happy birthday you honor

I don't see saving as a bad thing. If people pay off their debts and create a safety net for themselves, then whatever recovery we do eventually have will be more sustainable. Also, it makes dealing with entitlements easier, which we're going to have to do at some point anyway.

"I do not think the tax cuts are a good idea. Most of the increase in after-tax income is likely to be saved, rather than spent on buying goods and services. One of the reasons why the recession has turned into a depression is that Americans have meager savings, most of them in overpriced houses and overpriced stocks, and so they are sensibly reallocating income from consumption to saving."

If a lack of saving is a cause of the depression, why is taking action that will lead to more saving a bad thing?

If "a Keynesian program can help check a downward economic spiral," then why did FDR's spending spree in 1936 not work out so well?

Why was there still poverty in America after LBJ's "War on Poverty?"

Why are there still homeless and unemployed people in America after George W. Bush's "compassionate conservativism?"

Two words: William Easterly.

If people do sacrifice their welfare for the sake of "the economy" and take money out of banks to consume, bank capital reserves will get depleted. Who will then save the banks the second round?

"If "a Keynesian program can help check a downward economic spiral," then why did FDR's spending spree in 1936 not work out so well?"

In 1936-1937, FDR attempted to balance the budget which plunged the recovering american economy back into a recession, but thanks for your valuable and completely wrong insight to Keynesian deficit spending.

ALso, Keynes' general theory wasn't even published in 1936, and even after publication it didn't gain significant policy traction till the presidency of JFK. It's not as if Keynes published one day and all of the classical economists fell over trying to rush onto the boat. Truth is, we have never had a truly Keynesian approach to economic policy in the history of the country. Hopefully Obama will break that trend.

Also Wendy, LBJ's war on poverty did dramatically reduce poverty, and it was interrupted by a little thing called the Vietnam War, not sure if you have heard of it. ANd compassionate conservatism was just a slogan, not a real attempt at anything substantial policy wise.

And what does a developmental economist that spars with Jeffrey Sachs over the third world have anything to do with Keynesian deficit spending? I'm guessing you have just read "The Elusive Quest for Growth" and decided you should chime in with some non-sensical talking points.

"If "a Keynesian program can help check a downward economic spiral," then why did FDR's spending spree in 1936 not work out so well?"

In 1936-1937, FDR attempted to balance the budget which plunged the recovering american economy back into a recession, but thanks for your valuable and completely wrong insight to Keynesian deficit spending.

ALso, Keynes' general theory wasn't even published in 1936, and even after publication it didn't gain significant policy traction till the presidency of JFK. It's not as if Keynes published one day and all of the classical economists fell over trying to rush onto the boat. Truth is, we have never had a truly Keynesian approach to economic policy in the history of the country. Hopefully Obama will break that trend.

Also Wendy, LBJ's war on poverty did dramatically reduce poverty, and it was interrupted by a little thing called the Vietnam War, not sure if you have heard of it. ANd compassionate conservatism was just a slogan, not a real attempt at anything substantial policy wise.

And what does a developmental economist that spars with Jeffrey Sachs over the third world have anything to do with Keynesian deficit spending? I'm guessing you have just read "The Elusive Quest for Growth" and decided you should chime in with some non-sensical talking points.

ТС: ++

Has anyone given consideration to the fact that the beginning of the housing "burst" was caused by the baby boomers putting their housing stock on the market (downsizing)?

Interesting. I take it the analysis is assuming it operates in Closed Loop Economic System. That is, the money circulates within a narrow bound like within a Nation or a small group of Nations. If so, the analysis will stand.

The problem is, that the system is not closed, but open and significant monetary leakage occurs. Never too be seen again. Such is the problem confronting the U.S. today and its ability to respond to the current Economic Crisis. Why are the Banks cash poor? The offshoring of productive elements that consumers support. Hence, the massive cash outflow that has occured over the last twenty five years or so. And this money does not recycle back into the National Banking system to any significant degree. So, where does the cash come from to restimulate various economic factors? The Federal Reserve and Treasury. Which is what is being attempted now, but it will volatilize and disappear through the leaks as well. Leaving us only poorer than before. Before anything can be done, the leaks that have created this problem in the first place must be plugged.

Neil: The leaks are of interest and are addressed to some extent by targeting infrastructure projects and direct aid such as extended unemployment to distressed households.

I suppose we can say the leaks are the $800 billion trade deficit or 7% of GDP. But that's not right either as most of that amount comes back as reinvestment in the US, though that in the long run means yet more dividends and interest going "over there". Still a big leak.

If in a closed system our multiplier might have been four (not sure at all) say today as the dollar makes it rounds the 7% gross leak would add to over 25%. A huge "leak" over time. So, I'd agree; in the medium term we need to work to close the leak by some combo of buying less abroad and finding more stuff we can bring to the world bazaar.

But, Ha! as something of a mariner, I'm convinced that one response to a leak is that of bailing.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

CHUCK: You bring up the thorny question for "capitalist" economists of trusting "the market" vs some amount of planning.

Common sense, perhaps with advanced polling techniques and the readily available graphs showing housing prices outrunning the ability to pay for them, should have given "us" a glimpse of the downside of the graph before we got to the top of the hill.

Even going to a social gathering could tell us that about the only "investment" boomers and others believed in and were prepared to make was that of residential R/E and that like tulips the game would end at some point.

But, (I'm close to the housing biz) the functioning of the building, mortgage, and resale markets is one of starting a new home, or two, as soon as the last was sold, with both large builders and small trying to maintain or increase market share. Thus, huge public corporations such as Toll Bros, Pulte etc that have all the economic data anyone else has, ran straight into the windmill as have smaller builders. No one was prepared to see the new home market cut by 50% with no rebound.

They say Wall Street is "forward looking" in that stock prices rise perhaps six months earlier than increased earnings show up, it's my guess that's about as far out as "the market" can generally project.

In years past, I think a case can be made that a combo of FRB and other bank tightening slowed overbuilding, which in any case was typically regional and sorted itself out with relatively little pain. The Mortgage Mess, meant that this time we hit the windmill under full power, nationwide and with the company of many other nations. Big splat.

The pain will be intense and measurable. Median home prices soared to $250,000 while historically prices stayed in a relationship to median income that points to $175,000 today so the losses will be that triangle from the $175k base up to $250k, a LOT of money and the on average those buying since 2002 or so will be underwater.

The bright side? After a few years the problem of "affordable housing" will be greatly diminished.

The reason the Fed is increasing the supply of money is to help alleviate the current debt crisis. Some contend that Bernanke is willing to test Freidman's helicopter hypothesis by actually putting it into practice!

Has anyone considered the root of this crisis was the move away from the gold standard and the delineation of strong economic powers to elected officials who are incentivized, by elections, to maintain and fuel asset bubbles?

At the end of the day this is a failure of government regulation to properly incentivize agent actions within the system. We will now all pay for the system that Nixon created.

Our economic growth over the last 10 years has been predicated on asset growth and the ability to tap out these high asset values. Furthermore, couple high asset values with easy access to credit and you have arrived at the consumer created primer for US economic growth over the past decade. With the consumer up to his eyes in debt, unprecendented asset price correction, the destruction of the debt securitization machine and the evaporation of large sums of investor cash that bought the debt backed securities; we have stumbled into paradigm never thought possible.

Any model that fails to take into account the consumer's ability to leverage herself and cash out asset values will not arrive at how much more output will decline. Because much of the production capital growth over the past 10 years was only made possible by this debt/high asset value system, much of it needs to go out of production.

In the end, absent some sudden, large gain in effeciency or worker output gain, much of the capital and labor in the system will not find support. I do not know what the exact mathematical predictions will be if we take such factors and their multiplying effects into account, but those with the time to quantify these assumption will be faced with incredibly grim numbers.

Resultantly, any stimulus package that tries to kickstart our economic engine will find it is out of gas. The Obama stimulus should concentrate on strengthening social nets, infrastructure improvements and holding up our financial system. It should certainly shy away from trying to prime our economy.

Neilihat: On leakage:

- Some consider "capital flight" to be a form of leakage that occurs when the capital gains tax rate is higher in the US than in other countries. Make capital gains taxes more competitive, and require that corporate heads and hedge fund managers get more of their income from taxable income and not from capital gains.

- Some multinational corporations use sites in various countries to their advantage depending on the direction the currency and tax-advantage winds are blowing. This will always occur to some extent. But printing enough money, or not too much, can keep the value of the dollar favorable so as to attract industry, could it not (instead of buying securities, which is the other way).

- Corporations set up off-shore headquaters (Cayman Islands is a favorite) to avoid taxes, and some US policies allow govt. contracts with such corporations. Prohibit government contracts with corporations that have off-shore headquarters, or those whose assets are mostly off-share, etc.

- An energy economy too dependent on coal, oil and natural gas represents major leakage: If you live in a state that does not mine coal or have productive oil wells, you have to pay others for your energy. Converting to a greener, renewable and more sustainable energy economy, and decentralizing the grid so that people produced more of their energy locally instead of buying it from oil-coal-gas concerns, would go a long way toward dealing with this leakage.

- Military spending in the US equals or exceeds that of the rest of the world (especially if you count not only Pentagon and war spending, but veterans spending, and hidden costs such as Dept. of Energy maintenance of nuclear warheads, etc.). As we know from the depression and WWII spending, military spending in general does put people to work and stimulate the economy, but if we're not getting back something with a longer-term value such as infrastructure or education or or health care, and if we're spending more on military than we need to spend because of the military-industrial complex and the way the vested interests work, then this becomes major leakage.

RPB: I would not put too much faith in the gold standard. It works well in a system that seeks to protect those who own most of the gold, but not in a more realistic economic system. Things of value come from natural resources, from labor, ideas, creativity. A functioning monetary system has to facilitate the exchange of value, and should not be tied to gold any more than it should be tied only to labor, or only to natural resources, or only to the group that has the most and biggest guns.

anecdotally, large legacy organizations do not always use layoffs appropriately and it makes things worse for company - retaliation, hoard power and money, feed ego and need for control, make life easy for mgr on public aid

I'm the interest rate, I choose the credit crisis, how –I’ve been
celibate for seven years to take control of the classing adjustment
coupling would cause (oh that's how you won). So consequently
I could probably have the oil price at $170 currently, how -I was
sleeping to providing days with no expectations, and much ridicule.
Instead on July 16th I started exercising.

The directions in this cash economy come down to this:
1)react
2)fill in personality
3)demand cash

The answer to exiting this economy will always be the same -you
will use a program that the University of Waterloo (99386493) is
aware of. At a certain point of organizing your life with programs
you'll find everybody is dealing with NEXT BEST THOUGHT.

The program will provide you with directions that are as healthy
and as safe as possible using a process of elimination. A program
will answer the following questions, the best way to remove cash
dependency and determine which option an employee finds most
comfortable.

I caused the credit crisis, nobody else caused the credit
crisis. The extent anybody else was involved was simply I was
indirectly told one person having sex in the 80's caused a
recession, I waited and tried to take the job of interest rate.

I want to explain something -I only caused the credit crisis
because all the answers to leaving this cash economy are
products and companies currently in the free market system. My plan
was to lower the interest rate as fast as possible and direct
attention to myself with outrageous macro statistics. Which I have a
tendency to be involved with. Another instance besides the credit
crisis was WW3, though that title is an over exageration for
Isreal invading Hizballahland. What happened was I left Newfoundland
and went to Waterloo in June 2006, WW3 started I thought if I went
back to Newfoundland it would end, and the minute I got information
from the TV in Newfoundland they stated it had ended. I don't
actually understand the marco data but I believe it's basically due
to having the best money because of my ethical bloodline and my
free negative space bloodline (like Jesus, Nameless). I'm king of the
spares (1941).

The solution of using a program (impressive software) to leave the
free market system as healthy and as safe as possible will always
be the answer.

It makes sense that the University of Waterloo understands, it is
a technical Uni, this is a technical solution. As well if you
consider the state of industralisation, America's problem is
employment and TV. Canada's employment and TV are close so
relating to the situation in America is easier for Canadian's,
English being the major simaliarity.

That Canada would be a major source of suggestions makes
sense, that Upper class Canada is basically composed of
Waterloo, U of T, McGill, UBC, U of A is true. That amoung these
schools Waterloo is highly competitive concerning the computer
and programming is fair.

Since "the news" has made a predictable error my
question is what do you think my "PENIS POSITION OPINION" is,
since with ever opinion the people effecting directions will
check my virile (check my class). You'll find I'm number one in the
world, choose useful financial options, choose best value system.
Of the men who are owners their is a group that all the employed men
use, I provide intentions best at times. Who's character (ego, humor,
sexy, trust...) works best for your job with relativity.
Their are two groups of people you take opinions with, those that
effect and check your class expectations and those your class place
can be determined by the types of statements you have to say to
be expensive.

The point of checking virile is it determines your personal comfort
best which is the best way to be expensive. Given the point of this
economy is to follow the rule of,

Economic Profit:As much money as fast as possible or as long as
possible.

Such games include:
-my sex life affecting your employment, leading to jail finding you...
-women getting directions about work, approved by a male owner
-female payment due to no financial opinion happening through ridicule
-teenagers fitting into class expectation
-drug dealers controlling classing through tv
-the FBI not having a reason to to anything so coming up with
problems for work such as deturing communism.
-problems for the sake of problems for the reaction to keep fitting
class expectation so economic profit increases.
-Problems so that the reaction is "I don't understand", "Doesn't
make sense", "can't discuss".

Of course their are exceptions it depends on comfort.

We are still learning about the worst directions.

Since "the news" has made a predictable error my
question is what do you think my "PENIS POSITION OPINION" is,
since with ever opinion the people effecting directions will
check my virile (check my class). You'll find I'm number one in the
world, choose useful financial options, choose best value system.
Of the men who are owners their is a group that all the employed men
use, I provide intentions best at times. Who's character (ego, humor,
sexy, trust...) works best for your job with relativity.
Their are two groups of people you take opinions with, those that
effect and check your class expectations and those your class place
can be determined by the types of statements you have to say to
be expensive.

The point of checking virile is it determines your personal comfort
best which is the best way to be expensive. Given the point of this
economy is to follow the rule of,

Economic Profit:As much money as fast as possible or as long as
possible.

Such games include:
-my sex life affecting your employment, leading to jail finding you...
-women getting directions about work, approved by a male owner
-female payment due to no financial opinion happening through ridicule
-teenagers fitting into class expectation
-drug dealers controlling classing through tv
-the FBI not having a reason to to anything so coming up with
problems for work such as deturing communism.
-problems for the sake of problems for the reaction to keep fitting
class expectation so economic profit increases.
-Problems so that the reaction is "I don't understand", "Doesn't
make sense", "can't discuss".

Of course their are exceptions it depends on comfort.

We are still learning about the worst directions.

-We are not understanding the Rock and or Roll, please explain.

1)React
2)Fill in Personality
3)Demand Cash

How much should I respect you? Do you need lots of money for appearance
safety? Do you relate?

You'll find the bottom of the problem is the female reality of
toss (class), owned (who), tagging. Women have their financial
directions approved by a male owner, rock gets you.

Drug Dealers have problems sleeping while you have options,
correct is uncomfortable for the expensive allocation.

As for reacting the most important question is how much respect do you
get when you sing the JINGLE they expect of your phone number. This
informs them to tell you to stop playing the class game.

----------------------------------------------------------------------
The Jingle comment game

-placement is determined this way:
Approved success is done amongst the spares, it is a one on one game
of "care about me", then "care about publishing". My ten year endeavor
to try to start my Environmental Engineering Company places me
as number 1.

-Here is the reality of why commenting, taking your opinion, reacting
if your out of place is so scary to a paycheck character:

I'll make light of the most uncomfortable consequence to this
comment.

If you say that everytime at least you understand expensive.

The only welcome comments are Right wing criticisms with a welcome
stake in cash flow, this is the demanded citizen involvement. The
solution is take home pay, break even business. The solution to
implementing these necessities is done with an individual making
clever talented criticisms.

------------------------------------------------------------------------

-Stop making the DRUG DEALER VIEWER have to listen to your
international conversation about me (the inflation oil price) for
better directions about finding twenty dollars illegally.
A lot of people. Until the final second when you fix the bank cards,
being a rapist or assign paid, was safer for the criminal and should
continue. Crime is competing for a percentage of the print and it is
largely responsible for continuing this economy considering the habit
of fitting into employment and expecting that. The criminals are really
involved in your life through TV, they are really competive for control
over you, and the lifestyle is outrageously humiliating. The criminals
are not breakng their character until they are paid to, given their
level of involvement in this continuing this is the same for the rest
of you. The answer to fixing the unemployment and banks is either
yes or no and expectations of the solution are seriously incorrect
for people another CAMPAIGN TO MAINTAIN perhaps (follow the information
in the comment/jingle game).

-The unfortunate nature of changing this system (fixing the bank
accounts with both a GPS phone and monthly welfare) is the minute
you change it you have to accept rolling with the punches. Even if
you could discuss everything you needed to, you are still going to
find unexpected problems and will use computer program to provide
directions, this method improves to deal with this new problem.

Health Programs

Basically you'll fix the bank accounts because there is software the
University of Waterloo (99386493) is awear of, this software "knows
what you want" using a process of elimination, I can't stress the
available success of health programs. Which basically explain the
best way to expect pain, the best way to be realistic during pain
and control over improving these types of questions about what you want.
It's likely vocabularly needs to be adjusted to understand
things such as graphs which indicate what is happening, and help you with
predictable. Quickly explained statements are like muscles for you body
and graphing them happens considering what is on you x-axis (defined
information) and what is the y-axis (my question). The reason statements
about your body can be viewed as muscles is because "observing a
statistic changes a statistic" the program can control observing
statements about your health with this type of vocabularily.
An example of a statement your mind could adjust is "my burise
only hurts when I touch it" your mind then exercies your arm muscle
away from your bruise.
As a fair point anybody over 25 would know satisfaction is
better described as minimizing pain.

Producing Programs

"The man who truly and disinterestdly enjoys any one thing in the
world, for its own sake, and without caring two-pence what other
people say about it, is by that vary fact forearmed against some of
our subtlest modes of attack."

-The screwtape Letters
By: C.S. Lewis

-The "impressive software" could answer that feeling for you, and
many other questions about exactly what you want (food, exercise, ect).

As an addition: "Everybody is just changing stupidity"

tension...

-"just like the other girls" wants couple and babies.
-you like/don't like? friends? visitors?
Really the tension is trust concerning "control of"
-considering trust, type want or should.
-"I want what happens." (demand, acceptance, find the advantage,
rationalize comfortable).
-the feelings that my business takes, vs desired.
-memory works best doing honestly how I feel (less safe).
-trying to have control is less in control then EXTENDING MEMORY.
-cool is campaign to maintain opinions, this I call "comp"
the difference being "working now".
-careful, telling you that the point of shocking behavior is to react
scared results in being less scared, changing the shock.
-"Stand by your man" women aren't allowed to think by themselves.
-all seconds of employmet: we do stuff, to say things... and shouldn't.
-as for viewing these documents: "google.com doesn't exist either".

tensions...

-reality happens in three ways -want -fear -as expected, people like
reality to choose their expectation the man who chooses useful
best should win.
-the point of life is to remember your life, it should also be to try
but till you fix memory.
-control as extended memory or "all your time at once".
-they say "you're too nice" I'm like "I don't insult myself".
cause my rules were choices free of "guilt by association".
-survival charisma happens determining amusing while toy with
poor & lonely crack up.
-jelous is working partnerships find a journal.
-The children are not stupid and at thirty I'm still not stupid,
get a pass time.
-you're a twenty-seven year old woman, give up and mistress.
-The Economists love me, but what do they think about themselves.
-I decided that RESPECT should be defined as the ability to weigh
hurting, helping and not hurting.

The mother robot's means of survival...

Everybody is taking a stake in her view. Little did she as a child
realise if she was to react like her thougts had a audience she'd
find one. Maybe she thinks her reaction is unexpected/new, Visa
and the drug dealers don't think so.

Mother robot is so nice, so manipulated. Try mother robot try try.

---------------------------------------------------------------------

Ya the kids act stupid like Highschool Musical, it's terribly realistic.
Maybe it's that we use them as social pawns to fake the
employment is reasonable.

"Went to see High School Musical III last night."
"How was it?"
"I should have worked harder in high school so I'm talking to
someone better than you about this."
"It was sweet, all the little girls wanted that moment like
when the black people decided to go to the prom together. I think
their in for a surprise about how boys STILL are at twenty :-) .

-----------------------------------------------------------------------

Why will I robot?

It's like The Smiths line:
"does the mind rule the body or does the body rule the mind
I don't know"

Better said:
-"My body tells my mind things"

over time we notice...

-"Your body tells our mind things"

I had a gift from God, "start a environmental engineering company"
I thought "won't that (oil) shrink the economy, of course replacing
consumption could be work." The dream continues...

The Green Technology Sector is hindered by economic profit.
Money spent being green does not have the same returns as other
investment.

Amongst men a women's discrimination is that her directions are
provided to her through an owner, since a women has no financial
representation every male is better than any female (your owner
is an infant).The directions are only for continued classing,
remember it's personality first then sex. Toss, Owned, Tag.

When you're a real man... (I know you'll say...)

The diet game.
I eat what I want, when I want, whenever I want, as much as I want,
however I want. I also walk, at least this way I don't think about
food and waste my time.

Even the slightest inclination to eat is correct to me, no matter
what that food is. What I specifically don't do is think that I'm
not going to eat.

If this doesn't get me desire we might not agree on the meaning.

The Gay game.

There is SOMETHING WRONG WITH gay: never illegal. PRIVATE TOSS

Hey why say gay I think currently you're not having sex so
you're NONSEXUAL.

Sexuality is: how do you sympathise with what you respect in your
bloodline.

Masturbation is what you sympathise with in your bloodline not
necessarily what you want. If you think the images are not what
you want than maybe you need to understand helping yourself
or hurting yourself. It's difficult to know if you're being
comfortable comfortable, or comfortable uncomfortable.

The best question about sex is comfortable to remember, a bit more
subtle than the savor of youth.

As for your sexual status:
-intimate
-relationships
-intercourse
-what you want (voice).
Take a percentage.

Here's information about sex. Oh the defensive partner should
contract for penetration

After marriage, live together first, after a certain age, move out of
home, get a job first, don't hurt job (I am a metrician?)
love (parents?), trust (as expected?), go out (their opinion?),
casual, random (information?).

Do what you want.
I say twenty due to mature conversation.

Their are two differences between children and adults, money and sex. If
you choose money first and sex after, both are better vs. less.

Cool used to be determined by TV now it's computer access. As with other
classing heirerity easy to couple implies easy to work with. Currently
tv cool is like sex for friends, sex is cool, not intimidating things
to say.

Since sex effects working with basically sex effects health and
intelligence. The question are you smart is a stupid question, people
have different skills, a better question is are you confident, until
you find confidence you don't know if having sex is hurting your job.
Remarkably the most important feature about you is memory:
responsibility, placement, cooperation, trust demand MEMORY.

Something you might not realize until after is:
Are you avant guarde or derrier, your memory is TV's success.

How sex negatively effects health is called muscle removal (bounce),
your sex muscles become more difficult to contract. If your allowed
not to have sex for 4 years that problems has improved as much as
it's going to.

If the police are controlled by drug dealers it doesn't matter that
the phrase to indicate unhealthy sex is "This is illegal sex".

Relativity: could be interpretated as agreeing their is a
communication between what you are thinking and what is going
on around you. You'll be thinking about something, observe
a "severe statistic" and interpret options about what to expect.

(humm if signs from God are relativity and I can say the preceeding
statement why don't we call me God as well. I also used to refer to
myself as God so as to handle opportunity and responsibility
carefully and respectful of my perspective.)

I figured the more I was obsessed to do "something else" the more
religious (neutral) I was being to other people's perspective.

"Nobody ever had control of America before I took control of her."

"I was the last great economist, preceding a programmed distribution."

"In the end economics didn't imply finding one religion, it required
finding one currency."

-I'm leader of the canadian attempt of communism as a religion.

-I'm also leader of my young ambitions to green the OIL.

-This reaction here (easy to beat) is usually why I drink.

Ms. Brooker (99386493)

"I am the Interest Rate."

"I choose the Credit Crisis."

"I put the oil price to $147 because I was sleeping for a year. If I
continued to sleep I could have the price of oil at $200."

"SEVEN years celibate, BALD and mother is THOMAS."

You're wrong. This Friedmanite approach to lowering interest rates as a means of jumpstarting the economy is utterly fallacious. You're directly advocating inflation. Why not call it by its name.

Interesting chart on "bang" for various government bucks.

http://www.ourfuture.org/files/images/Economic-benefits-of-stimul.jpg

Agreed with Joseph Mises. Friedman advocated a consistent, predictable, simple rule based increase in money supply from year to year.

Хм… даже такое бывает.

I'm sorry but this public works Keynesian stimulus has all the sense of the mythical perpetual motion machine. The idea that our government can limitlessly spend money it doesn't have on make-work projects of questionable productivity "until the depression passes" is ludicrous.

They have to get the money from somewhere, for starters, and there's plenty of peril just in dealing with that.

Then, there's the fundamental problem of what caused the depression: mal-investment. The depression didn't just happen like some act of nature that will eventually pass just as naturally.

A series of government and federal reserve policy blunders, magnified by snake-oil quantitative finance and risk management gimmicks like CDS's causes a series of massive bubbles (housing, commodities, related equities, etc). These bubbles drew in enormous over-investment well beyond what real demand would have warranted.

Now, the bubble has burst and the liquidation or foreclosure of these bad investments is underway. It's painful. But it's healthy. It's a lesson for everyone. Housing isn't a productive investment (duh). People need to move on, let this sucker bottom out, deflation being an inherent part of that, and get back to producing goods and services that people are willing to buy with their real money (not cheap, fake credit).

The idea that the government can or should somehow try to prevent this liquidation from happening (like propping up the housing market) is preposterous. 18 million vacant homes means prices MUST fall.

One last thing: there may be macro-problems (or macro views on problems) but there are no macro solutions. Public works won't "multiply" shit. Sorry. It'll help certain specific politically connected corporations and contractors and their employees. I've seen no convincing evidence of a "multiplier", where $1 is government spending magically becomes more than $1 in consumer demand.

Obama should withdraw and shut down our world military empire and use the savings to eliminate the income tax permanently. THAT would be stimulus I can believe in.

Всегда читаю ваши посты с наслаждением. Всегда интересно, что напишите на этот раз

Alex....... I suppose the closest we can come to asking Milton would be to ask Gspn what he thinks Milton's response to there being a missing $10-$25 trillion from the economy. Yawn? and carry on as usual?

John? Are you denying the multiplier effect in sort of a "flat earth" manner? That multipliers don't exist?

http://www.absoluteastronomy.com/topics/Multiplier_(economics)

......... Anyway, I think we're about to learn a lot about DE-multipliers!

John, Public works projects don't work? Tell that to my Grandfather who was a supervisor on WPA Road Projects in Ohio After I.H. closed its doors for the duration. At least he managed to keep his house and put food on the table for his kids and shoes on their feet. And Ohio got some decent roads instead of the muddy lanes that they were before. In fact, I.H. reopened just to supply construction equipment.

As for shutting down the "World Military Empire", are you willing to share your bed with O'Sammy and his buddies? If they allow you too live that long.

Get Real!

John: I'm not a big fan of overspending on the military and particularly not in the area of regional pork ladled out by Congress, still, a recent pie chart shows US mil-spending at 20% of the total budget, perhaps there is a case to be made that it consumes another 5% indirectly .... so getting rid of the whole thing would save only about enough to begin to retire the DEBT built up by various "supply sider" experiments. Sorry, no break for the taxpayer. Worse to come!

John: I'm not a big fan of overspending on the military and particularly not in the area of regional pork ladled out by Congress, still, a recent pie chart shows US mil-spending at 20% of the total budget, perhaps there is a case to be made that it consumes another 5% indirectly .... so getting rid of the whole thing would save only about enough to begin to retire the DEBT built up by various "supply sider" experiments. Sorry, no break for the taxpayer. Worse to come!

http://www.care.org/graphics/getinvolved/advocacy/budget_piechart.gif

"The Fed does this by buying federal securities from banks; the cash the banks receive from the sale is available to them to lend, and what they lend ends up in people's bank accounts and so increases the number of dollars available to be spent."

This is because the number of good credits (in terms of consumers) is falling and the good credits are probably levered as high as they can go with real estate. This is the problem with TARP or any other monetary stimulus -- we don't have a shortage of money. We are tightening lending standards to a rational schema and therefore the economy will incur a permanent reduction of spending from the loose credit policies from before. Once the credit standards are reinforced (or re-enforced?), it will take a long time for the good credits to gain enough headroom to accept more leverage and make investments. Certain kinds of government spending can help avoid this. Example: accelerated spending of targeted advanced technology types. This will provide growth capital to technology companies who will definitely deploy the capital in the form of hiring and services spending which will create many more good credits from their employees.

I am a business lawyer and I am seeing some clients decide that they must move forward with capital expenditures and production, even in the face of dire economic consequences and predictions.

The analysis seems to be that if they scale back too far for too long, they certainly will lose; if they produce at normal levels, then at least they have a chance to survive, although the time that they can survive using this strategy if unsuccessful is less than if curb their efforts.

It is like a trapped animal who must leave the safety of a cave in the face of great danger; if he stays in the cave he starves, but if he ventures out he has a chance to survive even through great hardship.

At some point everyone is going to reach a point that they must do something because doing nothing is no longer an option. Do you agree? Doe this have a name in economics? When might it occur? How long does one wait until he decides to take desperate measures?

Directed to Judge Posner:
I thoroughly enjoyed your interview on the RadioEconomics podcast from 10/2/08.
Question: Could you explain the long-term risk/damage/benefits from the Govt printing our way out of this recession/depression by creating alot of inflation through massive fiscal spending? It seems to me (a lay person with a non-economist background) that the pros far outweigh the cons, which makes me think I must not properly understand the downside. Seems like high sustained inflation (followed by a Volker-type induced correction) would benefit those with high debt/worth ratio (avg American citizen) and harm those owed the debt (mostly foreign?). Plus, would stimulate spending.
Thanks in advance. Ken

@Jack
Here's the issue I have with this notion of "multipliers", which is a Keynesian construct, not some law of nature. The government spends borrowed/stolen/printed money on a project and those dollars flow through to contractors income which then gets spent on consumer goods (or put in the bank). So the money changes hands multiple times, shrinking as each transaction is taxed, and that's considered a "multiplier". Great.

But how do you wean that chain of consumption off it's life support of government funds? When that "stimulus" funding ends, so does the consumption it drives.

The theory, then, seems to treat this stimulus as a kind of life support "until the economy recovers" as if the economy is some force of nature. But it's not a force of nature, and the stimulus is ultimately a coercive diversion of resources by the state. I'm terrified of the restrictions on business that are coming alongside this government "stimulus" such as new climate change regulations. Where the state ascends, the private/productive sector recedes.

Companies have (or had) the burden of sustainability in their investments, which is why they tend not to build bridges to nowhere or Alternative Energy Museums in towns with 200 people. The burden of staying profitable is key justifying real investment versus phony mal-investment.

The dollars aren't really multiplying in the sense of creating real wealth that can grow to replace the root source, as the failure of the great depression's make-work projects seem to support.

Or am I totally off base? I'm just trying to get a handle on what's happening to our nation and my son's future. It's not looking great, for where we sit right now.

I'll assume the "flat earth" comment is just an ad hominem dig and ignore it.

As for the military budget, I don't trust the official numbers. Hasn't all of Iraq and Afghanistan been kept "off the books" as an "emergency expenditure"? These people are crooks and liars. Again, maybe I'm wrong, but I've seen estimates that our total annual military expenditure is nearly 1trillion. That's the place to start saving.

