crowding out if assumed to be very powerful ...
u get it
fiscal policy can be largely self nullifying
even if the borrowed funds get spent completely
if the credit markets off set any additional uncle borrowing
by reducing firm and or household borrowing by an equivalent amount
one way this gets turned into a nice trick
the impact of uncle on the credit markets raises rates
and by pre aexisting harmonics
the rate elasticity of firm and household borrowing is such as to exactly off set the increased borrow by uncle
with reduced borrowing by the F's and H's
but the broader point is to introduce doubt
doubt in the efficacy of the additional uncle spending
a doubt that arms itself
with visions of large countering contractions
in F and H spending out of net new borrowings
such it is hoped will pre emptively scuttled
any fiscal activism
uncle borrowings crowding out private borrowings
recipients
of net increased transfer payments
or new tax cuts
won't spend the additional funds
buying additional recent outputs of the production system
reactive firm pricing will render it all nominal
welcome to the stump list
all about stumping fiscal activism
