Healthy economy equals quiet bulletin board

[Giant Communist Robot]

Haggis' linky does not mention the series of cost-push shocks followed by the oil crisis in the early 1970's. These could set the stage for stagflation. Increasing commodity prices intiate the inflation spiral, and energy costs slow business into unemployment.

Its interesting to note this stagflation took nearly a decade to develope. Since we all agree unemployment will be with us for a long time we should hope the Fed keeps a tight lid on inflation. Some important things, though, will be beyond control.

[Haggis@wk]

Democrats have been running Congress for nearly four years, and President Obama has been at the White House for 18 months, so it's not too soon to ask: How's that working out? One devastating scorecard came out Friday from the White House, in the form of its own semi-annual budget review.

This whole report can be summarized in one sentence.

We have spent the past two years pursuing the policies that failed in the 1970s

At its heart, Obamanomics holds a central flaw: the idea that government acts as a multiplier to capital rather than a diluter and destructor of capital. The more capital it confiscates for its central-planning economics, the less we have for real growth.

[Giant Communist Robot]

Gold has come down and so has the dollar. This masks a bigger drop (in the price of gold) in non-US currencies.

[Shapley]

U.S. Economic Growth Slows to +2.4%

My own sense of things says that will be revised downward, but I've been out of the country, so my sense of conditions may be skewed...

[Haggis@wk]

your share of your state debt

[Haggis@wk]

Hmmmmm, there's that word again

Jobless Claims in U.S. "Unexpectedly" Climb to Three-Month High

[Giant Communist Robot]

Hmmmmm, there's that word again

I've come to understand what they mean is a number far away from the median of forecasts given by a poll of economists. In this case it was outside of the consensus range. It doesn't seem inappropriate to use "unexpected" when no economist forecast it.

This looks complex to me. Yesterdays' numbers estimated employment growth. This weeks' jobless claims have no special factor; they are just high due to the economy. I'm surprised the hiring-and-firing of Census workers is not something adjusted. Tommorrow the big report comes out--I expect non-farm payrolls to grow.

[Giant Communist Robot]

We have spent the past two years pursuing the policies that failed in the 1970s

At its heart, Obamanomics holds a central flaw: the idea that government acts as a multiplier to capital rather than a diluter and destructor of capital. The more capital it confiscates for its central-planning economics, the less we have for real growth.

Since Carter was the only Democrat in the 70's I guess that's where you are pointing your finger. He tried several solutions that didn't work, including some Nixon had used. I wouldn't say he had any new ideas. But when Paul Volcker stepped in and forced the country into a recession (and simultaneously made himself the most hated man in America) the problem was solved. It's worth pointing out that the economic situation then was different than it is now. For example, a recession is not the solution to our problem, it is the problem.

What does diluter and destructor of capital mean?

What do you mean by confiscation of capital?

Anyway, which specific policies from the 70's are you refering to?

[Giant Communist Robot]

Volcker, BTW, is one of those "you can never have enough regulation" kind of guys. Excessive regulation looks like central planning by proxy to me. Many economists seem to feel if they can just get the government to regulate more they will be able to control the economy. Blinded by hubris.

But Volcker was a hero for saving the economy back then.

[Haggis@wk]

What does diluter and destructor of capital mean?

GM's bailout is a prime example. It would have gone into bankrupcy, re-organized and emerged as a stronger, leaner and private entity (probably with less union workers and influence). As it is, it's still bloated, union owned and controlled, requiring continous fed funds and will untill a Repubilcan Congress and President kicks them to the curb where they belong. In the meantime they receive money that could have been spent elsewhere and requires the government to either print more money (dilution) or take it from us (destruction of capital).

What do you mean by confiscation of capital?

We've had this discussion so many times that I've finally come to the conclusion that all evidence to the contrary you still believe that government spending stimulates the economy. It never has. There is no example of it ever working anywhere any time in history. And while it doesn't work, it still requires the government to take money out of mine and Shapley's pockets that we could have used to genuinely stimulate the economy. We could have bought office supplies, computers, etc that we can then use to grow our businesses, make more money, spend more money to get more things to continue to grow our businesses, make more, etc.

But that money is gone because the government confiscated it from us and will confiscate even more beginning next year. That's called "confiscation of capital." You apparently believe the government has some secret power to make more of my one dollar confiscated from me than I could; I disagree.

Anyway, which specific policies from the 70's are you refering to?

Carter tried to combat economic weakness and unemployment by increasing government spending (TARP, STIMULUS anyone?), and he established voluntary wage and price guidelines to control inflation. Both were largely unsuccessful.

[Giant Communist Robot]

OK, I get it. Dilution means inflation; destruction of capital means taxation; and confiscation of capital means tax again.