@Neil,
I'm sure your grandfather is a great, hardworking family man. God bless him and his life of work. But a personal ancedote about someone benefiting while being on the taxpayer's dole doesn't prove anything. There's plenty of people on taxpayer-funded government "aid" including our entire farming industry.That doesn't make it reasonable or right. It's all welfare.

As for wanting to lay down with Osama, I'm not sure what you're implying. Osama is a product of CIA training and funding. Our world police posture hasn't made us safer. Sorry. Nevermind that it's all unconstitutional. Remember, our founders resisted entering the fray between France and England immediately after our independence, an independence that France helped us achieve. This interventionism is unamerican neocon garbage.

...did I mention that our government is bankrupt? That's a crucial point in this stimulus debate. The only reason The State can act in ways that a normal company can't is because of The State has a unique monopoly in the use of force, which it uses to rob the productive of their labor with taxation.

Great take on the great, fake magical multiplier:

http://www.mises.org/story/2869

Thanks for that link, Jack. I found this one from the bottom of yours.

Interesting article, clearly written, with good points. As a new viewer, I am surprised that for what seems to be a fairly calm reasonable blog, the number of clearly deranged comments is pretty high. This does not seem to be the place where such folks would hang out, but you never know. Perhaps there is an economic explanation for this? Did the author(s) manage to offend organized some lunatic fringe? Just bad Karma?

John, If you don't like the anecdote about the value of the Ohio Road Projects, how about the Hoover Dam or the Mississippi River Flood Control Projects, or the Trans-Continental Railroad or the Interstate Highway Projects or most recently the NAFTA Superhighway. Or etc., etc., etc. Too reject Federal and State funded Projects that benefit the Public at large because it's perceived as "Welfarism"; is nothing more than more Libertarian clap-trap that got us into this mess in the first place.

Now, how does the National Security and maintaining National Sovereignty become "Neo-Con Garbage"? Except in the fantasies of one out of touch. As for the Founding Fathers and their actions, the World has changed dramatically. Are we to be dragged down by the millstone of precedential actions by those who were doing the pragmatic thing at the time. If I remember correctly, later on they went after the Barbary Pirates alone and single handed cleared the Mediterrain. The only other one who did that was Pompey Magnus.

Oh, BTW, you had better bone up on the U.S. Constitution.

Bill sez: "At some point everyone is going to reach a point that they must do something because doing nothing is no longer an option."

......... I think you know the answer to that is "business". In a time of expansion the juxtaposition of fear and greed is on the upside of how fast to expand, on the downside it's the much tougher one of trying to maintain enough of the smaller market share to stay in business. Mergers to gain efficiency come to mind, but how to value either the acquirer or the acquired? Tough one!

John: Yeah, I dig give you a bit of a rib-poke as I thought, think, you're coming from the ideology that gave rise to HW calling it "voodoo" at least until he too became a participant and practitioner. Apologies.

@Jack
Here's the issue I have with this notion of "multipliers", which is a Keynesian construct, not some law of nature. The government spends borrowed/stolen/printed money on a project and those dollars flow through to contractors income which then gets spent on consumer goods (or put in the bank). So the money changes hands multiple times, shrinking as each transaction is taxed, and that's considered a "multiplier". Great.

JJJJJJJJJ Agreed. Virtually ALL economic constructs come from theory and observation, with much residing on the ragged edge of mass and individual pyschology. As for the above, if the multiplier WERE to only shrink due to the government getting some of its investment back through taxation our task of spurring would be far easier than it is in a "globalized" economy. I live in Alaska where our multiplier is half what it is in the US, as a "new" dollar takes a pretty direct path back to the L-48 that supplies most of our food, merchandise, heavy equipment etc. Likewise the leakage and lower multiplier of the US as a whole is due to our massive trade deficits including our horrible habit of exporting so many petro bucks.

But how do you wean that chain of consumption off it's life support of government funds? When that "stimulus" funding ends, so does the consumption it drives.

JJJJJJJJJ GOOD Question!! And one we're all concerned about. We've run substantial deficits in all but five? years since 1980 with much larger ones since 2000 and still our economy staggered along with declining wages and little job growth even before The Meltdown. I'd suggest some fundamental changes.

Among them are the matter of ever increasing wage inequality; I'll go up against about anyone who thinks that we can grow a healthy economy while median wages remain flat for 25 years. Nope; we ARE demand limited and it can not fly on the one small wing of increasing wealth at the top.

The theory, then, seems to treat this stimulus as a kind of life support "until the economy recovers" as if the economy is some force of nature.

JJJJJJJJ Well, I've a bit more hope than that of a "make work" situation. As you see, we've somehow neglected some couple trillion of delayed infrastructure maintenance and likely more in needed upgrades that would pay us all dividends in the future. It is NOT a foregone conclusion that anything undertaken by government for the general welfare of our nation is a "loser".

Too, I'm enthused about incentives to spur a New Energy future. Perhaps, as an Alaskan, I more jaded than most, but we (with FBI help) have jailed half a dozen legislatures and found a Senator of 40 years in office guilty of taking too many gifts from an oil service company that did the dirty work for oilcos in Alaska. Trust that NONE of these crooks were trying to "slip in" a CAFE standard or ANY means of slowing US consumption and waste of our precious oil supplies.

But it's not a force of nature, and the stimulus is ultimately a coercive diversion of resources by the state.

JJJJJJJJJ This IS a tug of war isn't it? One that clearly brings up the question of what role democracy plays in our nation as compared to what is sold as "the market" though it clearly includes those "coercive diversions" that can and are purchased from Congress on a regular basis. But! slow as it is, the pendulum finally swings in a democracy and it's clearly time to look at "the rules" regarding the commonwealth, energy for the future, and health care. I'd have LIKED to take these one at a time over the years... but..................... here we are.

I'm terrified of the restrictions on business that are coming alongside this government "stimulus" such as new climate change regulations.

JJJJJJJJJ Well there is still debate as to man-caused warming, but! fortunately much of the response to warming is alone the same path as dealing with Peak Oil, or if you don't like that one either, the VERY real problem of exporting our lifeblood to purchase ever more costly oil to waste. Review the chapters on "externalities?"

Where the state ascends, the private/productive sector recedes.

JJJJJJJJ Uh-oh. Are we assuming the private sector is "productive" while the public sector is not productive? Well, what the $50 teacher produces as compared to what the $10 million buck insurance CEO or DC lobbying firm produces is surely a topic for another day; but! most of the changes being discussed, infrastructure upgrades, New Energy, and health care will primarily employ private sector companies.

JJJJJJ As for being broke, shush! don't tell anyone! and most of us have begun a biz or bought a car or home while flat broke; it's the American way!

JJJJ And lastly if you want to wring reeking gobs of age-old fat out of the military I'll certainly help if I can however in this environment we're going to hear about "reset" and "adapting to the new enemy's tactics" along with "being prepared" etc though I hope there will be less overt fearmongering than in the past eight years. Oh.... the British press has done away with "war on terror" for it seeming to align forces not formerly aligned.

John, there are some sites on the web that try to give an understanding of the economic principles in which we've the most confidence, others are pumping ideology. The Mises site is involved in the latter and the story is full of errors.

http://www.mises.org/story/2869

@neilehat

I'm being an ideologue. Certainly. Proudly, in fact. That said, I'm in a process of learning (always will be) and am open to all ideas. But you are not representing state action particularly well by leaning on anecdote.

You can point to the hoover dam, or the TVA or NASA or many other taxpayer-funded government projects and say "Look! It Works!". Sure. It worked for those specific beneficiaries of the public dole. Not "us". But what you are ignoring is the grave of opportunity costs. The government must TAKE from some to fund these projects for others. This idea that "we" all benefit from this is a meaningless, romantic collectivism with no real foundation.

Private individuals in free enterprise have produced equally amazing projects without the need to take funding by the coercive force of taxation, inflation or public debt. And given the reality that none of these depression-era make-work projects lifted the country out of the depression, I don't see where the empirical evidence is for this public works keynesian multiplier. Please prove me wrong. I like to learn.

The true track record of state action has been to bolster corporate incumbents and big business, who hate free market competition as much as any marxist ideologue.

As for the national security, what the hell do I know, really. Maybe our global police force of 700 bases in 130 countries is holding the whole world together. But I doubt it. Call me a skeptic. What I do see, especially in the middle east, is a trainwreck of convoluted "alliances" that have all too often put our government in league with brutal dictators and made our government, by association, the enemy of millions of oppressed people. The overthrow of Mossadegh comes to mind.

As for this line:
"Too reject Federal and State funded Projects that benefit the Public at large because it's perceived as "Welfarism"; is nothing more than more Libertarian clap-trap that got us into this mess in the first place."

That's just plain nonsense. Sorry. Bush has been the farthest thing from a libertarian possible. He expanded the state in every respect, from regulations (sarbanes/oxley) to entitlement spending (medicare D/nochild) to the military. I'll study the constitution if you promise to get some schooling on the structure of our centrally planned banking system and the enormous regulatory mess that socially engineered our current crisis. This is not a "free market" crisis. Not by a long shot.

@Jack,
I agree that the deficit spending and loose monetary policy have created fake wealth at the cost of enormous debt burdens on our currency and our nation's future. We can certainly agree there.

But I think where you and I start to have a hard time is in basic language and, indeed, philosophy behind the language. I do not conflate the government with "us". The government is an organization of individuals with the same human nature and incentives driving their bureaucracy as any other organization. The difference is that the government derives its power and funding from coercive force and need not justify it's "investments" with sustainability or profit, like a private organization must do.

This idea of collective psychology and collective choice is just baloney. Each of us choose for ourselves. Elections with 5% margins don't mean that "we" chose anything. And even if the margin was 80%, that will still just equate to mob rule. We are, as Franklin said, a Republic... if we can keep it. I fear we've lost it.

So "we" didn't neglect infrastructure. The government did. Go check out the roads in Disney World. They're doing just fine. The BQE here in NYC on the otherhand? Forgetaboutit. And why do we even have so many damn roads in the first place? People complain about suburb sprawl and the death of "downtown", but it was these very government projects that have given us the car culture that created these "problems".

Let's take a look at the "New Energy Future" for a minute. So far, government mandates and massive "investment" has gone into hands-down the WORST fossil fuel alternative imaginable: ethanol. Truly, it is the worst. Hundreds of billions of dollars have been taken from the taxpayer and given to a tiny handful of people in crucial election states to fund what is universally acknowledged to be an immoral product. As a double-whammy, the subsequent boom has driven food prices sky high and punished the poorest and hungriest people around the world. Many countries have been destabilized by these phony and immoral food price spikes.

And even after a major public backlash, nothing has changed and nothing is being proposed to change this horrifying policy of using food and arable land for fuel.

THAT's state "investment".

When government agents, whose principal incentive is re-election, have discretion to spend other people's money, this is the result. Corruption. No company could have enabled this kind of policy absent the monopoly of force that Uncle Sam provides. And what of the enormous investment resources that have poured into biofuels INSTEAD of going to genuinely productive alternatives? Behold the opportunity cost. That is MALinvestment. Not a multiplier.

There's no reason to believe that the government will "invest" in the best technologies and every reason to believe that they won't. What they will do, is get gamed, and collude and steal away opportunity, just as Ethanol has drained research and capital away from other pursuits.

"This IS a tug of war isn't it? One that clearly brings up the question of what role democracy plays in our nation as compared to what is sold as "the market" though it clearly includes those "coercive diversions" that can and are purchased from Congress on a regular basis. But! slow as it is, the pendulum finally swings in a democracy and it's clearly time to look at "the rules" regarding the commonwealth, energy for the future, and health care. "

As you can see with our immoral farm subsidies, our monopoly-maintaining FCC, our destructive monetary policy and countless other forces of state agency... democracy isn't working. The pendulum is swinging in a range of about 3 degrees between the supposed "left" and "right". Why? Because the incentives for state agents keep the incumbents in power. "Campaign Finance Reform" simply erects higher barriers for new comers. Massive regulations like the new CPSIA of 2008 destroy small competitors, leaving the big guys to grow.

Democracy works when the state is doing the simple things that a balance of power can truly check. We're so far beyond that now.

"Well, what the $50 teacher produces as compared to what the $10 million buck insurance CEO or DC lobbying firm produces is surely a topic for another day"

Ask the kids in Newark how that $50 in taxpayer-funded salary is working for them. Even with $18k/student, that system is failing. It's only a few miles away from me and let me tell you... they're suffering. No competition + no accountability = failure.

DC lobbying happens because the state has the power to effect these companies. Ask Microsoft, who prior to the anti-trust suit had virtually no lobbying presence, what happens when your competitors choose to compete with Uncle Sam's club. They learned the price of doing business without collusive lobbying.

As for the insurance CEO... don't even get me started. Insurance as a concept has gone completely beyond all reason, and yes, is part of today's meltdown.

As for mises "pumping ideology", I don't consider that an insult or a useful criticism. If there's errors, dig into them. Again, Ideology drove our independence. Ideology underpins the very idea that "all men are created equally" when simple observation demonstrates that we are not. Ideology is what we need. Not "pragmatism" that leads us into ridiculous wars and ever expanded failed programs supported by tax-consuming interest groups.

If you knew me, you'd know that I'm a generous, empathetic person and a caring parent. Not some freak, supply-side cartoon character. But this idea that each of us can live at the expense of all of us is wrong. Bastiat understood that. Philosophy and ideology give us that gift on understanding.

god bless. Love the debate. Always learning.

I believe that the government is going to have to become a direct lender in order to stimulate the economy. Using the banks as lending intermediaries has not worked (i.e. the first half of TARP) because the banks need government money to offset their own losses, which are still increasing. Accordingly, government money infused into banks isn't making it into the "real" economy. In addition to Keynesian spending, we need the government to be a direct lender as well.

@Michael,

Why not just abolish the banks all together? It's not like we've learned anything from the 20th century about state-owned capital.

My lord. The banks are lending. Payrolls are being met. Inventories are moving. They're just no longer lending to the ludicrous high-risk borrowers that they used to during the credit/asset bubble. This is a return to sanity. The country, sadly, needs this depression to liquidate the bad investments and then rediscover what's still got value.

For the government to step in and try to keep the bubble inflated will bring nothing but greater destruction to real productivity and diversion of investment from good businesses to bad ones. Just look at the punishing flow of investment into these bust banks as the government announced TARP.

Now should be the time when the smart, prudent businesspeople rise up to take the place of the broken, bankrupt companies. Instead, we're punishing the prudent by endorsing and rewarding failure.

These are truly disturbing times.

@John P

Amen on your last post with respect to the free market ideology. There are too many unintended consequences and unknowns that will occur with a stimulus. Especially given the current funding environment and that success (lack of) of recent European debt auctions. I believe we are at a point in time where our only option is to inflate our way out of this mess.

However, with regards to the bank credit lines, in some cases they are overeacting and revoking/limiting/renegotiating credit lines to otherwise good companies.

For those interested in the "Logic" of how a stimulus (stimuli as they actually propose) works. This blog is written by a Berkeley professor who has done nothing but attack the Chicago School of Economic Thought. But do not think any contribution you may make to the site that questions the author's views will remain up for long - he deletes comments without mercy. This is especially true if you write something particularly clever or revealing. But it is nonetheless a good way of understanding keynesian and post-keynesian logic.

http://delong.typepad.com/sdj

John & RPB, As for "Free Market Ideology" and the many "unintended consequences and unknowns"; we're beginning to see the free market's many come to the fore. I hate too say this, but this position's days are numbered as the Public and Economists turn their backs on it and we can get back to rebuilding the Nation and supplying full employment. Oh, I'm sorry that's "Welfarism" and anathema to all "Free Market Ideologists".

I'd love to see the good Judge weigh in.

@RPB,

Thanks for the boost, buddy. My problem with "inflating our way out" is that inflation punishes the weakest among us. It is a re-distribution of wealth from the poor and working class, who see their salaries and savings devalued as prices rise. Meanwhile, the politically connected corporations, banks and government contractors get the benefit of spending the freshly printed money at current prices.

What we need is sanity. We need the government to calm down, stop the insane bailout zigs and lending zags that are further freezing investment and freaking out consumers. And we sure as hell don't need wild new regulatory structures that will scare entrepreneurs away.

We need creative destruction, baby.

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@neilehat

Don't get me wrong, I understand free markets failures in many fields. I also understand that Friedman's ideology did not take into accout the extent of financial innovation and failed to understand the agent's motivation to "game" the system (mortgage banker, structurer, fixed income rating analyst, derivative salesman, derivative investor up to the elected official that got votes by fueling the asset bubble, etc). The Chicago School needs modification, not complete destruction. However, one must also not forget all the government intervention, conservative or liberal, that fueled these asset bubbles and allowed these short sighted compensation schedules. Both were part of the mania that got us where we are. But that does not stand in the way of necessary government action to regulate properly, but not step in the way of proper innovation or in the way of people who look to create value. But let's not go nuts here and think these (relatively) minor failures refute our ideology of allowing agents to decide their own outcomes while also allowing them the freedom to innovate and derive profit.

@John P

The inflationary rhetoric of these stimuli and these stimuli affect on the poor is what many of the pundits and keynesians have forgotten. Wage/price spirals always disproportionately affect the poor.

But don't neglect the keynesian argument. Reminds me of the "underpants gnomes" from a dated South Park episode. The gnomes' logic:

1. Steal Underpants
2. Make Profit

Why does this reflect Keynesian stimulus ideas? Here is, essentially, Keynesian stimulus logic:

1. Government spending reduces overly high inventory levels to points far below optimal inventory levels
2. Manufacturers produce to return inventory levels to the "optimal level," employment returns to "full" levels as a result and the economy reverts to "normal"

Obviously flawed logic. Its like running from 1st base back to home and calling it a scored run.

Do they forget that they have to FUND these stimuli and that these must last long enough/be large enough to change agent future expectations of economic conditions? Both of these are not easily accomplished feats and I imagine a substantial amount of money will be spent before the Keynesians realize that Keynes' assumptions no longer apply to a globalized, service based economy mired in unprecendented debt. Where are we going to get the money once private treaury demand is tapped out? The only answer is through the Federal Reserve purchasing these asset by running the printing press and effectively causing massive inflation. I do not believe their would be any other mechanism.

But its alright. We can always short treasurys, short the dollar and buy gold. That way we'll atleast benefit from all these misguided stimuli.

@neilehat,

Continually saying "this downturn is the result of the free-market gone wild" again and again does not make it true. "Free Market Ideology" didn't drive the Fed's price fixing of interest rates at 1% for 3 years, which was a root cause of the bubble. Nor was it "free market ideology" that encouraged the GSE's to buy risky mortgages to the tune of over 1 trillion dollars. Nor was it "free market ideology" that pushed on the banks meet bad lending quotas or risk severe repercussions.

And if you think that "we" can provide full employment where "we" is government bureaucrats in league with big corporate titans, you really should study up on the 20th century. It's quite instructive. Seriously. Central planning is an abject an unequivocal failure. Plus it has the added bonus of being fundamentally immoral because it is built on theft. Take some time to go back to our country's roots. Read some John Locke. Reflect on the founding. It's very very instructive.

Humanity has endured oligarchic tyranny for most of it's existence. Saying we should go back toward central planning oligarchs and calling it progress is a scary proposition.

@RPB,
Me and you are the same page, brother. Sadly, it's a scary page that doesn't bode well for our nation. Keynesian stimulus is failed time and time again. Just look at Japan! A decade lost to nonsense mired in government meddling. Paul Krugman and the rest of the keynesian snake oil salesman will always be with us, peddling their perpetual motion machine and colluding with the state to consolidate central power. They are, quite frankly, evil.

Cheers!

"The saving rate has soared in recent months and is one of the major factors in reducing consumption and pushing us to the edge of a deflation."

Interesting, saving rate soared, despite 200 billions of "tax credit" stimulus by Bush administration during second half of 2008. Maybe Obama will be of better luck with 800 billions in 2009?

"The saving rate has soared in recent months and is one of the major factors in reducing consumption and pushing us to the edge of a deflation."

Interesting, saving rate soared, despite 200 billions of "tax credit" stimulus by Bush administration during second half of 2008. Maybe Obama will be of better luck with 800 billions in 2009?

"The saving rate has soared in recent months and is one of the major factors in reducing consumption and pushing us to the edge of a deflation."

Interesting, saving rate soared, despite 200 billions of "tax credit" stimulus by Bush administration during second half of 2008. Maybe Obama will be of better luck with 800 billions in 2009?

"The saving rate has soared in recent months and is one of the major factors in reducing consumption and pushing us to the edge of a deflation."

Interesting, saving rate soared, despite 200 billions of "tax credit" stimulus by Bush administration during second half of 2008. Maybe Obama will be of better luck with 800 billions in 2009?

First, I voted for Obama so please do not interpret my skepticism of the public works & transfer payment elements of his proposal as a Fox News inspired "right wing" attack.

Second, I agree w/ Prof Fama: the stimulus is borrowed money which will displace other uses of these funds and that the stimulus will only enhance income if the stimulus is moving resources from less productive to more productive uses. Govt intervention in the economy distorts activity & is less productive than the private sector, period! And please spare me the tired old Hoover Dam & TVA "proofs" of Govt success... All Obama's debt will do is reduce the amount of future economic growth. We'll all be poorer in the long run as a result of this spending orgy.

Third, for me, Henry Hazlitt's "The Failure of the New Economics" debunked Keynes' General Theory, way back in the 1950's... I encourage everyone to read this book and decide for themselves. Moreover, the 1970's proved empirically that Kenesianism is wrong. Look at the data...

Fourth, Govt manipulation of the market process (Fed Reserve policy, Fannie Mae, Freddie Mac, etc.) caused this mess and I'm amazed by how many people want even more Govt manipulation to fix the problem that it created!

Fifth, re: all economists now are Keynesian... The problem is very few of our schools teach the alternatives to Keynes. It's no wonder most Americans are completely confused, especially the media. How many students have actually read Schumpeter's "Theory of Economic Development"? And he was a Harvard Professor! How many of our econ students have ever heard of the "economic calculation" debate let alone actually studied it and understand that socialism cannot work in theory or reality? And that the more Govt manipulates the free market process, the lower our collective standard of living will be. Instead, most are taught that Govt intervention is good!

Last, even Bernanke admitted at one of Friedman's birthday parties that Fed Reserve manipulation of the money triggered the Great Depression. Moreover, I recommend eveyone read "Out of Work" by Vedder & Gallaway before concluding the New Deal did any good. The fact is, despite all of Roosevelts best efforts, the New Deal did NOT reduce the average unemployment rate between 1933 & 1938. Median unemployment was about 17% during this period which was 3% higher than the worst median unemployment the US ever experienced over its recorded history.

John, My family is the Country's roots. We washed up on the shores of this continent back in 1705 and duly began clearing the forests and slughtering the indigenous population to make it safe for Europeans. Then turned around and kicked the French, English and Spanish out. We're not about to start listening to some ideological hack who just recently got off the boat.

The Government as an "Oligarchic Tyranny"? Man! You have gone off the Deep End. Reading? It's just not reading that's important, but the proper interpretation of the texts as well. Something you should learn.

"Vox pupuli, vox dei"? More like "Vox populi, vox diabolus".

Please join the Facebook group of Libertarian bloggers : http://www.facebook.com/group.php?gid=40644723076

I am amazed with it. It is a good thing for my research. Thanks

suo marte and all: I'm seeing this lament with quite a bit of frequency lately:

"despite all of Roosevelts best efforts, the New Deal did NOT reduce the average unemployment rate between 1933 & 1938. Median unemployment was about 17% during this period which was 3% higher than the worst median unemployment the US ever experienced over its recorded history."

...... and have assumed it means Heritage.org has commissioned a few books on the subject.

I'd like to ask; "compared to what??" What would unemployment been w/o intervention? The same group urged Pres Bush to lower taxes despite massive deficits, citing "job creation" and all sorts of real or imagined benefits. Were those deficits not an attempt at Keynesian spurring however poorly targeted they were if that was the purpose? Was not the economic effects of WWII that of Keynesian spurring on steroids? Massive government spending and hiring?

RPB...... I guess that one thing we can all agree upon is that of the poor being disproportionately screwed in all cases. You've made the inflation case, and of course the unemployment, underemployment and depressed wages of a down economy disproportionally affects them first, longest and last, as well.

Only half facetiously I suggest giving "em" uniforms and a certain amount of honor as foot soldiers in the "war on inflation" and the very foundation of an economy that always has to have five or more percent unemployed that the other 95% enjoy a "balanced economy".

@neilehat,

You've rebutted nothing, my friend. I wish you had. I'm here to discuss ideas.

So I'm sorry that you're unwilling to really engage in the discussion. Instead, you feel the need to lean on personal anecdote and insult. It's fine. I'm happy that you are proud of your family history. Family is what matters most. But having ancestors back to the colonies doesn't make your ideas accurate or your unfounded proclamations the truth.

My Italian relatives came here only three generations ago. Are you suggesting that I'm not as "American" as you are? Have you somehow retained the knowledge of our founding in your DNA because your bloodline was here to see it? I'm just not seeing the point.

If your 19th century relatives could see what our government has become, and the hideous warfare/welfare state it maintains, they'd be shocked and horrified. Please, share your "proper" interpretation of some texts. I welcome actually ideas. I get enough dubious one-liners like "free markets gone wild caused this crisis" from the media.

As for my tone, well, I'm sick and tired of incrementalist, soft fascism being tolerated under the guise of "pragmatism". If you find my use of terms like Oligarchy or fascism hyperbolic, please challenge me. The Federal Reserve is a fascist, oligarchic rule over our financial system with no accountability whatsoever. I think that's a fair, rational statement. Not something "off the deep end".

@Suo Marte,
glorious, post buddy. simply excellent.

@Jack,
Regarding comparing the great depression to an alternative history: there were two recent prior downturns in the late 1870's and in 1920. Both rebounded quickly with essentially no federal action (because the constitution was still in effect). Remember "the roaring twenties"? Yep, that followed a sharp downturn during which the Harding administration did Zippo. At least... I think...

And yes, the poor and working class are screwed. Especially by protectionist policies that contract employment and reduce opportunities to enter the workforce for new comers.

@John: Well this is getting a bit long, but as you say we can learn from debate........ so I'll cherry pick just a few areas:

++But I think where you and I start to have a hard time is in basic language and, indeed, philosophy behind the language. I do not conflate the government with "us".

JJJJJJJJ At this time you may be right. Where I am I see FAR too much corporate power and trust of "The Market" which, as we've seen several times in the last 50 years doesn't respond to the lemmings running off the cliff until it's very late for responding. Thus, I INSIST the our government is us, and if not that is surely a subject at least as important as "Whhhhaa happened to the economy and the lemmings chance of ever retiring?" I suppose one hardship for Obama & Company going out on the plank is that of another faction lamenting "If god wanted infrastructure and a new energy paradigm "The Market" would have already created it."

And perhaps you say it in fewer words:

++We are, as Franklin said, a Republic... if we can keep it. I fear we've lost it.

JJJJJJJJ To which I ask "To whom??" And shall demo and cracy work to get it back? In your ethanol example it was CLEARLY Archer Daniels and farm lobbyists doing the "taking" and leaving us with what appears to be an irrational energy policy of little worth. A failure of government and not the market that should be corrected.

As for the "we" who neglected infrastructure there is no one else but "WE". While a bridge always has a father and usually a plaque, maintenance is an orphan and there is no one else but WE to care for it.

And as for comparing the PRODUCTIVITY of the $50K teacher to the $10 million plus insurance CEO, I guess that despite taking a slam at the teachers in your region that you've agreed that the teacher is a FAR better buy than is the CEO?

As for my getting out the violin and weeping towel for MSFT just now, forget it, someone went out and slipped in a computer "running???" Vista while I was gone and I've been disappointed every since Bush & Co seem to have sent the Anti-trust Division on an eight year holiday. WOULD that someone NOT have allowed Citigroup and others to become such monstrous dinosaurs!

++s for mises "pumping ideology", I don't consider that an insult or a useful criticism. If there's errors, dig into them. Again, Ideology drove our independence.

JJJJJJJJ Great, and perhaps when I've time I'll take a few swipes at the article. Logically, you've confused the use of the word ideology in one sense, as those high ideals of our founders with the far mmore wretched insertion of an irrelevant ideology into a discussion of known and generally accepted, and acceptable, economic principles.

This sort of thinking has been a HUGE problem for us since Jan 20th 1980 and one I hope will be at least partially corrected as the terms "trickle down" "supply side" and "voodoo" bring guffaws instead of the sort of faith-based reverence of the last 30 years.

And lastly as for "urban sprawl" and too many roads........ I've mixed feelings. I've sort of watched the LA area as Orange County became the "bedroom" and "white flight" refuge while today light industry, high tech and finance followed the growth of the residential sector making OC a center of its own and THE west coast financial center. In other areas the flow is reversing to regentrifying the once abandoned city cores. It's hard to say what "should have been" but as one close to land use planning I KNOW that if there is a tolerance or acceptance for it, it is VERY recent! Jack

I agree that the deficit spending and loose monetary policy have created fake wealth at the cost of enormous debt burdens on our currency and our nation's future. We can certainly agree there.

But I think where you and I start to have a hard time is in basic language and, indeed, philosophy behind the language. I do not conflate the government with "us". The government is an organization of individuals with the same human nature and incentives driving their bureaucracy as any other organization. The difference is that the government derives its power and funding from coercive force and need not justify it's "investments" with sustainability or profit, like a private organization must do.

This idea of collective psychology and collective choice is just baloney. Each of us choose for ourselves. Elections with 5% margins don't mean that "we" chose anything. And even if the margin was 80%, that will still just equate to mob rule. We are, as Franklin said, a Republic... if we can keep it. I fear we've lost it.

So "we" didn't neglect infrastructure. The government did. Go check out the roads in Disney World. They're doing just fine. The BQE here in NYC on the otherhand? Forgetaboutit. And why do we even have so many damn roads in the first place? People complain about suburb sprawl and the death of "downtown", but it was these very government projects that have given us the car culture that created these "problems".

Let's take a look at the "New Energy Future" for a minute. So far, government mandates and massive "investment" has gone into hands-down the WORST fossil fuel alternative imaginable: ethanol. Truly, it is the worst. Hundreds of billions of dollars have been taken from the taxpayer and given to a tiny handful of people in crucial election states to fund what is universally acknowledged to be an immoral product. As a double-whammy, the subsequent boom has driven food prices sky high and punished the poorest and hungriest people around the world. Many countries have been destabilized by these phony and immoral food price spikes.

And even after a major public backlash, nothing has changed and nothing is being proposed to change this horrifying policy of using food and arable land for fuel.

THAT's state "investment".

When government agents, whose principal incentive is re-election, have discretion to spend other people's money, this is the result. Corruption. No company could have enabled this kind of policy absent the monopoly of force that Uncle Sam provides. And what of the enormous investment resources that have poured into biofuels INSTEAD of going to genuinely productive alternatives? Behold the opportunity cost. That is MALinvestment. Not a multiplier.

There's no reason to believe that the government will "invest" in the best technologies and every reason to believe that they won't. What they will do, is get gamed, and collude and steal away opportunity, just as Ethanol has drained research and capital away from other pursuits.

"This IS a tug of war isn't it? One that clearly brings up the question of what role democracy plays in our nation as compared to what is sold as "the market" though it clearly includes those "coercive diversions" that can and are purchased from Congress on a regular basis. But! slow as it is, the pendulum finally swings in a democracy and it's clearly time to look at "the rules" regarding the commonwealth, energy for the future, and health care. "

As you can see with our immoral farm subsidies, our monopoly-maintaining FCC, our destructive monetary policy and countless other forces of state agency... democracy isn't working. The pendulum is swinging in a range of about 3 degrees between the supposed "left" and "right". Why? Because the incentives for state agents keep the incumbents in power. "Campaign Finance Reform" simply erects higher barriers for new comers. Massive regulations like the new CPSIA of 2008 destroy small competitors, leaving the big guys to grow.

