Wednesday, September 30, 2009

Positive perceptions of stimulus packages

Economic policymakers will be reassured that their stimulus packages were not acts of insanity when they read Krugman's views here which suggests that the stimulus packages has a likelihood of catalysing a virtuous cycle where increased fiscal debts will be increasingly offset (but not completely negated) by increased economic activity.

Increased economic activity means greater revenues. Greater revenues points toward higher tax revenue to governments which will ameliorate the fiscal deficit burden.

Will this view hold up in a "W" recovery pattern? We will all have to revisit Krugman if there is a change of circumstances.

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