NationStates Jolt Archive

Economics is not my specialty. I've done some quick research into it, but I'm still unable examine the veracity of the claims in this video, which I don't believe is showing the full picture...
http://www.youtube.com/watch?v=_dmPchuXIXQ

So, educate me... how do central banks circulate money? Are they ultimately responsible for regulating inflation? Do they have any oversight, ie: are their economic decisions subject to constraints of law (like raising interest rates by ridiculous amounts)?

How do central banks circulate money?

Put simply, when the central bank wants to increase the money supply it buys something, typically bonds. It prints the money it uses to pay, which is circulated into the economy. If a central bank wants to decrease the money supply it sells bonds, or foriegn currency reserves. The currency it receives in exchange is deposited in the central bank vaults and is thus taken out of circulation.

Are they ultimately responsible for regulating inflation?

According to the monetarists, since inflation is directly tied to the money supply, yes. I don't really buy this, personally, but having no real argument against it I'm not going to try refuting the claim.

Do they have any oversight, ie: are their economic decisions subject to constraints of law (like raising interest rates by ridiculous amounts)?

It varies from country to country. Here in Canada, the government has the authority to override the Bank of Canada,by submitting detailed instructions in writing. It rarely occurs, and when it does the governor usually resigns. The "offending" instructions, being a matter of public record, force the government to explain, in detail, why they objected to the policy the bank was pursuing.

So, educate me... how do central banks circulate money? Are they ultimately responsible for regulating inflation? Do they have any oversight, ie: are their economic decisions subject to constraints of law (like raising interest rates by ridiculous amounts)?

No, they don't actually circulate money. The central bank it the bank's bank. What they can do is target the interbank lending rate by either increasing or decreasing the amount of free reserves amongst the primary banks, thus increasing or decreasing the price of borrowing, and therefore attempting to control the rate of expansion of the monetary base.

All fiction of course. They have no more say over interest rates than you do. Which is why the world is now in a deflationary spiral.

Banks - They make money off your money. They play the stock market, invest, interest loans etc. FDIC is suppose to back your ass .. if there's a robbery or whatever. But I have yet to believe that if a major depression hit or some other economical disaster that you'd be guaranteed.. anything. Remember .. that as soon as a bank gets your cash .. it's gone within a day or two .. and invested or stocked. That's how bankers get rich. That's why if you go to your bank wanting to withdraw 10k or some other high amount it takes time -- 2 3 5 days. They do not hold enough cash there to process that AND process regular daily transactions. That money is out .. making money.

Bankers go around and find some kid in a playground kicking around a pine cone.

"Hey kid, ya want a dollar?"

"Why would I want a dollar?"

"You could buy stuff with it."

"I dunno, I got this here pine cone."

"Your pine cone sucks and people are making fun of you for it. Take this dollar and get yourself a proper ball."

"Really? They're making fun of my pine cone? That's not nice."

"It's not a nice world, not for pine cone kickers. They're calling you Pine Cone...conie...pine...con-they're calling you a loser. Only losers kick pine cones. Take this dollar, buy a ball and get with the winners."

"Well, alright. I guess. It seems like it might be better if I just showed them how fun my pine cone really was..."

"It isn't. You're kidding yourself. Take the dollar."

And then the kid takes the dollar and he goes out and buys a ball, but the only ball he can buy is a baseball. And so he's back at the park and he has his baseball but he doesn't know what to do with it. Back comes the banker...

"Hey mister, I got the ball but now what do I do with it? It seems a little small to kick it..."

"You don't kick it, it's not a soccer ball."

"I could play soccer with my old pine cone I bet!"

"What are you, a commie?"

"My sisters name is Connie..."

"Look kid, you need a bat."

"Can you get a bat for a penny, 'cause that's all I have left."

"Ho ho ho ho, no...pennies are just little souvenirs you get to remind you that you had money once but then you spent it."

"Well, great. How about I carve my own bat out of that fallen tree trunk..."

"If you want to be a loser..."

"Again?"

"'Friad so."

"So now what?"

"Well, I can't just give you another dollar. But I can lend you some."

"But if I use that money to buy a bat then how can I give it back to you?"

"You'll have to make some more."

"Oh! That'll be fun! I can borrow some crayons from the library and-"

"That'll get ya 10-20, kid."

"Dollars?"

"Years."

"That doesn't sound good."

"It isn't."

"So...how...?"

