Well, yes I’d say a reference to a one of the most critically acclaimed and influential novels of the English language that is specifically talking about wasteful government spending seems to be an appropriate aside to this discussion.
Perhaps you’d like to continue to expose your ignorance though.
Wait. Your take on 1984 was that it was about “wasteful government spending”? Holy shit, dude.
Are you having reading comprehension problems? No, I think that Chapter Three titled War is Peace in the fake book The Theory and Practice of Oligarchical Collectivism in 1984 references the party’s use of wasteful government spending as a tool. Do you not agree?
If XT were correct about the benefit from supplying our allies, there should have been a big improvement from late 1939 to late 1941, when we were not at war. How much of the delta in unemployment was the increasing number of people being drafted and how much from expansion.
As for post-war, everyone seems to have forgotten conditions in the US. In 1945 many people had build up massive savings (war bonds) from patriotism, marketing, and the lack of things to buy. Large consumer items were basically unavailable during the war because the plants had been converted to war use. Those two factors were enough to account for economic growth without exports - and Europe in 1946 wasn’t ready to import cars and luxuries.
BTW, the WW II debt was paid off in part because of 1950s income tax rates that would be considered confiscatory today.
XT is making an artificial distinction between foreign and domestic markets.
By getting the unemployed back to work, we developed our own markets. A nation doesn’t have to find them overseas.
Can you show me one prosperous country that relies completely on it’s domestic trade? Or explain how the US could possibly be what it is today had we relied only on borrowing money to put workers back to work strictly for domestic consumption? Just the logic behind why or how you think that would work, since it’s obvious that this model has never worked for any country currently on earth…well, unless you can demonstrate an example as request first.
That said, you are still misunderhearing me…I never said that you can’t develop internal markets, or that doing so is a waste. I said it’s not a magic bullet fix for all your problems, depending on what caused all those people to become unemployed in the first place. If you already HAVE a healthy economy and good import/export trade, and you have a downturn, then a stimulus could help kick start things again. Or, maybe it won’t, again depending on what your actual problem is. In YOUR example, it’s unclear that your fix would be such a silver bullet…in fact, I don’t see how it could be. If you’d like to walk me through it using some made up numbers or whatever, feel free, but my back of the envelop calculations are that you can’t simply put people to work by fiat and expect your economy to be sustainable. If you could do that then everyone WOULD do that, and we wouldn’t have high levels of unemployment and recessions and the like.
-XT
Let’s say we want to inject $800 billion of “stimulus” into the economy. Public works, washing park benches, digging holes and refilling them, whatever.
Where does this $800b come from? Keep in mind we don’t have it. We have to borrow it. China and Japan are big buyers of the debt to finance this stimulus.
Now you’re saying you can use foreigner’s money to boost a domestic economy and not worry about producing anything of value to sell to them. That’s an interesting magic trick! Can you then explain why their smart guys are buying US debt?
Aha you say! China is willing to buy USA debt so Americans can stay prosperous to buy their Chinese goods! Well then… why does China need to bother funneling billions through USA to loop back to their own manufacturers like some convoluted money laundering scheme? Why not just give their money directly to their own manufacturers?!
Think about that puzzle for a while and see if the USA can put its 8% unemployed back to work at a sustained level without any ties to foreign markets that helped finance its “Put People Back to Work Program” in the first place.
Nobody said we had to rely only on domestic trade! I’m only saying that the recovery doesn’t rely on expanding it.
You still don’t seem to understand Keynes.
Of course we rely on foreign trade. This isn’t about that, it’s specifically how to get out of a recession with high unemployment. It’s temporary.
Nor did I.
But you DID say that it doesn’t work. So do you now understand the theory at least?
Um, wait. If you already HAVE a healthy economy - you don’t need a kick start! Rethink that sentence please.
Why not?
Well, no, this has nothing to do with sustaining economies, it’s about kickstarting them.
Foreign vs. domestic markets are completely irrelevant. The laws of economics apply worldwide too. It doesn’t matter if your consumers are in Kansas or Austria, they’re consumers.
Americans are the biggest source. Though foreigners are getting to be more. But let’s continue.
NO!
The stimulus gets people working again. Factories have new customers because people have more cash to spend because they now have jobs. Those factories have workers who now also have more cash. They also produce stuff for foreigners to buy.
I think the Chinese buy debt because it’s a good investment, but whatever.
You tell me. Or ask the Chinese.
There’s no puzzle. You and XT don’t seem to get what this is about.
Your production is my consumption, and my production is your consumption. If nobody is producing…
[QUOTE=lance strongarm]
There’s no puzzle. You and XT don’t seem to get what this is about.
[/QUOTE]
Have to admit, don’t have a clue what you are on about or why you feel that what you are saying here is very convincing towards whatever argument you are making.
Why yes, you did. Your example was solely about domestic trade alone. I TRIED to introduce some outside factors, but you shut me down and told me it wasn’t important.
I’m no expert…no economist, nor do I play one on this board…but I grasp the basics of Keynes. At a guess and based on your contributions thus far in this thread, better than you do.
