Blog
|
|
Jan
20
Written by:
bobo
1/20/2009 10:39 PM
Any serious student of monetary policy or financial history has got to be familiar with the New Deal policies of Roosevelt - largely, and completely erroneously, thought to have pulled the nation out of the Great Depression.
Hogwash.
Didn't happen that way. The New Deal, and all the public works projects designed to create new jobs, were completely ineffective against the scourge of the Great Depression. Fact is that the Depression continued right up until we got into WW2 - amazing what sending 16 million men off to battle will do for unemployment stats, huh? As well as what going into a wartime economy, with price controls, rationing, and massive production to support the war effort, will do, eh?
The pablum being sold by most politicians and economists is that bailouts and make-work efforts a la Roosevelt will work this time, just as they worked last time. Except they didn't. Last time. Unemployment, depressed GDP, every meaningful measure of economic activity actually FAILED TO IMPROVE due to the New Deal - the entire thing was a failure by all reasonable tests. Its supposed success is a fiction, just as the supposed cessation of short selling due to the short selling ban is a fiction. The New Deal didn't do squat, and likely hurt the country, just as the short selling ban saw a trebling of short selling during the ban. The whole thing is a farce and a lie.
And yet this is what the great minds of our time have come up with to idolize as the solution to the current crisis. Or at least our best shot at righting the ship.
Huh.
Note that even as the Treasury Secretary appears before Congress over his tax dodging, nobody seems that interested that the most incredible delivery failures of government bonds in history took place on his watch.
Doesn't that give one pause to question how he will do as Treasury Secretary? No? What would you look at, other than his tax dodging and proximity to Wall Street, if not the largest accumulation of FTDs in the entire history of mankind? In other words, what would he have to do to be barred from holding the post? What is worse, other than running Enron or maybe running Goldman while it was infecting the entire world economy with toxic paper? Doh - that didn't stop the last Secretary from getting the job, did it? And being at the center of naked short selling didn't really quash his ability to take the post, and orchestrate the single largest redistribution of taxpayer dollars to Wall Street ever seen.
Scratch all my objections.
I suppose there are no crimes low or high enough to get one banned from holding government office these days.
And we will now do the Obama version of the New Deal, only to discover that it won't work the second time out of the gate, either. But we will watch trillions more get pissed down the Wall Street hole to discover that ugly news, so the banks who created this problem will want for nothing when their bets go bad. The whole tenure of the rhetoric is that "we" need to get "toxic assets" off the books of our largest banks, so they will resume lending. Why is it a good idea for "we" to underwrite the garbage and bad bets the for-profit banks made, and which drove massive bonuses? Well, because they are "too important" to allow to be held responsible for their failures at risk management, responsible lending, etc. "No banker left behind", could be this year's slogan. At least there's that to celebrate, as the next two generations' worth of earnings are pledged to cover the bill to subsidize the banks, the car makers, hell, basically everyone but you, me, and your neighbors - we get to pay the bills. The banks keep the money when their risky bets pay off, and we suck it up for them when they go bad. Good gig, that.
And now there's not even the pretense that this is anything but the final looting of the country, via bailouts and loans, by the ruling cotterie of banks and corporations.
Those who don't learn from history are doomed to repeat it.
Hope China does a better job running the country, once they own most of it, than we did. I say that because if they wanted to, they could buy much of it right now, given the amount we've borrowed from them, and that they've saved in addition to that. We have funded our bloated lifestyle with borrowed money from them, and the day they decide to pull the plug and start dumping dollars, or stop buying our bonds (which are now counterfeit as well, or at least many of them are, per the FTD data I mentioned above when discussing the Treasury appointment), the dollar goes into freefall and our asset value crashes to where it belongs, which is far below where it is sustained at present via our inflated borrowing.
That day will come. Question is when.
Here's another fun thought. Oil is far below intrinsic value now, actually below production costs per some estimates. How long do you think the Middle East is going to accept grossly distorted pricing for that commodity, before they tire of the manipulations (it is no more fairly valued at $35 than it was at $145) and stop pumping, or worse yet, hand the manipulators their heads?