"Well, you can make a bunch of stuff for that guy and he can sell it and give you some of that."

"How much?"

"Very little."

"That doesn't seem-"

"Look, do you want to be a loser or do you want to be a winner? That baseball isn't going to bat itself..."

"What if I just go back to my pine cone?"

"After you've already got your baseball? Can you really go back, you're already half there."

"I guess."

"So, do we got a deal?"

"How long do I have to work for that guy?"

"Until you're 65."

"What happens then?"

"It's best you don't ask."

And then he's trapped playing a game he didn't really want to play with stuff he doesn't need doing a job he doesn't want to do, hooked at an early age because the first one is always free.


This isn't really a fable, it's me being bored.

It's the kid's fault for not being able to kick a baseball. Thick bastard.

-El Snippo-

This isn't really a fable, it's me being bored.


You're fun when you're bored.

I'm fun when I'm bored too, but it's a different kind of fun. *nod*

Here's my incredibly amateur non-expert take on it, so please correct me if I'm wrong, which I probably am:

The Feds lower interest rates and grow the money supply (those two things are somehow tied I guess), creating inflation. Inflation functions to encourage investment in economically productive activities as opposed to currency hoarding. So instead if hanging onto currency that loses value, people put money in banks. Banks charge people to store their capital value. Banks then convert your money to things that tend not to lose their value, like stocks and shit, because they represent capital being put to economically productive use. This investment fuels the self-efficientizing and growth mechanisms of the economy, motivating companies to innovate, etc. These companies pay their employees, who put their money in banks, and the inflation-driven circle of life is complete.

But there are a few problems.

1) It seems to me that when the money supply is increased, it's a form of corporate welfare at the expense of the end consumer, the one who at the end of the day deals with hard, inflating currency. That is, the extra money is all top-loaded to the economy (right?), and anything we see is either trickle-down dregs or a loan. Inflation in that sense is nothing more than a transfer of capital value (through dillution) from the individual currency handler to the corporate investment interests, or put more simply, from the poor to the rich, a form of regressive resource restribution.

2) So what we have is a circle of inflation which drives corporate investment by transferring capital from the poor to the rich. That itself is elitist even from a capitalist standard, because it assumes that tangible economic development is better waged from a distance by the rich few than average microeconomic actors. I suppose there's an economy of scale argument to be made, but it removes any power to shape society from the working class completely to the upper classes, and if Marxism still has any validity, this phenomenon is why.

3) There's another circle involved that gets less respect from the powers that be, but has recently shown to be just as significant - the circle of consumption. Average Joes spend money to consume products produced by companies, which makes them money, some of which goes to investors and some of which goes to employees who then spend the money to consume more products. In this system, we see that the economy relies on consumption. If inflation transfers too much value away from average joes, they can't consume as much, so companies make less money, and the economy suffers. Unfortunately, if everybody has their heads in the sand, all that happens is the consumers take our mortgages they can't afford to continue their consumption, thus delaying the inevitable by creating an economic bubble, which is popping and will continue to pop for the next few years.

Of course, it wasn't inflation that caused the bubble. It was mostly because Bush cut programs that strengthen the middle/working/CONSUMING class AND hemorrhaged our economy's money into the black hole of Iraq. Only when the corporate interests are feeling the hit from the bubble bursting is everybody freaking out, and the feds increasing the money supply, causing more inflation because they think that a recession will magically prevent itself as long as we keep feeding the money addiction of corporate interests, as if they don't ultimately depend on consumers who are getting screwed over in the process. Nope, we're definitely in for a recession, and the present government seems determined to make sure that the working class rather than the monied interests shoulder its brunt, even if that causes it to deepen into a depression.

So clearly, the system is broken, or at least it lacks the kind of governmental stewardship necessary for it to work properly. So what do we do? What's the solution? Here's what you can do:

- reduce your participation in the capitalist economy. Bum things from other people. Give stuff to people. Grow food. Make things. Volunteer. This helps waken the dormant/auxiliary social gift economy that is natural to human communities, and makes it less dependent on the dominant capitalist economy.

- wield your own capital instead of giving it to a bank. Instead of letting your bank invest your money in firms that purchase factories, slash pay/benefits/workforce to "cut costs", and flip them for a profit, invest your money yourself in companies that you believe are doing things that help society.

- join a union and participate in it.

- write/call your congressperson. They are more impressionable than you think.