Democracy works when the state is doing the simple things that a balance of power can truly check. We're so far beyond that now.

"Well, what the $50 teacher produces as compared to what the $10 million buck insurance CEO or DC lobbying firm produces is surely a topic for another day"

Ask the kids in Newark how that $50 in taxpayer-funded salary is working for them. Even with $18k/student, that system is failing. It's only a few miles away from me and let me tell you... they're suffering. No competition + no accountability = failure.

DC lobbying happens because the state has the power to effect these companies. Ask Microsoft, who prior to the anti-trust suit had virtually no lobbying presence, what happens when your competitors choose to compete with Uncle Sam's club. They learned the price of doing business without collusive lobbying.

As for the insurance CEO... don't even get me started. Insurance as a concept has gone completely beyond all reason, and yes, is part of today's meltdown.

As for mises "pumping ideology", I don't consider that an insult or a useful criticism. If there's errors, dig into them. Again, Ideology drove our independence. Ideology underpins the very idea that "all men are created equally" when simple observation demonstrates that we are not. Ideology is what we need. Not "pragmatism" that leads us into ridiculous wars and ever expanded failed programs supported by tax-consuming interest groups.

If you knew me, you'd know that I'm a generous, empathetic person and a caring parent. Not some freak, supply-side cartoon character. But this idea that each of us can live at the expense of all of us is wrong. Bastiat understood that. Philosophy and ideology give us that gift on understanding.

god bless. Love the debate. Always learning.

@Jack,

One other thing. War is not good for the economy. Drafting all the unemployed and sending them to the meat grinder may have eliminated unemployment, but it wasn't economic. Not to take away from what the greatest generation. War is not creative destruction. It's just destruction.

@Jack,
Thanks for digging in a bit more. Again, this is all a process.

I beg you to not conflate the state with "us" simply on the grounds that it's some kind of counterbalance to "corporate power". Partly because it's philosophically bad and partly because it is no such thing. The state is pro big incumbents. Always has been.

I ask that you start looking into the long, horrible history of regulation in this country and how it has more often than not been a tool used by big corporations in league with the politicians to maintain their monopoly. This goes all the way back to some of the first big regulations, like the Interstate Commerce Act of 1880, which ended up bolstering the big railroads and protecting them from competition. Nobody hates a free market more than big corporate incumbents.

Dig into the FCC and see how it's entire history has been one big collusive enterprise of protecting the broadcasters from competition, enabling them to grow bigger and more powerful. Hell, even Ralph Nader wrote of the monopoly creation that regulations bring about in his 1973 paper "The Monopoly Makers".

And, again, I don't feel you've made a compelling case that "we" have ignored our infrastructure, or that there is a "we" at all. This is an enormous country of 300 million+ individuals. There is no single "we". That is macro theory at it's most abstract. It is "reductio ad absurdum" in the ultimate form. Some state and counties have maintained their roads and bridges, others have not. The Tappan Zee bridge in New York is teetering on collapse and every New Yorker knows it. How have they failed? Which New York election had infrastructure as a major plank in the platform? None. I personally haven't ignored any infrastructure. I reject being clumped into this "we". It is the politicians and bureaucrats that have failed their specific infrastructure maintenance mistakes. They are responsible for it. But the tragedy of the commons is called a tragedy for a reason.

I realize I'm getting hung up on a verbal shorthand, but I think it is the key to everything in a way. This conflation is what provides cover for our corrupt politicians and bureaucrats. It spreads around blame undeservedly.

I recommend you check out Russ Robert's Econtalk podcast. It is EXCELLENT. He spends a lot of time digging into this romantic myth of a collective "we". It is a myth. It is emotion and romanticism. Not reality or policy. Again, It masks accountability by spreading it around, just as Bush has socialized the failure of our fascist banking system.

As for "generally accepted economic principles"... I assume you're referring to keynesian economics and the alleged "multipliers". The "new economics" as compared to classical economics. I will happily admit that I reject the Keynesian school and find the Austrian descriptions of inflation and the business cycle to be much more compelling. I don't believe in macro solutions. I don't really believe that the macro is useful at all. Maybe that's the minority view. I'm fine with that. Most great ideas start off in the minority. As outliers.

I'm frankly amazed that anyone still utters Keynes at all when the stagflation of the 1970's completely destroyed the entire theory followed by Japan's lost decade which really put the nail in the coffin.

My understanding of economics education today is that it quickly becomes highly mathematized and niche and disconnected from economic history or the basic human incentives that underpin the discipline. Much of academia is a calcified museum of failed ideas thanks to group think and tenure. Keynesian economics is one of them.

You must recognize that the Reagan+Volker monetary tightening, built on sound Austrian principles, curbed inflation where Keynesianism could not. That Reagan went right back to deficit spending doesn't overturn the core truth of Mises and Hayek.

Forget "trickle down" and "supply side". I'm not presenting those ideas. I'm not talking about the "Laffer Curve". I have no love for deficit spending through tax cuts. I don't want the taxes or the spending. But if you're going to spend, they should at least tax to pay for it. And taxation generates a popular response that kicks democracy back into gear, whereas inflation and borrowing are insidious ways of state spending that kick the can on accountability. Bush and Greenspan kicked the can in 2001 and we're feeling it now (not that they were the only cause, not by a long shot).

Now, I'm very new to this stuff, so maybe I'm dead wrong. I'm a TV producer, not an economist. And I'm only 31. But I know a lie when I see one, and calling our current problems a "free market failure" is a pure lie. I also work very hard for a living and see how people interact in business and the role that incentives play. Austian economics, from what I can see, is the real deal, and the libertarianism of Ron Paul and Murray Rothbard is the most moral political philosophy I have ever read.

Sorry, Judge, for blathering in your comments. This is certainly terrible comment etiquette. I'm just a passionate skeptic. An enthusiast. A geek. My blog is coming online soon for all 50 people that care. ;)

@John: It's a bit of a topic diversion to point out that war is not ultimately good for the economy, though you'd have a hlll of a time convincing anyone who was a young adult during the 30s. But agreed, if we spend scarce resources to build a helicopter it might pay us dividends working for CG Rescue for 20 years as compared to blowing it up in a few weeks. (Unless of course "The Product" is that of winning the war)

But! I was pointing out the WWII was the ultimate Keynesian spurring and it "worked" in spades! And, you'll recall that those claiming "spurring" did no good, had NO controlled experiment, they're all just theorizing. Tough no expert, my guess is that the reason Bernanke and others are still having a hard time discerning the causes or the cures due to what appears to be an official example of Hogan's Goat.

Your other post on the horrible case of regulation has me thinking that you might be one of the few remaining, including Gspn who didn't learn some respect for oversight and regulation.

I'm not sure why this should be in a nation of football fans as if we use f-ball as a metaphor for capitalism neither work very well without ground rules and referees. With the rules in place and enforced both football and capitalism holds rewards for those who go to work and work wisely and efficiently. W/O we get losses equal to a year's GDP!!

As for "Reagan-Volcker" or perhaps better Carter-Volcker as it was Carter who took the hit for taking the "Whip Inflation Now" buttons off Ford's lapels, it was another Hogan's Goat era of devaluation of the dollar, soaring oil prices and the attendant price increases, and in housing et al us boomers sallying forth to buy our first homes, or, better yet "flip" them to our fellow boomers, buy an German built car with the proceeds and look down our noses at those who weren't "creating wealth".

As for "free market failure" I suppose you'd have to define your terms. Would you consider it a "game failure" if one team showed up with a front-end loader, popped the ball in the hopper and headed for the goal line? While the refs pretended not to hear the roar of the diesel?

Lastly, could it be that we MIGHT run our nation with a balanced budget and money supply managed so tightly that a buck today will be a buck fifty years from today? In theory, maybe and I'd love to see PORK power taken away from Congress and the Admin, but then there is that pesky real world.

Look back; along comes a costly, unpopular war no one wants to pay for that last half a generation.

(Fannie and Freddy of current fame were sold off by LBJ to hide the war costs, but he did, finally impose a surtax and left us with not too much debt.)

Then came the run on the dollar that made it necessary (I guess??) for Nixon (and Rebozo?) to dump the "gold standard" or to openly change the gold-dollar ratio.

(Ha a GS in which WE were not allowed to own gold! I'd tell Unc Paul that we're NOW on the GS as I CAN get rid of my paper for a lump of gold, and as with WWII and Vietnam gold did not curtail deficit spending.

Then the S&L debacle....... again, a half-baked "dereg" that allowed podunk "bankers" to enter commercial banking and waddle around gambling with FDIC backed deposits. Ten years smoldering in plain sight and finally........ ha! The "unexpected" Meltdown.

Then? a balanced budget for five years and comes a campaign, and a pol running on Reagan-revisited w/o the style or eloquence, but giving American children their Holy Grail, a tax cut that was FAR too big, and poorly targeted to boot. GOBS of D E B T. Nor did we need Anti-trust or any other regulation! Now? The Mop Up.

And somewhere out there near the end of the rainbow is Voila!! the ever elusive equilibrium with all those little supply and demand graphs hardly vibrating........ if only we could get it right!

+1 :)

@jack,
Again, love the discussion. Love it. Thanks for engaging.

I don't believe I'm well equipped to dig in on war-as-keynesian-stimulus. My instincts tell me that it's baloney. The very nature of an economy is free, voluntary exchange for the purpose of improving one's standard of living. Being drafted to fight (and die) in a war and calling that "employment" is a tragic redefinition of the term. Our brave men fighting WWII, therefore, were not gainfully employed. It's a great achievement that we've maintained a voluntary army since Vietnam and I pray we never go back to the slavery of a draft. Speaking of which... would you celebrate Slavery as a keynesian stimulus because it employed those people? It's the same moral logic as calling war employment.

On Volcker. Carter appointed him (and Carter was, on-net, a deregulator), but he prevented Volcker from taking the sound-money approach because he didn't want to lose re-election. Carter also instituted pro-cyclical wage/price controls that made matters worse. Check out "The Great Inflation"by Robert Samuelson. He lays out how Reagan's political support for Volker's policy, despite the deep recession it brought about in 1980, allowed for inflation to be checked. At least Carter kept govn't spend/GDP low. That was good. And the negotiation with Sadat was good too. Peace is good. Again, Reagan's deficit spending wasn't good and I don't endorse it. But his steadfast support for Volker was a major act of leadership (as well as confirmation of Austrian economics).

Regarding the "rules". Forget this abstract sports metaphors and look at reality. The real system in play. I think the problem we have, again, isn't the regulation as rules. It's action as rules. The rules go like this: Banks can be poorly run and fail, but if they're big and interconnected, Uncle Sam and the Fed will bail them out. THAT's the operative rule in place. That is the rule of the gain since 1913. That is the foundation of this risky culture. I'm a big advocate of a free banking system where they are run as private businesses and must sink or swim. If a bank goes under, it's capital is liquidated to pay back the depositors. There's great historical precedent for that being the more moral and more stable system in early Scottish banking.

What we have now is not free market banking. It's fascist, cartelized banking. It's a network of banks whose reserves are provided by the central planner/price fixer and then allowed to lend money they don't have and could never repay through a fractional pyramid scheme built on paper reserve notes.

I'm terrified of the inflation potential when that fractional lending kicks back in, given the 8.5TRILLION in reserve lending via open market operations that the Fed has undertaken. Stagflation is looming just over the horizon. We know it can happen and we know why.

So, again, I feel that you are leaning on a false premise. Were credit default swaps largely unregulated? yes. Is banking the most tightly regulated industry this side of medicine? Yes.

Notice Circuit City, the second largest consumer electronics retailer, just went under without a peep from Uncle Sam or the Fed. It's very sad for the 34,000 people, but very instructive for the market of business people running retail stores. Best Buy, I'm certain, is chastened by the failure of Circuit City. These corporate giants are much more vulnerable than you think. Screw up, and you will fail. IBM was the monopoly of computing until Microsoft until Google until someone else. The government doesn't help this. On net, they make it worse (just look at Airbus and the rest of the zoombie companies of Europe).

That is the fear every business needs for TRUE regulation to work: self regulation. The financial system has none of that. We've been bailing out banks since the great depression. I'm advocating truly fair, truly just change.

"Lastly, could it be that we MIGHT run our nation with a balanced budget and money supply managed so tightly that a buck today will be a buck fifty years from today? In theory, maybe and I'd love to see PORK power taken away from Congress and the Admin, but then there is that pesky real world."

What you're describing it the better part of the 1800's and first decade of 1900. It can and should be done that way. Our nation was truly built on it. The two lapses from sound money and fiscal sanity were the war of 1812 and the civil war, both of which were funded by inflation (as all wars tend to be). It all went out the window with Woodrow, the tyrant, Wilson. He is one of the worst presidents this country has ever seen, having cartelized banking by colluding with the titans to create the Fed (a move he immediately regretted, btw) and having gotten us into a war we had no business fighting (WWI). It very possible that there would have been no Hitler or WWII had the US stayed out of WWI. But I digress into quantum speculation...

Nixon is a criminal for (among other things) abandoning the gold standard as well as instituting wage/price controls, though it was the profligacy of his predecessors that led to that run on the dollar. What a nightmare. Today's problems truly date back to that fateful/dreadful decision.

As for WWII and Vietnam not being curtailed... remember that we still had a federal reserve. FDR took the nation off the gold standard in effect by changing the ratio. LBJ's insanity and borrowing put pressure on our fiscal soundness.

But notice, with a gold standard, that "run on the dollar" happened. That was the regulation of market forces at work. That was the world indicating to the US government "we don't trust your handling of your books". It's only because the US had the biggest guns and was the de-facto world standard that Nixon could even have done what he did.

Getting back to your cause-and-effect claims about de-regulation and it's resulting calamity...

You should think of our current banking system/bankers as caged animals. They've been protected from the natural world that most other businesses (like Circuit City or Apple or any REAL business) must grow up in. A world that teaches them the importance of prudence for survival. That protection is the Fed, the FDIC and the false halo of accountability of the SEC (who looked into Madoff 8 times without finding anything, thereby signaling to the market that all was fine).

Every so often, these caged animals are let out into a small section of the wild because of tiny reduction in regulation of a particular area (we've never had broad "deregulation") or because of a new "innovation" in finance. Having been babied and coddled and protected their whole lives, these guys lack the basic instincts to keep them safe. They get mauled to death. Except not death. Because as soon as they get in trouble, the Zoo keepers swoop back in and save most of them, re-inforcing their false sense of security. Rinse and repeat.

The free banks of Scotland didn't live in this Zoo. They lived in the real world. If they screwed up or took outsized risks, they failed. They were liquidated. Reputation and fear kept them from screwing around with their depositors security. Our system is the opposite.

I think you and I share the same goals. We want a sane, trustworthy system. But collusion, cartelization and protectionism don't give us that. Freedom to succeed AND FAIL is the only system that works.

As for the 1990's... Remember, again, that Clinton was a HUGE deregulator and managed to keep government spending in check thanks to balanced budgets sent his way by the conservative congress. The REAL conservative congress. Greenspan called Clinton "the greatest republican president". Not that I'm endorsing "republicanism". But that fiscal sanity of the 1990's wasn't all Clinton. The congress writes the budget. Clinton just had the smarts to be pro-balanced budget and pro-free trade. No small or easy feat for a modern Democrat. I hope Obama is that smart. I pray that he is.

John, Only three generations ago? My, you still are puppy. As for "soft Facism" strange this is coming from an "exItalian" whose brothers created Mussolini (everyone's favorite Dictator) and placed him on the pinnacle of power forcing us to create a military organization to crush him and throw the whole Fascist apparatus onto the trash heap of history (was this a form of "Welfarism" too?".

Try 18th Century. As for their approval, they would applaud the rise of the Modern Industrial State. It's far superior to opening Frontiers, where everyone is at the mercy of the terrain, weather, crop failures, lack of resources, lack of transportation networks, lack of decent Medical care - childbirth - diesease - injury, lack of clean water, lack of clothing, lack of shelter, lack of educational oppurtunities, and Oh, did I mention, the constant daily fear and reality of losing one's scalp to maurading "savages" or bands of mauraders roaming freely across the frontiers.

Now that was Free Market Economy at its best and you want to return to it?

Since you've come so late, I guess you're not familiar with the free and open Banking system that once prevailed prior to the establishment of a National Bank and later the Treasury and Federal Reserve. Which,in the early days, resulted in numerous Bank failures, frauds, Crashes, and Depressions. Thank God, for the establishment of an "Oligarchic Banking System". At least there's a sembelance of control now.

Open Freemarket Economies? I don't think so!

@Neilehat,

"As for "soft Facism" strange this is coming from an "exItalian" whose brothers created Mussolini (everyone's favorite Dictator)"

This is one of the weirdest strawman arguments I've seen in a while, I must say. Also, I didn't realize that Mussolini was the creation of some eugenics project. I thought he was born to a single mother, like everyone else. You learn something new everyday I guess.

So you're insinuating that I have less credibility in identifying state/corporate collusion (aka, fascist economic planning) because my family line traces back to Italy? I suppose I'm just a dirty immigrant to you, then, right? I'm not a natural citizen because my great grandparents were born abroad? (now I'm arguing a strawman, but you get my stylized point).

With all due respect, who has "gone off the deep end" exactly? I don't have any brothers. I have one sister. I'm not sure you and I can relate in this thread, because you seem intent on clumping together entire genetic lines into bizarre constructs, and I consider each individual person to have their own unique mind and free will.

I wish you well, sir, but I don't think you're interested in discussion. Just mildly bigoted attacks and genealogical pissing contests. Have a great day!

Judge Posner hit the nail on the head in identifying the key problem in a deflationary spiral as wage/price inflexibility. I completely agree with the scenario that he lays out IF wages are as inflexible as he says. Prices now seem to be falling more fluidly than in other post-war recessions.

I would argue that instead of re-inflating the economy to dupe workers into accepting lower real wages, which will also induce more bubbles and other distortions later, we should educate workers and businesspeople in the differences between nominal and real factors in the economy. People will catch on in the end, but there is no question that unnecessary upheavals can and will occur due to confusions brought on by fluctuations in the supply of money.

Education is the answer to the problem of wage inflexibility, not creating even more problems in the long-run to alleviate short-run adjustments, some of which are necessary due to the overinvestments in the past.

John, don't go away mad. I'm just trying to get the facts straight. Both personally and Economically. And as we have found out, Free Market Economies clearly have problems.

For your reading pleasure, may I suggest, "American Capitalism", "The Affluent Society" and "The New Industrial State" by J.K. Galbraith.

Chris: There seems still some growth in per capita AVERAGE income, but whether there should be is another question. It's the FLAT median income that is and has been a major problem for much of the last 25 years. As for downward flexibility it looks like a hll of a task to get CEO's and management of even the broke companies to give up major bonuses and perks, and I suspect an even bigger one to get those of flat median wages to give up medical care and food.

http://www.dol.state.ne.us/nwd/workserv/jobcareer/es/econind/pcgraphs.htm

I'm a big fan of education and think we've done too little in that arena. But! Were our entire nation packing BA and BS's would we not need about the same number of cab drivers, Walmart "associates" etc? Again, I suggest that as productivity has doubled in the same time frame that median earners gained not at all we've forgotten that a "rising tide MUST lift all the boats" otherwise our harbor will be filled with a lot sunk boats.

So, if wage deflation is "the answer" shall we begin the top? Say rolling back CEO gleanings from 400 times worker pay to the 50 times that it was in 1980? with corresponding declines in upper management?

@John: Well, ........ not to be snippy but my experience with learning a little bit about economics is that it's not, in general, a very instinctual business. Also I'm glad that you've one of Samuelson's books as I think he's still one of the better teachers of the basic principles.

On the "war issue" you still seem to have trouble separating out the Keynesian spurring effect from the overall issue of war itself.

Let's try something here: Barack and many others think it's an extremely desirable goal for America to invest in a New Energy future, and proposes to get there, in part, by government intervention and incentives. In the course of doing so, surely there will be a positive Keynesian spurring that would not take place without such government spending.

I don't like war much, but surely of all the wars America has been in none were less avoidable than WWII and one assumes that those in power at the time tried not to spend much more than it would take to ensure a win with the least loss of life and destruction of our nation. So hard to argue that it was not "good works". The point however is that it WAS for that time the ultimate in Keynesian spurring, we ran massive deficits while hiring and feeding those who had been nearly starving in our streets for the previous decade.

OBVIOUSLY, such government spending is not sustainable, but the problems after the war was NOT deflation, falling wages, high unemployment or starvation.

Again......... I'll sort of wimp out on going over the Nixon-Ford-Carter-Reagan era for the previously mentioned Hogan's Goat effect... ie it's difficult to tell who was the "good guy" after a barroom brawl.

Hmmm As for a "deregulated bank" model? during the early days of The Mess, I got a number of calls asking about the FDIC limits on bank accounts. As you can imagine even small biz often has $100k in a payroll account, and fortunately they quickly raised the amount that would be insured. I think you can answer this one by answering the following question:

Would you hand ANY of these WS slicksters even ONE of your hard-earneds were there not FDIC, SLIC, et al? Perhaps speculating on what those who called me about the safety of their bank accounts had I told them that FDIC was no longer in effect or was broke would help too.

And whoops! You say "we don't have free market banking" but even a cursory look into The Mess shows that those non-banks playing by non-rules are the ones tanking the system. Must have been fun for a while! to lend your cash out for 6% mortgages at 30 TIMES the cash actually on hand! Nasty biz though "deleveraging!"

Inflation? probably a given IF we and the world ARE able to make the crossing, but NOT because of "fractional lending" as "WE" are going back to more tried and true leveraging ratios and borrowers having at least a dab of skin in the game. Funny thing eh? a batch of "conservatives" flooding the world with "two dollar bills".

Indeed! All whose sanity is not corrupted by greed have the goals of a sane system, and a ballgame played by the rules with honest and attentive umpires. Yup.

Hmmm "The Clinton era". Let me disclose that the last and only Pres vote I gave to a Repub was for Jerry Ford who probably along with Ike was the only decent post-war Repub.

Still I'd say some of the seeds of destruction were sown during the mighty Clinton era when the stock market bubble was financing what wages were not for many Americans. Too, the home equity game had already begun with FAR looser restrictions on "cash back home refi's" that tended to corrupt "appraisers" and the system. The mysterious term "derivatives" was already loose and in common use and the amount of lucre given to the Clintons by the "banking" itself was enough to make one think of some sort of auditing of what was being bought.

As for Barack and the gang...... this will likely be a bumpy ride for those overly imbued with Libertarian ideals and visions of Ron Paul dancing atop a newly resurrected "gold standard" as the guy is a street level pragmatist who thinks in terms of families having food on their table and most likely finds the soaring wage/wealth inequality of what's left of America as undesirable and destructive as myself. Truth is in a $14 trillion economy there IS still enough to run the show, but not in the manner of the last couple of decades. CHANGE! indeed will be the touchstone of the next few years and not a minute to soon in my view.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

@jack,
Again, love the discussion. Love it. Thanks for engaging.

I don't believe I'm well equipped to dig in on war-as-keynesian-stimulus. My instincts tell me that it's baloney. The very nature of an economy is free, voluntary exchange for the purpose of improving one's standard of living. Being drafted to fight (and die) in a war and calling that "employment" is a tragic redefinition of the term. Our brave men fighting WWII, therefore, were not gainfully employed. It's a great achievement that we've maintained a voluntary army since Vietnam and I pray we never go back to the slavery of a draft. Speaking of which... would you celebrate Slavery as a keynesian stimulus because it employed those people? It's the same moral logic as calling war employment.

On Volcker. Carter appointed him (and Carter was, on-net, a deregulator), but he prevented Volcker from taking the sound-money approach because he didn't want to lose re-election. Carter also instituted pro-cyclical wage/price controls that made matters worse. Check out "The Great Inflation"by Robert Samuelson. He lays out how Reagan's political support for Volker's policy, despite the deep recession it brought about in 1980, allowed for inflation to be checked. At least Carter kept govn't spend/GDP low. That was good. And the negotiation with Sadat was good too. Peace is good. Again, Reagan's deficit spending wasn't good and I don't endorse it. But his steadfast support for Volker was a major act of leadership (as well as confirmation of Austrian economics).

Regarding the "rules". Forget this abstract sports metaphors and look at reality. The real system in play. I think the problem we have, again, isn't the regulation as rules. It's action as rules. The rules go like this: Banks can be poorly run and fail, but if they're big and interconnected, Uncle Sam and the Fed will bail them out. THAT's the operative rule in place. That is the rule of the gain since 1913. That is the foundation of this risky culture. I'm a big advocate of a free banking system where they are run as private businesses and must sink or swim. If a bank goes under, it's capital is liquidated to pay back the depositors. There's great historical precedent for that being the more moral and more stable system in early Scottish banking.

What we have now is not free market banking. It's fascist, cartelized banking. It's a network of banks whose reserves are provided by the central planner/price fixer and then allowed to lend money they don't have and could never repay through a fractional pyramid scheme built on paper reserve notes.

I'm terrified of the inflation potential when that fractional lending kicks back in, given the 8.5TRILLION in reserve lending via open market operations that the Fed has undertaken. Stagflation is looming just over the horizon. We know it can happen and we know why.

So, again, I feel that you are leaning on a false premise. Were credit default swaps largely unregulated? yes. Is banking the most tightly regulated industry this side of medicine? Yes.

Notice Circuit City, the second largest consumer electronics retailer, just went under without a peep from Uncle Sam or the Fed. It's very sad for the 34,000 people, but very instructive for the market of business people running retail stores. Best Buy, I'm certain, is chastened by the failure of Circuit City. These corporate giants are much more vulnerable than you think. Screw up, and you will fail. IBM was the monopoly of computing until Microsoft until Google until someone else. The government doesn't help this. On net, they make it worse (just look at Airbus and the rest of the zoombie companies of Europe).

That is the fear every business needs for TRUE regulation to work: self regulation. The financial system has none of that. We've been bailing out banks since the great depression. I'm advocating truly fair, truly just change.

"Lastly, could it be that we MIGHT run our nation with a balanced budget and money supply managed so tightly that a buck today will be a buck fifty years from today? In theory, maybe and I'd love to see PORK power taken away from Congress and the Admin, but then there is that pesky real world."

What you're describing it the better part of the 1800's and first decade of 1900. It can and should be done that way. Our nation was truly built on it. The two lapses from sound money and fiscal sanity were the war of 1812 and the civil war, both of which were funded by inflation (as all wars tend to be). It all went out the window with Woodrow, the tyrant, Wilson. He is one of the worst presidents this country has ever seen, having cartelized banking by colluding with the titans to create the Fed (a move he immediately regretted, btw) and having gotten us into a war we had no business fighting (WWI). It very possible that there would have been no Hitler or WWII had the US stayed out of WWI. But I digress into quantum speculation...

Nixon is a criminal for (among other things) abandoning the gold standard as well as instituting wage/price controls, though it was the profligacy of his predecessors that led to that run on the dollar. What a nightmare. Today's problems truly date back to that fateful/dreadful decision.

As for WWII and Vietnam not being curtailed... remember that we still had a federal reserve. FDR took the nation off the gold standard in effect by changing the ratio. LBJ's insanity and borrowing put pressure on our fiscal soundness.

But notice, with a gold standard, that "run on the dollar" happened. That was the regulation of market forces at work. That was the world indicating to the US government "we don't trust your handling of your books". It's only because the US had the biggest guns and was the de-facto world standard that Nixon could even have done what he did.

Getting back to your cause-and-effect claims about de-regulation and it's resulting calamity...

You should think of our current banking system/bankers as caged animals. They've been protected from the natural world that most other businesses (like Circuit City or Apple or any REAL business) must grow up in. A world that teaches them the importance of prudence for survival. That protection is the Fed, the FDIC and the false halo of accountability of the SEC (who looked into Madoff 8 times without finding anything, thereby signaling to the market that all was fine).

Every so often, these caged animals are let out into a small section of the wild because of tiny reduction in regulation of a particular area (we've never had broad "deregulation") or because of a new "innovation" in finance. Having been babied and coddled and protected their whole lives, these guys lack the basic instincts to keep them safe. They get mauled to death. Except not death. Because as soon as they get in trouble, the Zoo keepers swoop back in and save most of them, re-inforcing their false sense of security. Rinse and repeat.

The free banks of Scotland didn't live in this Zoo. They lived in the real world. If they screwed up or took outsized risks, they failed. They were liquidated. Reputation and fear kept them from screwing around with their depositors security. Our system is the opposite.

I think you and I share the same goals. We want a sane, trustworthy system. But collusion, cartelization and protectionism don't give us that. Freedom to succeed AND FAIL is the only system that works.

As for the 1990's... Remember, again, that Clinton was a HUGE deregulator and managed to keep government spending in check thanks to balanced budgets sent his way by the conservative congress. The REAL conservative congress. Greenspan called Clinton "the greatest republican president". Not that I'm endorsing "republicanism". But that fiscal sanity of the 1990's wasn't all Clinton. The congress writes the budget. Clinton just had the smarts to be pro-balanced budget and pro-free trade. No small or easy feat for a modern Democrat. I hope Obama is that smart. I pray that he is.

I think you are thinking like sukrat, but I think you should cover the other side of the topic in the post too...

"Barack and many others think it's an extremely desirable goal for America to invest in a New Energy future, and proposes to get there, in part, by government intervention and incentives. In the course of doing so, surely there will be a positive Keynesian spurring that would not take place without such government spending."

I disagree. Again, with all due respect. The technologies and companies that the government bureaucrats pick will be recieving money and endorsement that would otherwise go to a different company or technology. It is a diversion of resources from one group to another, not the creation of new/more activity.

I'll give you an anecdotal example. I live in Jersey. On a flight to LA I met a guy whose company does solar panel installation. I said "well, you're part of the 'green energy revolution'. He proceeded to tell me, answering my questions, that photovoltaic panel installation costs so much that it take 25 to 30 years for the energy savings to pay off the "investment". I asked "why the hell would anyone dump 25 years worth of energy costs upfront into that? Who even stays in their house that long?".

He had one word: government subsidies. I told him that I consider all subsidies to be immoral theft and want them abolished (I was nice about it, though, I promise). He then said that I was probably right because it was the subsidies that principally lead him into Solar vs. Geothermal or other technologies.

Now think about that. The state picked a winner based on some unknown criteria (likely just lobbying) and that it won't likely revisit (just look at ethanol). The result of the state's pick is a diversion of resources and people from other potentially more fruitful technologies.

Had that NJ solar panel man gone into another technology, his investment would have generated "multipliers" for a different set of suppliers and people. But he went with the state's people instead. And if he can't find investors for his effort, that tells you something about the viability of the technology. That the state needed to step in and invest is, in fact, an indication that it's probably NOT the right choice. That it's NOT a sustainable "investment".

And let's not go down the road of "but the government NEEDS to help get these industries started". Bill Gates is pumping huge investment dollars into fuel-producing algae. Free enterprise takes risks all the time. We don't need the government to do it.

Government sudsidies are theft. They are coercive redistribution of the same dollars, NOT the creation of new dollars.

As for the war-as-stimulus, I will continue my study and see what I think at a later date. My core principles, as well as the timing of the real recovery of the economy in the 1950's seem to tell me that it was the repeal of the New Deals more onerous and tyrannical acronyms like the NRA that enabled the recovery. Fighting the war and winning probably did restore many American's sense of hope and pride, which probably was the best outcome of the war. I just don't buy that destruction is good for the economy. It may stoke the base patriotism, but it's still horrible.

