freediver wrote on Oct 18
th, 2008 at 9:54pm:
Because people are far more careful about where they invest their money duiring a recession. The 'unproductive' investment tends to occur during the 'bubble'. The whole problem in a recession is that people are too hesitant to spend or invest.
Rates can fall near the end of a recesion, but only because REAL interest rates would be lower. We're talking about fixing them below the real rates. Let's not forget that it was loose monetary policy that caused the downturn in the first place by encouraging business ventures that relied on an unsustainably low interest rate.
freediver wrote on Oct 18
th, 2008 at 9:54pm:
Because there is only so much to go around, because people want to enjoy life now as well as investing for the future, and because there is a risk of overinvestment, and because of politics. I think the government should have held onto the handouts and spent them on infrastructure in a year or two when the labour shortage isn't as acute. This is why there was such a strong push for reserve bank independence - because governments can't always be trusted to do the right thing.
And you can trust the Reserve Bank? Don't you think it's slightly alarming that the total amount of money in existence has doubled over the last decade, thanks to the Reserve Bank?
The fact that you don't agree with what the government is spending taxpayers' money on demonstrates my point - that they can't allocate money or resources better than the private sector - they didn't spend your dollars where you would have valued them the most. MORE wealth would have been created had it been left in private hands. This is a proven statistical fact. The lower government expenditure is as a proportion of the economy, the faster the economy grows.
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