Wednesday, June 30, 2010

Talking Economics

 Sometimes I write what amounts to a blog in somebody else's blog. This time, when I did that, I decided to bring my thinking here as I had been writing on this also in a personal series of conversations with someone else who follows the economist Paul Krugman and believes in his economic theories.

Now I don't know if Krugman is right or wrong about a capital D Depression coming without all the governments in the developed world increasing their spending, but what Krugman wants to do is increase our own debt massively as a way to stave off that capital D Depression. He is putting out a lot of fear talk for if it doesn't happen. Well whether a Depression would be coming anyway, one of the ways to bring it on is with fear talk. He is doing his part to instill that. If people are already hoarding, will that decrease that happening?

Then too a lot don't realize how debt can impact small/little/ordinary/______ people (I swear these days no matter what you say, you offend somebody). If the US accrues more debt, does it also increase the money supply so that those savings someone is hoarding goes down in value? With SS locked in with the claim there is no inflation, those people, along with those on fixed incomes are just plain stuck when dollars decrease in value, and we all know that has already happened. Remember a dollar loaf of bread. Try finding one today!

Some blame Obama already for the debt the US has even though most of it was accrued in the eight years before he took the reins of power. In this political climate where he is accused with hateful drawings on signs of being a communist, a socialist and basically anything bad the sign holder can come up with, in that kind of atmosphere, what would happen if he followed Krugman's advice and started a CCC type program? The crazies would erupt with calling those work camps.

Not that I have anything against CCC type programs. During the Depression, they created a lot of structures that we still enjoy today but is this the same kind of era? Do the people out of work today have those skills?  If we did something like that instead of Unemployment checks, how would that go over in this political atmosphere? What would Fox say?

Right now Krugman wants the states bailed out but what had those states done to get into their problem? What if what they did was going to just come right back? Krugman claims debt means nothing but he is basing that on the assumption that the economy will bounce back and when it does, the money can then be paid down.

Krugman is an idealist, which is fine for a writer, but not so great in a politician in my opinion. Listen to him at a seminar but don't let him take our country down an unproven path (and despite his trying to equate it with the Great Depression, that was a different time and only definitely taken out of it by a worldwide war). To me to accept idealism as political truth is to ignore the practical. He expects a perfect scenario to play out. Life doesn't act so tidily. If we had had a perfect scenario, we'd not be where we are now.

In my opinion, he is stirring up enough fear that maybe he guarantees his prophecy will come true and he ends up being considered a great guru. He is doing us no favors right now though and before I would also support hugely increasing our debt, I'd have to hear a lot more opinions. I think as it stands, it would send us into even worse political turmoil and isn't it bad enough. Worse, it might not work and where would we be in two or three years with that debt and still not those jobs?

Farm Boss works with start up companies and hears the talk from those who invest in such. A LOT of money is out there but it's being held waiting for something, I guess. That money could be out getting new ideas developed, working with entrepreneurs, but if it isn't, if it waits for a government bail out or guarantee, what does that say about the innovative spirit of Americans? They wait on their government for everything? It is beginning to look that way.


If you want to read more of what I said and the question that inspired it, it's at: ]Economic Minefield].

26 comments:

Robert the Skeptic said...

I think that the TARP funds helped avert dropping into a complete depression; hundreds of thousands of pension funds were managed by AIG alone. I can imagine what people who said AIG shouldn't have been saved were thinking, that saving AIG was cushioning fat-cats in their yachts and penthouses. Instead the snowballing of thousands of pensioners suddenly unable to pay rent, care, medical, utilites, food would have put thousands into the streets. That's a depression!

Still I keep wondering "what recovery", where? America doesn't make anything any more except military hardware. And the Schizophrenic business sector expects consumer spending to buoy it's profits while not recognizing that the employees they are laying off ARE the consumers they are trying to woo. It's crazy!

We are at 10% unemployment and I don't believe it will ever go below that again. Too many people, too much debt, too much borrowing and China and India have taken over our manufacturing base.

I've said it a hundred times; we "boomers" have lived in the best times man ever has, and ever will, see on this planet.

Rain said...

What I wonder is they let Lehman go down but propped up AIG. A lot of people lost their pensions in Lehman's failure too. I heard recently that the banks now hold us hostage and whatever we say we would do to regulate them, they say it will destroy pensions and it stops any real action from occurring.

I am afraid you might be right though, Robert. We have lived through a very good time for the human race and not sure it can be sustained for a multitude of reasons. We could do better though and small business is really the answer more than corporations that send their work overseas to prop up the stock market. I worry for my grandchildren's future.

wally said...

I agree with both of you that the growing prosperity we witnessed when we were growing up in the 50's and 60's was an historical anomoly fueled by the pent up demand for goods and services following the Great Depression and WWII. Government spending programs weren't working very well during the depression but when we entered the war the economy took off. I don't know if we can repeat that. We're paying for two simultaneous wars right now. Other economists disagree with Krugman and are advising drastically reducing government spending. It's a scary time to be alive. My own opinion is that America and Europe have seen their day and will now gradually fade from world power and influence. The economies of India, China, and Brasil will bring those countries to a position where they can exert their own brand of imperialism just as the Europeans and Americans have done for generations. Like I said, we're living in scary times.