I'd never say that WWII was avoidable taken on its own. The US was attacked. Our brave, greatest generation saved the world. No doubt.

But, taken in context of WWI and the US involvement as well as the hideous retribution post Versailles of Germany and the immoral and criminal civilian starvation of the German citizenry by British blockade, I think it's very possible that there wouldn't have been second round of the great war without those problems from the first. But we'll never know. So I'll move on...

"As for a "deregulated bank" model... even a cursory look into The Mess shows that those non-banks playing by non-rules are the ones tanking the system."

How, then, do you explain the fact that the european banks got themselves in the same trouble with bad investment and dangerously high leverage?

What I'm talking about is a structure that informs the culture. If you kill the FDIC today, obviously it would have some short term catastrophe. I'm not a fan of fractional banking in general, which is the REAL root cause of this. 100% reserves, reducing banks to simple money warehouses that take a fee for storage and protection of the inventory, seems like one of the best ways to kill the business cycle in concert with an end to monetary fluctuation. You'd have no need for these organizations providing fake security.

Our system has transferred the regulatory power from the reputation system and fear of failure in the free market, to an inherently incapable set of insurance institutions. What about the fact that the FDIC is just another fractional scheme? If every bank that's truly insolvent went under right now, I doubt the FDIC could meet it's obligations. Think they could make good on Bank of America and Citigroup going belly up? I don't think so.

Get rid of all this phony insurance and protection and allow a new class of institutions with the prudence that failure brings to emerge, as will independent third parties that will provide reputation information (beyond the stock market). Consumer reports does better work than just about any government agency. Most of business doesn't have this ludicrous guarantee of protection. And yet people still start businesses.

Hmmm "The Clinton era". Let me disclose that the last and only Pres vote I gave to a Repub was for Jerry Ford who probably along with Ike was the only decent post-war Repub.

probably true. But, again, I do think that Reagan's work with Volker was a major achievement in real effect and in courageous leadership.

Still I'd say some of the seeds of destruction were sown during the mighty Clinton era when the stock market bubble was financing what wages were not for many Americans. Too, the home equity game had already begun with FAR looser restrictions on "cash back home refi's" that tended to corrupt "appraisers" and the system. The mysterious term "derivatives" was already loose and in common use and the amount of lucre given to the Clintons by the "banking" itself was enough to make one think of some sort of auditing of what was being bought.

I agree 100%. 1993 CRA mandatory quotas + 1997 mortgage tax exemption changes seem to be root instigators of the housing bubble. 1% rates for years + 1 trillion in subprime mortgage buying by the GSE's, seeking to restore congress's favor after their accounting lies took care of the rest. Absent those 4 government policies, I don't see this crisis happening, even with the unregulated CDS market and shadow banking system. It was the bubble that perverted the market and the incentives and psychology at play in it. At least Clinton had the guts to raise taxes and face the small-d democratic backlash. Bush just borrowed and printed his money, which is MUCH more insidious and immoral.

"As for Barack and the gang...... this will likely be a bumpy ride for those overly imbued with Libertarian ideals and visions of Ron Paul dancing atop a newly resurrected "gold standard" as the guy is a street level pragmatist who thinks in terms of families having food on their table and most likely finds the soaring wage/wealth inequality of what's left of America as undesirable and destructive as myself."

True. But I do have respect for President Obama and feel patriotic for the achievement of our country in elected the first black president so soon after Dr. King's era. I wish him nothing but god's blessings and success in his goals insofar as they involve helping people for REAL.

Bush is a failure. tax-cut and spend even more is a failure. I don't think tax and spend will succeed (just look at California and New Jersey, my home). But we'll see. Ron Paul is a true, brave patriot and one of the only honest pols in DC. I stand by that 100%.

Since I'm not running for office, I prefer to have ideological positions built on core moral principles. I see no reason to celebrate "pragmatism" when that pragmatism amid a broken system seems to inevitably involve the state doing more with my money that I earned through work and they stole through coercion.

As for your earlier discussion about wage rates and inequality, I think it's reasonable to say that, Despite our leadership's immoral, inflationary monetary and fiscal policies, the quality and availability of consumer goods has still exploded. I hate to say this, but our very definition of poverty in this country really needs some global context. When the average american poor person is overweight, has a residence, a car, and two TV sets I think our social safety net is pretty darn generous. Not to take away from their trouble. Millions of Americans are hurting. But human perspective is important.

The hardest part for people with the drive to climb up the ladder is that the system is built against them. Inflation devalues the income. The transition off the public dole includes deep potholes that disincentivize progress by cutting off benefits at a rate faster than promotional salaries grow. Minimum wages price many unskilled, uneducated workers out of the market, leaving them little choice but the public dole. I met a young, poor girl from Newark with 3 kids who had been awakened by Ron Paul's campaign and is now putting herself through school. She's far more credible to tell this story than I am, but she'd tell it the exact same way.

The state has taxed away the funding that would being going to local organizations and churches whose incentives are to help people become self-reliant. Instead we have a massive state and federal system of bureaucratic handouts and "tax credits". It's not working. Our most needy are being let down and more funding isn't the answer, as Newark's failed public school system demonstrates. It's all about the systematic incentives.

Again, sorry judge. We are staying on topic though! It's better than the comments section in your average Mac vs. PC "debate". And thanks again, Jack, for the back and forth. Very enjoyable.

ps. Jack, why do you include my entire post in your reply?

@neilehat,

Hey, no hard feelings. Listen, I just want what's best for the weakest among us. My reading of statism and it's long history is that it has always been a tool of the incumbents of power. And I think it's very clear that "protectionism", especially when it's coercively derived from the state, has impoverished the very people it claims to "protect". Look at Michigan. How have those worker been "protected" by work rules that prevent multi-disciplinary learning and thinking? How have "job banks" that kept people paid and idol instead of thinking and growing protected their future?

There will never be a perfect system where everyone lives just the way they dream of because human being are not all equal in their abilities and drive. I'll leave that for nirvana. The best we can hope for is equality under the law and equal opportunity to pursue our dreams. Coercion need not and should not be part of that. Mine is a morally based approach. Not a utilitarian "free markets work best so we should worship them".

You can't protect people from failure, crops or otherwise. Failure teaches. Kids learn not to touch the stove after they get burned. Keeping them away from the stove for too long just means they're more likely to burn down the whole house when they first try to light the pilot.

It's all about emergent order, my friend. Of human action, but not human design. Check out this story on the Santiago public transit system to see just how destructive centrally planned, coerced services can be for the poor. Google "public transit econtalk munger".

Enjoy the coronation, I mean, inauguration. ;) I kid. Well. Sorta.

I think you are thinking like sukrat, but I think you should cover the other side of the topic in the post too...

Thanks for your reply to my comments, Jack. Perhaps, I should have chosen my words more carefully when I referred to "education." I did not mean improving workers' schooling in order to improve their productivity, thereby enabling them to earn a higher real wage. Even though that strategy might very well be beneficial to all, I was not discussing that issue at this time.

What I meant was making people more aware of the difference between nominal and real wages, so that people realize that it is entirely possible for real wages to remain the same or even increase as their nominal wages fall. If people were more aware of this possibility, then they would be more likely to renegotiate wages and not feel resentful or become less productive in times of deflation as Judge Posner suggested might be a danger in such an environment. I think businesses have caught on to the need to reduce their prices so that prices have become more flexible than in the past.

I agree with you that it is entirely possible that executives are overpaid. It might very well be the case that as the recession rolls on that too generous or overly-managed firms fail in higher numbers or are forced to make significant changes in their pay and hiring structure. I am inclined to agree that executives are overpaid, but the problem, as I am sure you know, is that no one observer can make such determinations. It is the pooled knowledge that comes to the forefront as the market forces people to re-evaluate their business practices. This is why I oppose bailouts since such policies lock such inefficiencies and inequities into place.

On the issue of why the real median wage has stagnated over the past few decades, I think the problem relates to your reply to my post this week. From what I know about the issue, which is limited, those with more education (in the formal sense) have received increases in real income over this time period. Those with less education and fewer skills have seen their wages stagnate. Teens and women entering the workforce and more immigration may have contributed to a greater supply of less skilled workers or part-time workers driving down the wages of people in these categories.

The issues you raise here are troubling from a political and social perspective that transcend the current economic downturn. There is the question, as you raise it, of what to do with Walmart Associates and other people who do valuable work but do not receive high wages (even in a real sense in an expanding economy). One tack we could take on workers in such positions is to view them as a stepping stone to higher wage jobs with more responsibilities over time. That model holds for many, but not all. There are people who will never rise much above low wage, low status positions. This lack of ability to move upward on the status/income ladder might be due to lack of intelligence, lack of drive, a different leisure/labor trade-off, physical limitations, plentiful supplies of people willing to do certain kinds of work at lower wages, and other factors, some of which are involuntary.

There are many different situations that cannot be adequately dealt with by any one policy. But one case stands out to me as very disturbing. I joined a fitness center at a church in Atlanta where I am from originally. There was an older man who was the janitor who kept the gym and locker room spotless. The entire fitness center was sparkling clean and smelled fresh. He was constantly moving about to clean or tidy up the equipment. He was always pleasant to the patrons. Then one day, he was not there. After several days of not seeing him, I asked about him and the person at the front desk said that he had retired. Within a few weeks, the place was a smelly mess. Even though the architecture, the equipment, the cooling and heating system were all the same and top quality, the feel, sight and smell of the entire building was significantly diminished without this man's presence--not only due to his diligence in cleaning but also his pleasant disposition. I doubt that he earned that much money, but his contribution to the fitness center and many people's lives who encountered him were as rich, or more so, than other people who did their part in providing the exercise services to their patrons. My fear is that he was not as well remunerated as others who could negotiate for better pay. I suspect that his pay did not justly compensate him for his contribution to other people's lives. There is something missing in our way of rewarding people, but I do not have a proposal to improve on the market system. But I do agree that it has real flaws.

I think you are thinking like sukrat, but I think you should cover the other side of the topic in the post too...

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Chris: I'm not sure "what to do" about CEO's and upper management carving off too much of the pie. In theory "stockholders" would have a say but those are now frat bros et al running pension plans and mutual funds. Then it appears that their bloated gleanings do not tank an otherwise ongoing biz as there able to nibble a bit off every employee instead of the profits. In 1980 CEO pay was about 60 times worker pay (higher by far than in other nations, where for example Volvo was built on the concept of no one earning more than 10 times that of the least; today's CEO's take 400 times and propagate their scam by having "outside" salary boards, ha! who look at the other bloated packages to justify the next one.

As for median wages it's likely true that formal education is part of the picture, a close look at wages shows quite a few in the 100k range, then a dip at 200 or so then more in the much higher range. But! regardless of the reason, in the macro sense if median wages remain flat, median homes have to remain affordable to the median, as does med care and all else. ie It won't work. The rising tide MUST raise all the boats or the rising tide will no longer rise.

You are exactly right about the angel of a janitor. It's an accepted economic principle that, alone, generic labor and commodities have no market power. But w/o the book you can hear it in our language. "What are THEY paying........" results in an answer that is low and typically uniform, while "We sat down and hammered out a compensation package" usually results in country club memberships.

While you favor not tinkering with "the market" the choices are collective bargaining, and/or min wages on which one can maintain some std of living.

Consider....... wages too low to live on require someone to fill the gap and thus is a distortion to the economy in making a subsidy to the employer, even one as fat as Walmart that can use their ill-gained power to further kill off smaller local competitors.

Today we've an alphabet of low income subsidies from food stamps to housing, to med care, but to an HONEST economist it would be far better that the income of the least paid (other than rank newbies) cover those basic needs. The employee would be best served by deploying his limited dollars himself, and those employing would bear the costs of the human capital as they should. If the biz model doesn't work........ hey the guy who owns your gym can clean it up himself!

We're approaching Mexico in wage-wealth inequality, which doesn't seem to be mentioned much these days, but in years gone by that rich/poor with no middle clasess was ridiculed as a model that could not possibly work. So it has become here, no $7.25 field hand can afford med care while insurance CEO's are creaming $10 million off the top no matter what sort of scheme is cooked up.

John: Ultimately, if you want to understand more about what is or should be going on in economics you'll have to take at least a the two intro classes and duke it out with the instructor, Samuelson and others who 'wrote the book'.

But to your points. I'd agree that government not "pick winners" but that does not mean they can not play a meaningful role.

In your story they subsidized solar which gave them a lot of solar, perhaps at the expense of geothermal in some regions. But! as you point out the home owner will NOT pay 25 years of utility bills upfront even though someone may have free energy at that home for the subsequent 25 years. The more common solar installs become the cheaper they become with shorter paybacks. And, of course, today's homeowner is not paying all the external costs of just firing up another natural gas or coal burning turbine.

In short there is a "WE" in terms of community in these decisions, not just "the market" and a market that does NOT reflect all externalities and values NON-renewables, typically, at extraction costs.

"Barack and many others think it's an extremely desirable goal for America to invest in a New Energy future, and proposes to get there, in part, by government intervention and incentives. In the course of doing so, surely there will be a positive Keynesian spurring that would not take place without such government spending."

I disagree. Again, with all due respect. The technologies and companies that the government bureaucrats pick will be recieving money and endorsement that would otherwise go to a different company or technology. It is a diversion of resources from one group to another, not the creation of new/more activity.

And let me give you an anecdotal example. I'm close to the housing biz, one where builders and all really SEE themselves as you do....... independent capitalists who don't "need" government.......... and all that? Well, NONE of em are doing a proper job in energy conservation, UNTIL there is either A. government mandate B. government subsidy to cover the costs of the upgrade, and even then they're slow unless they profit from the subsidy vs the improvement costs.

Customers aren't aware enough, or know THEY are going to move before the improvements pay THEM, and the builder has enough problems w/o attempting to educate the public. How does one crack this w/o government leadership? ie...... human intelligence as compared to the rearward looking "market" intelligence?

As for "My core principles, as well as the timing of the real recovery of the economy in the 1950's seem to tell me that it was the repeal of the New Deals more onerous and tyrannical acronyms like the NRA that enabled the recovery."

jjjjjjjjj Again the post-WWII era was so unique that it's difficult to make generalities. For starters, of course, the rest of the industrial nations lay in complete waste while our own was not only humming but was, for the era, trim and efficient due to the shortage of manpower and need for tremendous war time production. And....... the New Deal work rules carried on, though obviously there was no need for WPA projects.

"When the average american poor person is overweight, has a residence, a car, and two TV sets........:

JJJJJJJJJ here and from here you kinda slip into talk radio ideology which doesn't mix very well with economics.

Truth is the poor tend to be more overweight due to cheap diets being fattening diets and those with two crappy jobs grabbing a bite at the fast food places where crappy pay requires a whole host of government subsidies so they aren't starving on the streets or stealing to make ends meet as well. "TV's" don't cost much, it's the arithmetic of trying to pay for health care out of miserable pay that simply does NOT work.

Well you seem to have enough interest that I'd urge you to pursue more formal education, and hey! if you're in media production we NEED more who can relate economic realities in terms that a TV audience can understand.

Sorry bout reposting.......... I'd put the post in the frame for ref and pushed the post before deleting it! Jack

I think you are thinking like sukrat, but I think you should cover the other side of the topic in the post too...

@Jack,
The more common solar installs become the cheaper they become with shorter paybacks. And, of course, today's homeowner is not paying all the external costs of just firing up another natural gas or coal burning turbine.

In short there is a "WE" in terms of community in these decisions, not just "the market" and a market that does NOT reflect all externalities and values NON-renewables, typically, at extraction costs.

I think you're missing my point. For starters, the definition of "community" starts to break pretty darn fast once you move beyond your own town or neigborhood. I live in NJ, but I don't believe that you can call the entire state a "community" is any sense that has real merit.

Sure, solar MAY eventually achieve scale and viability, but if it does so at the expense of alternatives because it was given the coercive benefit of a subsidy, there's no reason to believe that it was the best technological outcome. It is most likely not. What IS virtually assured is that it was the technology with the most effective lobby. Again, see ethanol.

That my state government has chosen to subsidize solar does not reflect a community choice. There was no referendum. And even if their were, a major rule would not make the coercive transfer of resources to solar right or moral. It would just be mob rule.

Nonetheless, "we" didn't make this decision. State agents made it.

"And let me give you an anecdotal example. I'm close to the housing biz, one where builders and all really SEE themselves as you do....... independent capitalists who don't "need" government.......... and all that? Well, NONE of em are doing a proper job in energy conservation, UNTIL there is either A. government mandate B. government subsidy to cover the costs of the upgrade, and even then they're slow unless they profit from the subsidy vs the improvement costs.

Customers aren't aware enough, or know THEY are going to move before the improvements pay THEM, and the builder has enough problems w/o attempting to educate the public. How does one crack this w/o government leadership? ie...... human intelligence as compared to the rearward looking "market" intelligence?"

There's many many problems with this anecdote. For starters, the housing industry is an incredibly powerful political force and an incredibly subsidized and hyper-regulated industry. The city/state and federal government are crawling all over housing from zoning laws to building codes to ordinances on the local side to the mess of social engineering, GSEs, tax incentives and outright subsidies on the financing side. If contractors think they are "independent capitalists" that's simply delusional.

The second problem is your idea of "proper energy conservation". What is "proper"? At what cost? Who decides? This is clearly a subjective notion. There are tradeoffs that must be made that have real costs. Those costs are a diversion of resources from somewhere else. How do you know that the costs of externalities isn't already more than baked into the chain? It may already be too high. Or too low. You can never know when these costs are mandated coercively by the state.

Builders should be free to build the house and sell it with full disclosure. If the buyers want more energy efficiency, they will create a demand that the builders will respond to, just as demand for the prius drove Toyota to push up production of the hybrid (a choice they may now have found to be a malinvestment during a fake oil price boom).

There is no moral or practical reason to believe that state officials know the "proper" energy conservation price any more than they've known any prior price. Price, wage and rent controls are an unequivocal, proven failure. The push up the cost for everyone but the lucky recipients of the privileges.
As for customers being aware or moving without making the improvements... I find this elitist. It assumes that government agents know better than the people and should spend the people's money for them by forcing the prices to go.

Imagine a mandate for solar installation in all new buildings. It would surely push up the cost. If it's subsidized, it would drive up taxes, socializing the cost, which is even worse. Imagine, reasonably, that a better technology emerges before the return-on-investment has been made. The mandate would (and does) amount to an outright destruction of resources, but a great boom for the favored tech supplier, whose lobbying was no doubt behind the mandated choice.

Sorry. I don't buy it. People have a right to voluntary choice.
"Again the post-WWII era was so unique that it's difficult to make generalities. For starters, of course, the rest of the industrial nations lay in complete waste while our own was not only humming but was, for the era, trim and efficient due to the shortage of manpower and need for tremendous war time production. And....... the New Deal work rules carried on, though obviously there was no need for WPA projects."
Fair enough, though not a real rebuttal. I will have to plead relative ignorance and move on.

"here and from here you kinda slip into talk radio ideology which doesn't mix very well with economics.
Truth is the poor tend to be more overweight due to cheap diets being fattening diets and those with two crappy jobs grabbing a bite at the fast food places where crappy pay requires a whole host of government subsidies so they aren't starving on the streets or stealing to make ends meet as well. "TV's" don't cost much, it's the arithmetic of trying to pay for health care out of miserable pay that simply does NOT work."

I'll accept that criticism. It's a controversial and inflammatory statement. I was just trying to stir the pot a bit. I was quoting an international economist who made this very observation, but whose name I can't recall. I think I heard it on the economist podcast. I still think that one should occasionally step back and examine the greater context. But I don't want to come across insensitive to suffering. I'm not. I'm deeply concerned with the most vulnerable in our society. They are my PRIMARY concern, in fact. The incumbents and fat cats have nothing to worry about.

Well you seem to have enough interest that I'd urge you to pursue more formal education, and hey! if you're in media production we NEED more who can relate economic realities in terms that a TV audience can understand.

It is my intention to continue studying as much as possible and turn my production skills towards popular education of these principles. I can get pretty far in my own reading and informal work, I feel, and I do intend to understand all sides. So far, my reading of Keynes and the arguments put forward by his adherents like Paul Krugman isn't good. It seems like bullsh1t.

The fact that just yesterday Krugman claimed that "unemployment above 4.8% is deflationary" on Bloomberg's on-the-economy demonstrates that he's selling snake oil. It seems pretty clear that the stagflation of the 1970's destroyed the keynesian theory of employment and inflation/deflation.

I am very impressed by the Misesian/Austrian explanation of inflation and the business cycle, especially as laid out in Rothbards "For a New Liberty". It is clear, complete and moral. It helps that all evidence I can find seems to make it clear that Keynesian stimulus and fine-tuning is a failure. Given how clearly today's crisis confirms the Austrian ideas, it's simply shocking that the mainstream has bought stimulus hook-line-and-sinker.... until you realize that big government will benefit many of the powers at work in pushing these failed ideas. Again, individual incentive are the key, not abstract collective constructs.

I really appreciate the discussion, Jack. I could care less about the two parties. I hate partisan hackery.

While I agree with your goals, Jack, I see collective bargaining and unions as well as minimum wage laws as exacerbating the problem of ratcheting wages up creating the problems that Keynesians are correct to identify as preventing the economy from righting itself in times of deflation.

The concerns you have about total spending in the entire circular flow of the economy should balance out if wages and prices, including interest rates determined by the market, are left free to find their own level. So, chronic underconsumption should not be a problem if the price system is allowed to work. Keynes, and apparently Judge Posner, reject Say's Law. I believe it to be valid if the price system is permitted to bring all the sectors in the economy into balance.

Perhaps a better proposal to deal with the concerns we have over some people being under-served at the bottom of the income ladder is the earned income tax credit that supplements the working poor's income while not tampering with the price system. I think we also need to get away from showing respect and honor only to the "movers and shakers" who strut about more effectively than others who do equally valuable work (in the overall scheme of things) that the market may not reward as effectively. Anyone who does honest work should be appreciated for their contributions regardless of the price of their work. Status and the price one receives for his product or labor should be decoupled. Price is partly happenstance as Frank Knight argued in his book, *The Ethics of Competition.* We should not confuse the function of price to coordinate people and resources with merit, which we continue to do.

Chris sez: "I see collective bargaining and unions as well as minimum wage laws as exacerbating the problem of ratcheting wages up creating the problems that Keynesians are correct to identify as preventing the economy from righting itself in times of deflation."

JJJJJJJ I see this economy as being demand limited, or better, demand strangled, so the Keynesian effort is at great cost to our future budgets trying to put a few bucks in the hands of the consumer; perhaps a third of a trillion/year as they seem to be estimating the time to get $$$ out there. Even min wages increases take some time as their paid weekly, the increased collective bargaining takes even longer, so neither have much of an immediate effect be it positive or negative.

Years ago, perhaps the late 60's we lived in an era of more demand than could be readily supplied, working folks were turning down overtime and job-hopping and new projects were probably slowed due to not being able to fund or staff them. Consider today........ be it car mfgs, computers; almost anything you can name we're WAAAY under capacity; say at 50% of what could be produced in most consumer industries.

Still there is unsatisfied demand, as many have yet to buy their first home computer or hook it to broadband and are still holding an aging car together that's already gone 150,000 miles or more, but! no discretionary income to devote to buying any of these things.

Somehow....... whenever raising wages at or near the bottom is suggested, many cry that we'll break the company and the nation. But, as CEO and other upper management salaries soared 400% or more, typically no such laments have been heard, making me suspect that something other than classical economics is at work.

As for "prices" settling out there are substantial problems with falling prices. In the computer biz surely there's little fat in putting out a $500 desktop. In housing it's worse, deals were made in the past for land, the development costs are sunk in many yet to be completed projects while energy costs have pushed the costs of building. Most builders are somewhat stuck with an organization of a certain size, but now that overhead is spread over few units, a problem shared by autos, retailing and much else.

I agree with what I understand of your last paragraph, but I see the EITC, and the rest of the alphabet soup of aid to low income workers as distortionary and a road to creeping socialism. Token pay from a wealthy corp like Walmart with the taxpayers chipping in to make ends meet? How can THAT approach allocate scarce resources efficiently? Should we subsidize other factors of production business "wants" but not enough to pay for?

Liked your "movers and shakers" as seemingly, among the errors of the last 30 years is that "the market" has been accurate in deciding that min wage earners are not even worth the min wage that has fallen in half, while CEO's and WS schemers were "worth" what they were paid. Before 30 years ago the ratio between the least paid and the highest was much narrower. One era was wrong......... I'll suggest it is ours.

Besides; how can an economy work if it take $18 to provide the most basic std of living and so many make half that or less? Someone, government it seems, has to fill the gap. It's not the Invisible Hand at work that I understand!

John sez:
I think you're missing my point. For starters, the definition of "community" starts to break pretty darn fast once you move beyond your own town or neigborhood. I live in NJ, but I don't believe that you can call the entire state a "community" is any sense that has real merit.

JJJJJJJJJJ Interesting, and I'd guess that too is one of the "debates" of the day with "ME" generation and "conservatives" tending to thing "we're all in this alone" however in the matter of spurring solar installation, our "tribe" wins even well before the installation breaks even. ie. WE are paying US wages to put install the energy source that does not require floating oil or NG across the oceans and sending boat loads of ever-shriveling dollars back to make THEIR economy robust and wealthy.

Sure, solar MAY eventually achieve scale and viability, but if it does so at the expense of alternatives because it was given the coercive benefit of a subsidy, there's no reason to believe that it was the best technological outcome. It is most likely not. What IS virtually assured is that it was the technology with the most effective lobby. Again, see ethanol.

JJJJJJJJJJ I'd plant lots of seeds and reap many blooms, but as above, each solar install DOES delay the day when fossil energy runs out or becomes a costly luxury for the few.

That my state government has chosen to subsidize solar does not reflect a community choice. There was no referendum. And even if their were, a major rule would not make the coercive transfer of resources to solar right or moral. It would just be mob rule. Nonetheless, "we" didn't make this decision. State agents made it.

JJJJJJJJJJ If you lived in CA or one of the more aware states (perhaps spurred by choking on smog) YOU would find that there was and IS a LOT of political support for solar and other promising alternatives. You'll have to study up on the interface between democracy and "the market". Now would be a very good time since "the market" has literally run the lemmings off a cliff.

jjjjj "And let me give you an anecdotal example. I'm close to the housing biz, one where builders and all really SEE themselves as you do....... independent capitalists who don't "need" government.......... and all that? Well, NONE of em are doing a proper job in energy conservation, UNTIL there is either A. government mandate B. government subsidy to cover the costs of the upgrade, and even then they're slow unless they profit from the subsidy vs the improvement costs.

Customers aren't aware enough, or know THEY are going to move before the improvements pay THEM, and the builder has enough problems w/o attempting to educate the public. How does one crack this w/o government leadership? ie...... human intelligence as compared to the rearward looking "market" intelligence?"

There's many many problems with this anecdote. For starters, the housing industry is an incredibly powerful political force and an incredibly subsidized and hyper-regulated industry. The city/state and federal government are crawling all over housing from zoning laws to building codes to ordinances on the local side to the mess of social engineering, GSEs, tax incentives and outright subsidies on the financing side. If contractors think they are "independent capitalists" that's simply delusional.

JJJJJJJ Tap dancing. Irrelevant to the point of their going by "code" or "FHA min" or federal energy conservation MANDATES. RARELY more. Although!!! Today there is the federal EnergyStar program that PAYS builders if their homes are a measly 30% more efficient.

The second problem is your idea of "proper energy conservation". What is "proper"? At what cost? Who decides? This is clearly a subjective notion. There are tradeoffs that must be made that have real costs. Those costs are a diversion of resources from somewhere else. How do you know that the costs of externalities isn't already more than baked into the chain? It may already be too high. Or too low. You can never know when these costs are mandated coercively by the state.

JJJJJJJJJJ Well not to be snippy but because I've read and seen a lot.......... including a good understanding of PEAK oil and what the world will be like when the demand and supply lines diverge sharply. It is D U M B for the first owner to select skimpy insulation, cheap windows, and cheesy HVAC when "They" will only be THERE for a couple of years and to foist another wasteful building off on US for the next half century or longer.

Builders should be free to build the house and sell it with full disclosure. If the buyers want more energy efficiency, they will create a demand that the builders will respond to, just as demand for the prius drove Toyota to push up production of the hybrid (a choice they may now have found to be a malinvestment during a fake oil price boom).

JJJJJJJJJJ Nope. For two reasons, on average they are mindless children who RARELY ask about how the house is built or anything about energy, secondly the priorities are not aligned; whoever buys a new house is bringing something into this world that is going to be there for the next century or so. It's not their right to stick us with another problem --------- and that IS why we have Building Codes though they are hopelessly out of date in regard to wasting the earth's energy.

There is no moral or practical reason to believe that state officials know the "proper" energy conservation price any more than they've known any prior price. Price, wage and rent controls are an unequivocal, proven failure. The push up the cost for everyone but the lucky recipients of the privileges.

JJJJJJJJJ More tap dancing? Mix in a gob of irrelevant issues and hope?

As for customers being aware or moving without making the improvements... I find this elitist. It assumes that government agents know better than the people and should spend the people's money for them by forcing the prices to go.

JJJJJJJJJJ Haahaaa! Look around kid! The seat belts and safety items in your car? FDA doing its best to assure your food and meds are fit for consumption and do what is claimed? Ha! W/O building codes you'd hear of houses collapsing every week. Perhaps you'll recall inspectors being paid off to save $200/home for hurricane clips in Florida? so hurricane Andrew had a ball blowing the roofs off of them? You especially will have to have the discipline to take an econ course as you're already overly dipped in half-baked "libertarianism". You'll see.

Imagine a mandate for solar installation in all new buildings. It would surely push up the cost.

JJJJJJJJ Ha! As your seat partner said...... today it might be a 25 year PAY BACK. Now go to your future value tables and tell us what the return will be in the 2nd 25 years? the third? When we KNOW that the price of energy will increase.

If it's subsidized, it would drive up taxes, socializing the cost, which is even worse.

JJJJJJJJJ Oh? How about "socializing" the gains as well?

Imagine, reasonably, that a better technology emerges before the return-on-investment has been made.

JJJJJJJ Indeed! Somewhere around here I still have my first four function handheld calculator...... paid $120 for it, perhaps 2 day's pay at the time. Worth every penny! Written off the first year. Yes........ we'll always move forward in fits and starts.

The mandate would (and does) amount to an outright destruction of resources, but a great boom for the favored tech supplier, whose lobbying was no doubt behind the mandated choice.

JJJJJJJJJ while we've just lived through an unusually corrupt era, let's NOT assume that's the way of the world.

Sorry. I don't buy it. People have a right to voluntary choice.

JJJJJJ I'd advise looking a bit closer. Also looking back to era of little oversight and regulation. (You won't have to go very far back)

"Again the post-WWII era was so unique that it's difficult to make generalities. For starters, of course, the rest of the industrial nations lay in complete waste while our own was not only humming but was, for the era, trim and efficient due to the shortage of manpower and need for tremendous war time production. And....... the New Deal work rules carried on, though obviously there was no need for WPA projects."

Fair enough, though not a real rebuttal. I will have to plead relative ignorance and move on.

JJJJJJJJJJJJ Cool, it's the stone truth, and part of today's problems relate to our becoming fat, dumb, and complacent while being "King of the Mountain"

"here and from here you kinda slip into talk radio ideology which doesn't mix very well with economics.

Truth is the poor tend to be more overweight due to cheap diets being fattening diets and those with two crappy jobs grabbing a bite at the fast food places where crappy pay requires a whole host of government subsidies so they aren't starving on the streets or stealing to make ends meet as well. "TV's" don't cost much, it's the arithmetic of trying to pay for health care out of miserable pay that simply does NOT work."