Are they ultimately responsible for regulating inflation?
Well, they're doing what they can. People's expectations of future prices cause them to demand more wages, spend more or raise their own prices and at the same time you get all sorts of impacts from the supply side (like higher oil prices making things more expensive or globalisation making things cheaper).

They try to influence the former either by sticking to very clear rules indicating that they'll fight inflation when it happens (as in Australia) or by making statements about the state of the economy that indicate how they rate inflation and how they'll act in the future (as in the US). That way people know not to expect inflation getting out of hand, which is a self-fulfilling prophecy.

The latter they can't do much about.

As for what they actually do - it's fairly complex stuff, but pretty much everything's been mentioned. Veblenia's answer is a more old-school Keynesian one (where they do open market operations and modify the amount commercial banks have to keep as deposits with the central bank, since any other cash is out making money, as Naturality said). Lacadaemon's answer is more contemporary, since the old Keynesian way of doing things isn't quite considered as effective anymore as far as the mechanics are concerned. So rather than targeting the amount of money and letting the market sort out the interest rates, they now target the interest rate and let the market sort out the amount of money. AFAIK, the Chinese central bank is even doing both to an extent, because it's still a command economy in significant areas (and it's got its currency peg to worry about).

Anyways, the result is the same, regardless which variable you specifically target.

Do they have any oversight, ie: are their economic decisions subject to constraints of law (like raising interest rates by ridiculous amounts)?
Generally there is a law establishing the central bank and giving it some sort of mission. This is the one for the US: http://www.federalreserve.gov/generalinfo/fract/

That mission is of course binding, though in effect the decision makers of the central bank make decisions according to their own opinions on how things are going. This independence is vitally important - if the central bank chairman was directly subservient to the current administration, he may well use his powers to time the cycles of the economy just in such a way as to maximise the chances at re-election. He could also abuse them to allow the government to spend more, or to make government policy more effective.

Either way he would start to lose credibility when it comes to fighting inflation. And as soon as the Fed loses credibility, people's fears about inflations kick in and cause that self-fulfilling prophecy. That's part of the reason why inflation seems to go down (and therefore the NAIRU as well) as central bank independence goes up.

Put that together with the fact that central bank chiefs in developed countries are generally very reputable economists who take their mission seriously, and you're unlikely to get them just acting randomly. That being said, Greenspan was being an idiot for a remarkably long time without people calling him on it, and now Bernanke is balancing dangerously close to the same edge.

The Feds lower interest rates and grow the money supply (those two things are somehow tied I guess), creating inflation.
The Fed doesn't create inflation. It's just that if you get to stable prices or even deflation, the place starts to look like Japan in the nineties, so they don't target a number so close to zero that you might trip across.

Inflation in that sense is nothing more than a transfer of capital value (through dillution) from the individual currency handler to the corporate investment interests, or put more simply, from the poor to the rich, a form of regressive resource restribution.
Who says the same mechanism doesn't apply to private people? They invest in various things...more importantly, they get themselves credit cards and mortgages. And even more importantly, their wages rise with inflation too, which sorta deals a mortal blow to your theory.

Changes to the real wages meanwhile aren't caused by inflation but by underlying real factors which are a different matter to the topic at hand.

Unfortunately, if everybody has their heads in the sand, all that happens is the consumers take our mortgages they can't afford to continue their consumption, thus delaying the inevitable by creating an economic bubble, which is popping and will continue to pop for the next few years.
Basically you're using the terms more or less randomly in a way that sounds about right to you.

Inflation applies equally to share returns and loan repayments. Its presence doesn't do anything to change what you say you have identified, namely that the rich own shares while the poor get mortgages.

Furthermore, inflation is actually a good thing when you have a mortgage, because you end up having to repay less in real terms. Unless the interest rate goes up, of course, but if the central bank is interested in creating inflation for the benefit of the capitalists, I see no reason why it would raise them.

And considering this, why is it that lots of mortgages cause a bubble? A bubble is a relatively well-defined phenomenon, so you must have a clear process in mind.

Of course, it wasn't inflation that caused the bubble. It was mostly because Bush cut programs that strengthen the middle/working/CONSUMING class AND hemorrhaged our economy's money into the black hole of Iraq.
The US economy's GDP (that is just the value added to stuff in the economy over one year) is around $13,500,000,000,000. The cost of the Iraq war is difficult to estimate, but might be somewhere around $108,000,000,000 a year. So that would make it 0.8%. Compare to 16.7% for the government budget excluding all defence spending.

