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Well, your argument is a little illogical.

No: it is not illogical. It is a contradiction, which is a fundamental part of logic.

You are really talking about the fundamental contradiction of capitalism: increasing investment (or savings) leads to lower return on investment, because there is more competition for less capital available for demand. The solution to the contradiction is an expanding economy, so there is more total capital available for both supply and demand sides. But you can't get that without an effective balance between supply and demand sides, which in the real world need frequent adjustment (what the Fed tries to do). This is why I think the extreme supply siders are off the deep end. The closer capitalism comes towards the pure supply side desire, the closer it comes to realizing the contradiction, which is what Marx argued would lead to its collapse.
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