I'll accept that criticism. It's a controversial and inflammatory statement. I was just trying to stir the pot a bit.

JJJJJJJJJJ Are you aspiring to talkjock or scream show status? What we need MORE of are public educators. Figure we're running this show with 75% not having gone to college while half of the rest paid little attention.

I was quoting an international economist who made this very observation, but whose name I can't recall. I think I heard it on the economist podcast. I still think that one should occasionally step back and examine the greater context. But I don't want to come across insensitive to suffering. I'm not. I'm deeply concerned with the most vulnerable in our society. They are my PRIMARY concern, in fact. The incumbents and fat cats have nothing to worry about.

JJJJJJJJJ

Well you seem to have enough interest that I'd urge you to pursue more formal education, and hey! if you're in media production we NEED more who can relate economic realities in terms that a TV audience can understand.

It is my intention to continue studying as much as possible and turn my production skills towards popular education of these principles. I can get pretty far in my own reading and informal work, I feel, and I do intend to understand all sides.

JJJJJJJJJJ Probably not, as you are already cherry picking the field for that which suits your biases. Better you get into school and have to PROVE your theses.

So far, my reading of Keynes and the arguments put forward by his adherents like Paul Krugman isn't good. It seems like bullsh1t.

JJJJJJJJJ Oh? And what do you think of arguments that "raising taxes" will kill the economy? despite running massive deficits? What do you think the last eight years would be like had "we" raised taxes to pay for the first batch of spending and later the war?

The fact that just yesterday Krugman claimed that "unemployment above 4.8% is deflationary" on Bloomberg's on-the-economy demonstrates that he's selling snake oil.

JJJJJJJJJ I don't know what level is 'deflationary' but the housing mess is already being exacerbated by those losing even ONE job of a household having to walk away and perhaps double up with parents etc......... thus adding MORE homes to the excess inventory that Ha! banks own today and far more they WILL own by the end of this year.

It seems pretty clear that the stagflation of the 1970's destroyed the Keynesian theory of employment and inflation/deflation.

JJJJJJJJJ Well I lived through that era too and while it too was a multi-faceted mess, Keynes didn't play much of a role and perhaps they handled it azz backwards to boot. See the "inflation" came from costs of Vietnam and other DEBT that led to the necessity of either going off the "gold standard" entirely or admitting that the buck was no longer worth $35 to the oz. In essence that led to oil being priced (kinda) in gold, both of which tripled and more.

The Fed and all treated this external price shock (about which we could do nothing) as "inflation" and tightened to stifle "inflation". Myself and others thought we'd have been better off to just let the external price shock work its way through the system. But! that was an era opposite of today when there were other inflationary pressures than the oil shock, ie instead of being short of demand as today, we were short of supply, and an inflationary expectation (yes, if you study econ take some psych too!) had broken out which was not constrained by Nixon's Wage Price controls, nor Jerry Ford's "Whip Inflation Now" buttons, leaving Volcker the nasty task of snubbing things up tight. Carter took a lot of heat for it and lost the next election.

I am very impressed by the Misesian/Austrian explanation of inflation and the business cycle, especially as laid out in Rothbards "For a New Liberty". It is clear, complete and moral.

JJJJJJJJJJJ I think we all have a fondness for some ideal economy with a fixed money supply and perhaps the Clinton era came close with the help of Congress and "paygo" but what are ya gonna do with some guy comes down the pike selling tax cuts and pixie dust?

It helps that all evidence I can find seems to make it clear that Keynesian stimulus and fine-tuning is a failure.

JJJJJJJJ Well don't go to DC just now as you're likely to get run over by either the incoming or outgoing Keynesians. Ha! Perhaps he'll always be hated and dissed in the good times but hauled out regularly in the bad?

Given how clearly today's crisis confirms the Austrian ideas, it's simply shocking that the mainstream has bought stimulus hook-line-and-sinker.... until you realize that big government will benefit many of the powers at work in pushing these failed ideas. Again, individual incentive are the key, not abstract collective constructs.

JJJJJJJJ You've not mentioned much about the The Mess, and Ha! (check with Keynes!) waking up to find the thieves have left us about $12 trillion poorer than most thought we were last 4th of July.

Perhaps the typically wise Krugman is wrong about 5% unemployment being deflationary as the average loss of $100,000 per household itself can be QUITE a cold shower! Ahh yes......... economists tend to start out with "all other things being equal the effect is ........... yadda" but! as was the case after the Depression, During WWI, after WWII, after going off the gold standard, during the S&L mess that cost us taxpayers $100 billion, and the current Mess they never are!

I really appreciate the discussion, Jack. I could care less about the two parties. I hate partisan hackery.

JJJJJJ Ha! sorry but they are part of the game too! I once got a fine grade on a paper proposing an economic commission that would limit the political swings as one twit came to power and another left, but! it's politically impractical as the incoming twit could gin up a war or respond to some other emergency that would trump the powers of the econ commission. Good luck and perhaps see you on the current topic. Jack

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Interesting, and I'd guess that too is one of the "debates" of the day with "ME" generation and "conservatives" tending to thing "we're all in this alone" however in the matter of spurring solar installation, our "tribe" wins even well before the installation breaks even. ie. WE are paying US wages to put install the energy source that does not require floating oil or NG across the oceans and sending boat loads of ever-shriveling dollars back to make THEIR economy robust and wealthy.

I'm not celebrating selfishness as a virtue or saying "greed is good". Nor should others celebrate envy. I simply reject the obviously intentional conflation of "we" with "a select group of us". The politicians use this as propaganda to steal from one portion of "we" and give the proceeds to another portion of "we". I reject that. I care about the forgotten man. If you want to label me anything, I'm a libertarian, not a conservative. As if that matters. What matters is ideas and morals, not labels and pop-culture group think.

"If you lived in CA or one of the more aware states (perhaps spurred by choking on smog) YOU would find that there was and IS a LOT of political support for solar and other promising alternatives. You'll have to study up on the interface between democracy and "the market". Now would be a very good time since "the market" has literally run the lemmings off a cliff."

Dude, I live in NJ. It's practically a political and policy mirror of Cali. Same tax-and-spend lunacy. Same anti-business/employment policies. And, again, you are missing the core point. I fear that you are trapped in labels and collective constructs and missing the simple core ideas. Or perhaps you're throwing away your ideas in favor of short-term "pragmatism". Don't sell yourself so short.

If cali or NJ has so much popular support for these technologies, than certainly there should be a viable market for unsubsidized green energy. If that energy is not yet productive enough to lure people in your "aware" state voluntarily, what right does the majority have to steal from everyone and from the alternatives in order to pick a winner or set of winners through subsidy and mandate? You've not made a convincing case for this right. And if they simple given equally to every single idea with no discretion in order to "let a million flower bloom", how will that do anything other than raise energy prices for everyone. It will just be a transfer of wealth from the consumers to the producers with no net gain at all.

Leaning on "the market is collapsing" therefor "the public sector can do better) is inherently resting on "our crisis is a free market failure". But, again, that is neither reasonable nor empirical when you look at the whole picture. Portions of the economy have been tricked into malinvestment by bad policies and a collusive monetary system. Many other parts of the market of free enterprise continue to hum along productively creating products and employment. 93% of our workforce is still gain-fully employed, after all (though I remain deeply skeptical of all macro stats like employment, GDP inflation stats).

If you really want to think about this in a broader way, consider who provided the ultimate oil subsidy: the road building government. Government city planning and the highway system have enabled the car culture and LA's complete lack of public transit.

"Well not to be snippy but because I've read and seen a lot.......... including a good understanding of PEAK oil and what the world will be like when the demand and supply lines diverge sharply. "

Please, out of mutual respect, try to refrain from the "I know more than you, that's why" argument. It's both insulting and unconvincing. I'm glad you're so confident in the absolute geological makeup of the earth and of your ability to foresee the future of civilization. I'm not, personally. Prediction is very hard, especially when it's about the future ;) The peak oil fear has been going on for decades, if not centuries in one form or another. $4 gas was supposed to be a sign of the great peak oil problem. It wasn't. It was an inflationary asset bubble just like housing.

And yet, we got a preview this year of what will happen when the true peak oil moment happens. Prices will rise, profits will fall and investment will pour into alternatives until we have completely replaced oil with other sources. All of this has happened before and will happen again.

Now, will we use up all the oil in the earth at some point? Yes and No. No because the marginal cost to extract the last bits of oil will certainly become too high compared to alternatives. Yes because that point will essentially be the same thing as using it all up. But the economics of this will drive investment. The question is when. Do we have 50 years of oil left or 300?

That you believe a discretionary political process can make this technological transition more productively than actual supply and demand is to ignore a century of failure. The history of this "investment" by government is the stripping of funds from more productive uses to give to less productive, but politically expedient uses. Again, profit animates productive investment. Toyota expanded prius production when it became profitable, not because of altruism.

"Nope. For two reasons, on average they are mindless children who RARELY ask about how the house is built or anything about energy, secondly the priorities are not aligned; whoever buys a new house is bringing something into this world that is going to be there for the next century or so. It's not their right to stick us with another problem --------- and that IS why we have Building Codes though they are hopelessly out of date in regard to wasting the earth's energy."

At least you're honest in your belief that people are stupid children that don't have the right to make choices for themselves. Again, this is unfortunate, elitist paternalism. If you buy a house and your energy costs can be productively reduced (as in the money put into the improvements leaves you with a net gain relative to all other uses), why wouldn't people do that?

If they don't, why do you feel that you or the state has a right to FORCE it? By pushing up the price of the home, you are TAKING money from the home buyer (and all the people who would have received that lost saving/spending as income) to give to someone else (the contractors and subcontractors). I don't believe you or the state should have that right. And I don't believe that the homeowner is taking anything from "us". They're paying for their higher energy usage. Not stealing.

"Ha! As your seat partner said...... today it might be a 25 year PAY BACK. Now go to your future value tables and tell us what the return will be in the 2nd 25 years? the third? When we KNOW that the price of energy will increase."

And do you also "KNOW" that there won't be any more productive energy alternatives during that 25 year stretch? Dumping 25 year's worth of cost in energy TODAY, means that you haven't saved any of it to buy more productive energy TOMORROW. Again, this is short-term thinking that you are disguising as long-term saving. And claiming that inflation helps your argument to spend it now would only further my case for the destructive malinvestment that inflation creates.

Buying a computer for $1000 TODAY, means that you don't have that $1000 to buy a cheaper/faster/better one TOMORROW. I have faith that the energy options we have today are not the end but just the beginning of the technology revolutions to come. Why should the government force the destruction of tomorrow's investments by mandating todays spending? It just makes no sense at all.

Probably not, as you are already cherry picking the field for that which suits your biases. Better you get into school and have to PROVE your theses.

My current employment is much more productive for my family than formal study in econ, but if I win the lottery, I'm consider it. Bias is always a challenge to overcome. At a certain point, you choose to believe a core ideal and it informs how you judge what you learn. Clearly, we both have done so. I try very hard to keep open, and these kinds of conversations help that process (even if I'm arguing for a position). It's all a Socratic process. I try to explain these ideas so that I can better understand them. I'll happily concede a stronger logical argument.

That I remain unconvinced by Keynesian fine-tuning and statist planning does not mean that I am more ideological than you. We are just coming from two different sets of ideals and assumptions. You seem to believe that coercion by the state is necessary because people don't know what's good for them and that their ignorance somehow hurts the community on net, warranting the coercion. You've made that clear. Fine. I don't buy that. Even if you're right and people don't know any better, I still reject coercion on simple moral grounds. I also see a political system that has done everything to encourage ignorance and poor choices as well as a collusive media that has filtered public discourse to marginalize the classical economic view. Even metrics like GDP are themselves an inherently keynesian tool.

Furthermore, I find it hard to accept or trust the very class of people, both democrat and republican, that have among other crimes been forever raiding the Social Security Trust Fund to pay for their lavish spending and destructive ideas. If you strip away the payroll tax surplus, only one year of the Clinton administration saw a surplus. This, again, is pure theft. They may call it an inter-public debt or some kind of IOU, but it is not. It is the pillaging of each person's savings to pay for other people's dole. It's a ponzi scheme.

"I think we all have a fondness for some ideal economy with a fixed money supply and perhaps the Clinton era came close with the help of Congress and "paygo" but what are ya gonna do with some guy comes down the pike selling tax cuts and pixie dust?"

I totally agree. I think Clinton + Gingrich = better policy. Here's the key. I'm not a politician. I have no electoral incentive to be an inflationist or a "pragmatist". I believe that all political "pragmatism" is the act of choosing which short-term hypocrisy least offends your personal long-term ideal. I don't need or want to live in hypocrisy. My goal is to understand the core ideas and use that understanding to navigate the world, teach my children, and inform my vote. I'll leave the self delusion to DC and it's vast network of partisan boosters.

Well don't go to DC just now as you're likely to get run over by either the incoming or outgoing Keynesians. Ha! Perhaps he'll always be hated and dissed in the good times but hauled out regularly in the bad?

Our core problem is that he never left the minds of the politicians. Reagan's defense spending in deficit was keynesian stimulus, though he came the closest to real ideals by protecting Volker's sound money policy. Bush, too, was a keynesian. His tax cuts, by not being matched with equal spending cuts, amounted to keynesian deficit spending. His entitlement expansion was also pure big-government keynes. The fed's monetary stimulus had the same keynesian effect. I don't mind the tax cuts on principle, but without the spending cuts to match, they were reckless. That Bush funded he government with more borrowing and inflation instead was dishonest.

You've not mentioned much about the The Mess, and Ha! (check with Keynes!) waking up to find the thieves have left us about $12 trillion poorer than most thought we were last 4th of July.

I don't understand. "The Mess" of 2008 is nothing more than the inevitable bust to follow an inflationary boom. The seeds of this past Fall were planted during the 2001 to 2006 commodity bubble and before that, the tech equity bubble. Again, this keynesian short term thinking clouds the root causes. And when you look at the horrifying rhetoric and Bernanke/Paulson, it's impossible NOT to be skeptical. "We may wake up and not have an economy". Gee. I wonder why people started to freak out?

We should do NOTHING and let the correction be sharper, but shorter. Trying to soften it will only allow more and more malinvestment to undermine our future. Let the banks fail. Let it all collapse, especially housing prices. Let deflation provide the silver-lining of increased buying power to the victims of this inflationary bubble.

Perhaps the typically wise Krugman is wrong about 5% unemployment being deflationary as the average loss of $100,000 per household itself can be QUITE a cold shower! Ahh yes......... economists tend to start out with "all other things being equal the effect is ........... yadda" but! as was the case after the Depression, During WWI, after WWII, after going off the gold standard, during the S&L mess that cost us taxpayers $100 billion, and the current Mess they never are!

Agreed, which is why macro-economics is garbage for policy making. It's always possible to extract the empirical evidence needed to support any view with a system so complex as our entire economy. Simply hold this or that constant and POOF! Which, again, is why I care about the core ideas. Our political class continues to ignore the simplest ideas of Adam Smith and so they dig us deeper and deeper into a whole in pursuit of bogus goals like "full employment".

We don't work because work is good. We work to make money so that we can buy things that other people can make more productively than we can for ourselves. It's basic division of labor and specialization. Productivity produces wealth, as it frees people's time and money to pursue ever higher standards of living. If full employment itself was a virtue, it would be easy to achieve. Just blow up every factory and city in america and start over. Subsistence living is generally fully employed with every able-bodied person working from the youngest children to the oldest grandparents. That's not prosperity. The pursuit of LESS employment is truly our goal. We all hope to retire early. To enjoy living. Too bad the politicians continue to inflate away our savings and our dreams.

Keynes and his followers can cover over these ideas with inflationary short term tricks, and then blame their long-term outcomes on the next guy, but it doesn't change the reality.

...or maybe I'm totally wrong. Thanks for the debate. See in another thread.

John: Glad you came back. And w/o going over all the examples, I again urge you to study economics, or if not, to understand that all those places where you say you "believe" or "reject" are based in ideology and not the science or craft of economics. In your age group the interface between democratic (or republic if you prefer) policy and "the market" has been neglected and that would be a good area to investigate. When it's working (and we will get it working again or our nation will fail) the purpose of the entire politic is to take inputs from the citizens and in that "great deliberative body" that has become greatly corrupted, is to parse those inputs and adopt those that prevail.

Energy? Let's pretend that the US itself is a giant conglomerate for a moment. US Inc uses far more oil and energy of all types, per capita, than any other nation, further it uses more energy per GDP than most other nations. It wouldn't take much of an exec to figure out that energy is our Number One raw material that is utterly crucial to our economy. Conversely any shortfall is our Achilles Heel, both for maintaining our economy as well as in terms of national security, both directly and that were our economy to continue to tank we'd have to make substantial cuts in defense and warmongering costs.

So, given what you know of our being 70% dependent on imported oil (up from just 30% during the last (70's) crisis and the nature of some of our suppliers, would you, as we have since the 70's leave all this to "the market" or engage your brains and experience to proactively respond for the future and benefit of US Inc?

You housing example demonstrates that you'd favor luck and lemmings headed for the cliff you KNOW is out there be it "50 or 300" years. (The answer is that the divergence of supply and demand lines WILL come in years or decades while "some" oil will be their for our kids to fight over for much longer. Lowering our dependence will save them from having to fight quite as hard.)

So........ to the housing example which is quite a bit different from an auto example due to the lifespan of the auto being so much shorter and that when the current gas hogs are render obsolescent they can be readily junked with their carcasses sent to Japan to return in new and more efficient form.

"At least you're honest in your belief that people are stupid children that don't have the right to make choices for themselves. Again, this is unfortunate, elitist paternalism."

jjjj Indeed, and I don't care much for it myself, however it is the case.

If you buy a house and your energy costs can be productively reduced (as in the money put into the improvements leaves you with a net gain relative to all other uses), why wouldn't people do that?

jjjjjjjj Well the top three are: Lower income folk DO have a hard time affording a suitable home. Upper income folk are children too and favor even more SF to heat and cool, more goodies, and don't care much about utility bills, as high fuel prices don't bother them much on their choice of gas-hogs to drive. Ignorance and short-sighted selfishness completes the top three.

With! of course the results that those first owners of over 20 million new homes constructed in the last decade left the second owners and their children a wasteful home, in which, statistically they no longer own. The typical owner remains only 6 years. And! for US Inc and even higher dependence on oil, coal and NG. (Please keep in mind that were US Inc to lower consumption 10% or so that we'd not be dependent on M/E oil at all)

Sooooooo, what we have here is a disconnect between the immediate wants of "the market" and that of OUR long term standard of living and security.

What IS taking place as President Obama takes the stage IS a return to the longer term thinking and survival of the community, which is of course an understandable, democratic, reaction to The Mess created over 30 years of mindless, over-reliance on "The Market" and the corrupt selling of market distorting favors by Congress and previous "pro-market" Admins.

It's an ongoing yin yang struggle that will never be completely solved nor find some elusive "equilibrium" but for now, we've erred to far in terms of letting WS and other hors have their way with the people to the detriment of US Inc and will be headed back the other way for quite a while.

Lastly here is a real world problem for you:

At the bottom of the article is a graph showing the sharp divergence of ALL wages, even college wages, from the productivity these working folk have created. Sans unions and raising min wages or doing something with taxes, how do you suppose our citizenry will ever catch up on getting their share of the productive wealth of our nation?

And if you take a "don't care" that trickle down has failed, position the second part would be that of how you'd expect any growth or even stability as the FLAT median wages for 25 years are nibbled away by basic expenses leaving some 5,000 LESS to "go shopping?"

Cheers and best! Jack

@Jack,

Again, thanks for the debate. I'm still not buying your argument for coercive action by the government that will push up prices for unknown long-term benefit. I don't see the evidence of broad successful central planning anywhere in history. What I see is a history of bottom-up emergence of solutions by voluntary individuals and groups. Wikipedia points the way forward, not technocratic planning.

What I think you should consider is that, while I'm being ideological (based on the moral imperative that coercion is wrong), you're being equally so in your certitude about the future, about the timing for peak oil and how today's resources should be organized for this allegedly known future. No offense, but I find that position pretty arrogant, along with the ongoing recommendation that only formal economics schooling can open my eyes to my flawed ideology.

The theme seems to be that everyone is an idiot so let them eat cake. I do reject that ideology on moral grounds.

As for the raw deal the working class is getting, I agree, but you've continued to dodge the monetary/fiscal inflation issue, which has been, in my opinion, the main enemy of the average working person. The federal reserve is the enemy here, as is the inflationary fiscal policy.

I'm just disgusted by the "old boys network" in the top bracket of the financial industry and the CEO pay-to-fail situation as anyone in America. As WFB once said "the problem with socialism is socialism. The problem with capitalism is capitalists".

I'd go further. I'd say the problem with capitalism is that it's prosperity creation is so effective that it becomes invisible, and then assumed, and then ignored.

I think we share the same hopes and goals for the future. You have more faith in central planners and select expert technocrats. I find that process inherently unproductive and swamped by corruption and favoritism, as evidenced by Ethanol and other hideous ongoing failures. Remember, there were plenty of honest experts saying that Ethanol was the future, while somehow forgetting that it requires arable land. Where did they expect us to grow this stuff? Parking Lots? Experts can get it wrong. Horribly wrong. Nobody spends as carefully when it's with other people's money.

You may be right that people are short-sighted. That doesn't give anyone else the right to rob them of their labor or make the choices for them. Sitting in a econ 401 class isn't likely to change my core ethics in this regard.

Chat with you soon.

John a few more observations:

"Again, thanks for the debate. I'm still not buying your argument for coercive action by the government that will push up prices for unknown long-term benefit. I don't see the evidence of broad successful central planning anywhere in history."

jjjj With a government spending 20% of GDP there is no way that they are not steering the bus in one direction or another. MANY years ago, even before the 70's oil crisis I wrote a paper favoring shifting some of our income tax burden to that of NON-renewable resources. After all labor and creativity are QUITE renewable while the NONS clearly are not, each dip out of the well is one gone forever. Others since have proposed small shifts in that direction; Carter who gave us the CAFE stds and other conservation efforts that broke the OPEC cartels pricing power also proposed one thin dime of gas tax. He was shot down by his own Party out of concern for the regressive nature of the tax.

The Clintons proposed the even brighter and more broadly based BTU tax which COULD have helped close the Reagan-Bush deficits and worked to gradually lower consumption via millions of market based decisions. NOPE! Said assorted lobbyists and oil hors, and off we went having to raise income taxes and living the lie of cheap and plentiful energy as our dependence for our Number One raw material kept rising. (Does this movie sound like it had a happy ending?) "The spot Market" of oil and vehicle buying decisions were made on false signals. And........ here we are. Or if you are lulled into complacency, again, but the steep recession bringing us a brief holiday...... here we will be soon!

"What I see is a history of bottom-up emergence of solutions by voluntary individuals and groups. Wikipedia points the way forward, not technocratic planning."

jjjjjjjj Great, we all see those, and of course the task of government is to provide a fertile economic field for positive invention, production, and distribution. That had BETTER include KNOWING not guessing where sufficient supplies of our Number One raw material will come from. Further, it IS the government's job to provide oversight and protection from the fraudulent behavior that may well have plunged us into the deepest Depression in history. You may not like intervention by the Anti-Trust Division of Justice (and surely haven't seen ANY in the last 8 years and precious little before that) but allowing the Citigroup creation and other's that are now "too big to fail" but are, curiously were not worthy of oversight and regulation cost US taxpayer many billions. I don't know of "Libertarians" who like having their pockets picked by organized thieves.

What I think you should consider is that, while I'm being ideological (based on the moral imperative that coercion is wrong),

jjjjjjjjj I don't think we've a "coercive" government, however there are lots of incentives and opportunities provided beginning perhaps with K-12 education and subsidized continuing education. You may not like them (yet) however they are hardly coercive. Wrong word.

you're being equally so in your certitude about the future, about the timing for peak oil and how today's resources should be organized for this allegedly known future. No offense, but I find that position pretty arrogant,

jjjjjjjjj Sorry, but I'm a mariner and have to begin my journey with a destination in mind and trust my instruments and experience to get me there safely and efficiently. If I hear a storm or other warning, using my human intelligence I may change my course.

"along with the ongoing recommendation that only formal economics schooling can open my eyes to my flawed ideology."

jjjjj as in any field you'd be given tools to use as the field, like most, is not intuitive. I know very little about TV production, video cameras or post-production editing, do you suppose that what I currently "feel" as to how to go about it would serve me and my audience well?

The theme seems to be that everyone is an idiot so let them eat cake. I do reject that ideology on moral grounds.

jjjjjjjjj Whoops old Marie Antoinette said that in response to learning that her vassals were starving and had no bread........ and is held up as an argument in favor of the King's intervention.

As for the raw deal the working class is getting, I agree, but you've continued to dodge the monetary/fiscal inflation issue, which has been, in my opinion, the main enemy of the average working person. The federal reserve is the enemy here, as is the inflationary fiscal policy.

jjjjjjjjjj. Hmm Well THAT is quite the can of wriggling worms. And to be sure, I've lived to see a dollar become a dime while no such currency deflation occurred during my father's time. The causes are many, but largely WWII and Viet debt that pushed us off the "gold standard" along with subsequent federal debt and our no longer being the economic powerhouse (compared to others) that we once were and running, today, $800 billion trade deficits, in which others get more dollars than they chose to spend here. We are "lucky" that we ARE selling off America chunk by chunk to make the books balance......... but! the very selling of our productive assets will soon create yet more outflow as the profits accrue to our foreign owners.

Compared to such waves the FRB is but an underpowered player who can influence only our own affairs slightly, while being swamped by international money flows and events. Fixing The Mess will ultimately cut our dollar (dime?) in half again. No choice.

I'm just disgusted by the "old boys network" in the top bracket of the financial industry and the CEO pay-to-fail situation as anyone in America. As WFB once said "the problem with socialism is socialism. The problem with capitalism is capitalists".

jjjjjjjj Ahhh but he was born to the manner and wasn't quite going to call them rogues, crooks and thieves. Ultimately his Nat Review was to maintain the "old boy" privilege, lost money year after year, and was subsidized by others favoring the "old boy" club and limited membership.

I'd go further. I'd say the problem with capitalism is that it's prosperity creation is so effective that it becomes invisible, and then assumed, and then ignored.

jjjjjjjj Hmmmmm well in many eras it HAS been and I'd hope we can harness its power again someday but we'll have to be a lot more honest than have been the "boomers". Interestingly the recent "conservatives" (if calling the Bushies such does not cause an upchuck) have done their figures on "the SS problem" using but 1% GDP growth for the next 50 years, I do hope they are wrong as things were much better when we were growing at 3-4% or so. The diff is quite amazing... using the rule of 72 something growing at 1% would have a 72 year doubling time while at 4% the doubling would occur in just 25 years and SS would be just fine.

I think we share the same hopes and goals for the future. You have more faith in central planners and select expert technocrats.

jjjjjjjj It's deeper than that. Be it our state constitutions or the first pages of an econ text it is our goal to develop our resources "for the benefit of the people" and goes back further than the corporations Andrew Jackson opposed, or the stock market that today all too many have confused with The Economy.

I find that process inherently unproductive and swamped by corruption and favoritism, as evidenced by Ethanol and other hideous ongoing failures. Remember, there were plenty of honest experts saying that Ethanol was the future, while somehow forgetting that it requires arable land.

jjjjjjjjj Well "they" "forgot" more than that! and for now we can dismiss it as pork corruptly purchased by Dwayne Andreas and Archer Daniels with complicity from every farm group and farm state Congressman. But!! as it enters our distribution it MIGHT turn out OK if we can develop enzymatic, or! since NAFTA screwed the Mexican sugar industry, have them turn their surplus cane into ethanol as it's an eight times better feedstock and the reason Brazil could run their nations vehicles on ethanol.

Where did they expect us to grow this stuff? Parking Lots? Experts can get it wrong. Horribly wrong. Nobody spends as carefully when it's with other people's money.

jjjjjjj sadly "The Experts" knew it was, at best, a breakeven proposition.

"You may be right that people are short-sighted. That doesn't give anyone else the right to rob them of their labor or make the choices for them."

jjjjjjjjjj Rob? Hmm since Reagan was taken over by the Pentagon boys I've railed against looting our Treasury and leaving you younger folk nothing but D E B T to pay, but it seems only this year that I've been joined by younger folk who could do simple math or ask why wealthy boomers ought to be breaking the bank with unaffordable tax cuts and exempting the Hilton and Walton family from paying inheritance taxes. Well, slopping the hogs, was surely a good election tactic for ReaganBush and Bushy and since I'm on the recipient end, perhaps I'm a fool to stick up for the younger folk........ for all the good it has done!

Too I'd rather not leave you with a thirst for oil and a fleet of fast SUV's you won't be able to maintain, but it's not going to happen by letting the vagaries of "the market" steer the course. What do you suppose "the market" would do to Chev's huge Volt investment if it responds to $1.50 gas and President Obama were not to lead with new CAFE standards?

Cheers and best, Jack

Sitting in a econ 401 class isn't likely to change my core ethics in this regard.

Chat with you soon.

Jack,

I'm gonna step back and look at the bigger ideas here, since you and I can joust about particulars forever. Your fundamental position is as follows:

The government spends at least 20% of our annual GDP, and that's not going to change. They should spend it the way you want them to, regardless of the current productivity of that spending, because you know precisely how and when this spending will pay off. You already know precisely which technologies deserve "investment" and the proportions to which each should get incentives.

You are convinced that no better options will emerge in the future, which is why you want to drain the pool of available resources for tomorrow's ideas in order to pay for today's.Sorry, Jack. I know you mean well. I'm sure you're a great mariner. But neither you nor any other oligarchic technocrat has the right to steal my income which I would otherwise be putting toward my son's future. That you think you know best doesn't mean that you do. Others are just as certain of the precise opposite approach. In the 1970s there were the same people (I guess you were one of them) claiming that we had hit the Peak Oil mark. It was wrong then and I see no evidence that it's right today.

It seems reasonably clear that Carter's Department of Energy failed, as our progressive reliance on foreign energy directly correlates to our domestic restrictions on production. Carter didn't break OPEC. He handed empowered them.

My position is that the free, voluntary enterprise system, when it's not perverted by central bank planning and interest rate price fixing, does an infinitely better job in having manpower and capital flow to the most productive use. Profits attract investment. Capital drive up productivity and pushed down costs. Competition pushes down prices. Everyone's buying power increases and prosperity grows across the board. And if a foreigner can do it better/cheaper, we should be allowed to buy it free of import tariff. That savings provides the same increase in buying power and prosperity as a domestic productivity, and allows us to spend more money on domestically productive companies. This is just Adam Smith, but it's no less true than ever.

It's ludicrous that we still have things like sugar quotas, which steal from everyone in the form of higher food prices to give to a tiny collection of producers more money. This is true of all tariffs and subsidies, though. They always hurt the majority in favor on the politically-connected special interest. Protectionism is theft.

Government seems to do the exact opposite of free enterprise. The incentives are just not in government to seek productivity. Instead, they seek "full employment" because the delivers more votes. But that's not an effective goal. And yes, our government is fundamentally coercive. The income tax is a coercive theft of private property. Borrowing robs other potential borrowers from access to funding. Inflation robs from the poor and working class to give to the politically connected.