Iraq's just not that big a deal in the grand scheme of things.

Economics is not my specialty. I've done some quick research into it, but I'm still unable examine the veracity of the claims in this video, which I don't believe is showing the full picture...
http://www.youtube.com/watch?v=_dmPchuXIXQ

So, educate me... how do central banks circulate money? Are they ultimately responsible for regulating inflation? Do they have any oversight, ie: are their economic decisions subject to constraints of law (like raising interest rates by ridiculous amounts)?

I especially enjoyed the horror movie scenes added for affect. :rolleyes: If you really want to understand the banking system and the value of it to this nation, it would be well worth a real course from a university instead of depending on YouTube wannabes.

I dug out my text from college just to be able to give you some basics to what you asked. No opinions from me on what is the best policy, I'm a situational economist. :p (that is a joke).

This is part of the summary in my Principles of Money, Banking, and Financial Markets textbook. It gives a fair idea of how it works...or should work.

Presumably the supply of money affects the rate of spending, and therefore we should have enough money so that we buy, at current prices, all the goods and services the economy is able to produce. If we spend less, we will have idle capacity and idle people, if we spend more, we wind up with higher prices but no more real goods or services. In other words, we need a money supply large enough to generate a level of spending on new goods and services--the economy's gross national product (GNP)--that produces high employment at stable prices. More money than that would mean too much spending and recession or depression.


1) Control over money supply rests with the Federal Reserve, which tries to regulate the supply of money so that we have enough spending to generate high employment without inflation.

2) Checking accounts, which make up the bulk of the money supply come into being when banks make loans and buy securities. They vanish when bank loans are repaid or banks sell securities.

3) The Federal Reserve regulates bank lending and the money supply through its control over bank reserves.

4) By changing bank reserves and thereby the money supply, the Fed alters people's liquidity and, it is hoped, their spending on goods and services, which in turn helps determine GNP, the level of unemployment and the rate of inflation.

5) The relationship between money and spending depends on how rapidly people turn over their cash balances. This rate of turnover of money is called the velocity of money. Since any given supply of money might be spent faster or more slowly--that is, velocity might rise or fall--a rather wide range of potential spending could conceivably flow from any given stock of money.

6) Inflation has been one of our most troublesome economic problems for fifty years.

7) In cases of hyperinflation, the money supply is clearly the main culprit.

8) Increases in the money supply are a necessary but not a sufficient condition for the creeping type inflation we have been experiencing.

9) More money does not always lead to inflation, because velocity can fall and output can expand. In the long run, however, inflation cannot continue unless it is fueled by an expanding money supply.


--in practice it isn't quite this simply as anyone with any econ background knows, but in principle that is basically it.

Regulation is varied. National banks (NA noted after the bank name) are subject to supervisory authority of the Comptroller of the Currency, the Federal Reserve, and the FDIC. A state member bank (no NA in the name) is regulated by the state in which is located, usually through a state banking commission, the Federal Reserve, and the FDIC. It depends on the type bank as far as commercial banks.

The Federal Reserve is governed by a board of governors consisting of 7 members appointed by the President and confirmed by the Senate. The term of each appointee is 14 years, with one board member's term expiring in each January of even-numbered years. This is to prevent presidential board-packing. A chairman is chosen from the seven and serves a four year term.

The board is independent of the congressional appropriations process and partly exempt from audit by the GAO, because its operating funds come from the earnings of the twelve regional Federal Reserve Banks.


--Anyway just some basics that I'm sure make it all clear as mud.

The Fed doesn't create inflation. It's just that if you get to stable prices or even deflation, the place starts to look like Japan in the nineties, so they don't target a number so close to zero that you might trip across.I understand the "need" for some inflation from a capitalist perspective, but I was under the impression that the Feds DO control the money supply, and that without its growth, inflation generally wouldn't occur.

Who says the same mechanism doesn't apply to private people? They invest in various things...more importantly, they get themselves credit cards and mortgages. And even more importantly, their wages rise with inflation too, which sorta deals a mortal blow to your theory.

