The Sound Of Settled Economics

Obama is just "spreading the wealth around"; from future generations to present democratic voters. God Bless America, it needs it!

Just more smoke and mirrors from the new guys in power. Nothing in-depth or substantial. Glory hounds, that's all they are. If Obama was really serious about 'CHANGE' as he promised, he would start by cleaning up the corruption in Washington, Wall Street, and Corporate America, after all that's the reason we are all in this mess. But it's just business as usual on those fronts. Republicans, Democrats - there's no real difference. They all come from the same bowl of sh!t. Just different turds floating to the surface to take charge of the carnage.

"Government is not reason, it is not eloquence, it is force like fire, a troublesome servant and a fearful master. Never for a moment should it be left to irresponsible action."
George Washington

Margaret Thatcher said it best.
"The problem with socialism is that you eventually run out of other people's money"

Are you sure that's not a quote from Bush or, frankly, every single other politician who ever existed?

ted, no, that's not a quote from all politicians. After all, the mantra of socialism is equality of outcome, not equality of opportunity.

The agenda of conservativism is promoting equality of opportunity and this acknowledges that such a process is characterized by inequality (of ability and choices); diversity, and opportunity. This means more freedom, while the socialist society rejects freedom - of thought, of process, of outcome.

As Friedman so correctly pointed out, spending someone else's money explodes and sets up new classes of privileged, primarily the bureaucrats, their special interest filiations and the trade unionists.

Put this in the wrong place sorry.

President Clinton may provide the best road map back to sanity. Paygo. Essentially the wild card here is what the government is doing.

Some history: During the 9o's the greatest expantion in history took place and that was productivity. It explains why we have only 22% increase in real incomes yet seem to have so much more buying power. Essentially computers came along and allowed for cheaper stuff made better and more efficiently and in exacting quantities in a timely matter giving folks stuff they actually wanted as opposed to someone making an educated guess as to what it was they wanted.

Alan Greenspan who is essentially a accountant watched all this and new the importance of facilitating it in the only real way he could, cheap money. Greenspan is probably the only guy in the Universe who knows the national inventory of everything. How much is produced who produced and why and all the details pertaining to production and its effect on everything else. It's what made him so good he did his homework on the minutia. He didn't just look at aggregates.

Because of the rapid expansion of the Goracles interweb and it's effects on everyday life he gave them their head as it were in order to get it built knowing full well that a correction would be needed however the benefits were so great that he couldn't rein it in. Better faster proccessors needed to be built. Optic cable needed to be laid etc etc.

Of course by 2000 there were massive excesses in the system and we had a collapse tech company returns on equity were running at 200 percent when 13 - 16 is the norm. Growth was collapsing.
Deflation was ensuing.

Deflation is the most difficult economic malady to undue it gets hold and stays. There is a school of thought that what finally laid the great depression to rest was World War 2. So around 2001 Greenspan took interest rates to essentially zero. However the goverment implemented its fiscal policy which went too far and off the markets went. Too much in the way of tax cuts along with massive government spending.

Greespan testified to the effect saying that government went to far. With it's fiscal policy so we essentially had a V bottom in the markets and off we went again markets screaming higher.

What Greenspan was pleading for was paygo. Want a new government program either raise taxes or cut spending somewhere else. It is how Clinton managed surpluses when he was President.

Governments are an essential part of any economy with out them inflation always comes into play and boom and bust becomes a way of life. A well managed fiscal policy can mitigate that to a large extent smoothing the curve.

Once paygo is implemented it soon becomes clear the effect the government has on the economy. In a couple of years the level of optimum government spending and taxation can be implemented because you can see it's effects almost immdiately.

If Paygo went into effect today they would either have to raise taxes or cut programs. Well it soon become clear that raising taxes would slow the economy because hey government doesn't create wealth it consumes wealth. So the economy would slow like having a jake brake turn on. Cutting programs would speed it up like turning the Jake off. Money would flow to were it is really needed not to some politicians pet project.

A balance and equilibrium would soon come into place as balance between government spending, tax revenues and GDP growth would become apprent. As the economy heated up the Fed would be the accelerator or brake using primarily monetary policy greatly mitigating boom or bust. Should a massive injection be required then a direct cash infusion into the system via the Fed would stimulate but would be so rarely needed as to be an afterthought.

Households and business fundamentally take care of themselves it's either manage your spending for survival or you don't survive. Pretty basic stuff thats not lost on most and well managed for the most part.

Sorry Jeff but cutting taxes does not cause inflation. Cutting taxes stimulates the economy which slowly drives up interest rates. But if you artificially keep interest rates too low then you create inflation (specifically asset bubbles). The tech bubble is Greenspan's fault. The credit bubble is Greenspan's fault.

