Will Germany Drag World Economy Into Another Great Depression?
By: Mike Whitney
May 22, 2010
Deficits create demand. Demand generates spending. Spending generates economic activity. Economic activity generates growth. Growth generates jobs, increases government revenues, reduces deficits and ends recessions.
When consumers have too much debt, they will not spend no matter how low interest rates are. This is not theory, this is fact.
If the government cuts spending at the same time as consumers, then overall spending declines and the economy slips into recession. This is what the deficit hawks want–a return to recession. This is politics, not economics.