Changes to the real wages meanwhile aren't caused by inflation but by underlying real factors which are a different matter to the topic at hand.That may be true in a libertarian fantasy world full of rational actors who all read a passage of Rand every night before bedtime, but in the real world economic stickiness and not-perfectly-rational microeconomic behavior play a large role. Nominal wages don't rise with inflation, but only rise not at all or just enough to keep people from quitting so that profits are maximized as economically required by competitive capitalism. There is no realistic way for people to successfully invest without paying a monied interest to facilitate the investment. Furthermore, most people do not have the capacity to invest in such a way as to preserve or expand their capital to the same capacity that the more monied corporate interests can, due to the advantages economies of scale give in analyzing something as complex as the economy. Credit cards and mortages are perfect examples of how capitalism takes advantage of individual actors' imperfection in managing their finances - a way to profit off our advertising-induced need for instant gratification.

Basically you're using the terms more or less randomly in a way that sounds about right to you.1) Text doesn't make sound unless it is spoken. 2) People are deterministic entities incapable of random behavior. 3) This sentence doesn't communicate anything useful.

Inflation applies equally to share returns and loan repayments. Its presence doesn't do anything to change what you say you have identified, namely that the rich own shares while the poor get mortgages.Wikipedia tells me that adjustable rate mortages are periodically adjusted based on a variety of indices. Our system ensures that consumers bear the brunt of the recession by squeezing them between nominal wage stagnation and inflating payments on a complex, arcane mortgage they were told they could afford but couldn't.

why is it that lots of mortgages cause a bubble? A bubble is a relatively well-defined phenomenon, so you must have a clear process in mind.Because the debt is turned into a commodity which is assumed to have value, but doesn't when the consumer can't repay it?

The US economy's GDP (that is just the value added to stuff in the economy over one year) is around $13,500,000,000,000. The cost of the Iraq war is difficult to estimate, but might be somewhere around $108,000,000,000 a year. So that would make it 0.8%. Compare to 16.7% for the government budget excluding all defence spending.

Iraq's just not that big a deal in the grand scheme of things.I disagree. Firstly, .8% isn't chump change when it's being poored down a drain. Secondly, those are only the direct costs. There are indirect costs, including lifetime physical/mental health care costs for vets, interest (it's all debt) and a variety of other less measurable but very real economic consequences. Thirdly, the comparison with other forms of government spending isn't valid, as most government spending is recycled directly into the economy in the form of wages, services, and infrastructure that in most cases actually serve to stimulate the economy by lubricating its gears, redistributing wealth to consumers, tackling hidden costs (poverty, crime, potholes) head-on, and increasing its efficiency (tech, education funding). Unfortunately, GW has made a mission of cutting this spending in order to whore out to corporations. In this sense, the Iraq War costs are doubly impactful in that they stop the government from spending the money to help the economy by instead literally blowing up valuable economic resources. While it may be true that the Clinton administration has to share some blame for the housing bubble, I think this Iraq War thing is a big deal economically.


Also, what PelecanusQuicks said.

Banks - They make money off your money. They play the stock market, invest, interest loans etc. FDIC is suppose to back your ass .. if there's a robbery or whatever. But I have yet to believe that if a major depression hit or some other economical disaster that you'd be guaranteed.. anything. Remember .. that as soon as a bank gets your cash .. it's gone within a day or two .. and invested or stocked. That's how bankers get rich. That's why if you go to your bank wanting to withdraw 10k or some other high amount it takes time -- 2 3 5 days. They do not hold enough cash there to process that AND process regular daily transactions. That money is out .. making money.

Banks hold enough money to withdrawal 10k without a problem. Typically though if you do that a bank manager will intervene and handle the transaction. While they do that of course they ask if everything is fine and if the bank can do anything for you.

Whenever private banks need money for their reserves, they place an order with the local Federal Reserve. A week later or so, it arrives. The Bureau of Engraving and Printing gets orders form the Federal Reserve to print whatever.

That's how it works in the US at least. Effectively, it comes out of thin air.

Whenever private banks need money for their reserves, they place an order with the local Federal Reserve. A week later or so, it arrives. The Bureau of Engraving and Printing gets orders form the Federal Reserve to print whatever.

That's how it works in the US at least. Effectively, it comes out of thin air.

Time for my Economics 520 to pay for itself...

That's only partially correct. The money banks receive from the Federal Reserve is actually a loan against the reserves held by the central bank; they have to pay it back once their needs are met, and the rate charged is the discount rate (if borrowing directly from the Federal Reserve) or the federal funds rate (the rate charged when borrowing from other banks' excess reserves held at the Fed). Physical currency makes up only a very, very small fraction of the total money supply; all of the dollars in circulation total well less than $1 trillion, nowhere near enough to meet the needs of the banks within the system. The BE&P basically has no ability to significantly alter the money supply (unless it were to print off a colossal amount of currency, and inflation would devalue it long before that).