When the FED or BoC keeps rates too low, investors are forced to take on more risk to get the yield they desire because Treasuries no longer offer an attractive yield. That brings interest rates down for all risk classes. Furthermore, when banks are given too much cash to lend through the FED's open market operations they lend more and end up giving loans to riskier and riskier clients.

To contend that tax cuts cause inflation is pure folly. If we want the banks to lend normally, the FED needs to stop buying their T-Bills, handing them cash, and blackmailing them (ooops ... sorry moral suasion) into lending. If we want consumers to save money and not demand risky investments the FED needs to stop lowering yields on treasuries and government bonds.

I think it's a fallacy that WWII brought us out of depression. If you look at the data, we stayed in recession for several years after the war. Government never drives economic recovery, only healthy free market conditions allow for recovery.

Anyone interested in listening to a whole whack of fools should check out some of the Davos Annual Meeting on the Economy (You Tube).

Americans, in particular, if they don't want to go the way of socialism really need to take a strong stand against what Obama is doing. Otherwise, you have to assume that the 54% who voted for him truly want socialism ala France.

"Never let a serious crisis go to waste. What I mean by that is it's an opportunity to do things you couldn't do before." - White House Chief of Staff Rahm Emanuel

Exactly.

Yep, a good excuse for governments and corporations/businesses to justify their actions here they didn't have an excuse before. Just have to embellish their reasoning to make it palpable to the public.

My father made an observation that 9/11 was the best thing that ever happened to governments and businesses. It gave them an excuse to implement policies that they only dreamed of. Now this "economic crisis" is another excuse.

As far as I am concerned it is a market correction and the governments should take a step back.

John McCain would probably be POTUS if during the election he said let the SOB's die...they screwed up, they got greedy...no bailout...let them die. But no, had to try to match Obama in words. Dumb.

there are more stupid people than intelligent people with critical analysis skills.

30% spending of GDP from all levels of governments is about an optimum, anything less tends to be inflationary anything more restricts growth.

Typically, liberals view drug addicts, the homeless, criminals and the generally lazy as helpless victims. They claim that virtually no ill that befalls these people is ever the result of wrong decisions or poor attitude on their part. Furthermore it is the duty of taxpayers to pay for these mistakes and never to question why and how these individuals got themselves into their predicaments in the first place.

Today, the term "helpless victim" has now been stretched to cover virtually any actor anywhere in the entire economy, whether they be a $70 per hour auto worker, an inept artist, or the owner of a million dollar home that they could not possibly afford. It is now apparently the solemn duty of taxpayers to bail out all of these "victims".

In the same vein as a liberal views drug addiction or homelessness as unfortunate, causeless accidents, today's recession is also viewed as a literal accident for which no one can be held accountable. No one, that is, except for those investors who had the good sense not to get on the bubble bandwagon to begin with. Now, they are to be punished severely with inflation and confiscatory taxation for exercising foresight and not emasculating themselves financially like so many of their fellow citizens.

Does this mean they can be called "Bailout Deniers"?

What I was trying to illustrate with the depression WW 2 analogy was the difficulty of getting out of a depression they are monsters.

Charles that was the point to get people to undertake building the infastructure for the internet. Other wise it would have taken maybe decades. So Greenspan injected massive liquidity to get business to spend what was needed to build it in order to maximize the benefits of productivity. That would in a short period of time more than compensate. However once the infastructure had been mostly built the market collapsed the key here is the benefits of productivity.

The wrench in the machine was excessive fiscal spending.

I see I was not clear, ET. I was referring to the second quote - "Never let a serious crisis go to waste. What I mean by that is it's an opportunity to do things you couldn't do before." - in saying that it was true of all politicians, Bush being a prime example and Bob Runciman actually saying so expressly when he was an Ontario cabinet minister.

The only road Obama is going to provide for the dem's is their lost in 2010.
This spending is just plain crazy that well do nothing but pad the pockets of a small few for relection and that's it.

Smile Obama and watch how fast your high ratings fall like a rock!

Remember John Snobolen's comment.The first thing you do is "create a crisis."
His mistake was he made it to members of the Education Ministry breaucracy, rather than the Harris caucus and all hell broke loose.

ET - I also like what Friedman said in his documentary series - "Free to Choose".

In parallel with what you said - he felt it was important to set the starting line equal for everyone, but not to adjust things so that everyone finishes the race at the same time.

And, others have mentioned this as well as you, but he said that government programs invariable benefit two things; big business and Special interest groups.

I think we will see that in Obamaland. There will be much corruption as a result of expenditures siphoned off by both.

Dennis hit the nail right on the head. Why should I have to bail out any unionized worker or inept business?

My wife and I saw this bursting bubble over a year ago. We made all the right decisions....payed down debt, limited our purchases and shuffled our assets out of stocks and into cash.

And now, I am going to be stuck with paying for the idiocy of a whole bunch of people.

