> Money is one of the pillars of civilization. It lubricates and simplifies commerce. It incentivizes useful human behavior, from day labor to innovation, from intellectual development to respect for law.
> Everyone needs the ability and the opportunity to earn money or the support of someone who has it. For most of us, the biggest bulk expenses are for shelter and transportation. Taxes and insurance may add up even higher. Prudent people control spending and save money regularly throughout most adult years.
> Responsible governments attempt to adjust economic activity to a level that enables most citizens to satisfy their needs for money--by use of tax policies, spending programs, regulations and central-bank actions. With the advent of Reaganomics all of these tools except central-bank actions have trended toward abdication of responsibility for America's long-term economic health, with the result that central-bank actions were over used and finally counter productive. Citizens were encouraged to be imprudent until their ability to do so was exhausted.
> It's time to use all the tools of economic adjustment to restore sustainability and integrity to the US economy.
Monday, February 23, 2009
Sunday, February 22, 2009
Economic Remedies
> Were Republican prescriptions for economic health effective, there would have been some balanced budgets under Republican administrations, instead of the 10x increase of national debt since 1980 and even bigger increases of private debt.
> The periods of apparent prosperity and economic vigor in the past three decades depended on irrational behavior by every segment of society. Ordinary citizens were irrational to take on mortgages so large that other forms of saving were precluded, to believe that prestige could be gained from owning a larger house or fancier car, to shop recreationally, to chronically carry credit-card balances, to take out second mortgages exceeding appraised values, to contract for ballooning or ARM mortgages, to believe that most businesses can increase revenues faster than inflation.
> Policy makers were irrational to cut taxes when spending exceeded revenues, to allow unfettered off-shoring of manufacturing jobs by multistate retailers for pennies per item, to neglect incentivizing wind and solar electricity generation, to neglect world-wide family planning, to organize society such that it depends on constant economic growth when the earth cannot support existing economic activity and when most of that activity is un-needed fluff.
> It is now clear that the our socio-economic system, capitalism, can't function when people start behaving more rationally. If tax cuts were the remedy, we'd have a hot economy now.
> The periods of apparent prosperity and economic vigor in the past three decades depended on irrational behavior by every segment of society. Ordinary citizens were irrational to take on mortgages so large that other forms of saving were precluded, to believe that prestige could be gained from owning a larger house or fancier car, to shop recreationally, to chronically carry credit-card balances, to take out second mortgages exceeding appraised values, to contract for ballooning or ARM mortgages, to believe that most businesses can increase revenues faster than inflation.
> Policy makers were irrational to cut taxes when spending exceeded revenues, to allow unfettered off-shoring of manufacturing jobs by multistate retailers for pennies per item, to neglect incentivizing wind and solar electricity generation, to neglect world-wide family planning, to organize society such that it depends on constant economic growth when the earth cannot support existing economic activity and when most of that activity is un-needed fluff.
> It is now clear that the our socio-economic system, capitalism, can't function when people start behaving more rationally. If tax cuts were the remedy, we'd have a hot economy now.
What good is the stock market?
> I've contributed to a retirement stock account for 35 years, but I still don't know what my investment does for the businesses whose stocks are in my account. The only investments that clearly support a business appears to be venture capital and the IPO. Subsequent stock sales just repay and enrich earlier stock holders and don't go to the business.
> If this be true, there seems to be no benefit to society of hedge funds. Every dollar sequestered by a hedge-fund investor is a dollar removed from the pool of ordinary investors. Can that possibly support the businesses whose stocks are traded by the hedge fund? Why, then, would the inventors of the hedge fund be awarded the Nobel Prize in economics? Why was that hedge fund bailed out during the 1990s?
> I raise these questions because reporters and policy makers seem to care about the index-fund prices. Stockholders like me care for personal reasons. Is there an objective reason, that is a national interest in the index-fund prices?
> If this be true, there seems to be no benefit to society of hedge funds. Every dollar sequestered by a hedge-fund investor is a dollar removed from the pool of ordinary investors. Can that possibly support the businesses whose stocks are traded by the hedge fund? Why, then, would the inventors of the hedge fund be awarded the Nobel Prize in economics? Why was that hedge fund bailed out during the 1990s?
> I raise these questions because reporters and policy makers seem to care about the index-fund prices. Stockholders like me care for personal reasons. Is there an objective reason, that is a national interest in the index-fund prices?
Thursday, February 5, 2009
Reaganomic Crisis
* Few individuals or businesses are unscathed by the economic crisis. Republican law makers, encouraged by Fox News lemmings, are insisting on the very Reaganomic formulae that got us here--out of work, losing money and in debt. Even if tax cuts were to stimulate, it would leave us with the same vulnerabilities and competitive disadvantages, with nothing to show for the additional debt.
* The fundamental and irreversible problem with the economy (ours and the world's) is that all the goods and services needed by the population can be provided by a declining fraction of the population, this as technology increases efficiency. Conscientious workers and well run companies are weakened by competition for providing goods and services and bankrupted by modest reductions in demand for them, as occurs when consumers behave more rationally.
* A satisfactory distribution of economic opportunity can only be achieved artificially by policies with that as a goal, ie by anti-Reaganomic policies.
* We should use this crisis as an opportunity to make adjustments that will be needed eventually when the earth cannot support the wasteful American way of life or the extension of that way of life to developing countries. Specifically, a substantial portion of the stimulus spending should go to wind, solar and geothermal power, as well as improved energy efficiency (cars, buildings, transit).
* The fundamental and irreversible problem with the economy (ours and the world's) is that all the goods and services needed by the population can be provided by a declining fraction of the population, this as technology increases efficiency. Conscientious workers and well run companies are weakened by competition for providing goods and services and bankrupted by modest reductions in demand for them, as occurs when consumers behave more rationally.
* A satisfactory distribution of economic opportunity can only be achieved artificially by policies with that as a goal, ie by anti-Reaganomic policies.
* We should use this crisis as an opportunity to make adjustments that will be needed eventually when the earth cannot support the wasteful American way of life or the extension of that way of life to developing countries. Specifically, a substantial portion of the stimulus spending should go to wind, solar and geothermal power, as well as improved energy efficiency (cars, buildings, transit).
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