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Deficit spending: What psychologists know, economists and politicians miss.

August 2, 2010

Deficit spending is a game economists hate and politicians love. Spain owes $200,000,000,000.00. The US owes trillions. The rest of the world owe each other an astronomical number of dollars. A world that has lived on borrowed money for a century is erroneously told by economists to balance its budget ( my idiot friend was so happy recently for finally paying off his mortgage). After the French and Russian revolutions, politicians correctly realized that the only way they can retain power is if they create welfare state to pacify their people (hungry people unite and topple governments). Economists erroneously assumed  that deficit spending was bad because it led to inflation, irresponsible taxing, over-borrowing, rampant spending, forcing children of the next generation to suffer and pay for the deficit, bankrupting economies, and having to bail out nations.

The truth according to behavioral economics is that living on credit is wonderful. You have more money to live the life you want to live. Listen, people and politicians: Borrow the maximum amount you can get as long as the monthly payments are low, the interest rate is low, amortization is at least 30 years, you can afford the payments, and you invest the borrowed money in agriculture, infrastructure, decent housing, and having wholesome fun. My idiot friend who is 70 should have used his money not to pay off the mortgage but to travel and have fun. Responsible deficit spending is an economic gift that the economists do not recognize and the politicians don’t regulate. You can!

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