As an example, all the above ground silver in the world could be bought for about $10 billion dollars or so, by credible estimates. So why wouldn't they buy $100 billion of derivatives, which are being sold at below production cost of the real metal by manipulators hugely short the silver market....and buy all the physical metal....and then demand delivery on the $100 billion of options they hold? That would BK the largest banks in the world, when it became obvious that the only way to deliver would be to buy the metal from the Middle East for $90 an ounce, when the delivery agreement calls for $11.....or just default, effectively going belly up instantly. Why do the bankers who got us here feel completely invulnerable to quid pro quo? Could it be that they own the regulators to the point that they feel no amount of crookery will be halted? Nothing is too blatant, as the cops are deliberately blind, deaf and dumb? That they can bully politicians into getting the population to foot all their bills if their crookery backfires?
History teaches us that even in societies where the cops are crooked, external forces will come to bear to restore equilibrium. My above hypothetical is just one way that could happen. China deciding to slow or stop buying our debt is another. Shutting down the oil spigot until prices return to sanity is another. There are any number of ways that the banks who control the world's pricing could be shot in the head, forced to discover that there is no such thing as too big to fail on a global scale.
All of this, BTW, is a failure of the settlement system and the regulatory system. Only if no settlement is required can you issue option agreements that vastly overprice or underprice the underlying commodity, safe in the assumption that you will never have to deliver, and can just keep manipulating and depressing prices by issuing yet more agreements. Ditto for bonds, stock, or anything else that can be manipulated.
Fix the settlement systems, and you fix the problem. At the end of the day, the entire thing is a function of the derivatives markets, originally intended as a mechanism to hedge for those producing the commodity, becoming a giant casino where the market makers never intend to actually deliver anything. Same with the stock market, where much of the distortion is caused by market makers never having to deliver what they sold to manipulate..er...stabilize...prices. That's the root of the current global crisis - AIG never thought they would have to actually deliver cash equivalent to the policies they wrote (oops, I mean the credit default swaps - policies you would have had to put aside reserves for, instead of handing the taxpayer the bill). When LTCM failed, it was largely because they never thought they would have to make good on all the options agreements they wrote - but then one day, they did, and poof, bye bye guaranteed money-making system.
If you enforce timely delivery, you enforce honesty in the transaction. My bet is that this entire crooked game collapses on itself as fewer choose to play in the rigged casinos, and more choose to demand delivery of the items the derivatives guaranty delivery of.
Perhaps the banks already understand that, which is why they are now landgrabbing every dime they can get before it all blows up? Better to get cash today, and convert it to assets that will retain value - oh, wait, I mean, hoard it against future shocks to the system - so that when it all comes apart, they still have the assets, even though the new value of the currency post shocks is about on par with Bolivars....
This year is going to be way uglier than the mainstream is letting on. Just as last year was, too. Does anyone really buy that nobody in the financial press could figure out that it was all coming apart, and that only a few bloggers actually got it? Puhleeeese.
The only fun part will be watching the lengths that the completely corrupt systems will go to deny the obvious - just as the mainstream media is ignoring the hard evidence of "journalists" like Bethany conspiring with hedge funds to manipulate stock prices. Think that's amazing? Pretending that e-mails, in black and white, memorializing her larcenous behavior, just don't exist, even as they are published on the Web? Or how about the SEC and DOJ falling all over themselves to ignore blatant frontrunning by some of the nation's most prominent hedge funds? You know, as in (and this will come as a huge surprise to those following the Rocker suit) getting analyst reports ahead of publication so they can trade on the non-public market-moving information? The cone of silence appears to have dropped around that, as well. So much crime, and yet the cops and media are literally blind to it, even when it is presented on a platter. As in the Madoff case, or the Aguirre/Pequot debacle. They just keep ignoring the elephants in the room - but now they need a stadium to house all the wildlife, there are so many.
You ain't seen nothing yet...
BTW, this isn't a political view, or blog. I don't care whether democrats or republicans are proposing the fixes that won't fix anything, or what party is allowing the looting of the treasury by the banks and special interests. Doesn't interest me in the least. It's the net effect I care about. So please save the "it's the other party" arguments for why we are hosed. The short answer is that larceny knows no political, racial, religious, or other distinction.
As always, Digg it if you think it should receive wider readership.
Copyright ©2009 Bob O'Brien
Tags:
25 comment(s) so far...
Re: As An Aside: Make Work Programs Don't Work
I was reading a local paper where new houses are being built for the poor.
The house in question cost 130 thousand to build .The buyer was givin a down payment and closing costs by the program of about 15 thousand.
