CONTRACTION

An economy in shrinkage or withdrawal is in a state of contraction.
Called loans (loans recalled by the lender and cancelled), failed loans,
business cut-backs to save costs and resources, layoffs, shutdowns.

In the thirties this lead to an economic depression. Lacking risk,
incentives, or assurances of more, businesses and more consumers
conserved. The contraction collapsed DEMAND. The famous Lord Maynard
Keynes made DEMAND the single greatest factor ofathriving economy in his
inter-war, and earlier, studies of the effects of consumption in a
economy.
Demand spurs a growing economy.

Except in a dictatorship, people consume what they decide they need and
want. They spend cash and credit forward to consume. This consumption
multiplies as "demand" in every sector for facets of the goods and
services production and delivery line.

People are paid at intervals of that production consumption cycle for
their part in the economy and for their added value to the production
process. Prices are the bargain as "cost & satisfaction" to each tier
of production and consumption.

How much growth? Well the old sages said -- when the population is the
measure -- at least ahead of the population growth or it is
subdivision.

And recession? the little depressions - the turn down in a business
cycle is still two consecutive business quarters with a net decline in
growth. France is officially in one. It is applied euphemistically
to any slowdown.sometimes.

The way out? Inflating, stimulating an economy to grow .. to restore
CONFIDENCE to consume - to manufacture ahead - to risk.

The tools? Credit and tax incentives to employ and to consume. In
the blog entries following in the next days you'll be reminded of the
'hot seventies' with the lingo of "investment tax credit" (good when
you've made a profit for taxation); and the rapid amortization schemes
-- such as 3-10-5 (three years depreciation [cost recovery] for business
vehicles and some machinery... 5 years for other machines in business
& 10 years for business real estate).

If the economy's demand exceeds supply and gets too hot - the resulting
demand induced price inflation can be tamped with 'savings'
inducing/spending deferring taxes and consumption taxes to aid the
treasury's supply side and 'brake' or cool the economy. Imports can
also reduce price inflation by expanding supply & sharing the demand.

Government (which economics students remember as the G in the old
GDP/GNP calculation is an eater. Its demand is enormous and can consume
as an engine. Its payment factor, its revenues & buying means, will be
at issue.

Expect deficits paid for with US bonds which the conservative & wary
investors will gobble. Europe will do likewise, so will Japan and
countries elsewhere in Asia.

So since demand compounds demand and demand includes demand abroad
whether as trade or tourism, none need starve nor collapse if the
coordination works and is effective,

Like other grand Keynesian schemes: (the Reagan stimulus, The
Kennedy-Johnson tax cuts and Great Society spending, the Marshall Plan &
wartime spending ... the engine responds.

(As a closing note, a favorite economic historical fact mentions the
massive spending of Britain for the early 19th century Wellington
Campaigns against Napoleon - rather than bankrupt the British economy,
they surged the economy and Britain grew richer .. financed by British
Rothschilds et al.) Not an endorsement of war, but an underlying proof
of measured demand fueling an economy.

No one died from 'star wars' and the Lasser curve.