All of that is morally wrong and the system that funnels this stolen money is politically redistributive, NOT productively redistributive.If you could tell me that in exchange for dumping trillions into less productive energy sources, we'd have a promise of the end to our military globe trotting and a subsequent tax cut to counter the cost increase, I'd at least consider it a net gain in human life, if not real productive investment. But I don't think your crystal ball is that clear. Both parties are now just as horrifyingly interventionist as the democrats used to be starting with Woodrow the tyrannt Wilson right up to everyone's favorite LBJ. People seem to forget that JFK launched the Vietnam war. But the GOP is just as lost on this front now with the "war on terror". The very name is preposterous. It's like saying we're going to have a "war on fear". Dumb.

So, no, I don't trust your judgement on energy. I don't believe your story about the future. I don't buy your argument for why I should. But I am listening and do appreciate and respect your engagement in the issues. Why can't you take that passion and work to make it happen WITHOUT the monopoly of force that is The State? If your way is the right way, you should have a convincing enough argument that voluntary funding should be available. It's pretty clear that our modern economy is privately funding all kinds of long-term research from fueling-producing algae to intergalactic tourism.

Oh yes, I do care about our environment. Very much so. It's part of why I'm 99% vegetarian. But I see far more effective tools to fight polution in property rights and stripping the mountain of protections from lawsuit our government has erected for polluters like Monsanto as the most moral starting point. I don't think the government should borrow a trillion dollars and sink it into today's oil alternatives when they are clearly less productive.

The fact that so many the statist greens reject Nuclear power, despite it's immense productivity, proves to me that they aren't interested in prosperity at all. If they really wanted to fight carbon, replacing coal with Nuclear would be the best bang for the buck. Clearly. And it works on a cloudy, windless day too! These people only want control and ideological redistribution to their buddies and their personal hobby horses. They don't respect people's rights to their own property and that makes their means immoral. It's just a bald-faced power grab by wannabe despots.

I think we're on the same page about the gold standard, though. The REAL change that would matter for everyone would be to return to commodity-based money and eliminate central banking. That's the best starting point for re-building our financial system. That would lay a moral foundation by stripping away the state's power to inflate and reinstate the highly effective free-market regulation known as "failure" in banking. No company should ever be bailed out. Ever.

As an energy side note, you have to kind of feel sorry for the people of every major oil nation. It seems that having oil prevents productive investment in other areas and depresses prosperity for the people. Meanwhile, Island nations like Singapore or Japan are enormously successful despite virtually no raw domestic resources. Just one more proof that trade and productivity are the keys to prosperity.

Cheers.

John sez:
Jack,

I'm gonna step back and look at the bigger ideas here, since you and I can joust about particulars forever. Your fundamental position is as follows:

The government spends at least 20% of our annual GDP, and that's not going to change. They should spend it the way you want them to, regardless of the current productivity of that spending, because you know precisely how and when this spending will pay off. You already know precisely which technologies deserve "investment" and the proportions to which each should get incentives.

jjjjjjjj Putting words that suit your aims in the mouths of others is a debating tactic called creating a strawman, something much easy to destroy than the person himself. Cheesers of the Limbaugh ilk are most common users of the tactic which of course is aided quite a bit by having the kill switch too.

But! your first part is right. For most of my life the gov spent about 16-18% but since Reagan we routinely add another 2% to make the interest payments on the massive debt run up under the pseudo econ term "supply side" ie. voodoo and D E
B T

And No, I do not always "know" what are suitable priorities, but!!! each and every year our Congressional Reps do indeed decide how to spend 20% of GDP. And! They've more influence than that as there are often small incentives that pave the way for private consumers and industry to spend more than they otherwise would. Perhaps you'll recall getting some benefit for school that for many might make the difference between going and not going?

You are convinced that no better options will emerge in the future,

......... nope. perhaps a rereading? My story about my $120 calculator that did only what a give away biz card calculator today? But! at the time there being no other choices but slide rules, I got my use out of it very shortly. Many have since had the very same experience with computers and other electronics.

which is why you want to drain the pool of available resources for tomorrow's ideas in order to pay for today's.

............... hmmmmmmmmm do you have a home? perhaps with a 15-30 mortgage? A car with 3-5 year payments? Or cash tied up in one? Aren't you worried that homes will go out of style or your car become obsolete before it's paid for?

Sorry, Jack. I know you mean well. I'm sure you're a great mariner. But neither you nor any other oligarchic technocrat has the right to steal my income which I would otherwise be putting toward my son's future.

.......... Aaaah! Planning for his future? Engineers gave us a grade of D on our rotting infrastructure, and as you may know, once deterioration gets going it goes faster if not repaired; YOU inherited fairly good infrastruture for the times, do you think I'm thinking too far ahead to want to leave him, my boy and their entire generation a dust heap?

That you think you know best doesn't mean that you do. Others are just as certain of the precise opposite approach. In the 1970s there were the same people (I guess you were one of them) claiming that we had hit the Peak Oil mark.

......... Huppert. And the peak was that of the US that he predicted using a computer model; hit it dead on; despite the huge Prudhoe Bay find. Yep, it's his model that predicts the Peak for the world. Who knows? Might be dead on, or off by ten years, maybe, long shot? 20 years, then what? And what as the rising consumption curve departs from the

It was wrong then and I see no evidence that it's right today.

jjjjjjjjj Look around. And no I was not the predictor I only thought it fairly dumb to waste NON-RENEWABLE resources. My guess it that when our kids are 30 something, they'll look at us like we look at those killing sperm whales to the point of extinction to burn the oil out of their heads for candle light and shoe polish. We've other options.

It seems reasonably clear that Carter's Department of Energy failed, as our progressive reliance on foreign energy directly correlates to our domestic restrictions on production. Carter didn't break OPEC. He handed empowered them.

jjjjjjjjjj Well, NO. Trouble is it worked TOO good as oil dropped below $10 and off we went to build the greatest fleet of gashogs and energy wasting homes the world has ever seen. Almost like we were teed up in a conspiracy. 70% dependent on Iran not getting upset and closing the Strait of Hormuz, or someone else shutting down the Suez as did Egypt for 7 years after one of their regular tiffs with Israel.

My position is that the free, voluntary enterprise system, when it's not perverted by central bank planning and interest rate price fixing, does an infinitely better job in having manpower and capital flow to the most productive use.

jjjjjjjjj simple in concept and we've covered much of that. Remember? the childish idiots who tailor a home's energy profile to their 6 year stay and leave another energy liability for the rest of us.

Profits attract investment. Capital drive up productivity and pushed down costs. Competition pushes down prices. Everyone's buying power increases and prosperity grows across the board.

...... That's a rough summary of chapter one, but I think Samuelson has about 20 chapters.

And if a foreigner can do it better/cheaper, we should be allowed to buy it free of import tariff.

........... so they say. However we'll soon learn quite a bit about that.......... theory. I'd say study the chapter on "relative advantage" and see if you think the author means "competing with slave labor" BTW how's it working out? Do you have an understanding of what Trade Deficits amounting to 7% of our entire GDP means?

That savings provides the same increase in buying power and prosperity as a domestic productivity, and allows us to spend more money on domestically productive companies. This is just Adam Smith, but it's no less true than ever.

........... ahhh yes. Used to lay that one on my dad who never took econ but did live thru the last Depression that had much of the same profile as the one coming. "Hey! those cute Japanese cars are such a much better deal" my friends would say. "Maybe so" said the old Depression and WWII Vet" but when you don't have a job it doesn't matter how cheap it is. BTW in those days we often ran trade surpluses which made our currency strong.

It's ludicrous that we still have things like sugar quotas, which steal from everyone in the form of higher food prices to give to a tiny collection of producers more money.

........... Oh? and wasn't NAFTA going to fix all of that? The WTO? "The New World Order?" Ahhh yes and the check is in the mail and poverty in Mexico didn't increase dramatically.

This is true of all tariffs and subsidies, though. They always hurt the majority in favor on the politically-connected special interest. Protectionism is theft.

.......... Interesting. Did the Bushies know that when they passed the Medicare Prescription bill that disallows price shopping? Even WITHIN our own borders, much less the global economy? With the result the VA pays but 40% of what Med care pays? One suspects you'll hear a lot more about Fair trade than "free trade" in the coming years. Hint: the corpies with 14,000 "HQ's" all in a building the size of an 8-plex in the Cayman Is tax haven are playing ALL of the naifs and ideologues off against each other. Take a look?

Government seems to do the exact opposite of free enterprise. The incentives are just not in government to seek productivity. Instead, they seek "full employment" because the delivers more votes. But that's not an effective goal.

.......... They do speak of jobs, and both they AND the private sector speaks of higher GDP's and neither is much of a measure of standard of living, but! when unemployment is low and GDP is growing at a good pace it does all work a lot better than the converse. (You'll soon get a front row view!)

And yes, our government is fundamentally coercive. The income tax is a coercive theft of private property.

..............Uh-oh! Do we have one of those "Libs" so half-baked he doesn't even want to pay for our warmongering? Those little yellow flags everyone stuck on their gashogs 5 years ago were cute as a bug's behind, but now YOU and your boy ARE getting the tab that boomers chanting "No new taxes" have left for you. I think it averages $100k per household now, but! as you see we'll be piling on quite a bit more.

Borrowing robs other potential borrowers from access to funding. Inflation robs from the poor and working class to give to the politically connected.

......... Ha! probably w/o buying even the very nicely written "Economics for Dummies" you'll soon see that it is all skewed in favor of the rich and connected. Perhaps one of your theories will explain why CEO pay soared from 50 times worker pay in 1980 to over 400 times this year, while min wages and median wages declined and since 2000 even wages of college educated have been Flat

All of that is morally wrong and the system that funnels this stolen money is politically redistributive, NOT productively redistributive.If you could tell me that in exchange for dumping trillions into less productive energy sources, we'd have a promise of the end to our military globe trotting and a subsequent tax cut to counter the cost increase, I'd at least consider it a net gain in human life, if not real productive investment. But I don't think your crystal ball is that clear. Both parties are now just as horrifyingly interventionist as the democrats used to be starting with Woodrow the tyrannt Wilson right up to everyone's favorite LBJ. People seem to forget that JFK launched the Vietnam war. But the GOP is just as lost on this front now with the "war on terror". The very name is preposterous. It's like saying we're going to have a "war on fear". Dumb.

So, no, I don't trust your judgement on energy. I don't believe your story about the future. I don't buy your argument for why I should. But I am listening and do appreciate and respect your engagement in the issues. Why can't you take that passion and work to make it happen WITHOUT the monopoly of force that is The State? If your way is the right way, you should have a convincing enough argument that voluntary funding should be available. It's pretty clear that our modern economy is privately funding all kinds of long-term research from fueling-producing algae to intergalactic tourism.

Oh yes, I do care about our environment. Very much so. It's part of why I'm 99% vegetarian. But I see far more effective tools to fight polution in property rights and stripping the mountain of protections from lawsuit our government has erected for polluters like Monsanto as the most moral starting point. I don't think the government should borrow a trillion dollars and sink it into today's oil alternatives when they are clearly less productive.

The fact that so many the statist greens reject Nuclear power, despite it's immense productivity, proves to me that they aren't interested in prosperity at all. If they really wanted to fight carbon, replacing coal with Nuclear would be the best bang for the buck. Clearly. And it works on a cloudy, windless day too! These people only want control and ideological redistribution to their buddies and their personal hobby horses. They don't respect people's rights to their own property and that makes their means immoral. It's just a bald-faced power grab by wannabe despots.

I think we're on the same page about the gold standard, though. The REAL change that would matter for everyone would be to return to commodity-based money and eliminate central banking. That's the best starting point for re-building our financial system. That would lay a moral foundation by stripping away the state's power to inflate and reinstate the highly effective free-market regulation known as "failure" in banking. No company should ever be bailed out. Ever.

As an energy side note, you have to kind of feel sorry for the people of every major oil nation. It seems that having oil prevents productive investment in other areas and depresses prosperity for the people. Meanwhile, Island nations like Singapore or Japan are enormously successful despite virtually no raw domestic resources. Just one more proof that trade and productivity are the keys to prosperity.

Cheers.

Можно взять картинку с вашего блога?

Весна будет тёплой, а секс горячим

John sez:
Jack,

I'm gonna step back and look at the bigger ideas here, since you and I can joust about particulars forever. Your fundamental position is as follows:

The government spends at least 20% of our annual GDP, and that's not going to change. They should spend it the way you want them to, regardless of the current productivity of that spending, because you know precisely how and when this spending will pay off. You already know precisely which technologies deserve "investment" and the proportions to which each should get incentives.

jjjjjjjj Putting words that suit your aims in the mouths of others is a debating tactic called creating a strawman, something much easy to destroy than the person himself. Cheesers of the Limbaugh ilk are most common users of the tactic which of course is aided quite a bit by having the kill switch too.

But! your first part is right. For most of my life the gov spent about 16-18% but since Reagan we routinely add another 2% to make the interest payments on the massive debt run up under the pseudo econ term "supply side" ie. voodoo and D E
B T

And No, I do not always "know" what are suitable priorities, but!!! each and every year our Congressional Reps do indeed decide how to spend 20% of GDP. And! They've more influence than that as there are often small incentives that pave the way for private consumers and industry to spend more than they otherwise would. Perhaps you'll recall getting some benefit for school that for many might make the difference between going and not going?

You are convinced that no better options will emerge in the future,

......... nope. perhaps a rereading? My story about my $120 calculator that did only what a give away biz card calculator today? But! at the time there being no other choices but slide rules, I got my use out of it very shortly. Many have since had the very same experience with computers and other electronics.

which is why you want to drain the pool of available resources for tomorrow's ideas in order to pay for today's.

............... hmmmmmmmmm do you have a home? perhaps with a 15-30 mortgage? A car with 3-5 year payments? Or cash tied up in one? Aren't you worried that homes will go out of style or your car become obsolete before it's paid for?

Sorry, Jack. I know you mean well. I'm sure you're a great mariner. But neither you nor any other oligarchic technocrat has the right to steal my income which I would otherwise be putting toward my son's future.

.......... Aaaah! Planning for his future? Engineers gave us a grade of D on our rotting infrastructure, and as you may know, once deterioration gets going it goes faster if not repaired; YOU inherited fairly good infrastruture for the times, do you think I'm thinking too far ahead to want to leave him, my boy and their entire generation a dust heap?

That you think you know best doesn't mean that you do. Others are just as certain of the precise opposite approach. In the 1970s there were the same people (I guess you were one of them) claiming that we had hit the Peak Oil mark.

......... Huppert. And the peak was that of the US that he predicted using a computer model; hit it dead on; despite the huge Prudhoe Bay find. Yep, it's his model that predicts the Peak for the world. Who knows? Might be dead on, or off by ten years, maybe, long shot? 20 years, then what? And what as the rising consumption curve departs from the

It was wrong then and I see no evidence that it's right today.

jjjjjjjjj Look around. And no I was not the predictor I only thought it fairly dumb to waste NON-RENEWABLE resources. My guess it that when our kids are 30 something, they'll look at us like we look at those killing sperm whales to the point of extinction to burn the oil out of their heads for candle light and shoe polish. We've other options.

It seems reasonably clear that Carter's Department of Energy failed, as our progressive reliance on foreign energy directly correlates to our domestic restrictions on production. Carter didn't break OPEC. He handed empowered them.

jjjjjjjjjj Well, NO. Trouble is it worked TOO good as oil dropped below $10 and off we went to build the greatest fleet of gashogs and energy wasting homes the world has ever seen. Almost like we were teed up in a conspiracy. 70% dependent on Iran not getting upset and closing the Strait of Hormuz, or someone else shutting down the Suez as did Egypt for 7 years after one of their regular tiffs with Israel.

My position is that the free, voluntary enterprise system, when it's not perverted by central bank planning and interest rate price fixing, does an infinitely better job in having manpower and capital flow to the most productive use.

jjjjjjjjj simple in concept and we've covered much of that. Remember? the childish idiots who tailor a home's energy profile to their 6 year stay and leave another energy liability for the rest of us.

Profits attract investment. Capital drive up productivity and pushed down costs. Competition pushes down prices. Everyone's buying power increases and prosperity grows across the board.

...... That's a rough summary of chapter one, but I think Samuelson has about 20 chapters.

And if a foreigner can do it better/cheaper, we should be allowed to buy it free of import tariff.

........... so they say. However we'll soon learn quite a bit about that.......... theory. I'd say study the chapter on "relative advantage" and see if you think the author means "competing with slave labor" BTW how's it working out? Do you have an understanding of what Trade Deficits amounting to 7% of our entire GDP means?

That savings provides the same increase in buying power and prosperity as a domestic productivity, and allows us to spend more money on domestically productive companies. This is just Adam Smith, but it's no less true than ever.

........... ahhh yes. Used to lay that one on my dad who never took econ but did live thru the last Depression that had much of the same profile as the one coming. "Hey! those cute Japanese cars are such a much better deal" my friends would say. "Maybe so" said the old Depression and WWII Vet" but when you don't have a job it doesn't matter how cheap it is. BTW in those days we often ran trade surpluses which made our currency strong.

It's ludicrous that we still have things like sugar quotas, which steal from everyone in the form of higher food prices to give to a tiny collection of producers more money.

........... Oh? and wasn't NAFTA going to fix all of that? The WTO? "The New World Order?" Ahhh yes and the check is in the mail and poverty in Mexico didn't increase dramatically.

This is true of all tariffs and subsidies, though. They always hurt the majority in favor on the politically-connected special interest. Protectionism is theft.

.......... Interesting. Did the Bushies know that when they passed the Medicare Prescription bill that disallows price shopping? Even WITHIN our own borders, much less the global economy? With the result the VA pays but 40% of what Med care pays? One suspects you'll hear a lot more about Fair trade than "free trade" in the coming years. Hint: the corpies with 14,000 "HQ's" all in a building the size of an 8-plex in the Cayman Is tax haven are playing ALL of the naifs and ideologues off against each other. Take a look?

Government seems to do the exact opposite of free enterprise. The incentives are just not in government to seek productivity. Instead, they seek "full employment" because the delivers more votes. But that's not an effective goal.

.......... They do speak of jobs, and both they AND the private sector speaks of higher GDP's and neither is much of a measure of standard of living, but! when unemployment is low and GDP is growing at a good pace it does all work a lot better than the converse. (You'll soon get a front row view!)

And yes, our government is fundamentally coercive. The income tax is a coercive theft of private property.

..............Uh-oh! Do we have one of those "Libs" so half-baked he doesn't even want to pay for our warmongering? Those little yellow flags everyone stuck on their gashogs 5 years ago were cute as a bug's behind, but now YOU and your boy ARE getting the tab that boomers chanting "No new taxes" have left for you. I think it averages $100k per household now, but! as you see we'll be piling on quite a bit more.

Borrowing robs other potential borrowers from access to funding. Inflation robs from the poor and working class to give to the politically connected.

......... Ha! probably w/o buying even the very nicely written "Economics for Dummies" you'll soon see that it is all skewed in favor of the rich and connected. Perhaps one of your theories will explain why CEO pay soared from 50 times worker pay in 1980 to over 400 times this year, while min wages and median wages declined and since 2000 even wages of college educated have been Flat

Here's the graph: http://news.bbc.co.uk/2/hi/business/5303590.stm

All of that is morally wrong and the system that funnels this stolen money is politically redistributive, NOT productively redistributive.

.......... well, a good question. Sans unions and a decent living level of min wage, income and wealth inequality has grown tremendously in the US, we used to "laugh" at Mexico for having only poor and rich and no middle class and WE are there. HAD "a rising tide lifted all the boats" as productivity doubled over the last 25 years median HH income would not be $50k but more like $80k and WE would not be in the mess we are in with a demand limited meltdown/Depression. Few seemed to lament the "redistribution" that created this massive inequality as it was taking place. But! the clamor as its unwound will make up for the 25 years of silence.

If you could tell me that in exchange for dumping trillions into less productive energy sources, we'd have a promise of the end to our military globe trotting and a subsequent tax cut to counter the cost increase, I'd at least consider it a net gain in human life, if not real productive investment.

........... Hey! You're showing promise! But please reflect on what energy "efficiency" has been garnered since Reagan tore the solar installation of Carter off the White House.

But I don't think your crystal ball is that clear.

.......... such is life. Even the BEST of real execs make their livings making long term decisions based on less than perfect knowledge. Mariners and small businessmen too.

Both parties are now just as horrifyingly interventionist as the democrats used to be starting with Woodrow the tyrannt Wilson right up to everyone's favorite LBJ. People seem to forget that JFK launched the Vietnam war.

......... Well it's kinda easy to forget, since Ike put the first "advisers" in after the French bailed out, and so it was until JFK's demise and I was drafted along with a million others when LBJ promptly took the thing up from a few thousands to half a million, but what's your point? "Commmie fear" was as loose in the land then as is "Muslim fear" is today.

But the GOP is just as lost on this front now with the "war on terror". The very name is preposterous. It's like saying we're going to have a "war on fear". Dumb.

............. yep.

So, no, I don't trust your judgement on energy. I don't believe your story about the future. I don't buy your argument for why I should.

............ dig deeper? We had plenty of energy when I was thirty......... shall I remind you that we were just 30% dependent in the 70's crisis and 70% dependent during this one? Quite a change in 30 years, eh? Perhaps lucky, in a way that the world wide recession is lowering demand........... for a brief time.

But I am listening and do appreciate and respect your engagement in the issues. Why can't you take that passion and work to make it happen WITHOUT the monopoly of force that is The State? If your way is the right way, you should have a convincing enough argument that voluntary funding should be available.

........... there will be that too, and perhaps eventually, most, ala T. Boone's big plans. But HE is spending $50 mill to influence DC and get some enabling legislation. And guess what? rich as he is, he is on hold for not being able to get financing.

It's pretty clear that our modern economy is privately funding all kinds of long-term research from fueling-producing algae to intergalactic tourism.

............ well some anyway research is down in the US compared to many nations including poor ones like China, if we fall behind what are we going to have to sell that will maintain our current std of living? Those looking for the Higgins bosun at CERN were nearly shut down by the Bushies in favor of warmongering costs, but! fortunately the incoming Dems have refunded it. Cost? 'bout $100 mill/ year......... or the cost of ONE military jet.

Oh yes, I do care about our environment. Very much so. It's part of why I'm 99% vegetarian. But I see far more effective tools to fight polution in property rights and stripping the mountain of protections from lawsuit our government has erected for polluters like Monsanto as the most moral starting point.

............. Yup.

I don't think the government should borrow a trillion dollars and sink it into today's oil alternatives when they are clearly less productive.

........... I've not been an advocate of such. But! I'm greatly cheered that Barack is subsidizing energy retrofitting of 2 million homes..... there are some horrible energy wasters out there, and, of course, strapped as they are, with the best of intentions, the folks can not front the money themselves. Dam shame we didn't have the foresight to have improved the building codes long ago as it's FAR more expensive to retrofit than to do it right in the first place. Also GREATLY cheered by both the improved CAFE standard that will INCLUDE trucks and SUV's too and allowing CA to make its own, likely tighter standard; set the rules and let "The Marker" find thousands of creative ways to meet the challenge.

Geez this has gotten so long and we've not even touched on the unfunded externalities of CO2 and other pollutants which may well screw things up for those of your boy's age. But change does come, it seems just yesterday (sorta) that Rachel Carson's "Silent Spring" and another author's A Sand County Almanac were the first and about the ONLY environmental books and smoking was allowed everywhere but in a courtroom, church or classroom.

The fact that so many the statist greens reject Nuclear power, despite it's immense productivity, proves to me that they aren't interested in prosperity at all.

............. Well nukie isn't entirely rejected, but! in the US it may not be a very good business model.

http://www.rmi.org/images/PDFs/Energy/E05-08_NukePwrEcon.pdf

.......... you might enjoy rummaging around some of the rest of RMI.org........ Lovins is a pretty savvy and interesting guy.

If they really wanted to fight carbon, replacing coal with Nuclear would be the best bang for the buck.

............. wind seems to have the edge where it's available and solar is coming on strong too. See RMI

Clearly. And it works on a cloudy, windless day too!

.......... I was just thinking we COULD put Nukies where the sun doesn't shine and the wind doesn't blow. Funny thing Pres Cheney coming in all hopped on nukie and eight years later nada? Must be something fundamentally wrong.

These people only want control and ideological redistribution to their buddies and their personal hobby horses. They don't respect people's rights to their own property and that makes their means immoral. It's just a bald-faced power grab by wannabe despots.

I think we're on the same page about the gold standard, though. The REAL change that would matter for everyone would be to return to commodity-based money and eliminate central banking.

.......... it's pretty complex and even after chapter 18,19,20 or so........ it's not easy to see much less design a new set up. BTW I suppose we're on "the gold standard" more so than pre-Nixon when you and I were prohibited from owning gold....... today if we don't trust the script we can turn it into bullion, or Euros which would have been the move in 2000

That's the best starting point for re-building our financial system. That would lay a moral foundation by stripping away the state's power to inflate and reinstate the highly effective free-market regulation known as "failure" in banking. No company should ever be bailed out. Ever.

.............. Ideally. But then "Libs" most likely wouldn't favor anti-trust action to keep Citi and others from "getting too big to fail".

As an energy side note, you have to kind of feel sorry for the people of every major oil nation. It seems that having oil prevents productive investment in other areas and depresses prosperity for the people.

.......... I've lived in one for 30 years, named Alaska. And! it's a mixed blessing/curse. There's quite some prosperity these days, especially when unregulated WS thieves run the price up to $140 while the costs remain at $14! Thanks all! But it's true, humping bags for tourists for lowpay in the summer and no pay in the winter does pale by comparison to extraction.

Meanwhile, Island nations like Singapore or Japan are enormously successful despite virtually no raw domestic resources. Just one more proof that trade and productivity are the keys to prosperity.

.......... Indeed! and one that points up that we might be best off not chest thumping and proclaiming "We're the best!" But I've been to Japan and were you and your family doing well there you'd be living in 500 sf and be riding a crowded subway instead of tooling along our crumbling highways tuning your Ipod.

Cheers and best, Jack

John sez:
Jack,

I'm gonna step back and look at the bigger ideas here, since you and I can joust about particulars forever. Your fundamental position is as follows:

The government spends at least 20% of our annual GDP, and that's not going to change. They should spend it the way you want them to, regardless of the current productivity of that spending, because you know precisely how and when this spending will pay off. You already know precisely which technologies deserve "investment" and the proportions to which each should get incentives.

jjjjjjjj Putting words that suit your aims in the mouths of others is a debating tactic called creating a strawman, something much easy to destroy than the person himself. Cheesers of the Limbaugh ilk are most common users of the tactic which of course is aided quite a bit by having the kill switch too.

But! your first part is right. For most of my life the gov spent about 16-18% but since Reagan we routinely add another 2% to make the interest payments on the massive debt run up under the pseudo econ term "supply side" ie. voodoo and D E
B T

And No, I do not always "know" what are suitable priorities, but!!! each and every year our Congressional Reps do indeed decide how to spend 20% of GDP. And! They've more influence than that as there are often small incentives that pave the way for private consumers and industry to spend more than they otherwise would. Perhaps you'll recall getting some benefit for school that for many might make the difference between going and not going?

You are convinced that no better options will emerge in the future,

......... nope. perhaps a rereading? My story about my $120 calculator that did only what a give away biz card calculator today? But! at the time there being no other choices but slide rules, I got my use out of it very shortly. Many have since had the very same experience with computers and other electronics.

which is why you want to drain the pool of available resources for tomorrow's ideas in order to pay for today's.

............... hmmmmmmmmm do you have a home? perhaps with a 15-30 mortgage? A car with 3-5 year payments? Or cash tied up in one? Aren't you worried that homes will go out of style or your car become obsolete before it's paid for?

Sorry, Jack. I know you mean well. I'm sure you're a great mariner. But neither you nor any other oligarchic technocrat has the right to steal my income which I would otherwise be putting toward my son's future.

.......... Aaaah! Planning for his future? Engineers gave us a grade of D on our rotting infrastructure, and as you may know, once deterioration gets going it goes faster if not repaired; YOU inherited fairly good infrastruture for the times, do you think I'm thinking too far ahead to want to leave him, my boy and their entire generation a dust heap?

That you think you know best doesn't mean that you do. Others are just as certain of the precise opposite approach. In the 1970s there were the same people (I guess you were one of them) claiming that we had hit the Peak Oil mark.

......... Huppert. And the peak was that of the US that he predicted using a computer model; hit it dead on; despite the huge Prudhoe Bay find. Yep, it's his model that predicts the Peak for the world. Who knows? Might be dead on, or off by ten years, maybe, long shot? 20 years, then what? And what as the rising consumption curve departs from the

It was wrong then and I see no evidence that it's right today.

jjjjjjjjj Look around. And no I was not the predictor I only thought it fairly dumb to waste NON-RENEWABLE resources. My guess it that when our kids are 30 something, they'll look at us like we look at those killing sperm whales to the point of extinction to burn the oil out of their heads for candle light and shoe polish. We've other options.

It seems reasonably clear that Carter's Department of Energy failed, as our progressive reliance on foreign energy directly correlates to our domestic restrictions on production. Carter didn't break OPEC. He handed empowered them.

jjjjjjjjjj Well, NO. Trouble is it worked TOO good as oil dropped below $10 and off we went to build the greatest fleet of gashogs and energy wasting homes the world has ever seen. Almost like we were teed up in a conspiracy. 70% dependent on Iran not getting upset and closing the Strait of Hormuz, or someone else shutting down the Suez as did Egypt for 7 years after one of their regular tiffs with Israel.

My position is that the free, voluntary enterprise system, when it's not perverted by central bank planning and interest rate price fixing, does an infinitely better job in having manpower and capital flow to the most productive use.

jjjjjjjjj simple in concept and we've covered much of that. Remember? the childish idiots who tailor a home's energy profile to their 6 year stay and leave another energy liability for the rest of us.

Profits attract investment. Capital drive up productivity and pushed down costs. Competition pushes down prices. Everyone's buying power increases and prosperity grows across the board.

...... That's a rough summary of chapter one, but I think Samuelson has about 20 chapters.

And if a foreigner can do it better/cheaper, we should be allowed to buy it free of import tariff.

........... so they say. However we'll soon learn quite a bit about that.......... theory. I'd say study the chapter on "relative advantage" and see if you think the author means "competing with slave labor" BTW how's it working out? Do you have an understanding of what Trade Deficits amounting to 7% of our entire GDP means?

That savings provides the same increase in buying power and prosperity as a domestic productivity, and allows us to spend more money on domestically productive companies. This is just Adam Smith, but it's no less true than ever.

........... ahhh yes. Used to lay that one on my dad who never took econ but did live thru the last Depression that had much of the same profile as the one coming. "Hey! those cute Japanese cars are such a much better deal" my friends would say. "Maybe so" said the old Depression and WWII Vet" but when you don't have a job it doesn't matter how cheap it is. BTW in those days we often ran trade surpluses which made our currency strong.

It's ludicrous that we still have things like sugar quotas, which steal from everyone in the form of higher food prices to give to a tiny collection of producers more money.

........... Oh? and wasn't NAFTA going to fix all of that? The WTO? "The New World Order?" Ahhh yes and the check is in the mail and poverty in Mexico didn't increase dramatically.

This is true of all tariffs and subsidies, though. They always hurt the majority in favor on the politically-connected special interest. Protectionism is theft.

.......... Interesting. Did the Bushies know that when they passed the Medicare Prescription bill that disallows price shopping? Even WITHIN our own borders, much less the global economy? With the result the VA pays but 40% of what Med care pays? One suspects you'll hear a lot more about Fair trade than "free trade" in the coming years. Hint: the corpies with 14,000 "HQ's" all in a building the size of an 8-plex in the Cayman Is tax haven are playing ALL of the naifs and ideologues off against each other. Take a look?

Government seems to do the exact opposite of free enterprise. The incentives are just not in government to seek productivity. Instead, they seek "full employment" because the delivers more votes. But that's not an effective goal.