The bank refused to lend the money on the 130 thousand value of the actual cost to build the house reappraised it and stated the house was only worth 75 thousand.
The program director accepted this and the 130 thousand dollar taxpayer funded house was sold for 75 thousand [minus the down payment and closing cost givin to the low income buyer thats 60 thousand].
130 thousand cost to taxpayers 60 thousand sale price.
With government support like this the building industry is going to recover very well all we have to do is sell our products at less than half of cost and give the buyers the down payment and closing costs.
I bet the rest of the new 'new deal' works out to cost as much and be as effective.
The paper is the macomb daily jan 19 issue [michigan]
By bbhindyou on
1/21/2009 7:49 AM
|
Re: As An Aside: Make Work Programs Don't Work
LTCM on a country wide scale. The big banks thought they were too big to fail and too powerful in manipulating the markets. Now it's clear they were wrong. There are even bigger forces out there, ones that have not even begun to flex their muscles.
If the banks get called on their Silver "trades", they'll go BK. If they get called on their FTD and FTR "trades" in equities, they'll go BK. And so on. These Wall Street banks are nothing more than speculators with public money. NOw Citi. JP
On a country wide scale, the US is ground Zero and will fare worst. I came back from Germany, where the financial crisis is also being felt, but not where near to the degree as here. Comerzbank has just been nationalized and a few other banks have been given lifelines. to avoid a Domino effect and help the insurer Allianz. But all this comes out to about 30-50 Billion Euros from the Government - if you include all rounds of assistance - a fraction of what we're spending here. It represents 3% of GDP for Germany. Where as the USA has already committed to spending more than 10% of GDP on the bank bail out.
By tommytoyz on
1/21/2009 9:54 AM
|
Re: As An Aside: Make Work Programs Don't Work
Too true, Tommy. The worst part is the wholesale sellout of the nation by the media. It really is akin to Pravda, where only the sanitized news of singing tractor workers gets published. The more I see, the more I see a fascist approach to things - tight media control (or self-censorship - same effect), double standards for the power elite, the view of the population as a group of indentured servants to be harvested for the benefit of those running things, inflammatory nationalistic rhetoric with a focus on xenophobia, increased government role (and thus control) in previously private industries, re-allocation of wealth from productive, competitive entities to unproductive, uncompetitive ones, state domination of education and thus history and reasoning, etc. etc.
Ground zero is going to have a tough decade, methinks.
By bobo on
1/21/2009 10:00 AM
|
Re: As An Aside: Make Work Programs Don't Work
Bobo, slightly off topic, there is an excellent short article on tax policy and related misconceptions in Mother Jones (yes, that bastion of Bolsheviks running around with lighted bowling ball bombs). Fiscal Fitness is the title. Author won Pulitzer and reported for NY Times, but don't let that put you off. Another angle of attack on the looting of our country by ???? whoever they are. If we collected more taxes, we wouldn't need to borrow so much, right?
By honkytonker on
1/21/2009 1:24 PM
|
Re: As An Aside: Make Work Programs Don't Work
You guys, realize that a new sherriff is in town and he is being advised by the best!!
Recs: 3 Cox got out just in time! Obama slams the revolving door
“Any governmant employee is not allowed to go to work for any entity they were responsible for regulating for 2 years and are banned from attempting to influence any remaining employees after they leave their positions”
I would say that is a good start, say you not? Now we know why Cox and Paulsen left on the first thing smoking yesterday!!LOL!!!
By Sean on
1/21/2009 1:55 PM
|
Re: As An Aside: Make Work Programs Don't Work
Sean. Yet more BS. Why? Simple.
Most ex-SEC staffers go to work for law firms, not wall street banks. The SEC doesn't regulate law firms, just participants. The law firms that represent the Wall Street mob aren't what this bars, thus it is largely meaningless.
I would have inserted the simple words, "And their lawfirms" if I wanted any actual change. That verbiage is missing. For good reason...
By bobo on
1/21/2009 1:58 PM
|
Re: As An Aside: Make Work Programs Don't Work
Citi, Goldman, JP Morgan - all speculating on the price of oil by leasing supertankers to park oil for future sale. OK, at least that's a tangible asset, but still not an investment grade decision for a bank to make. They're speculators with public funds.