[Giant Communist Robot]

Carter tried to combat economic weakness and unemployment by increasing government spending (TARP, STIMULUS anyone?), and he established voluntary wage and price guidelines to control inflation. Both were largely unsuccessful.

True. But not largely unsuccessful, stunningly unsuccessful.

[Giant Communist Robot]

We've had this discussion so many times that I've finally come to the conclusion that all evidence to the contrary you still believe that government spending stimulates the economy. It never has. There is no example of it ever working anywhere any time in history.

This is an interesting challenge. When I have more energy I want to look into this.

[Giant Communist Robot]

I knew it wouldn't be too hard to check, and I found a recent example. Took all of six minutes to find one. Anyway, I'll give the details later.

[Giant Communist Robot]

Looking at those numbers I see you can still argue over it. I'll look for a clear example later.

[Giant Communist Robot]

I looked at how the stimulus money has been spent. It looks like pork and waste. Poooorrrrrrk!

[Shapley]

Apparently, GM has decided to invest half a billion dollars (bailout money?) to upgrade their plant in Ramos Arizpe, in northern Mexico. Mr. Obama promised to create jobs for Americans, he just neglected to mention that it would be Central Americans, Latin Americans, South Americans...

As I've noted before, I think governments can stimulate the economy through spending (Ancient Greece, Ancient Rome, Colonial Britain all did so), but they can only do so if they have the capital to spend. If they are borrowing the money, as is ours, then they are merely taking investment capital from private sources and redirecting the investment, usually less efficiently. Such is the case today, and it is the reason Greece, Spain, and the United States cannot spend their way out of this slump.

In most cases, however, such as the ancient examples to which I refer, the spending is directed towards projects that stimulate private growth: better harbours to promote import and export, better roads to promote trade and travel, better sanitation to promote the health of the working peoples (better health promotes greater productivity), etc.

[Haggis@wk]

If you want to know why I am skeptical of the government’s ability to prevent housing market bubbles here’s Exhibit 9,824: the government’s new $1000 down housing program.
No, really. The government has apparently decided, in its infinite wisdom, that what the American economy really needs is more homebuyers with no equity.

These people are idiots. Idiots who’ve been entrusted with nuclear weapons, and their economic equivalents.

[Giant Communist Robot]

I looked at the numbers for the recent downturn in GDP and was able to find quickly where an increase in Govt. spending corresponded with an increase in GDP. The bulk of the increase was in consumer spending (which is about 70% of our economy anyway) so I eyeballed a muliplier from the Govt spending and it looked suspiciously large. Also, considering the stimulus, it looked a little like the Govt actually cut back on some spending because the total increase wasn't very much. I checked to see how the stimulus had been spent up to that point and it was only about 130m. It doesn't fit. Most of the stimulus money had been used for job training.

Some jobs are economically marginal, and when a recession occurs people with those jobs will be unemployed. But during a recession no one is hiring anyway so job training doesn't help much. After the recession we still need people to work those marginal jobs and this is where most will go. Some solution.

If the stimulus money had been largely spent on equipment upgrades and construction projects I think we could make the case for the multiplier working, but not here. To me the numbers look like the economy began recovery on its own.

[Shapley]

As I said, if the government spending is on projects that aid private investmentors, then it can help stimulate the economy, in essence by stimulating the stimulants.

Currently, however, my limited vision does not allow me to see any specific areas where government spending can help.

In some areas, the government acts as a consumer-by-proxy for the people. The government builds roads so individuals needing to get from point A to point B don't have to build them themselves. The process of building the roads helps those individuals and, assuming they engage in commerce at point B, and possibly along the route between the points, allows them to help stimulate the economy. Additionally, those who manufacture and ship road-building equipment, and those who are employed in the building of the road, are helped in the process. The same can be said of harbours, bridges, airports, railway freight stations, and canals. Anything that assists in the conducting of commerce helps to stimulate the economy.

Maintaining roads has less of an impact, though it is a necessary expense. As long as the roads are servicable, they fulfill their utility to commerce. However, those who make and ship mainenance equipment benefit, as do the labourers who do the mainenance. Necessary maintenance is a stimulant, but I have a differnt view of 'make work' projects, designed solely to provide employment.

We currently have sufficient roads, bridges, harbours, and airports to handle the level of commerce, so my limited view tells me that employing people building more will constitute 'make work' projects, and not aid in stimulating commerce, with perhaps a handful of exceptions.

Stimulus money spent on scientific research strikes me as unproductive. Not that research is unproductive, but that the time lag from reasearch to commercial production is usually longer than the economic downturn itself.

I agree with you on job training. Training people for jobs that are not there does not strike me as productive at all.