Pump Priming

Pump Priming
The action taken to stimulate an economy, usually during a recessionary period, through government spending, and interest rate and tax reductions. The term "pump priming" is derived from the operation of older pumps; a suction valve had to be primed with water so that the pump would function properly. As with these pumps, pump priming assumes that the economy must be primed to function properly once again. In this regard, government spending is assumed to stimulate private spending, which in turn should lead to economic expansion.

The phrase originated with President Hoover's creation of the Reconstruction Finance Corporation (RFC) in 1932, which was designed to make loans to banks and industry. This was taken one step further by 1933, when President Roosevelt felt that pump-priming would be the only way for the economy to recover from the Great Depression. Through the RFC and other public works organizations, billions of dollars were spent "priming the pump" to encourage economic growth.

The phrase was rarely used in economic policy discussions after World War II, even though programs developed and used since then, such as unemployment insurance and tax cuts, are automatic pump primers of sorts. However, during the financial crisis of 2007/2008 the term came back into use, as interest rate lowering and infrastructure spending was thought to be the best path to economic recovery.

Investment dictionary. . 2012.

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  • pump priming — Ⅰ. pump priming UK US noun [U] (also pump priming) ECONOMICS ► the process of investing money in order to encourage the development of a business, economy, etc.: »After three years of careful pump priming, the industry is now up and running. Ⅱ.… …   Financial and business terms

  • pump-priming — ˈpump ˌpriming noun [uncountable] ECONOMICS encouraging a business, industry, or economy to develop by putting money into it. For example, a government may increase its spending in order to increase economic activity during a recession: • the… …   Financial and business terms

  • pump-priming — pump prim·ing or pump priming (pŭmpʹprī mĭng) n. Government action taken to stimulate the economy, as spending money in the commercial sector, cutting taxes, or reducing interest rates. * * * …   Universalium

  • pump-priming — pumpˈ priming noun 1. Starting a pump working efficiently by introducing fluid to drive out the air 2. Investing money in order to stimulate commerce, local support, etc • • • Main Entry: ↑pump …   Useful english dictionary

  • pump-priming — pump .priming n [U] the process of trying to help a business, industry, or country to develop by giving it money …   Dictionary of contemporary English

  • pump priming — ☆ pump priming n. large expenditures by a government, designed to stimulate expenditures by private industry …   English World dictionary

  • pump priming — noun 1. spending money raised by borrowing; used by governments to stimulate their economy • Syn: ↑deficit spending, ↑compensatory spending • Hypernyms: ↑spending, ↑disbursement, ↑disbursal, ↑outlay 2 …   Useful english dictionary

  • pump priming — pump′ prim ing n. bus gov the spending of government funds in commercial enterprises as a means of stimulating the economy • Etymology: 1935–40 …   From formal English to slang

  • pump-priming — noun 1》 the introduction of fluid into a pump to prepare it for working. 2》 the stimulation of economic activity by investment. Derivatives pump prime verb pump primer noun …   English new terms dictionary

  • pump priming — /pʌmp ˈpraɪmɪŋ/ (say pump pruyming) noun 1. the procedure of filling a pump with fluid so as to expel air and increase its starting efficiency. 2. government action aimed at stimulating an economic recovery, as by increasing expenditure and… …  

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