Just let them die - all of them along with the insurers they're in cahoots with and let the smaller smarter players take over the bigger roles. The guilty should reap the rewards of their actions and let others take over.
By tommytoyz on
1/21/2009 3:56 PM
|
Re: As An Aside: Make Work Programs Don't Work
The reason the US was able to finally extricate itself from the liquidity trap of the 1930s, I'm told (and have no reason to dispute its veracity) was because the US government paid a bunch of doughboys to go overseas and kill some people but, while they were overseas, they couldn't spend all the fabulous loot they were being paid, and, when they were repatriated, suddenly found themselves in the posiition of having to spend their loot to re-establish themselves in the US.
God bless the Greatest Generation that Ever Lived.
(And Woe Be to the Me-First Self-Agrandizing Generation That Never Will Be.)
By Willlie Loman (i.e. "everyman") on
1/21/2009 6:14 PM
|
Re: As An Aside: Make Work Programs Don't Work
Tommy
Let them die. You have another strong voice agreeing with you:
http://finance.yahoo.com/tech-ticker/article/161718/Crisis-Solved-Give-Money-to-Healthy-Banks-Let-FDIC's-Bair-Handle-the-Dying?tickers=C,JPM,BAC,USB,WFC,XLF,SKF
Paul
By Paul on
1/22/2009 7:02 AM
|
Re: As An Aside: Make Work Programs Don't Work
FYI - Bud's blog does not display correctly.
By captdale on
1/22/2009 12:44 PM
|
Re: As An Aside: Make Work Programs Don't Work
Bobo...then wtf is the sense of gettingup in the morning..may as well drink the kool aid..roll over and die..but that aint gonna happen..so we have to do something..and I believe that Obama is the right guy...at this point in time...to undo 8 years of cluster f$ck in our government..so help us God......
By stryker-ny on
1/22/2009 12:45 PM
|
Re: As An Aside: Make Work Programs Don't Work
Stryker:
The logic is bad. "We have to do something, thus doing something that doesn't work is better than nothing."
Wrong. Putting water in your gas tank because you are running on empty in the middle of the desert, isn't a good solution, even if you rationalize that it is better than nothing. It isn't. It won't work. So doing it is a bad idea.
The problem is that the correct thing to do, which is to allow the banks to fail, the debt to default, and the fallout to occur, doesn't sit well for Washington or the banks. But that is the correct thing to do. You cannot bail out uncompetitive entities, and "create jobs" by siphoning off the resources of the productive and competitive, and redirect them to those unproductive or uncompetitive, and have it do anything but destroy investment and incentives for the productive. You may "create jobs" but it is a false creation, as NET the number of jobs must decline over time, as the government make work projects won't employ capital in a manner that actually creates new jobs - it will merely trade those more competitive jobs that would have been created, for fewer uncompetitive jobs, which will ultimately fix nothing, and will hurt the country.
The money going to a Citi now won't go to other, competitive banks who didn't screw the pooch with reckless behavior. This in turn will diminish the ability of those banks to grow, and create jobs - so the better run, competitive entities won't be able to grow as they could and should, in order that the badly run can stay dominant, guaranteeing a lack of progress and competitiveness.
Same with auto companies. Instead of new technologies or approaches being created and rewarded with capital to grow, we get the same lousy bunch of morons building substandard crap at a higher cost than the competitive offerings.
It's kind of like, the government has taken the tact that suffering consequences for being crooked or uncompetitive or reckless is a bad idea. Thus, behaving that way carries no penalty, which is why we see more and more of it - why try to be better if you can suck and still walk away a gazillionaire? And why try to play fair if you can cheat and get away with it? Imagine we are talking about a school, instead of an industry. If you can cheat on all your tests to graduate, and if there is no penalty should you get caught, why would you bother working hard and studying? Few would. They'd be out partying while the rubes did the donkey work.
And that is where we are. Why try to start the next microsoft if you can instead run a hedge fund, naked short with impunity, and retire by 40 with a billion in your pocket? Why spend the 100 hour workweeks creating a better mousetrap if you can cheat and get the same or better payout with half the hours - and probably be lionized by the NY press at the same time?
The answer to all this is let the frigging system implode, allow the genetic failures to sink into the tarpits, and allow the better entities to pick up where the failures left off, but doing it right.