Ingineer66 said...

This may be a little harsh, but I am not good at sugar coating things. You Boomers were handed the world on a silver platter and now it is all screwed up and will continue to be screwed up until you are all dead. Then when you stop bleeding Social Security and Medicare dry, the country can rebound with a normal distribution of age and consumption and production. OK that was a lot harsh. But seriously unless we figure out that we cannot fund every feel good do nothing policy that anybody throws against the wall be will continue to be broke. If we would let our freedom and drive to better our lives take hold again we will continue to be a superpower and a beacon of hope to the world. We may not be the only superpower in the world but we will still be at the top.

And I would love to see a CCC program in this country. At least the taxpayers get something in return for the money. What we are getting now is billions of dollars being thrown at anti-poverty programs that have zero return on the investment. Let us return to more freedom and freedom to fail. That seems to be something the current administration is trying to keep everyone from doing, but instead it is going to make us all fail.

Robert the Skeptic said...

@Ingineer66

So your America sounds pretty cool, the only drawback I guess would be having to step over the poor living in the streets on your way to the restaurant. Millions of citizens unable to care for themselves in their elder years, THAT is my definition of harsh.

It's all good to have people be "self-sufficient" and less government... that is until YOU, through accident and illness, lose YOUR ability to fund your own retirement or medical/disability.

I worked as a welfare caseworker for a decade, the myths that you and many believe about "the poor" are glaring. Good luck with that.

Rain said...

It is harsh ingineer and also not recognizing the reality of people and how they sometimes are trapped through life and events. Someone who is handicapped or mentally impaired simply cannot do all you might wish. So what I am guessing is you want to go back to the times where people like the old starved? The reason we have had social programs is because some didn't feel they could enjoy their plenty when others were near starvation. If that changes, that's when we won't be the country we claim to be. This idea of being a world super power is more recent, certainly not the goal of our ancestors. It's ignoring history to believe we can maintain the top forever. We won't and we don't need to. What we need is to give our people a good life to the best of our ability. We don't owe some exorbitant wealth.

mandt said...

"Krugman is an idealist, which is fine for a writer, but not so great in a politician in my opinion." Astute opinion and correct. Better to read Mike Whitney.....always right on target. He often writes for Counter Punch. Check Goggle.
Indeed America is exceptional: and will fade from supremacy in a third the time in took Great Britain to become a second-rate empire (x-empire).

Ingineer66 said...

Robert you are taking me for much more harsh than I am. My ex wife was on AFDC before we were married, I know how it works at the welfare office. I am not against safety net programs and programs to help people get on their feet. But I am not for the generational welfare where we have created a caste of people that have become totally dependent on the government and taxpayers for every aspect of their life. If you worked in a welfare office you know what kind of people are out there.

I am not stepping over poor people in the streets now, are you? But I do occasionally have to walk around able bodied young people begging in the street when I go downtown.
I would bet if you went to a government housing project in a large city you could step over some drunk or drugged people in the gutter or hallway. This pie in the sky attitude that if we just threw more money at the poor everything would be OK mentality is not going to work. We have spend trillions of dollars on the "war on poverty" since 1960 and the poverty level is still about the same that was then. We cannot sustain the welfare, nanny state that we have while neglecting basic services that government should actually be providing.

And I did not say we should strive to be a superpower. I said that we will be one based on our freedoms and way of life. That is if we are allowed to continue have those freedoms and way of life that we have enjoyed for the past 200 years.

Rain said...

I understand your frustration, ingineer and feel some of it too. How to separate those who genuinely need help from those who are gypping the system. The war on poverty didn't work but we can't go to a time where we do nothing either. It's spending but spending smarter is what I think.

It's like the unemployment problem and how much of that is people wanting the jobs they used to have but that will no longer exist? That is where re-education comes into play but many people don't want to give up what they already got educated to do. It's a tough time.

Rain said...

and the way of life in this country is better for some than others. I am sure you know that.

Greybeard said...

And the poorest of this country have big screen TV's and taxpayer-funded cell phones.
I'm sure you know that too, Rain.

Rain said...

Not the poor I know out here, graybeard. Heck I know a lot who aren't poor and don't have cable tv or big screens because they can't afford them. Who are the poor you know? Not saying it isn't happening but clearly not everywhere. As for the cell phones, like they'd do them a lot of good-- out of range. Well we can use them in town. Who buys them for them and do they pay for service too?

You cannot blame that one on Obama, can you? That guy must be a whirlwind of energy if he's doing all of this at the same time... I suppose I shouldn't kid about it as you don't have much of a sense of humor about him right now, I am guessing. *s* Frankly I felt i had to find a way to laugh during the Bush years as it was that or go nuts. Sometimes laughter is the best medicine. It doesn't mean I don't take it seriously but just a lot of things, even bad ones, do have a humorous side and it's really our saving grace to be able to laugh.

