...so foreign to politics. On page 9 of Schiff's cartoon book it says thus "By doubling his productivity Able is now able to produce more than he needs to consume. From gains in productivity all other economic benefits flow." I added the emphasis.
How often do you hear of productivity being the main goal behind any sort of economic stimulus? Instead they tout tariffs that encourage domestic production, production which is less efficient. They pander to unions that are entirely less productive. They inject newly created funds (cuz they sure haven't underconsumed to procure those funds) as an effort towards stimulus, funds which only increase the money supply, which in my mind is the only genuine definition of inflation. Deficit spending? As if money is wealth. I'm obviously no Keynesian and I continue to struggle to see how deficit spending can do anything but prolong the necessary corrections.
I think a HUGE principle from this simple story thus far is simply the need for underconsumption to precede any sort of growth whatsoever, yet underconsumption goes against everything our government is built to do. Our government not only overconsumes (even the 90's show large increases in the money supply, according to "sources", and it's a lot easier to run a surplus when that happens) but it seriously discourages underconsumption in the private sector.
Government has managed to take every healthy incentive and pervert it. Moral hazards run rampant, thus disabling risk to function properly. Genuine savings is almost irrational due to inflation. Grow your earnings faster than inflation or die.
Anyway, tell me what I'm missing.
Here's where I am divided. I agree with the Austrian school of thought, but there is a point where some pragmatism forces deviation from ideology.
ReplyDeleteDepending on who you talk to, there is strong reason to believe that without some stimulus and some bailouts, the whole entire system could have collapsed. We are in agreement that money is just a bunch of numbers floating in machines that maintains credible as long as 99% of the people believe that there is worth and that banks will redeem their money on request. Had more banks crashed, especially AIG, with whom many of the largest banks were insured, the value of every other bank in the system would have diminished significantly. Couple a crashing financial system with a failed car industry and the millions of people employed immediately by the big 3 and suppliers/dealerships, we would no doubt be in a much worse situation right now.
Any idiot who gets on the talk radio and blames any of the current problems on the bailout is and idiot (I have heard these exact words by Glen Beck and Rush). That's like an idiot taking out a huge loan from the bank and complaining that his life is worse-off because of it. There is an argument to be had in that this dude will be screwed in 3 years when the loan comes due, but he has no reason to complain about his immediate situation due to the loan.
I am of the belief that the bailout was a necessary evil, like women (thanks benton), and now let's move forward following the Austrian school of thought. Count our blessings that we still have an economy that works, and tighten our belts going forward. If we don't, I agree that next time it will be much worse.
Luckily the book later on will touch on the idea of Keynesian spending in times of slowdown.
ReplyDeleteI'll admit I'm in no way pragmatic when I say that there should have been no bailout. There should have been no bailout because the creation of the funds for such a bailout is straight up theft. Because the distribution of the newly created funds is not uniformly disbursed (why would it be, that would only show how ridiculous the concept is of it being beneficial) then all it is doing is transferring wealth. It takes value from some and transfers it to the politically well-connected. It is simply changing the ratio of the value of each dollar, because obviously the total size of the wealth of the economy has not increased. It is straight up theft if you consider the total effects. You might say it is for the good of each person that the economy stays afloat, therefore you're justifying the forced extraction.
That is just a moral argument. There are plenty of economic arguments. For one, precisely because the economy is so global and complex I do not think it would have crashed. Besides, why try to sustain such a broken, unsustainable system. There are corrections that need to fix themselves, no individual or group of individuals can fix them. The economy has been running off of overextended funds at a rate it can't maintain. The bailout and flood of cheap credit is akin to making sure a meth addict can get even larger doses so as to maintain a level that is artificial and dangerous.
Because important corrections have not been made, I think we ARE worse off due to the bailout. We continue to ENABLE a dangerous course. In the meantime ordinary people are getting screwed for the good of the whole. And if you're one that supports that logic, well...