But nobody wants that, as we have been indoctrinated with the notion that there shouldn't be any wholesale industry failures when those industries become obsolete. Using this logic, we would still have a thriving horse and buggy industry, subsidized to save the jobs associated with them - instead of cars and planes, and the hundreds of thousands of jobs those industries have created.
When you invest in failure, which is what this is, you get more of what you invested in. Your payout is failure, squared. This is what it looks like. It is also why societies that won't reward failure by redistributing wealth from the productive to the non, will eat our lunch. Simple.
It's not a do the wrong thing or drink the koolaid question. It's a, it's not politically correct to do the right thing, so we will do the wrong thing so we can at least claim to have done something.
It sucks, and I'll be the first to call it what it is, just as I called non-rules and non-enforcement by the SEC what it was. Sorry. But that is how I see it.
Bad apples are getting rich, setting bad examples for the next generation of apples, and when they screw up, we reward them instead of putting them in front of a firing squad.
My prediction: Expect more bad apples, as that is what you have invested in. Simple.
By bobo on
1/22/2009 3:57 PM
|
Re: As An Aside: Make Work Programs Don't Work
Imagine that when something like a car is built, there are two groups of people:
A) People that receive wages, salaries and dividends
B) Payment for raw materials, bank charges, interest, investment banking fees, other external costs
The bulk of people that might buy that car fall into group A, but the total payments to a PA are less than the cost of all the cars produced PA+PB. The manufacturer would always be stuck with a fraction of his production unless he either:
- exports to another country (but it isn't possible for every country to do that)
- loans are created totaling PB (these loans are claims on tomorrow, which compound making the problem worse from one year to the next)
There was a book called "Credit-Power and Democracy" written in 1920 by C.H.Douglas. The idea is that we produce too much and the problem is distributing what is produced and it is a problem for the producer as much as for the consumer. Money shouldn't be thought to have value other than as a claim chit on a percentage of what is produced. A lack of chits should never cause layoffs or factories to stop producing as that makes no sense. Why should a shortage of claims on production be something that reduces the level of production, reducing the level of wealth for everyone?
Deflation: a shortage of chits
Inflation: chits increased too quickly, so the value of a chit suddenly plummets, causing things to cost more chits
The problem is the naked shorters and banksters have sucked up all the chits like a giant vacuum cleaner and the system is being starved and production is shutting down because all he chits are with group B.
Where I agree with Bobo is that the banks shouldn't get a dime. Where I disagree is I think Obama is in a position to print money and send checks to people in group A with absolutely no cost because even though there are more claims, there is also more production. Obama should run the printing press to fight deflation.
The book spawned the Social Credit Party in Canada, which is responsible for things like socialized medicine, but the basic idea of the party was that the purpose of production was to make things for consumers and consumers need a national dividend of chits so they can consume what is produced.
Kiefer Sutherland's late grandfather, the one time Premier of Saskatchewan made a good cartoon in 1962 from a story in 1920 about the social credit movement and Mouseland.
http://www.youtube.com/watch?v=gqpFm7zAK90
By M. Mouse on
1/22/2009 6:01 PM
|
Re: As An Aside: Make Work Programs Don't Work
Well, Mr. Mouse, we do agree that the banks shouldn't see a dime. I will disagree that the correct thing to do is to run the printing presses and try to have the country spend its way out of recession. Problem is that the pieces of paper are claims against GDP, and future GDP. With a stagnant GDP, you can't print lots more claims against the static GDP without the value of the paper going down in time, and prices going up (it takes more claims to buy the same loaf of bread).
I think the Austrian school has it right. Governments cannot create value, they can only drain it, and by creating more money backed by the same GDP, they are in fact diluting the value of the currency. Any deflation we see will be a function of the population not spending money they didn't earn or save, which to me isn't a bad thing. Trying to keep the machine running based upon an increased spending by consumers predicated upon ever-increasing borrowing is a disaster waiting to happen.
I also happen to think that the distribution of chits, as you put it, should be a function of productivity, not entitlement. I get that we all seem to believe that we are entitled to certain levels of comfort, safety, etc. however those are largely new ideas - from the last 80 years or so. Before that, you earned what you spent, and you were entitled to nothing you didn't earn. I don't have a problem with that, either. I will predict that we will see asset deflation for the next few years, driven by a return to sustainable real values as opposed to inflated values, however the disastrous course of running the printing presses will ultimately lead to inflation, and lots of it, once the assets find their equilibrium.
