimulus turned out to be an economic depressant. The explanation lies in what the spending was actually stimulating.
The issuance of US government bonds from budget deficits led to more financial investment and less real investment in economic production, largely as a substitution effect, independent of interest rate policy. The borrowing by the US government was used mainly to finance welfare consumption. Decades of US government budget deficit spending led to ever rising personal consumption, but falling net investment, depressing economic growth (Sy, 2016b).
The type of statistical relationship between government budget deficits and economic growth rates found for the US economy over decades is also found across the 35 countries over a ten-year period, as the following chart shows.
(Image)
A linear regression analysis of the data shows a statistically significant anti-correlation of -44 percent, with an R-square of 0.19, suggesting that one percent increase in government budget deficit will likely cause a decline of -0.36 percent in annual economic growth. (Including China and India would reduce the anti-correlation to -35 percent and the R-square to 0.13 for the regression.) Even though there could be different reasons for this causality for each country, the empirical relationship is unlikely to be a statistical artefact because of the underlying causes identified for the US economy. We conjecture that, through various means (not specified), various government budget deficits lead ultimately to increased consumption, reducing net investment and hence economic growth, in accordance with the axiom of macroeconomics (Sy, 2016b).
Budget deficits are automatically destabilizing, in the sense that any unexpected economic contraction would automatically increase the budget deficits relative to GDP, which then exert a greater depressive effect on economic growth. Indeed, we have identified government budget deficits as the gravitational force of Keynesian black holes (Sy, 2016b), because budget deficits tend to increase, just like the increasing force of gravitation near a black hole. Persistent government budget deficits have created, around the world, mountains of government debt, which could be the fuel for a global financial supernova.
Arkolon wrote:Banks can create unlimited amounts of money out of thin air
At the cost of solvency rate. Demanding such an egregious amount of extra spending believing banks will cover it through fractional reserves would imply such a low solvency maybe ten depositors withdrawing their money would cause a massive panic.
Arkolon wrote:As an identity, public excess expenditure is private excess savings
It's not like deficits exist, right?
Arkolon wrote:a government deficit, for example, increases corporate profits by mathematical necessity
Interesting. Do you have some empirical data to back your proof?