"DSK" wrote.
Why is the tremendous amount of spending on the war in Iraq not helping
the economy more?


Maxprop wrote:
Probably because we don't have a tangible enemy, as we did in WWII.

No. Dollars don't care about ideology.

Have you ever heard of the term "velocity" referring to money &
economics? It may or may not be the real reason, but the easiest way to
explain the current situation (huge increase in gov't spending, no or
only very small increase in aggregate demand or the overall economy) is
that the velocity of the money spent is not high enough to generate more
dollars being spent.

I would explain this by saying that the people reaping these huge war
profits are not spending the money as they rake it in. Probably sending
it overseas.


... Note how the
stock market bumped when the statue of Saddam was torn down. Also note how
it has fluctuated every time bad news from the Iraqi front airs.

The stock market is only a tiny portion of the overall economy. And it
is a follower, not a leader, in the overall economy. For example, in
1929 we had an ongoing recession that was not reflected in the stock
market... instead the stock market ballooned even more... for a while...
The dot-com bust was the same. It made no sense whatever to place a huge
valuation on companies with no profits and no productivity. And guess
what, eventually the stock market followed!

Suggested reading:
http://lachlan.bluehaze.com.au/books...1929crash.html

Regards
Doug King

"DSK" wrote in message

"DSK" wrote.
Why is the tremendous amount of spending on the war in Iraq not helping
the economy more?


Maxprop wrote:
Probably because we don't have a tangible enemy, as we did in WWII.

No. Dollars don't care about ideology.

Have you ever heard of the term "velocity" referring to money &
economics? It may or may not be the real reason, but the easiest way to
explain the current situation (huge increase in gov't spending, no or
only very small increase in aggregate demand or the overall economy) is
that the velocity of the money spent is not high enough to generate more
dollars being spent.

You seem to imply that money is an autonomous medium, moving irrespective of
the whims and wishes of the humans that handle it. Interesting.


I would explain this by saying that the people reaping these huge war
profits are not spending the money as they rake it in. Probably sending
it overseas.

Oh, so it's not autonomous. Okay, your point immediately above may be
correct. Overseas investment is increasing daily. Nothing new, really, but
at least it should be reflected in the world economic picture. But it
ain't, at least not currently w/r/t the Iraq war.

... Note how the
stock market bumped when the statue of Saddam was torn down. Also note
how
it has fluctuated every time bad news from the Iraqi front airs.

The stock market is only a tiny portion of the overall economy. And it
is a follower, not a leader, in the overall economy.

In theoretical economic parlance, yes. But the activity of the markets
(global, not just the US) have a huge impact upon the decisions and actions
of those who control vast amounts of money. The markets aren't strictly
followers, rather they are part of a larger symbiotic relationship, replete
with feedback loops.

For example, in
1929 we had an ongoing recession that was not reflected in the stock
market... instead the stock market ballooned even more... for a while...
The dot-com bust was the same. It made no sense whatever to place a huge
valuation on companies with no profits and no productivity. And guess
what, eventually the stock market followed!

Suggested reading:
http://lachlan.bluehaze.com.au/books...1929crash.html

It's been a while since my college econ, but I do recall some of the
features of the '29 crash.

Max

Maxprop wrote:
You seem to imply that money is an autonomous medium, moving irrespective of
the whims and wishes of the humans that handle it. Interesting.

Not at all. Just referring to an economic concept. Money doesn't do
anything by itself, obviously. Equally obvious is that not everybody
does the same thing with their money: some spend it one place, some
spend it another, some save more, some save less.

What I am saying is that with the tremendous increase in U.S. gov't
spending, and the continued economic doldrums, it looks like the people
who received that money did not go out and spend it in ways that help
the U.S. economy.

As an aside, it seems likely to me that much of the money handed out for
the Iraq war is now being spent by overseas corporate types... it will
get back to us, eventually, but in the meantime it has done us little
(if any) good... economically and other ways...


The stock market is only a tiny portion of the overall economy. And it
is a follower, not a leader, in the overall economy.


In theoretical economic parlance, yes. But the activity of the markets
(global, not just the US) have a huge impact upon the decisions and actions
of those who control vast amounts of money. The markets aren't strictly
followers, rather they are part of a larger symbiotic relationship, replete
with feedback loops.

Unfortunately the feedback loop is mostly hysteresis.

As a market for capital, the stock market is important to the economy.
In any other way, it is parasitic.

DSK