You can't print value. You can only increase the number of chits - claims against value - resulting in a diminishment of the value of each chit.
The real problem is that we have now got what Patrick correctly terms a kleptocracy, which is a fascist state run by thieves for their own enrichment, and where the delicate social construct of you working for 8 months a year for the benefit of the state in return for protection breaks down. You aren't being protected, but you are being drained of most of your chits - between federal and state taxes, sales taxes, property taxes, gas tax, alcohol tax, tobacco tax, etc. etc. It's a bad deal. A really bad deal, and we are witnessing a great nation moving down the road towards becoming a second world nation, where there are the poor, the working poor, an impoverished middle class, and the very rich.
By bobo on
1/22/2009 6:13 PM
|
Re: As An Aside: Make Work Programs Don't Work
http://www.questionsquestions.net/gatekeepers.html
Foundations have little oversight and can spend their untaxed earnings wherever they please. The directors are part of the revolving door bunch.
By Why there is no opposition media... on
1/23/2009 6:24 AM
|
Re: As An Aside: Make Work Programs Don't Work
I like you Bobo do not want to put a political spin on this but one must state the obvious. When ever people receive something for nothing the consequence of that gesture never has a good ending. Every thing that has been proposed so far by the new administration smacks of socialism which inevitably leads to a flight of the most intelligent, prosperous and ethically strong people to other destinations to pursue their dreams. The argument that used to be made is that this is the only country where these dreams can be pursued. After you do a careful and thorough study of our taxes, education levels, crime, job pool candidates, LAW ENFORCEMENT, diminishing military strength, permit requirements to mow your lawn and 100 more etc. one can conclude we are not on the top anymore. So that leaves this country with less than the best innovators and more social parasites. For the new plan to work you need more innovation, law enforcement and a strong set of ethical and cultural values. Oppurtunity can abound here because of all our natural resources but if they are not allowed to be used because of some agenda we are loosing our greatest chance to survive.
By rtway on
1/23/2009 7:13 AM
|
Re: As An Aside: Make Work Programs Don't Work
The whole bank bail out is even worse than it appears. When the FDIC doubled it's protection, it didn't do it for free. They doubled the cost of FDIC insurance to the banks. So now the good banks, which do not need or get TARP money, have just seen one of their largest costs double. The bad banks, who made poor loans, bad decisions and big bonuses, use TARP money to pay the WHOLE FDIC insurance.
It's a very bad joke.
By tbs_theman on
1/23/2009 8:25 AM
|
Re: As An Aside: Make Work Programs Don't Work
Rtway: Don't you get it? It isn't socialist. It isn't democratic. It is theft. The labels and all the pomp and ceremony are to keep you and your neighbor from calling it what it is, and keep you arguing over this administration or that one. It doesn't matter what label you affix - your money is being stolen, and squandered in ways that won't work, and won't wind up doing much of anything but enriching the companies on the receiving end of administering all that make work, or supplying it. It's misdirection, theft and redistribution cloaked in the appearance of social programs. And it won't work.
By bobo on
1/23/2009 8:28 AM
|
Re: As An Aside: Make Work Programs Don't Work
Bobo,
I couldn't have explained it better. Right on. We're already in a big socialistic country with the government so big. I'd like to see a comparison and see if the US isn't already more socialistic than declared social countries like Germany. I have an inkling that our government here is perhaps bigger per capita or GDP, if everything is taken into account.
We can not become more competitive by shoveling more public money and resources towards uncompetitive companies, business models and management. Success doesn't result from that formula.
By tommytoyz on
1/23/2009 1:54 PM
|
Re: As An Aside: Make Work Programs Don't Work
In reply to your comment, the idea of social credit is a capitalist one. The word "social" is misleading as the social credit party was the right wing party in Canada versus the Democrat left wing party at the provincial level.
The concept is that capitalism almost works, but it is always losing a little bit. If you think of a country as a closed system, there is never enough money supply for the consumers to consume what is produced and that hurts the producers.
The idea of exporting or getting consumers to borrow on tomorrow is short sighted as it is a self limiting negative feedback loop.
I agree with you that if you produce chits and the economy stagnates, then each chit becomes less valuable. The idea is that if you put chits in the hands of consumers and it stops plants from closing and there is more wealth in the economy for the chit to fractionally represent, then you really do get something for nothing.
