okay_okay

Stimulus spending varies in effectiveness depending on where it's spent. If you borrow money to pay unemployment benefits, the unemployed are almost guaranteed to go out and spend it and increase demand (they have no other income, and unemployment doesn't even replace their old income - they'd have a very hard time saving any of it). If you spend money on something like war, the money goes largely to contractors rather than to people likely to immediately spend it (plus, people die). If you spend it on tax cuts for people who are employed but scared, they're likely to just save it or pay down debt (these are normally good things to do, but when an economy is in desperate need of demand, they're a waste of stimulus - see "the paradox of thrift").

Also, compare it to velocity vs acceleration. If you have the same deficit you've always had, that's not changing demand - the deficit is already factored in to the total amount of demand in the economy. On the other hand, if you increase the amount of money being spent in the economy from its baseline, that creates an "impulse" that will have an effect on aggregate demand.

I love the idea of this, but:

As you buy more and more debt, won't this bid up the price of defaulted debt as sellers realize people are buying it?

Won't this idea be defeated by its own popularity?