PMSH has made a mistake, and he is no longer a fiscal conservative as far as I am concerned.

Give me Mike Harris and Preston Manning any friggin day!!!

VOTE REFORM !
VOTE REFORM !
VOTE REFORM !

Kingstonlad, I am sure that the Prime Minister would understand your sentiments.

Something happened in North America when the 0 took over from President Bush. I have been terrified of Communism for many years, I read and saw what horrors it ushered into civilized nations like Czechoslovakia, Poland, Venezuela, Cuba, Russia and Siam/Vietnam....the dehumanizing effects of Communism and the little sister Socialism goes against everything that I value in living life.

Prime Minister Harper has kept Canada out of the terrifying grip of the Troika of Traitors; that trio of brutes would have bankrupt Canada and then pulled the rug out from under the Democracy (as the Bolsheviks did in USSR and as the USSR did in all the countries that the Red Army 'liberated' in WWII - there were no free elections in those nations; as promised by Stalin in Yalta).

We have to 'maintain' until we see the fallout in USA - if we cave to the 'agenda' to help 0, then we will all go down the socialist sewer pipe. It makes me very, very nervous.

Like other conservatives I am not a big fan of Harper's deficits but I do understand why he did it in this era where you have to be seen to be doing something or you obviously don't care. Harper's plan (unlike Obama's plan) front loads the spending in the first two years and more importantly does not add to permanent government program spending. And there is little or no pork.

I wonder if Harper is also thinking "Never let a serious crisis go to waste" and will use these huge one time government expenditures as an excuse to cut program spending - good bye CBC, business welfare, Human Rights Tribunal, etc. Harper can rightly argue "We can't just ask Canadians to tighten their belts - the government will have to make some hard choices and reduce some programs in order to bring back a balanced budget." If he plays his cards right government will be smaller after this recession leading the way to future tax cuts. He can use this crisis to get rid of many of those things in government that irks his conservative base.

Am I dreaming?

I think people will come to see this as the Rape of The American Taxpayer as it dawns on people that the money was just syphoned off and did nothing.

Fritz, I keep my fingers crossed.

Jeff Cosford at January 30, 2009 2:06 PM

I don't know whether it's 30% or 25% but it is certainly not 43% (now 45% plus)

Kingstonlad,

I will need to read the history books about this period before I understand it. I only hope Fritz is correct. Another thing, this insanity is global; at least Harper as minimized the craziness in Canada.

Until i know better, I shall follow the money and see where it disappears.

Don't worry kids, PMSH still gets my vote, and i shall be out hustling next election...........it is just that this whole deficit thing.......... S U C K S ! ! !

I see armed militias gaining plenty of new members and support.

TELL HARPER

For libertarians and conservatives worried about the deficit Colby Cosh has a good piece Quit whining about the budget

Fritz,
It's time for Canada to give up childish things...sell CBC to Canadian Tire! Keep CBC radio for the old white hairs. Nobody will notice that CBC-TV is gone!

We in the US are going to have some bad years, but that is what we deserve, until "trust" becomes the gold standard.

Trust in our legal system: Its fatally flawed & the principle reason for the pervasive "Jackal" attitude. Abolish the 9th Circuit & the economy will jump back to life.

The AGW has hurt America Business.

"The AGW has hurt America Business."

Finally, that's the first time anywhere I've head anybody say that. The years of constant fear mongering about AGW had to have an effect on the economy. The constant threat of the liberals taking power in Canada and imposing absolutely insane destructive polices towards our economy had to scare off incredible amounts of business and investment. And why has nobody mentioned the sustained, record high oil prices that dragged all business and consumers down and triggered this recession?

The US has gone left with Obama, Canada has gone right with Harper.

Let's hope Harper et al (on OUR right) can moderate the US' possible future left-leaning disaster. Is it silly to suggest that Canada is where the US wants to be?

Mark Steyn often refers to the "cult of ignorance"

Last evening, at a dinner party, a perfectly nice guy said to his neighbor, "They [the Republicans] voted for the bailout to give money to the fat cats, then voted against the stimulus to give money to everybody else."

It's a dinner party, for Christ's sake.

How do you launch into an explanation of the difference between LOANING money to ease liquidity bottlenecks, and GIVING money to political allies ?

No one wants to hear it.

[quote]Is it silly to suggest that Canada is where the US wants to be?[/quote]
PiperPaul,
No it’s not silly!. If Canada provides "THE RULE OF LAW" and access to that judicial system, Business will find it safe to invest.

The US 9th Circuit is corrupt, black robes on the take for the Environmental lawyers. The 9th protects & blocks access to justice. It is not a coincidence that the 9th is frequently over-ruled at the US Supreme level. If they can't get it right, for whatever reason, they are an impediment to a society based on the rule of law.

We need a "three strikes' law for lawyers & Judges