Dr. [as in Ph.D.] Hunt, an economist and financial investor, provides some great information.
- Bond yield is a good economic indicator: low yields indicate low inflation, a weak economy. Right now bond yields indicate business conditions in the US and globally are quite poor.
- Unproductive Debt causes instability, disinflation and cripples the financial condition. PRODUCTIVE DEBT is that which generates an income stream that can be used to repay principal and interest. [This same principle is what keeps poor people poor and what makes wealthy people richer. Once the income stream pays off the loan, it keeps generating an income stream, so, goes right to wealth building.]
- To repair the economy: shared sacrifice, inform the public, find strong leaders to scale back government spending without contracting the economy. [Keynesian debt multiplier is now discovered to harm rather than help.]
- Shift income-based taxes, [multiplier = -3], to consumption-based taxes, [multiplier = -1], but address the regressive nature of the consumption-based taxes.[lower-income earners who struggle to make ends meet should not pay as much as higher-income earners].
[Source: “In Search of Solutions – An Interview with Dr. Lacy H. Hunt” published on LinkedIn.com, Feb 26, 2015]
MULTIPLIER EFFECT EXPLAINED: Example only. If $100 is spent by the government, assume $40 makes its way to the worker and the company gets $60. Both use that money to buy, build, and justify borrowing all of which increases the flow, [velocity] of money in the economy. That spending and borrowing gives other companies and their workers the opportunity to earn and also spend. A ripple effect that when working in a healthy manner keeps an economy growing strongly, called an inflationary cycle. This is slowed by too much savings, but more so by income taxes and consumption taxes. That slowing effect is defined as a “negative multiplier”.