And in regard to the OP's question: central banks circulate money by manipulating the sale of government bonds and by altering the reserve ratio at banks. Beyond that, the money supply changes based upon the actions of the private sector and the government has no other hand in it beyond guaranteeing the value of that currency.

That may be true in a libertarian fantasy world full of rational actors who all read a passage of Rand every night before bedtime, but in the real world economic stickiness and not-perfectly-rational microeconomic behavior play a large role.
If you're not interested in learning how this works, then why don't you just say so?

You already have your mind made up on this, so you probably could have had the courtesy of saying as much in the beginning and saved me the effort of typing up a response.

If you're not interested in learning how this works, then why don't you just say so?

You already have your mind made up on this, so you probably could have had the courtesy of saying as much in the beginning and saved me the effort of typing up a response.1) You may have me confused with the OP
2) Learning doesn't mean not questioning.
3) If your economic theory does not translate to the real world phenomena in which I am interested, then you are correct that I have little interest in such a theory.

That may be true in a libertarian fantasy world full of rational actors who all read a passage of Rand every night before bedtime, but in the real world economic stickiness and not-perfectly-rational microeconomic behavior play a large role. Nominal wages don't rise with inflation, but only rise not at all or just enough to keep people from quitting so that profits are maximized as economically required by competitive capitalism. There is no realistic way for people to successfully invest without paying a monied interest to facilitate the investment. Furthermore, most people do not have the capacity to invest in such a way as to preserve or expand their capital to the same capacity that the more monied corporate interests can, due to the advantages economies of scale give in analyzing something as complex as the economy. Credit cards and mortages are perfect examples of how capitalism takes advantage of individual actors' imperfection in managing their finances - a way to profit off our advertising-induced need for instant gratification.

Contrary to what some people think debt is not necessarily a bad thing. It allows people or businesses to buy things they ordinarily could never afford. Saving up enough money to pay cash for a car or a house is a great idea in theory, but for the vast majority of people it is impossible.

The problem is when you take on excessive debt. For example if you net $2,000 a month just having a $200 car note will destroy your finances, however taking on $1,500 a month in payments will. It's a two edged sword consumer's should know better than to get in this holes and lenders should know better than to lend money to people who are in bad shape to start (most do however).


Wikipedia tells me that adjustable rate mortages are periodically adjusted based on a variety of indices. Our system ensures that consumers bear the brunt of the recession by squeezing them between nominal wage stagnation and inflating payments on a complex, arcane mortgage they were told they could afford but couldn't.

What happens on many ARMs is people get them because the intro rates were very low and people assumed they'd be making enough down the road to take on the adjusted rate, but many of them were unable to do so. Again the blame must be shared between consumers for making such foolish choices and lenders for giving people loans they couldn't afford.

A common misperception is that bank's want poor people to default, they don't. Disposing of a property in foreclosure is much more expensive than having the sutomer pay the loan out.

I disagree. Firstly, .8% isn't chump change when it's being poored down a drain. Secondly, those are only the direct costs. There are indirect costs, including lifetime physical/mental health care costs for vets, interest (it's all debt) and a variety of other less measurable but very real economic consequences. Thirdly, the comparison with other forms of government spending isn't valid, as most government spending is recycled directly into the economy in the form of wages, services, and infrastructure that in most cases actually serve to stimulate the economy by lubricating its gears, redistributing wealth to consumers, tackling hidden costs (poverty, crime, potholes) head-on, and increasing its efficiency (tech, education funding). Unfortunately, GW has made a mission of cutting this spending in order to whore out to corporations. In this sense, the Iraq War costs are doubly impactful in that they stop the government from spending the money to help the economy by instead literally blowing up valuable economic resources. While it may be true that the Clinton administration has to share some blame for the housing bubble, I think this Iraq War thing is a big deal economically.


While I do agree the excessive cost of the Iraq War isn't a good thing, it is not a major burden on the economy. You seem to think that the government is just burning all that money. Most of it is going to pay soldiers and contractors (who put that money back into the economy via spending or investing) and to buy supplies and equipment (which also flows back into the economy since much if not most of the stuff is bought from US companies and flows into the economy that way.