That's why when they print money to send people to war or to create big infrastructure projects, the GDP goes up and the claim chit is worth more even though there are more of them.
I'd rather have my percentage of the wealth produced by an economy with 0% unemployment than a percentage of the wealth produced by an economy with 30% unemployment.
The best way to think of it is like in poker. Over time, the chips all go to one player, who evolves to be the most successful, but then the game stops. The big player can't get any wealthier as he has 100% of the claim on all the money in the pot. The chips are just claims on the money in the pot.
What most players do is allow buy ins where more chips are issued in exchange for putting more money in the pot, so players can continue to play. Since there is more money in the pot, the big player has the exact same wealth, but now he has a chance to get claims on the new money in the pot.
It's a bit hard to wrap your brain around, but someone working productively is putting more value into the pot. Someone who is able to work 40 hours a week just because Obama issued him more chips, claims on the economy or to use the misunderstood word "money" increases the value.
The 1% Mr. Bigs who own all the wealth in the nation are also better off because the economy with 100% employment is creating more value that they can get a percentage of. The bigger economy is like the bigger pot.
By M. Mouse on
1/23/2009 1:57 PM
|
Re: As An Aside: Make Work Programs Don't Work
"The idea is that if you put chits in the hands of consumers and it stops plants from closing and there is more wealth in the economy for the chit to fractionally represent..."
1) Plants closing are fine by me. The notion that we need to stop plants from closing is lunacy - plants should close when the products they produce stop being in demand, either in a closed system, or in reality, an open system where the plants have to compete in a global market. For instance, lots of buggy plants closed when the automobile took off, and they were over time replaced with auto plants, which employed many more people. If we had tried to "save" the plants, we would have exchanged dollars that went to new and more productive industries, for dollars that went into a dead end industry - and those dollars wouldn't have been available to go into the auto industry.
2) If you produce 100% more chits, and GDP grows 4%, you have reduced the value of each chit. Sure, there are more chits in circulation, however they are worth less as a claim against the GDP. People will feel richer and spend more chits, but they will have to, as they ultimately will need a wheelbarrow to carry the chits to the store for a loaf of bread. We've seen the results of the "print more money so people have more money" ideology, and it ends in disaster.
We have to disagree on this one.
My philosophy is simple. Not a dime more in bailouts, take our lumps and allow the debt that needs to default to do so, and then let the better run survivors take over the vacuum from the poorly run incumbents.
By bobo on
1/23/2009 3:07 PM
|
Re: As An Aside: Make Work Programs Don't Work
Bobo, I'm a big fan, but I'll have to disagree with you on some of this. Ever been on the Blue Ridge Parkway? It was built during the depression. Millions of people have enjoyed the parkway since it was completed. There is some neat stonework around the overpasses; men learned some new skills. They sent money home to their families and people didn't starve. I don't know if the New Deal programs ended the depression or not, but I know my grandparents were blue dog Democrats to the very end.
To say that Obama plans to "make work" implies that everything is just nifty keen--no bridges in need of repair--and we all know that simply isn't so.
Perhaps you should talk to the man who lost his job when the DHL center closed in Ohio. There are NO other jobs. He is going to have to walk away from his house, and leave the area his only child resides in.
Or talk to the man who came into my office. He's been a mason all his working life. There are no jobs now. He has sold off his equipment to pay bills, so if a big job came along, he wouldn't have the equipment to do it. He's on antidepressants and hates it--says he thought he wouldn't need it if he had some work.
You speak of traveling. One of the saddest things I've seen in Third World countries is the lack of opportunity. Great gobs of people who desperately want to work, but there is no work. I then understood what is so precious about this country--the wealth of opportunity. But that opportunity is quickly slipping away from so many. Yeah, some have contributed to their own problems, but many others were working hard, keeping their nose clean. They were just in the wrong place at the wrong time.
Please keep being the prophet in the wilderness, but don't totally separate yourself from the pain of real people.
By z3peru on
1/24/2009 4:49 PM
|
Re: As An Aside: Make Work Programs Don't Work
Z3: I'm not saying that public works projects don't create nice bridges. I'm saying that when government deploys money to create jobs, the result is the worst possible for the dollars paid. Witness $200 Pentagon hammers for an example.