.......... They do speak of jobs, and both they AND the private sector speaks of higher GDP's and neither is much of a measure of standard of living, but! when unemployment is low and GDP is growing at a good pace it does all work a lot better than the converse. (You'll soon get a front row view!)

And yes, our government is fundamentally coercive. The income tax is a coercive theft of private property.

..............Uh-oh! Do we have one of those "Libs" so half-baked he doesn't even want to pay for our warmongering? Those little yellow flags everyone stuck on their gashogs 5 years ago were cute as a bug's behind, but now YOU and your boy ARE getting the tab that boomers chanting "No new taxes" have left for you. I think it averages $100k per household now, but! as you see we'll be piling on quite a bit more.

Borrowing robs other potential borrowers from access to funding. Inflation robs from the poor and working class to give to the politically connected.

......... Ha! probably w/o buying even the very nicely written "Economics for Dummies" you'll soon see that it is all skewed in favor of the rich and connected. Perhaps one of your theories will explain why CEO pay soared from 50 times worker pay in 1980 to over 400 times this year, while min wages and median wages declined and since 2000 even wages of college educated have been Flat

Here's the graph: http://news.bbc.co.uk/2/hi/business/5303590.stm

All of that is morally wrong and the system that funnels this stolen money is politically redistributive, NOT productively redistributive.

.......... well, a good question. Sans unions and a decent living level of min wage, income and wealth inequality has grown tremendously in the US, we used to "laugh" at Mexico for having only poor and rich and no middle class and WE are there. HAD "a rising tide lifted all the boats" as productivity doubled over the last 25 years median HH income would not be $50k but more like $80k and WE would not be in the mess we are in with a demand limited meltdown/Depression. Few seemed to lament the "redistribution" that created this massive inequality as it was taking place. But! the clamor as its unwound will make up for the 25 years of silence.

If you could tell me that in exchange for dumping trillions into less productive energy sources, we'd have a promise of the end to our military globe trotting and a subsequent tax cut to counter the cost increase, I'd at least consider it a net gain in human life, if not real productive investment.

........... Hey! You're showing promise! But please reflect on what energy "efficiency" has been garnered since Reagan tore the solar installation of Carter off the White House.

But I don't think your crystal ball is that clear.

.......... such is life. Even the BEST of real execs make their livings making long term decisions based on less than perfect knowledge. Mariners and small businessmen too.

Both parties are now just as horrifyingly interventionist as the democrats used to be starting with Woodrow the tyrannt Wilson right up to everyone's favorite LBJ. People seem to forget that JFK launched the Vietnam war.

......... Well it's kinda easy to forget, since Ike put the first "advisers" in after the French bailed out, and so it was until JFK's demise and I was drafted along with a million others when LBJ promptly took the thing up from a few thousands to half a million, but what's your point? "Commmie fear" was as loose in the land then as is "Muslim fear" is today.

But the GOP is just as lost on this front now with the "war on terror". The very name is preposterous. It's like saying we're going to have a "war on fear". Dumb.

............. yep.

So, no, I don't trust your judgement on energy. I don't believe your story about the future. I don't buy your argument for why I should.

............ dig deeper? We had plenty of energy when I was thirty......... shall I remind you that we were just 30% dependent in the 70's crisis and 70% dependent during this one? Quite a change in 30 years, eh? Perhaps lucky, in a way that the world wide recession is lowering demand........... for a brief time.

But I am listening and do appreciate and respect your engagement in the issues. Why can't you take that passion and work to make it happen WITHOUT the monopoly of force that is The State? If your way is the right way, you should have a convincing enough argument that voluntary funding should be available.

........... there will be that too, and perhaps eventually, most, ala T. Boone's big plans. But HE is spending $50 mill to influence DC and get some enabling legislation. And guess what? rich as he is, he is on hold for not being able to get financing.

It's pretty clear that our modern economy is privately funding all kinds of long-term research from fueling-producing algae to intergalactic tourism.

............ well some anyway research is down in the US compared to many nations including poor ones like China, if we fall behind what are we going to have to sell that will maintain our current std of living? Those looking for the Higgins bosun at CERN were nearly shut down by the Bushies in favor of warmongering costs, but! fortunately the incoming Dems have refunded it. Cost? 'bout $100 mill/ year......... or the cost of ONE military jet.

Oh yes, I do care about our environment. Very much so. It's part of why I'm 99% vegetarian. But I see far more effective tools to fight polution in property rights and stripping the mountain of protections from lawsuit our government has erected for polluters like Monsanto as the most moral starting point.

............. Yup.

I don't think the government should borrow a trillion dollars and sink it into today's oil alternatives when they are clearly less productive.

........... I've not been an advocate of such. But! I'm greatly cheered that Barack is subsidizing energy retrofitting of 2 million homes..... there are some horrible energy wasters out there, and, of course, strapped as they are, with the best of intentions, the folks can not front the money themselves. Dam shame we didn't have the foresight to have improved the building codes long ago as it's FAR more expensive to retrofit than to do it right in the first place. Also GREATLY cheered by both the improved CAFE standard that will INCLUDE trucks and SUV's too and allowing CA to make its own, likely tighter standard; set the rules and let "The Marker" find thousands of creative ways to meet the challenge.

Geez this has gotten so long and we've not even touched on the unfunded externalities of CO2 and other pollutants which may well screw things up for those of your boy's age. But change does come, it seems just yesterday (sorta) that Rachel Carson's "Silent Spring" and another author's A Sand County Almanac were the first and about the ONLY environmental books and smoking was allowed everywhere but in a courtroom, church or classroom.

The fact that so many the statist greens reject Nuclear power, despite it's immense productivity, proves to me that they aren't interested in prosperity at all.

............. Well nukie isn't entirely rejected, but! in the US it may not be a very good business model.

http://www.rmi.org/images/PDFs/Energy/E05-08_NukePwrEcon.pdf

.......... you might enjoy rummaging around some of the rest of RMI.org........ Lovins is a pretty savvy and interesting guy.

If they really wanted to fight carbon, replacing coal with Nuclear would be the best bang for the buck.

............. wind seems to have the edge where it's available and solar is coming on strong too. See RMI

Clearly. And it works on a cloudy, windless day too!

.......... I was just thinking we COULD put Nukies where the sun doesn't shine and the wind doesn't blow. Funny thing Pres Cheney coming in all hopped on nukie and eight years later nada? Must be something fundamentally wrong.

These people only want control and ideological redistribution to their buddies and their personal hobby horses. They don't respect people's rights to their own property and that makes their means immoral. It's just a bald-faced power grab by wannabe despots.

I think we're on the same page about the gold standard, though. The REAL change that would matter for everyone would be to return to commodity-based money and eliminate central banking.

.......... it's pretty complex and even after chapter 18,19,20 or so........ it's not easy to see much less design a new set up. BTW I suppose we're on "the gold standard" more so than pre-Nixon when you and I were prohibited from owning gold....... today if we don't trust the script we can turn it into bullion, or Euros which would have been the move in 2000

That's the best starting point for re-building our financial system. That would lay a moral foundation by stripping away the state's power to inflate and reinstate the highly effective free-market regulation known as "failure" in banking. No company should ever be bailed out. Ever.

.............. Ideally. But then "Libs" most likely wouldn't favor anti-trust action to keep Citi and others from "getting too big to fail".

As an energy side note, you have to kind of feel sorry for the people of every major oil nation. It seems that having oil prevents productive investment in other areas and depresses prosperity for the people.

.......... I've lived in one for 30 years, named Alaska. And! it's a mixed blessing/curse. There's quite some prosperity these days, especially when unregulated WS thieves run the price up to $140 while the costs remain at $14! Thanks all! But it's true, humping bags for tourists for lowpay in the summer and no pay in the winter does pale by comparison to extraction.

Meanwhile, Island nations like Singapore or Japan are enormously successful despite virtually no raw domestic resources. Just one more proof that trade and productivity are the keys to prosperity.

.......... Indeed! and one that points up that we might be best off not chest thumping and proclaiming "We're the best!" But I've been to Japan and were you and your family doing well there you'd be living in 500 sf and be riding a crowded subway instead of tooling along our crumbling highways tuning your Ipod.

Cheers and best, Jack

А газовый конфликт не окончен, а Вы тут всё о своём трёте

دردشة صوتية

@Jack,

I wasn't trying to erect a strawman, but I was trying to encapsulate your position so that you could defend you assertions of a right to lord over the "children". That you talk about consumers like "children" I think reinforces my little paragraph summary.

It's okay. I don't judge your character for it. But I do fundamentally disagree with the ethics of it. If my neighbor isn't weatherizing his house, that doesn't give me the right to force him to. He's paying higher energy bills and there's little reason to feel that those costs don't cover the use. He may be choosing to put that weatherizing money into feeding his kids or saving for their education. Maybe he's weighed the potential cost savings against his alternative used and declined to do so. Regardless, I have no right to force it or to steal from other people to enable it. The subsidies for him to do so are simply stealing that money from other people, who may have voluntarily chose other uses for it as well.

I think we are disconnecting in that you keep dipping into short-term pragmatism and policy where I'm staying in the clouds of ideas and ideals. I believe that you are trapped in accepting the current system of monopoly-maintaining central power and it's false check of regulation.

It reminds me of the net neutrality debate, where many activist are now calling on government to enforce, in effect, price controls on service providers because they feel that those providers are fixing to extract monopoly rents. What these activists can't/won't see is that it is the government that granted our teleco's their monopoly and the FCC that has been getting bought to maintain it through their coercive monopoly power.

The solution to net neutrality is a fully deregulated wireless spectrum, not more regulation of the current players. No play could sustain high rents in an open competitive market for wireless broadband.

This would be an amazing move if the Obama team wasn't ideologically trapped in monopolize/regulate as the model.

And so the same goes with much of your points. You call more coercive regulations and subsidies to check these state-sponsored monopolies. Never mind that the government DOESN'T HAVE THE MONEY. Calling for them to print the money anyway will just destroy more wealth through inflation and malinvestment, while also setting up a currency crisis that will make our current problems look tame.

As for the huge trade imbalances, well, I can't claim to have a clue. I will simply say that I would think the fact that other nations hold billions in US dollar-denominated debt gives them a stake in our future, which seems good. China doesn't want a dollar crisis, as it would be devastating to their fiscal health. It also gives them a say in our future, which is scary. And I don't see "fair trade" as being any different than protectionism that will push up prices and pervert the flow of resources and choices.

Anyway. It's been tons of fun. We'll see how it all plays out. It should be interesting to see if our information age helps us adapt quicker to bad policy choices than occurred during the 1930's. The practical reality is that people won't change their minds. If it all crashes down further and further, the Keynesians will say we need to spend more and the austrians will say they are right. If we pull out of it, the Keynesians will say they were right and the austrians will say we've only kicked the can toward an even bigger future collapse. I'm still in the latter camp, but I'm open to change. What I'm not open to is accepting coercion as a legitimate tool.

On a side note: please don't conflate me with mainstream "conservatives". If a label fits me, it's either libertarian or classical liberal. I reject "the war on terror" as well as "the war on drugs". The black market for drugs that our country's policies create is the key source of trouble for Mexico, Haiti, Afghanistan, Columnbia and ever other drug-cartel-ravaged country. I say we treat victimless crime (drug abuse) not as crime at all, but as an illness. That's not "conservative".

Terrorism is a symptom, not a root problem, so a mission of "kill all the terrorists" is futile and destined to bankrupt our nation. The root cause, however, isn't poverty, but policy as evidenced by the profile of most terrorists as educated middle class men. Also, I don't personally find "patriotism", when it is used to foster us vs. them attitudes, to be much different from scary propaganda used to whip up a mob. Again, none of that is "conservative".

As for Japan and my lifestyle, well, I do happen to hop on a filled bus then a packed subway twice a day, here in NYC. And I do live in very modest home, proudly. I drive an SUV, but I bought it used which means I've saved more carbon than any new prius owner.

John, good observation. And I tend to like Libertarian ideals, but they "work" so much better at the lofty level than at street level. In fact, in Alaska we once had a quite active Lib party and speaking of streets, the more radical of Libs used your coercive argument even down to paving the street in front of your house.

As for China, I'd compare our position to these playful rascals who inherited a fine farm with a nice house. They enjoyed partying in town a lot and most years ended up selling less than they purchased. Fortunately there was a friendly banker who was genial and if I remember right, sort of a friend of the family. "No problem" he'd say "I'll just lend you full value on that back 40". As you can guess pretty soon the payments were even higher and "back 40's" were mortgage more often. The banker did indeed have much to say about things when the payments were late, and finally presided over the sheriff's sale.

As for my home buying children, it's an area in which I've considerable expertise, along with that of a few other areas, but there are today thousands of areas, thus my comments as to how I'd do as your camera man next Tuesday. All you do is just point the thing, right? In short we are all experts in one or a few narrow areas and bumpkins in many others as Bernie Madoff's savvy and once wealthy clientel can attest.

To be sure, as Libs are wont to insist, in some areas getting the playing field right or having a private outfit take the place of the FDA might work. But the capitalist system rewards only the areas where a buck can be turned, and even better if you can get away with dumping the effluent in the river and no one speaks for the river, the sea or our rapidly declining NON-renewables. "The Market" pays only the costs of extraction which is to greatly undervalue their future value.

So......... we are left, as kids at a hot dog feed with the choice of telling our guests we've enough for two dogs a piece, or........ having those in the front of the line take three and leaving only empty buns for those yet to come.

Ahh, yes, NYC, Ha! perhaps our city that is most like Tokyo......... Ha! Did you catch PosnerBecker on paying a premium to venture into such crowded areas? Hasn't Bloomy proposed $20 for driving into the city? A sort of ideal Lib idea, but one that might be tough on the starving student eh?

Thanks for the back and forth, Jack.

One last thought. Libertarian ideals aren't pie-in-the-sky. They built this country. They animated it's revolution, it's constitutional restraint on central power and it's construction during the the first century of it's existence. The libertarian ideals underpin all civil rights.

That the former statist conservatives re-branded themselves as "progressives" at the beginning of the 20th century and hijacked our republic with decades of war and statism doesn't invalidate libertarian ideals. What they came in to a creditor nation in surplus and transformed us to the earth's greatest debtor nation on the verge of leading a new global collapse.

John, Thanks, but I sense you might be cherry-picking your history treatises as the very concept upon which our country was founded and maintains the oldest Constitution of the world's nations was that of classical liberal progressivity.

It's something of a mystery where "we hold these truths to be self-evident" came from, and several writers make a fair case that it came from the "Indians" as NO such "truths" were at all "self-evident" in the old world and many were certain that the people limited in education as the were at the time would be able to run a nation.

But these are again vague generalities that explain little of what is happening today and what SHOULD be happening today.

For now I'll leave you with a puzzle to solve and since the problem came about with little "central power" (like none) let's say you solve it using only Lib precepts that you believe in.

http://news.bbc.co.uk/2/hi/business/5303590.stm

The chart at the bottom shows a sharp divergence of wages from productivity, one that is worsening by the week. How would your deal get the wage lines to, at min, parallel the productivity lines or ideally! return to there traditional relationship?

Assuming the Lib phil. "doesn't care" if all of the productivity gains go to the "owner class" and the top 20% of "earners" (see recent WS bonuse??) does the "phil." have some idea who is going to buy all the stuff created by the soaring productivity??

One assumes your gig does not include collective bargaining or "central powers" dictating any increases to the, token, min wage.

Also I'd rather not hear about "morality" "feelings" or "beliefs" I'm looking forward to finding ways in which the economy, MIGHT, again flourish. Fair enough? Jack

Nice very informative

Thanks for that link, Jack. This is a fascinating problem. I wouldn't be so bold as to claim I have an answer. But here's what I can make of this article, and the questions I'd love to have answered.

Given my limited knowledge, I would agree that globalization and outsourcing have clearly put big pressure on middle and working class wages. I find macro stats a bit too general to feel comfortable taking them at face value. I'd prefer to see the wages split out by industrial sector. All that said, I'll assume these are reasonably accurate.

I also don't see any indication that these numbers are adjusted for inflation. CPI is a BS indicator regardless.

So, what's my austrian explanation? Here goes:

#1. The massive jump in the top earners is almost entirely coming from the financial sector, which was going bonkers as a result of the Fed's massive inflation during that same period. The divergent graph correlates with the Fed's 1% rates exactly.

#2. The lower wages would have actually translated into higher REAL wages if the effects of globalization were allowed to cause broader price deflation. Instead, monetary and fiscal policy pushed up prices on housing, food, and fuel and probably held consumer goods artificially constant. In short, someone whose wage remained stuck at 30 grand should have had greater buying power in 2006 than 2000, but that benefit was robbed of them by the Fed and Congress.

#3. Consumer goods prices probably were being pushed up by the home equity cash-out demand, which is a direct result of loose monetary policy that exploded the housing bubble and established an environment of lunacy on Wall St. This was pure inflationary money, not real wealth. With most manufacturing labor now overseas, consumer goods demand wasn't adding much to working class wages.

#4. The CEO pay situation seems out of control emotionally, but I don't think it'd be something worth discussing if we had an honest, hard-money system that didn't rob the working class of buying power.

Now, I may be 100% wrong. But even if I am, I still think that the policy changes we need are a return to hard money standard that ends this working-class-killing inflation. Raising taxes, political spending and trade barriers won't help anyone but the direct recipients of government largesse.

Does that make sense? Again, maybe I'm dead wrong.

John:

"Thanks for that link, Jack. This is a fascinating problem. I wouldn't be so bold as to claim I have an answer. But here's what I can make of this article, and the questions I'd love to have answered.

Given my limited knowledge, I would agree that globalization and outsourcing have clearly put big pressure on middle and working class wages. I find macro stats a bit too general to feel comfortable taking them at face value. I'd prefer to see the wages split out by industrial sector. All that said, I'll assume these are reasonably accurate.

jjjjjjjj Well it's a macro factor in an economy where its sickness too is macro..... recessions of the past tended to be regional while this mess blankets most of the nation and much of the world.

I also don't see any indication that these numbers are adjusted for inflation. CPI is a BS indicator regardless.

jjjjjjjj Irrelevant as both the productivity and wages were measured in the same units. Also, the 25% disparity is too big to be hidden under a silk hanky.

So, what's my austrian explanation? Here goes:

#1. The massive jump in the top earners is almost entirely coming from the financial sector, which was going bonkers as a result of the Fed's massive inflation during that same period. The divergent graph correlates with the Fed's 1% rates exactly.

jjjjjjjjjjjj But the problems shown is one of productivity gains running away from ALL wages. Austrian or otherwise we'll not have growth and lots of "go shopping" while wages are flat. "Constipation" is a word not common to econ analysis......... but it does come to mind.

#2. The lower wages would have actually translated into higher REAL wages if the effects of globalization were allowed to cause broader price deflation. Instead, monetary and fiscal policy pushed up prices on housing, food, and fuel and probably held consumer goods artificially constant. In short, someone whose wage remained stuck at 30 grand should have had greater buying power in 2006 than 2000, but that benefit was robbed of them by the Fed and Congress.

jjjjjjjjjj OK, some points on housing prices though mainly the "stimulus" was from "non-banks" going rogue and lending at 30:1 up from a historic 5 :1 In any case in the example we aren't too interested in the buying power of the wages that trailed productivity by such large margins..... it is that divergence that is of interest. (Also, H/C costs are growing at 9%..... a number that should be frightening to younger folk 72/9 equals an eight year doubling time)

#3. Consumer goods prices probably were being pushed up by the home equity cash-out demand, which is a direct result of loose monetary policy that exploded the housing bubble and established an environment of lunacy on Wall St. This was pure inflationary money, not real wealth. With most manufacturing labor now overseas, consumer goods demand wasn't adding much to working class wages.

jjjjjjjjjj Not much here. The time frame is too short for the divergence to be explained away by prices et al........ THE problem is that of all wages falling from their historic relationship with productivity. And! If "the rising tide does not lift all the boats" we'll not see a rising tide for long.

#4. The CEO pay situation seems out of control emotionally, but I don't think it'd be something worth discussing if we had an honest, hard-money system that didn't rob the working class of buying power.

jjjjjjjjj Ha! I was just thinking about how Posner/Becker and all Repubs are gleefully interested in dissecting low end wages and have had several handwringing wanks about it here. But 400% increases in CEO gleanings? or bonuses taken out of charity..... "ah "the market"". Consider, just the WS bonuses of $50 billion, same this year when they were on their knees begging same as last year when the thieves were pawning Ponzi-derivatives would be the entire income for One Million median household incomes. This will not fix itself.

Now, I may be 100% wrong. But even if I am, I still think that the policy changes we need are a return to hard money standard that ends this working-class-killing inflation. Raising taxes, political spending and trade barriers won't help anyone but the direct recipients of government largesse.

jjjjjjjjjj Well your views on some sort of nostalgic return to a gold standard aren't too relevant to the problem posed.

I'm not seeing much here that is likely to restore labor's relationship with productivity gains, and I reiterate that flat wages means flat "shopping", actually worse than that due to energy and H/C taking bigger bites from all.

Does that make sense? Again, maybe I'm dead wrong.

jjjjjjjj Yeah, you've a few points here..... but what unions used to do was push for wage increases when the industry was "making a buck" and ease off or even give back as we've seen with airlines, UAW and others when times were tight; the graph shows that NO one is succeeding in getting their share, not even the college level faction. Flat = Flat.

@Jack,

Some very interesting points. Do you know how they are calculating productivity? I'm very skeptical about the accuracy of GDP. If the economic transactions in the financial industry were measured as output and then attached to the productivity calculation as a per-capita gain, that alone could account for this departure. Or maybe I've treaded into an area about which I have no clue.

I'd love some more info on those graphs and how they're calculated.

John, you ask a good question and it's not one that lends itself to a quick or flippant answer as GDP while mathematically sound is sort of a slippery customer....

Wiki makes the accepted definition pretty clear:

http://en.wikipedia.org/wiki/Gross_domestic_product

.......... myself, and I think most, taking a look into econ are quick to criticize GDP for much the same reason as your Austrians below:

* Austrian economist critique – Criticisms of GDP figures were expressed by Austrian economist Frank Shostak.[3] Among other criticisms, he stated the following:

The GDP framework cannot tell us whether final goods and services that were produced during a particular period of time are a reflection of real wealth expansion, or a reflection of capital consumption.

He goes on:

For instance, if a government embarks on the building of a pyramid, which adds absolutely nothing to the well-being of individuals, the GDP framework will regard this as economic growth. In reality, however, the building of the pyramid will divert real funding from wealth-generating activities, thereby stifling the production of wealth.

Austrian economists are critical of the basic idea of attempting to quantify national output. Shostak quotes Austrian economist Ludwig von Mises:

The attempt to determine in money the wealth of a nation or the whole mankind are as childish as the mystic efforts to solve the riddles of the universe by worrying about the dimension of the pyramid of Cheops.

Simon Kuznets in his very first report to the US Congress in 1934 said:[4]

...the welfare of a nation [can] scarcely be inferred from a measure of national income...

In 1962, Kuznets stated:[5]

Distinctions must be kept in mind between quantity and quality of growth, between costs and returns, and between the short and long run. Goals for more growth should specify more growth of what and for what.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

......... I like Kuznets' last sentence above, as it leads to consideration of that interface between "The Market" and the democratic will of the people that I've mentioned in our discussion and others on this board.

......... There is more that is relevant to a consideration of GDP as a poor measuring device. For example, upon looking at the numbers of the US spending 18% of GDP on H/C while the French spend but 10% of a smaller GDP, one would figure that we've nearly twice the H/C as France; though if you ask around you'll find they're on par or that the French have somewhat better care. So, GDP is not so hot for comparing the living std of one nation to another except in rough approximations.

Still, economists have to have some means of measuring that is not prone to being overly subjective; and they'd argue that year after year we've about the same number of "OJ Simpson" trials, and hurricanes that push up "productivity".

There are other measurements such as:

http://en.wikipedia.org/wiki/Human_Development_Index

....... and it's of interest that the US ranks just 15th. I suppose using subtraction we could say that our GDP overstates our well-being by perhaps 10 nation positions.

......... There are several other "happiness" indices halfway down the wiki page that are worthy of consideration. All of these strike me as being good stuff in consideration of the study of econ which at its roots is the study of how to use, always scarce resources, to the best benefit of a nation or the world's citizenry.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Tacking back toward your question we've another conundrum. There is another chart that looks like the productivity/wage chart but it shows the divergence of home prices from a VERY long trend of being about 3 times median income, say $150 -$180k which have soared since 2001 to $250k, a figure that is not sustainable given flat median wages.

I predicted to a friend that we could see where they would fall to and thus measure the area under the triangle made by the rise and fall to tell us how much our bankers and homeowners will lose.

My friend pointed out that not all of that rise was inflation, but that homes were built bigger and with more amenities and likely "worth" more. He's right, as even in the boom, for the most part, home building is a 10% margin business, though the sharp rise in CA land costs are more related to the overheated market and would be counted as fluff or inflated.

So we're again confronted by the fuzzy concept of "worth". In one sense, most clearly in areas of the nation where land costs did not soar, the "worth" of the new home was its price and most of its price reflected in materials and efficiently deployed labor.

Still, even if these homes are palaces well worth their price, their median price has to be some function of median wages, given some leeway for lower income folk living in apartments, and others affording more home due to savings or inheritance. So, almost, no matter what happens in Congress the median home price has another 10-15% to fall with lots of losses to go around!

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Well, I'm getting closer to your question! In that the "housing bubble" is well represented in the GDP (rise in productivity) as are the huge salaries stolen on Wall Street. Thus the housing bubble should have lifted both productivity and wages. But wages remained flat despite the gleanings of our "bankers".

While those productivity gains do look higher than usual (this is where an economist needs a room full of computers and some staff!) still we'd expect a doubling in productivity over 25 years (as is the case) but wages, and particularly low end wages have been flat or worse for nearly as long.

Soo, regardless of how we got here, or whether it's "fair" or due to "the market" or outsourcing, inadequate education, or any of the rest of the "reasons" the result is that of our housing stock being unaffordable on average, that most folks are seeing no money left over to "go shopping" and we can expect a FLAT or declining economy until wages (in terms of purchasing power) begin to rise.

(As you pointed out wages, may "rise" due to the falling prices, but that is a very rough way to go in a nation where most margins are thin and we're stuck with fixed mortgage, car, and credit card payments.)

Unfortunately, wage gains will be very tough to make in an environment of 10% plus unemployment with companies laying off and tightening costs........ so! if you see Barack and Congress doing things that look as though they are redistributing wealth from top toward the middle or below, they probably are, and it's about the only way to get the plane flying again. Later, much later! after the patient is out of bed, we can again talk diet, exercise, balanced budgets, money supply and all, but not before.

@Jack,

Those are great quotes from Mises and underpin a very crucial idea about the false value in macro econometrics. I think we can both agree that these fundamentally Keynesian macro figures are inherently broken and corrupt. Furthermore, I would like to see the government get out of the business of calculating them all together, because the cultural weight of a government statistic is totally out of step with it's likelihood of being more honest or accurate.

As for other metrics like "Human Development" or, far more ludicrous and fraudulent, "Happiness", I will simply say that I am just as skeptical of them on the same grounds. The current trend in "happiness" stats and studies are complete garbage because, just like Keynesian stimulus, they ignore the time function. I may not be happy in my job today because I'm working to pay off my debt and position myself for a future business idea, or vacation, or lifestyle change. It's just short-term garbage IMHO, though I do pay attention to the thinking.

Aggregates just aren't worth very much from what I can see. Think about polls of consumer confidence where people say "I'm optimistic about my own future, but worried about the country/world". The former has real human value. The latter is just an echo of what they see and read in the media (most likely).

My problem with your follow on remark, though, is the collectivist approach to "the market" and the false dichotomy of it relative to "the democratic will of the people". For starters, "the market" is nothing more than an abstract name for the aggregation of all "the people's" voluntary exchanges. I find it as inherently democratic as any other system, only more just, because it is voluntary.

"The Democratic Will" on the other hand ends up amounting to top-down oligarchic and usually corrupt decisions by politicians whose own personal incentives are fundamentally out of step with the very nature of long term planning. Look no further than the horrifying Kelo case to see how "the democratic will" exercised by elected officials can be outright totalitarian. How it can easily violate basic ethical notions of innocence, rights to property, and freedom for aggression. Political democracy can't handle economics. It's just not built for it.

I 100% agree with your analysis of the home market and where it's headed. Price isn't related to "value" or "worth" except in so far as those ideas drive the incentive of a buyer who's able and willing to pay. Objectively, a vacant palace that nobody wants or can afford to buy and run is WORTHLESS. It's price and value is ZERO. At some point, the price will come down to where someone will be willing to buy it, and bear the costs of running it. At that point, the transaction will be the only determinant of the value by any useful measure. Any other measure of "worth" falls into emotion an is solely in the eye of the beholder.

I know that's an obvious statement that you clearly get, but our Congress does not. Why else would they be interested in buying all this worthless garbage with some vain idea that the market's pricing in broken but their deeply flawed and corrupt discretion is better?

It is striking, again, that the government macro policy pursuit of "affordable housing" has produced the precise opposite effect and destroyed wealth and buying power. I think they should eliminate our current tax code and all of the perverse incentive structures that go along with it just based on this failed experiment. We've been down this road before with Rent Controls. Push the price down for one group and drive the price up for everyone else.

"if you see Barack and Congress doing things that look as though they are redistributing wealth from top toward the middle or below, they probably are, and it's about the only way to get the plane flying again."

I think that's not correct. To get the plane flying again, we need to let the bottom hit as fast as possible and avoid any new mal-investment bubbles, especially in the slow-changing capital investment arena. One such area I believe has a high degree of mal-investment potential is, as we've already discussed, green energy. This could be a sink-hole whose boom in coming years could seed a nation-ending bust.

Here's my alternative stimulus plan:

#1. Trash the tax code. I'd like it all gone, but if you have to start with a single flat tax for income, business, and cap gains, it's still far better. Close the IRS. End accounting as a profession along with all the exemptions and cheats and costs that go with it.

#2. If you want to see a huge boost in productivity that matters, my personal advice would be to eliminate the FCC, totally deregulate radio spectrum and allow private property rights in that space. You'd instantly see an end to the internet stranglehold by the current telcos and watch the US skyrocket in cheap, fast wireless broadband for all. That would be a tremendous base on which to build new emergence/crowd-sourced open systems for education, commerce and who knows what else. Our spectrum is a precious mismanaged resource with almost limitless potential.

#3. The other thing I'd do would be a 100% decriminalization of drugs. The drain on our society in lost human life to black market violence and the cost in needless incarceration is just too great. The potential cost due to a failed Mexican state on our borders is too large. Make it all legal and let it be sold in an environment with support and treatment professionals there to help the addicted. I believe we'd save billions on this and improve our healthcare system in the process.

#4. End all business subsidies and product mandates. No farm bills. No ethanol. No oil incentives. Scrap that.

What do you think? Politically possible? Of course not. But I think it's the right path and not one bit of it involves coercive state force.

Healthcare and Education are very different issues and I don't feel prepared to roll them into this discussion. But my inclinations are quite similar. Healthcare seems broken by a misalignment of incentives that are calcified by the code-driven compensation that Medicare has imposed and held in place. Bundled outcome-driven payment seems like a better way, and I believe the free market would get there faster without medicare maintaining the status quo. Education has similarly bad incentives where failure gets more funding and success gets ignored. But I digress.

Again, spectacular debate. Very interesting stuff.