Greybeard said...

Glad to help Rain.
Go here and be absolutely amazed at the craziness goin' on in our world right now.

And what's up with you guys out there? Don't you know it's "RACIST" to not provide cell towers for your welfare recipients!!!
Get with the program Rain.

Rain said...

hey, I'd settle for talking someone into providing a cell tower for me while they were at it. I hardly ever get to use my cell phone :(

Rain said...

Wow, that was amazing. And it is Obama. I guess part of the stimulus. They better enjoy it while they can *s* Next prez may not be so generous with taxpayer funds... He is a busy bee, isn't he? *s*

wally said...

Rain, check this out. You might find it interesting in regards to the so-called Obama phone: http://www.factcheck.org/2009/10/the-obama-phone/ and also this:
http://www.snopes.com/politics/taxes/cellphone.asp

Rain said...

Thank you, Wally. There is so much distortion out there that most of us have no idea what to believe. I appreciate the links :)

Greybeard said...

Like most of the major media, Snopes has been politicized so badly I have trouble with it as a reference, Wally.
I'm more comfortable with truthorfiction.com

Where the money for the free phones comes from is irrelevant to me. (Note that I did not claim it was an Obama program... the Chicago Examiner did.)
My point is we all know there is NO FREE LUNCH. EVERYONE in my area has one, and they use them liberally while they stand at the grocery checkout wielding their State-supplied welfare card.
Most also separate their groceries into two piles and pay for their alcohol and cigarettes with other funds, so you and I are subsidizing them in that arena too.
I don't know about you, but while I'm watching the country go down the drain economically, it makes my blood boil.

wally said...

Greybeard: If you are comfortable with truthorfiction.com I wonder why you first offered the link to examiner.com, a website that is not a reliable news source and has very little editorial oversight.
According to the dates mentioned the phones could just as easily be call "Reagan phones" or "Bush phones".

The problem I have with the truthorfiction.com article is that the headline implies that the email rumor about Obama phones is true. You have to read the whole article to see that it isn't true. Most people have a problem with reading the whole article. Sound bites suffice for them.

Rain said...

Thank you, Wally. And thank you, graybeard and everyone else, whatever side you are on, for posting what you think. I feel that our only hope for communicating is for us all to say what we think without attacking each other and work it through.

This has led to another blog topic for me. The next one was already written (on economics) but the one after that *s* it'll be coming from these conversations and the questions it has led me to think about.

Greybeard said...

I see your point Wally.
But at least you CAN find the truth at truthorfiction.com
When it is politically to their advantage, Snopes just lies.

Ingineer66 said...

Here is California since we have so much extra money laying aronud. We are advertising on the radio and TV that everyone deserves a Home phone. Just because nearly everybody in the nation has a cell phone and many younger people are not getting home phones doesn't matter. So if you qualify wink wink the taxpayers will pay for you to have home phone service or give you a large discount on home phone service. Oh and they are also advertising a program to help you pay for car insurance too if you can't manage that. No wonder we are $19 billion in the hole out of $98 billion budget.

Rain said...

I know nothing about states and what they are doing but it's why I do not favor another bailout for the states. They have to get responsible and those that are not will have to lay off their state workers, renegotiate pensions or do whatever they must to do it. I don't believe in the US stepping into it and going deeper in debt for possibly foolish state choices.

Anonymous said...

I can't help it... got to make a statement; AS A SMALL BUSINESSMAN, involved with technology and services businesses, the factor that makes employment happen is available space (a place) and the available funds ( credit card, angel investors[people who believe in an idea and are willing to risk their $$ to make it happen] , venture/ vulture investors/capitalists or institutional investors(your 401k in some form..no matter how laundered.! It is that simple..
Tax credits ..like a direct write off against income [think Sch A deductions] for investment in real things that are to produce a product OR R&D investment for future products AND the ability to borrow at 0% for 12 months or get angel $$...that is what allows a good idea to become a product that people want. General tax cuts for people with the bottom of Sch 40 > 250k does nothing ..period !!! Give me $$ for no interest and a 2-3% premium/transaction charge for 12-18 months and I will sell you a new product from technology or from the farm. That makes jobs ! These are available again..for 15 months that $ flow has been shut off. The vultures want gov to guarantee any possible loss because the 'bail-out' lead the way. There are 100's of MILLIONS $$ waiting a sign. They (the fund mgrs) only know the risk tables and assign probability (poker), The ideas are there and means are there ..it is the Concept of listening to financial masters to guide 'common sense' in "structured" or "institutional" accounts that causes chaos and major losses. If you have $$ to invest..follow your heart and 'common sense'. Buy water, water front property,nice vacation property , energy, baby supplies, elder care and do not charge too much for your services.
Farm Boss

Greybeard said...

Agreed, Farm Boss.
But when you get your business up and running, never forget you'll have a manager helping to run your business, and that manager may not have YOUR best interest at heart!

Anonymous said...

really appreciate YOU -- thanks a lot!