So, you didn’t answer any of the questions or even take a shot at it, just a throw away line about how I don’t understand Keynes. 
Yes, you did…and it was that I was responding to earlier.
YOUR EXAMPLE DOESN’T WORK. Do YOU understand what I’m getting at now?
Seriously…wtf? You quoted what I said there and then come back with this??? Did you READ what I wrote? Here, let me help…I’ll underline the key part that addresses your, um, point here:
[QUOTE=XT]
If you already HAVE a healthy economy and good import/export trade, and you have a downturn, then a stimulus could help kick start things again.
[/QUOTE]
See, if you have a healthy economy, but you have a downturn, then your economy is out of balance for some reason, but basically healthy…thus, a stimulus might help. It’s debatable. If you have a basically unhealthy and unsound economy, such as your islanders fishing example, then a stimulus with the sole intention of putting people to work so that they could then buy fish is not going to work. You’d need to expand your market some how to justify a ‘stimulus’ designed to basically build new infrastructure.
Because. Good grief, I’ve explained this a half dozen times in every way I can think of. I’ve asked YOU to explain why YOU think it would (and gotten a ridiculous ‘You still don’t seem to understand Keynes’ as a reply). I give up…I can’t think of another way to explain it to you without going into some pedantic analogy or BS and excruciating calculation with made up numbers.
Kickstarting, as in kicking a football? Maybe with Charley Brown and Lucy? And perhaps shifting the goalposts? Maybe so that, if Charley actually kicks the ball it goes through the goal? But no…Lucy keeps moving the football, right?
Then why don’t we only trade with ourselves? Why don’t the Aussies only trade with themselves? Why does anyone trade with anyone? Just for the fun of it? Shouldn’t the Indians and Chinese have the biggest economies since they have the largest internal markets, by your reasoning?
-XT
One can argue that in a war, by destroying the supplies and production capacity of your competition (aka “the enemy”) you are increasing the value of your own supplies and production capacity through classic market forces.
Actually, I’ve never seen that argued, but thought it up in the process of reading this thread. 
Really? Because you seem to indicate (correct me if I’m wrong) that an economist who advocates a different level of fiscal stimulus vs monetary stimulus is being inconsistent, at best, and being ridiculous, at worst.
I wouldn’t trust any economist that claimed $1T of fiscal stimulus was equal to $1T of monetary stimulus.
If you are arguing that equal amounts of both are equivalent methods of achieving the same thing, you’re lumping Paul Krugman together with the likes of Milton Friedman, Alan Greenspan, and Paul Volcker as people who disagree with you.
But what needs fixed is the reason why I’m scared to use my cash to buy the television set. It doesn’t help for me just to smash my window, and then have a guy fix it.
Because then, I have a fixed window, no money in my pocket, and the window man is now out of work again. Until the underlying problem is solved, the troubles continue. Make work projects are nice temporary things to keep the TV guy and the window guy from starving while the economy is bad, but they don’t “stimulate” anything.
I think that was my point. It’s early and no coffee yet. 
But what you’re telling is essentially just a story. We’ve had dozens, hundreds of iterations of this - assertions of this or that, but that’s all they are.
What you’re saying is entirely inconsistent with reality. Do you have any evidence that supports your assertion?
That’s not really relevant to my original point, which was that paying people to do useless work can generate an increase in wealth in an economy with depressed demand and thus the broken windows fallacy isn’t a fallacy in that particular case.
Whether or not such spending can help fix the depressed demand obviously depends on the causes of demand being depressed, and so is kind of stepping out of the analogy.
But for a lot of common causes, paying people to do useless work can help. If demand is depressed because unemployment is high and people are worried about losing their jobs, then lowering unemployment “temporarily” will alleviate those concerns and lead to more demand and thus a more permenant decrease in unemployment (which will then further alleviate concerns, etc). If demand is depressed because investors worry about funding new businesses while there’s a shortage of likely customers, then creating a bunch of temporary customers will help alleviate those concerns and cause an increase in investment in businesses (whose employees will be other businesses customers who will in turn encourage further investment in those businesses, causing further hiring, etc).
Pity.
It was just an example though.
You introduced foreign trade not to make the simple statement that foreign trade is good for economies, but as some kind of alternative to Keynesian theory altogether.
So let’s apply Keynes’ theory to foreign markets:
Our unemployment problem is here, not China. Our stimulus money is best spent here, to help our people, and build our infrastructure. Paying the Chinese to build roads in China so they will buy more U.S. goods might work too, but it’s not the best solution.
Yes, we need foreign trade, but that doesn’t contradict Keynes. That’s my point.
Of course not. Nobody said a stimulus was the ONLY thing needed to recover, not even Keynes would say that.
It could be me, it could be you. Sometimes debate is frustrating. I have been just as frustrated with you and your inability to get this. Don’t get upset.
Foreign trade is essential. Just not to kickstarting an economy. Sustaining it afterward, yes. It is not a substitute for stimulus. It is necessary, but not sufficient.