You don't have to believe me. Much has been written of the counter-productivity of saving dieing industries, or preserving jobs - while it sure feels good to do so, it ultimately sustains jobs that should have died, at the expense of creation of new jobs that would result in greater productivity and competitiveness. Net, it's a bad bet, although it always goes down well with politicians and the masses. Problem is that what feels good for the masses isn't necessarily what works.
I recommend we do what works. Not what feels good. Life doesn't always feel good. Time for the nation to deal with it, and stop the happy horseshit that is a legacy of socialist views that failed once in the 30's, and a sort of twisted esteem building ethos that also is completely counter-productive. Sometimes your industry is doomed for extinction. Sometimes you don't win. Sometimes there is suffering that teaches important lessons. I'm not being harsh, I am saying that doing things that don't work, and rob productive job creation, is a bad idea. That's all. Doesn't mean I don't feel sorry for those in the extinction zone.
By bobo on
1/24/2009 6:46 PM
|
Re: As An Aside: Make Work Programs Don't Work
Without a doubt, Bobo has it right. He is like fine wine, getting better with each passing year. Politics is not the issue, it has no chains or boundaries when it comes to corruption. Obama's ties to the criminal thugs in Chicago, or his political friends, possibly blood relations to Odinga in Kenya, where political losses are equalized by violence and murder, is mostly un-addressed by the mortgaged U.S. media. The massive theft by the criminals at the top of the Money Pyramid have not gone unnoticed across citizen minds, domestically or globally, however. The circus shows in Washington including the subliminal, rancorous messages they convey do not get missed like they may think either. People across the U.S. are as mad as Bobo, and they won't respond well in the end. The economic pie has already been stolen, and they believe theft is commonplace now when looking high above. Bob likes to point to China as the more able steward, and he is probably right. I've always believed these Money Changers would need to penetrate their lands inclusive of ripping its hard line government to shreds. We are now hearing the "Money Changer Representatives," like Paulson, Bernanke and Geithner, starting to accuse them, as a result of hoarding, of causing their own internal problems, as well as our own. I'd love to see perpetrator investigations, arrests, claw backs, incarcerations and even hangings for their treasonous ways, but that's not going to happen now, is it? First, we'll have civil unrest. I can see the stress in peoples faces locally all around me. Ultimately, we'll have war to clear the earth of people who desperately need resources. :-( And, to think that, Warren Buffett has had the nerve to bless the actions and methods of characters including Obama and Paulson is quite a let down but alarming as well. He really aided and abetted the duping and fleecing of the American public in this cycle, at this snapshot in time relative to the risks and uncertainties which remain real and prevalent.
By ckza on
1/25/2009 9:31 AM
|
Re: As An Aside: Make Work Programs Don't Work
Hey bobo,
been a lurker for a while and think you are right on. All the spending the government is proposing is only digging us into a bigger hole; we need to just let the system collapse; then we can rebuild; until then, anything we do is more like putting a band aid on an arm that has already been amputated.
The reality is the banks are insolivent; however, no one seems to grasp this yet...except here. The only bailout that is needed imo is for depositers...thats it...let the banks go under.
The stimuus will not create new jobs in the private sector; it only increases the size of the government which needs to stop spending...has anyone looked at what is in the stimulus; most of the spending is for increasing the size of the government...permanently. For those thinking this stimulus is about building roads; think again; thats only 3 percent of it; the majority of the rest is going to the government programs...or to states so that they dont have to cut back on spending; which the states must do; but wont have to because of artifical support through government out of control spending. I dont really care about the politics of it either bobo...except the politics of uncontrolled spending of washington.
The tax bill on this will be so high that it will be impossible to pay back by any tax payer. This spending as well as all the wierd monetary policy by the fed are symptons of a problem...problem of bankruptcy of the financial system which im unsure can be avoided under the current direction and all the corruption.
I also saw an interesting article relating to a theory on the ppt and how they pump money into the system to artificially keep the stock market from crashing...the theory is they ppt...create money out of nowhere and then use naked shorting to create shares to buy; inflates the price....then delete the money out of the system so the fed leaves no trail..and maybe shares also?...i dont know if this theory has any merit; but was interesting read...also quoting from memory so hope i am quoting right...thought it might be of interest to some of you.
By djs on
1/27/2009 7:01 AM
|
|
|
|