S&P Downgrades U.S. Debt for First Time - WSJ.com

MORE ON WHY SIMPLE KEYNESIAN SOLUTIONS WON'T WORK IN THE US WITHIN THE EXISTING POLITICAL STALEMATE AND POLICIES: S&P Downgrades U.S. Debt for First Time - WSJ.com

Think of demand with a bit more discrimination.

For example, I ask you to provide me with some kitchen cabinets (your job). To do this, you will have to borrow money to buy supplies or use your own equity. You will have to hire one extra person.

You estimate the costs and the profit potential. The fact you'll have to borrow money or tie up equity; pay taxes on any profit, etc.

When you look at my offer to buy, you decide you can't make enough profit so you pass on the potential job.

This is the same as any department store buying stock, food store buying food products, etc.

So, the logic that demand creates jobs is fine - as long as the support for production is there.

The extreme example is of course situations in which shortages are so great there is a black market and or inflation.

What is going on now is that there are too many hurtles facing domestic supply. Thus, when QE2 pumped money into the economy, people invested and sent cash outside the US.

The left has no sense of the burden they've placed on the supply side of the economy. To them, nothing has changed. Sadly, the goal posts are continuing to move and the reset will be harder and harder as the economy falters.

Some sectors remain robust - think Apple - but????

What we need from the Democrat's perspective is exactly yours - i.e. goose demand - pay people for not working, etc. - all of the Keynesian remedies of the 1930's with the added benefit of loose money.

Well, it hasn't worked; and, I would posit for the same reasons it didn't work in the 1930's - read Arthur Laffer for a discourse on this.

Another way to think of it is to compare the economy to a soldier or hiker. Regularly they could walk say 50 miles a day (I don't know - pick any number).

Then you start adding weight to a backpack, don't give them as much food as before (read: regulations, taxes, labor policies, etc. - all dear to the heart of Democrats and some Republicans) and, low-and-behold, some (read Democrats) expect them to cover the same distance as before in a day.

When they don't cover the same distance, the Democrats can't grasp why.

This is the dilemma the economy is in today. And until the supply side of the equation is changed, demand economics won't work or will work only be pushing on a string.

We saw what happened when government policies tried to put too many people into the role of being homeowners. All looked good until the bubble burst.

We have several bubbles going on right now and the fact that there is no public or political consensus that they exist and/or how to fix them is far more complex than simple Keynesian economics.