@John, well we took on a lot and there is every opp for misunderstanding, let's take a look:

Jack,

Those are great quotes from Mises and underpin a very crucial idea about the false value in macro econometrics. I think we can both agree that these fundamentally Keynesian macro figures are inherently broken and corrupt.

jjjjjjjjj No. And reread your Austrians, as they did concern themselves with NOT building pyramids. While some like to spin them into an all "The Market" syndrome, it's not the case. Consider, the cost of the war which did not come about due to "The Market" but a failure of democracy. (I'm hoping that soon you'll see that there is a three legged stool; Democracy, Market, and Religion all of which have feedback loops to each other)

Furthermore, I would like to see the government get out of the business of calculating them all together, because the cultural weight of a government statistic is totally out of step with it's likelihood of being more honest or accurate.

jjjjjjjjj Well, it's not a precise science, and truth is most applied science is not precise either. Perhaps go out with your camera and interview some of the one in ten who're unemployed this week, and a few who are losing a small or even large biz after a lifetime of work. "Conservative" or not they'll be on the edge of their seat looking at what the Fed and Congress are doing. Feeding the hungry kid is NOT an abstract notion.

As for other metrics like "Human Development" or, far more ludicrous and fraudulent, "Happiness", I will simply say that I am just as skeptical of them on the same grounds. The current trend in "happiness" stats and studies are complete garbage because, just like Keynesian stimulus, they ignore the time function. I may not be happy in my job today because I'm working to pay off my debt and position myself for a future business idea, or vacation, or lifestyle change. It's just short-term garbage IMHO, though I do pay attention to the thinking.

jjjjjjjjjjj Ah! saved! by the last word! And I'd urge you to consider the indexes more thoughtfully; after all what IS it that your generation would hope to build? Just a soulless machine of ants adding to the soaring economic inequality? Add a few more sheckels to a GDP that can "afford" the reckless deployment of the mightiest war machine the world has ever seen?

Aggregates just aren't worth very much from what I can see. Think about polls of consumer confidence where people say "I'm optimistic about my own future, but worried about the country/world". The former has real human value. The latter is just an echo of what they see and read in the media (most likely).

jjjjjjjjjjj Hmmm well there is still time to study macro and see what it's all about. As for polls of that sort they draw out as much emotion "stiff upper lip old boy" as anything else, and there are FEW, who know how bad things ARE under the hood. NO one, alive today has seen a mess like this one; what they have seen are "pullbacks" a recession of two quarters duration....... NOTHING like this one.

My problem with your follow on remark, though, is the collectivist approach to "the market" and the false dichotomy of it relative to "the democratic will of the people". For starters, "the market" is nothing more than an abstract name for the aggregation of all "the people's" voluntary exchanges. I find it as inherently democratic as any other system, only more just, because it is voluntary.

jjjjjjjjj Well, that's sort of a good start. And I'm a big fan of capitalism for garage sales large and small, and for inspiring creativity, invention, and cause to answer the alarm in the morning. But! many things do not fit into the paradigm and the paradigm has considerable inherent flaws (which one learns about in Intro)

........... How to value Central Park? Was it dumb of the city manager who set that land aside? Should NY auction it off for high rise development? "Highest and best economic use??"

"The Democratic Will" on the other hand ends up amounting to top-down oligarchic and usually corrupt decisions by politicians whose own personal incentives are fundamentally out of step with the very nature of long term planning.

jjjjjjjjj Well, you were born during the Reagan era of "greed is good" to be sure and haven't seen very good examples of a functioning democracy for the most part, since. But why are you conceding "the Republic if YOU can keep it" to "corrupt politicians??" And if not a reformed democracy, what? the nazism of and all powerful corporate dominance?

Look no further than the horrifying Kelo case to see how "the democratic will" exercised by elected officials can be outright totalitarian. How it can easily violate basic ethical notions of innocence, rights to property, and freedom for aggression. Political democracy can't handle economics. It's just not built for it.

......... I don't know the Kelo case.

I 100% agree with your analysis of the home market and where it's headed. Price isn't related to "value" or "worth" except in so far as those ideas drive the incentive of a buyer who's able and willing to pay. Objectively, a vacant palace that nobody wants or can afford to buy and run is WORTHLESS. It's price and value is ZERO.

jjjjjjj INdeed, and such is available in Detroit; want a nice brick home built of brick in the 20's with old world trim and woodwork on a large lot? for ONE dollar and a year's back taxes? It's there!

At some point, the price will come down to where someone will be willing to buy it, and bear the costs of running it.

......... Indeed, in NY you've probably seen Brownstones and others chopped up into apartments or even rooms. But the trip there will be VERY bumpy, as you'll soon see.

At that point, the transaction will be the only determinant of the value by any useful measure. Any other measure of "worth" falls into emotion an is solely in the eye of the beholder.

......Indeed, a meeting of the minds of a "willing" seller and willing and able buyer.

I know that's an obvious statement that you clearly get, but our Congress does not. Why else would they be interested in buying all this worthless garbage with some vain idea that the market's pricing in broken but their deeply flawed and corrupt discretion is better?

........... Tis thee who's lost in the woods on this one. Your Austrian boys largely thought in terms of a cash "market" and wouldn't have a clue about one based on credit markets.

It is striking, again, that the government macro policy pursuit of "affordable housing" has produced the precise opposite effect and destroyed wealth and buying power.

jjjjjjjjjj Well, truth is the government did not pursue anything to do with affordable housing. And what little they did to help a few low income folk afford a place to live and raise their families is too small a fraction of The Mess to bother with. And! of course there is and was a structural problem. Home prices escalated both from real cost increases of building, as well as "bubble" increases. Meanwhile, as I keep pointing out there is the Major, major flaw of median wages being FLAT while those lower than median have seen falling wages. Thus! an "affordable" home can not be built in most areas of our nation. The real costs of building have outstripped the wages.......... ie "the worthless empty mansion" effect.

I think they should eliminate our current tax code and all of the perverse incentive structures that go along with it just based on this failed experiment.

............ Oh? and replace it with what? Absent lobbyists, we probably WOULD have seen some of the tax burden shifted from income to the consumption of NON-renewable resources. Surely taxing NON-renewables is one of the best places to tax and we do have to pay for our bombs and wars somehow.

We've been down this road before with Rent Controls. Push the price down for one group and drive the price up for everyone else.

.......... Ahhh yes! here we are again, back at the subject of low end wages being far too low. Whether NY or some cheaper venue why should wages be lower than what one human being can live a very basic life upon? If a company needed a delivery van, I don't think we'd tolerate subsidizing their costs, nor would be expected to provide "affordable" garaging. And! for those companies who don't find a van "worth it" there are bicycle messengers and other means of shipping things.

"if you see Barack and Congress doing things that look as though they are redistributing wealth from top toward the middle or below, they probably are, and it's about the only way to get the plane flying again."

I think that's not correct. To get the plane flying again, we need to let the bottom hit as fast as possible and avoid any new mal-investment bubbles, especially in the slow-changing capital investment arena. One such area I believe has a high degree of mal-investment potential is, as we've already discussed, green energy. This could be a sink-hole whose boom in coming years could seed a nation-ending bust.

.......... Well, that's because you're hung up on this "model" thingy to the point of not being able to see that, no matter the model, having the top 20% cream off such a large fraction of the productive wealth that NO wage increases have been seen for median and below for 20 years. Again......... static income for the (expected) consumers? static economy. (Except for H/C and energy having taken another $5,000 out of the median HH's $50k that the shortfall itself is deflationary. Be a while before this one is mentioned as no one knows what to do about it, and a politician still can't openly champion redistribution --- though I WAS out of my seat with joy to hear Barack slap a half mill cap on the WS hors WE are bailing out. No, it will have to be bit by bit like this week's funding of health care for ALL of our kids.

Here's my alternative stimulus plan:

#1. Trash the tax code. I'd like it all gone, but if you have to start with a single flat tax for income, business, and cap gains, it's still far better.

......... Ha! Our sport's heroes and Paris Hilton would luv you to death! Just dump the tax burden on yourselves? Read the chapters on regressive taxes and why we don't adopt them? ie "blood from a turnip?" et al?

Close the IRS. End accounting as a profession along with all the exemptions and cheats and costs that go with it.

.......... Well accountants are supposed to be looking for profits and efficiencies, not ducking taxes. But how do you design a tax w/o exemptions? Say a wholesaler on razor thin margins gets taxed on his million gross while the lawyer is taxed the same despite far lower costs?

#2. If you want to see a huge boost in productivity that matters, my personal advice would be to eliminate the FCC, totally deregulate radio spectrum and allow private property rights in that space. You'd instantly see an end to the internet stranglehold by the current telcos and watch the US skyrocket in cheap, fast wireless broadband for all.

.......... hmm truth is that Korea and others of virtually a socialist model have FAR better broadband service that is universal and cheap, and Japan's is tenfold faster. Complex area. We are NOT leaders in the sector.

That would be a tremendous base on which to build new emergence/crowd-sourced open systems for education, commerce and who knows what else. Our spectrum is a precious mismanaged resource with almost limitless potential.

........... Well, at least Barack is pushing for universality of broadband, though perhaps not from your model; ha! he does see the promise!

#3. The other thing I'd do would be a 100% decriminalization of drugs. The drain on our society in lost human life to black market violence and the cost in needless incarceration is just too great. The potential cost due to a failed Mexican state on our borders is too large. Make it all legal and let it be sold in an environment with support and treatment professionals there to help the addicted. I believe we'd save billions on this and improve our healthcare system in the process.

.......... well......... tough one. Truth is if we wanted to ruin that business, we'd continue to make it difficult and costly for the suppliers, while providing free or very cheap drugs to existing addicts and making treatment on demand a reality. But with the religionists in office we couldn't even get clean needle exchange despite the obvious benefits in terms of treating AIDs and Hep.

#4. End all business subsidies and product mandates. No farm bills. No ethanol. No oil incentives. Scrap that.

........... Ha! MANY years ago in my first Econ course I suggested ".......... a 20 year phase out of farm subsidies....." But! you do need to bone up on the flaws in capitalism that cause every nation to have min wages, farm subsidies, and other tweaks to make up for the flaws.

What do you think? Politically possible? Of course not. But I think it's the right path and not one bit of it involves coercive state force.

......... What if I told you that food prices are typically cheaper (counting tax costs too) than they'd be w/o farm programs? (It is the case)

Healthcare and Education are very different issues and I don't feel prepared to roll them into this discussion. But my inclinations are quite similar. Healthcare seems broken by a misalignment of incentives that are calcified by the code-driven compensation that Medicare has imposed and held in place.

......... Welllllll, Medicare is just for those who've survived the gauntlet and lived to age 65...... but great that you mention H/C as it's another area in which "capitalism" does us NO favors. Doubt? Ok that kid of yours or his Mom becomes gravely ill, does Pop head down to Big Al's Discount Medical Stuff to price shop a good deal?

Bundled outcome-driven payment seems like a better way, and I believe the free market would get there faster without medicare maintaining the status quo.

........... That's about where I am. It would require a universal single payer voucher that could be cashed with different competing providers, and the deal enhanced with a bill of right for the consumer. We could save 40% and provide top rung H/C for all. Barack campaigned on shoving us all into existing insurance pools but is smart; so why have "insurance" hors at all if we're ALL in the pool? "Insurance" companies are well placed to provide MEDICAL CARE, instead of being parasites on the system.

Education has similarly bad incentives where failure gets more funding and success gets ignored. But I digress.

......... Indeed, "digress" and dip into spin tripe!

Again, spectacular debate. Very interesting stuff.

Well, I conclude that you're easily smart enough to do some studying on the side. And I don't mean this as an insult at all........ but you know those handy "For Dummies" series? They've quite a good one out on economics that gets good reviews even from profs. If you're going to muck around with "The Austrians" it would be good to juxtapose what you're hearing from their graves with the mainstream of economic thought and become familiar with the tools that have been developed by Nobel winners over the years.

Cheers and luck! Jack

Jack,
It's been fun. I'd love to have this continue in an actual verbal exchange. I think we both lean on our own priors and core ideals and that's fine. You've made, in my opinion, an unconvincing case for state coercive decisions. You've not attempted to establish the ethical right for much of this political discretion or address the fact that "public choices" are, in fact, made by individual agents whose personal incentives are not aligned for productive choice, only re-election.

I've enjoyed the exchange, but have not appreciated occasionally being talked down to. The fact that my opinions may contradict a keynesian econ textbook does not invalidate them. Not on that fact alone, anyway. We have an entire generation of MBA's whose portfolio theory and financial modeling study has just been unraveled as a fraud. Textbooks can be wrong. Horribly wrong.

And continually saying "that wouldn't make it past a first year econ class" doesn't help your case. It only demonstrates that you're unwilling on unable to make the counter argument and must instead try to simply marginalize my opinion. I respectfully suggest that you avoid this approach in the future. It's just insulting. I know you aren't meaning it that way, but it is. My advice is to make the argument. If it's econ 101 easy, than make the case directly.

What you call flaws in capitalism, I call flaws in political leadership. Farm subsidies, minimum wages and the rest of these specific policies that you seem to feel emerged out of genuine necessity are demonstrably destructive. Each of them emerged as a special interest pay off for votes, not a true solution to a structural problem. We can just agree to disagree, but again, grant me the same respect I'm granting you with that.

It's been a great discussion and I will always concede my own ignorance. But I think that your great blind spot is monetary policy and your great mistake is that you focus too much on the trees, not the forest. For example, pointing out the "value" of Central Park, while ignoring the social destruction of Robert Moses' urban development projects which ripped apart communities through NYC and left systemic poverty more deeply intrenched. That's just one example.

At the same time, I feel that you are leaning on calcified collectivist ideas of "the market" and "democracy". These are the ideological axioms that seem to sit under your positions. It's fine. But I'd have preferred to dig into those more, instead of getting lost in so many other areas. Oh well. For another time perhaps.

You should know that I am watching a full intro macro course on my iPhone that goes over all the standard keynesian model nonsense. 40 hours of fun. Have a great weekend!

Jack,
It's been fun. I'd love to have this continue in an actual verbal exchange. I think we both lean on our own priors and core ideals and that's fine. You've made, in my opinion, an unconvincing case for state coercive decisions.

jjjj I've made no case for "coercive state decisions" but have tried to touch on the democratic foundations of our nation that evolved not far from my own birthplace in the Commonwealth of Massachusetts which predates even the father of capitalist economics and have tried to give examples of how democracy and economics interface and combine to both create community and culture as well as to govern and provide the necessary level playing field upon which a civilized capitalism might produce the best of our, always, scarce resources.

You've not attempted to establish the ethical right for much of this political discretion or address the fact that "public choices" are, in fact, made by individual agents whose personal incentives are not aligned for productive choice, only re-election.

jjjj The "ethical right" stems from our states and the three arms of our federal government that binds us together in a federation and manifests itself in a host of ways from the division of lands we've stolen into townships, sections, and public lands, to a system of public education, and albeit slowly to a social contract that does not include the ownership of human beings, as well as providing for our defense and a wide variety of interstate agreements, without which commerce would be very difficult. There is more, but this sprinkling should suffice.

I've enjoyed the exchange, but have not appreciated occasionally being talked down to. The fact that my opinions may contradict a keynesian econ textbook does not invalidate them.

jjjj Sorry, no intent, but the book recommended is a good one. And, the book is not a "Keynesian econ" book as he came late to the party and stood on the shoulders of Adam Smith's "Invisible Hand", Ricardo's work on "relative and absolute advantage" and a host of others, though Keynes has made perhaps THE contribution that for many years has prevented modern, complex economies from soaring and falling like a kite with no tail. Whether Keynes will work with the, near, integration of the world economies, without a Reserve Bank for the world is anybody's guess.

Obviously, if, as seems the case, China is employing beggar-thy-nation tactics by fudging the value of the yuan instead of allowing it to float in concert with the post gold standard agreements of most nations and refuses to play by the rules, we may well be on a path to repeat the breakdown and Depression of the 30's as if it were a waltz we just had to repeat from time to time in order to remember what to do afterward.

Not on that fact alone, anyway. We have an entire generation of MBA's whose portfolio theory and financial modeling study has just been unraveled as a fraud. Textbooks can be wrong. Horribly wrong.

jjjj Our Wall Street thieves were not lacking in book learning but in morality. It is greed and only greed that can convince our largest investment banks that by performing mumbo-jumbo with loan portfolios that it's prudent to raise loan ratios from 5:1 to 32:1 atop an obvious housing price bubble.

If the above is an argument against the known and tested rules of econ it's not valid as every post WWII "Mess" has come about by deregulations that were done in violation of economic fundamentals accompanied, predictably, by the foxes getting into the unguarded hen house. They are basically three: The S&L crisis, Enron, and the current and most destructive Mess; each based in a half-azzed "dereg" with obvious flaws.

Lacking ethics, a moral compass or a sense of community, instead of repairing the fences our grossly overpaid WS hors in each instance slipped in, ate all the hens and left The Mess for us to fix.

And continually saying "that wouldn't make it past a first year econ class" doesn't help your case.

jjjj While I'm glad you're going rapidly through a macro intro on your own, given your belief system, I'd say you'd need the Socratic give and take of a classroom and knowledgeable professor to fully get the material. But! I could be wrong.

It only demonstrates that you're unwilling on unable to make the counter argument and must instead try to simply marginalize my opinion.

jjjj Hmm, In the 70's there was quite a fad toward Libertarianism, some of which took the then popular "Chicago school" views of Milton Friedman, and gobbed 'em up with the prattlings of Ayn Rand, spiced the whole thing with notions of getting away w/o paying taxes despite a love of a giant military machine....... and well, in short, I've been there.

I respectfully suggest that you avoid this approach in the future. It's just insulting. I know you aren't meaning it that way, but it is. My advice is to make the argument. If it's econ 101 easy, than make the case directly.

jjjj I may have overstated the "easiness" of Econ 101 as some or much of it is challenging for most. Also, as econ provides tools for measurement along with tools for making the cumbersome engine run, if I'm talking to one who rejects the whole thing what sort of case could I make? A prediction? Next year WILL be worse than this? And sans heaps of Keynesian intervention it WILL be worse, far worse than otherwise. A kite really "should" fly w/o a tail and with the string tied to a post.... and a diesel "should" run without a governor, but they won't.

What you call flaws in capitalism, I call flaws in political leadership. Farm subsidies, minimum wages and the rest of these specific policies that you seem to feel emerged out of genuine necessity are demonstrably destructive.

jjjjjjjjj Capitalism was not designed by an all-knowing god and DOES contain flaws. "We" can discuss what to do about the inherent flaws, and many learned folk have done so, but there is NO example in the world of one running without adjustments and governing rules. If you've played a few games of Monopoly that could be helpful as it's based upon the lassez faire economics that created the last gilded age when income inequality just happened to be about what it is today and ended with the Depression.

Each of them emerged as a special interest pay off for votes, not a true solution to a structural problem.

jjjj OUR democracy is a mess too. Despite the imagery of the 60's being one of activism, truth is that was a VERY small minority and for an all too brief time. For the most part the boomer generation is largely a continuation of the Ike generation that came home from the war tired and just wanted a bit of peace and a chance at some prosperity. We've muddled along without paying much attention to the maintenance of OUR democracy and lo and behold have about the government we have "paid for". Why should we have a government that prompts you, me and others to so often mention "special interests?" It too requires our love and attention...... as Ben Franklin said......" we bring you a republic, if you can keep it". Can we?

We can just agree to disagree, but again, grant me the same respect I'm granting you with that.

jjjj I've a great respect for your being here, and considering, delving into what makes the whole thing run. At 30 you're doing well, and not one in 100 bother to take a scholarly look at the principles of capitalism they profess to love. That's why I correspond. I don't know all the answers and indeed, the science of economics is still relatively new and very much a work in progress.

Also, as you, perhaps too cynically point out there ARE sacks like ex-Senator, now lobbyist and "investment banker" of PNC which lost 80% of its value this year who prostitute a Phd in econ for personal gain and rank ideology. You, who'll for your entire life bear a share of the costs of this Mess can thank him for shuttling a bill through Congress after the 2000 election that did a shoddy job of repealing Glass Steagal, the very laws put in during the Depression to keep "bankers" from doing precisely what they've been doing since the repeal. Perhaps a note of thanks too for the Bushies who should have noticed the foxes having their way with the hens and at least plugged the biggest holes. Ahh! but then you, as Bush believe it will all run on auto-pilot and needs no tending. Well, you're about to "enjoy" the fruits of that theory!

It's been a great discussion and I will always concede my own ignorance. But I think that your great blind spot is monetary policy and your great mistake is that you focus too much on the trees, not the forest.

jjjjj Monetary policy is indeed a part of the mechanism and I've lamented massive deficits in peace time since the Pentagon took over the Reagan admin.... some $14 trillion bucks later it seems my voice hasn't been heard! We'd be FAR better off had we paid our bills on time, except perhaps in the case of costly warmongering.

For example, pointing out the "value" of Central Park, while ignoring the social destruction of Robert Moses' urban development projects which ripped apart communities through NYC and left systemic poverty more deeply intrenched. That's just one example.

jjjjjj Isn't "Robert Moses" something of a metaphor for "the car?" And an era when "what's good for GM is good for the nation" and CAR was king, despite NY even then being far better off had they invested heavily in the public transportation you mention using? And wasn't it finally community that put a stop to Moses's grand freeway designs? If I recall...... the people finally rallying around Grand Central Station?

At the same time, I feel that you are leaning on calcified collectivist ideas of "the market" and "democracy". These are the ideological axioms that seem to sit under your positions. It's fine. But I'd have preferred to dig into those more, instead of getting lost in so many other areas. Oh well. For another time perhaps.

jjj We need both. I too am a capitalist in trusting that Intel will continue to bring the cost of computers down......... but there is no automatic mechanism in capitalism to protect from over-fishing, polluting our streams, oceans and air, nor to provide a park or museum to give respite from the bazaar.

You should know that I am watching a full intro macro course on my iPhone that goes over all the standard keynesian model nonsense. 40 hours of fun. Have a great weekend!

............ Great! Let me know what you've....................... learned (if that is not talking down) Jack

It is the never-ending exchange. Love ya, Jack. A few quick retorts (as if either of us are ever quick).

"though Keynes has made perhaps THE contribution that for many years has prevented modern, complex economies from soaring and falling like a kite with no tail. Whether Keynes will work with the, near, integration of the world economies, without a Reserve Bank for the world is anybody's guess."

That is just dead wrong from what I can see and read. Keynesian fine-tuning directly lead to catastrophic stagflation (impossible in the keynesian model), a rash of recessions throughout the 60s and 70s, and the collapse of the international gold standard.

Volker's austrian-style hard monetary policy and the emergence of anti-keynesian inflation targeting is what produced "the great moderation". Greenspan fell off the wagon and dumped us in this mess, proving once and for all that the state cannot be trusted with a discretionary monetary monopoly.

As for your notion that greed suddenly became a stronger force in human nature and wall street than ever, I don't buy it. What I see is a set of policies with clear and obvious incentives that lead us here. I see a bubble with very clear causes outside the market which reinforced and were then multiplied by a cultural/calculation failing.

"but there is NO example in the world of one running without adjustments and governing rules."

I suggest you investigate the free Scottish banking system and the work of George Selgin. Remarkably important given our current mess. Funny thing. The potential to actually fail and be liquidated really does work better than a "lender of last resort" + a host of false security-inducing regulators and insurances.

I very much agree that markets have short-sightedness on the environmental front and that pollution and other destructive externalities must have a means to be addressed. But also see that this is generally abused by the state and used as yet another fascist-style favoritism for certain firms (like Monsanto). I believe that property rights offer many more effective and ethical approaches to addressing the pollution issue. But that is theory. I could be totally wrong.

Jack, this has been a real treat. Truly. I'm arguing strenuously and, indeed, ideologically. But I think you can see that I'm working very hard to understand things. And I am open. The keynesian idea that a downward spiral often happens too fast for the positive effects from savings-driven investment seems to have some merit. Perhaps.

I'm not a partisan in the political sense (I've come to hate politics in a way), and would actually prefer a higher-level discussion of the ethics and morality of all of these ideas.

I'll leave you with something I posted elsewhere that I think has some merit:

"Pragmatism in politics is the act of choosing the least blatant act of hypocrisy among many options." - that's mine

John, Good evening. Here are the dates of the major Depressions in the US....... with one coming every 25-30 years until the Fed Reserve was implemented in 1915. As nations need an FRB....... and we had none, basically J P Morgan played that role........ to good advantage.

1807-1814
1837-1844
1873-1879
1893-1898
1929-1941

It is the never-ending exchange. Love ya, Jack. A few quick retorts (as if either of us are ever quick).

"though Keynes has made perhaps THE contribution that for many years has prevented modern, complex economies from soaring and falling like a kite with no tail. Whether Keynes will work with the, near, integration of the world economies, without a Reserve Bank for the world is anybody's guess."

That is just dead wrong from what I can see and read. Keynesian fine-tuning directly lead to catastrophic stagflation (impossible in the keynesian model), a rash of recessions throughout the 60s and 70s, and the collapse of the international gold standard.

........... "stagflation" was a term invented during the Nixon-Ford-Carter era when things were screwed up as Hogan's Goat. And fortunately, the "rash of recessions" did not turn into deep Depressions.

Volker's austrian-style hard monetary policy and the emergence of anti-keynesian inflation targeting is what produced "the great moderation".

.......... You'll recall that after Nixon devalued the dollar he opened the flood gates of Keynesian stimulus, too wise the old crook to want a deep recession during his re-election campaign. It was a dynamic era suitable for some PhD thesis as to what really was going on.

Greenspan fell off the wagon and dumped us in this mess, proving once and for all that the state cannot be trusted with a discretionary monetary monopoly.

........ Hmm, not long ago Greeny was "The Maestro" who could do no wrong. Truth is he did pretty well, but admits to being blindsided by the WS thieves of our era. Who would think that the three major bond raters, Moody's, AM Best, and S&P would sell off reputations earned over a century for short term gain? I gotta tell you I never thought I'd see the day that Moody's would give a turd a triple AAA rating!

Gaaaaaaaaaawd think of the karmic D E B T!!! Wiping out folk's lifetime retirement savings and kids college funds and WASTING what all who toiled in those, once great, companies built in half a dozen years of unmitigated greed and corruption.

As for your notion that greed suddenly became a stronger force in human nature and wall street than ever, I don't buy it.

......... Greed does seem to wax and wane but truth is it shows up most virulently when one drops their guard and there are countless examples in recent years. Enron? And WHAT was the SEC thinking when a savvy trader took his time to SHOW them the Madoff Ponzi........ and NOT act???? Just screening hedge funds for ROI would have been enough to send in the FBI!

What I see is a set of policies with clear and obvious incentives that lead us here. I see a bubble with very clear causes outside the market which reinforced and were then multiplied by a cultural/calculation failing.

.......... Criminals abounded during our entire history....... that's WHY such acts as Glass Steagal were implemented. Served us well too for 75 years.

"but there is NO example in the world of one running without adjustments and governing rules."

I suggest you investigate the free Scottish banking system and the work of George Selgin. Remarkably important given our current mess. Funny thing. The potential to actually fail and be liquidated really does work better than a "lender of last resort" + a host of false security-inducing regulators and insurances.

.......... we all favor the creative destruction of outmoded or inefficient businesses failing or being absorbed into others........ and here we are again: Both Glass-Steagal AND a Anti-trust Division that had not been rendered comatose by the Bushies would have prevented Citi from ever merging with Travelers. LOTS of punks got VERY rich on that deal and YOU'll get a good chunk of the bill:

"Citigroup was formed on October 8, 1998 following the $140 billion merger of Citicorp and Travelers Group to create the world's largest financial services organization.[6] The history of the company is, thus, divided into the workings of several firms that over time amalgamated into Citicorp, a multinational banking corporation operating in more than 100 countries; or Travelers Group, whose businesses covered credit services, consumer finance, brokerage, and insurance. As such, the company history dates back to the founding of: the City Bank of New York (later Citibank) in 1812; Bank Handlowy in 1870; Smith Barney in 1873, Banamex in 1884; Salomon Brothers in 1910.

http://en.wikipedia.org/wiki/Citigroup

I very much agree that markets have short-sightedness on the environmental front and that pollution and other destructive externalities must have a means to be addressed.

.......... How about on ALL fronts? Some years ago they wanted to give CEO's incentives to perform for the stockholders, but Whoops! they gave 'em gobs of short term stock options, and guess what? they pumped the company short time! Car companies "sell" cars to fleets like Avis with a side deal to buy them back after two years. Hey! Bonuses all around! followed by poor performance and layoffs for working folk. Cool eh?

But also see that this is generally abused by the state and used as yet another fascist-style favoritism for certain firms (like Monsanto). I believe that property rights offer many more effective and ethical approaches to addressing the pollution issue. But that is theory. I could be totally wrong.

......... Ha! like taking YOUR drinking water out of the river downstream of your effluent tube? But, truth is cap and trade does much of the same thing without dumping the entire burden on industries that must exist for a while but ARE big polluters......... like coal.

Jack, this has been a real treat. Truly. I'm arguing strenuously and, indeed, ideologically.

............ Hey! ideology is out now! Science is in!

But I think you can see that I'm working very hard to understand things. And I am open.

.......... Indeed and that's far more noble than those who don't try at all.

The keynesian idea that a downward spiral often happens too fast for the positive effects from savings-driven investment seems to have some merit. Perhaps.

.......... To be fair this MESS goes well beyond a common recession threatening to turn into a Depression. Any school of econ understands that a massive contraction of the money supply WILL create a dive bomber. You're young yet, but suppose you're 50 or 60 with $150k of paper profits in your home and another $100K or so squirreled away on WS and looking over the RV brochures only to wake up one otherwise fine morn and find your home underwater, and $40k left in the 401k. Times MILLIONS of people. Want to try to sell 'em a home or car? the RV? or even a $5,000 vacation? Nope.

I'm not a partisan in the political sense (I've come to hate politics in a way), and would actually prefer a higher-level discussion of the ethics and morality of all of these ideas.

........... SOME of that does take place behind the scenes, but consider, 75% of those alive today didn't go to college, of the 25% that did less than half MIGHT have been forced to take two semesters of the "Dismal Science" and half of those didn't pay attention and were just getting through it on their way to law school....... so, giving credit to some who're self-educated over the years........ let's say 15-20% have a clue founded on knowledge of history and econ, which is about the same number as Limbaugh's audience...... so how are you going to talk to them?

I'll leave you with something I posted elsewhere that I think has some merit:

"Pragmatism in politics is the act of choosing the least blatant act of hypocrisy among many options." - that's mine

.......... Well it's flippant to be sure! Having come from a miserable nation like the UK was at the time do you suppose our founders had cause to be cynical? but rose above it and performed something of a miracle --------- IF we can keep it? Mo lata......... Jack

President Barack Obama is the new President of USA. He is faced with new challenges and ideologies which he has to take with great deal of wisdom. The president has some serious ideas about the economy, beyond just the enormous amount of quick loans that he made to the nation. He also has set his sights on cutting down the national deficit. The U.S. is currently about $1 trillion in debt. President Obama is looking to cut it in half – despite having just made $787 billion in quick loans. There has been an annual deficit for the last few years running, yet the Obama deficit may end up as a contradiction in terms, if he has his way. That would be worth making all those quick loans now, if it means investing in the future.

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If the government/businesses decied to approve my media choices who should the top business (interest rate) answer to, who is my employer?

Organizing who the employers are, while reorganizing and after
welfare/directions are distributed is a difficult question, it's fair to expect young, unclassed, computer friendly, professionals to be preferred as the designated employer. So young professionals.

Anyway allocating control over my media influence as one of your first moves to employment at capacity is a necessity because of the difference in your stocks, oil, interest rate...

Just as a hypothesis, because I've followed rules with great care, I can help you get what you want (due to relativity). Even if controlling my schedule doesn't aquire the people reorganizing more sucessful bets (demands), I specifically am out of the way.

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