Date: Sat, 08 Feb 2003 09:20:44 -0500
From: -Bob- <noemailnopsammain.com>
Subject: Re: fuel prices


On Fri, 07 Feb 2003 18:20:33 -0500, Malcolm W. Mason <arpicnopsammail.com> wrote: >Historically , wars are great for the economy. > >It took WWII to end the Great depresssion and it did it worldwide >without any help from the New Deal which could not or did not move the >US as fast as WWII did. > >MWM Short summary with a bi-partisan view: Historically, as in WWI and WWII, that may be true. However, there are some important differences. First, there was no deficit back then and the government essentially paid for the economic expansion. Secondly, we sold gobs of stuff to the Europeans and made a barrel of money on it. As a comparison in modern day economics, you might recall that in the Reagan years, we spent huge sums on a military buildup. Unfortunately it was all deficit spending. The resulting deficit is what sank the economy and resulted in George Bush's (Sr) problems when the bills came due and large sums of gov't money now had to be spent on retiring the debt rather than things that employ people. The recent expansion (the Clinton years) was fueled by the elimination of the deficit spending and the fact that the government's obligations were in reduction, freeing up funds to be spent in other areas. Also when the government is not sucking up all the available credit with deficit spending, Wall street gets excited. Don't get me wrong. I'm not pinning all of the economy's actions for or against any particular President. However, it is important to consider the "wars help the economy" in view of the historical differences in the economy. Back to modern day: we are again "growing" the deficit and will suffer from the effects of "payback" later on (to say nothing of the reduction in capital available for more productive uses) Wall Street and business are worried that the increase in debt is going to cause problems - so it does in a self-fulfilling prophecy. This war is slated to cost 100 billion (Administration estimates) to 300 billion (other estimates). We got other countries to pick up the cost last time but this time we don't have the same level of cooperation. That $100b+ will be major drain on the economy. While it will create some jobs, the increase in the deficit is a real problem. Also, energy prices will skyrocket and that will help the downward spiral. Energy companies suck up money and provide very few jobs in return. I don't see a war helping to eliminate the recession, but instead it will prolong it. The only possible "up-side" is that once it starts, there is less uncertainty about it, and that seems to help a little. Bob

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