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I never claimed that military production resulted in useful things, other than military advantage. But, because that production is not consumed in a normal sense, it has the same effect, in a macro sense, as capital spending -- i.e. you are paying people for production that will not be consumed. They will spend their wages on things that are consumed. That helps the larger economy, which is largely based on production of goods and services for immediate consumption. See THE GREAT SLUMP OF 1930 by Keynes and do the little arithmetical calculation he suggests.

This used to be more effective, before consumer goods manufacturing was exported to low labor cost countries, but it would still help the domestic service based economy by providing relatively high wage jobs and injecting purchasing power into the base of the economy.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Oct 15th, 2010 at 01:24:58 PM EST
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