The world markets got a little scarier today. Plunges across the globe are fairly rare and cannot go unnoticed or be treated lightly - as if only a passing storm.
The question in everyone's mind is, where is my money going to be safe? Treasuries? Gold? The mattress seems to be gaining a tempting popularity. And while I don't think it is wise for consumers to stockpile large amounts of money, it may, however, be prudent to invest in inventories. Inventories of needed supplies - food, clothing or other items - that we may need in the future for schooling, work, job changes (or worse - layoffs), and emergencies. Physical, tangible, non-monetary items that even the deepest recession cannot take away or devalue.
And why not? These types of goods are cheap right now. Merchants are begging you to buy them. And the investment will go a long way when you need to draw on it in the future. And if in some miracle the economy suddenly changes course, the goods will return you the pleasure of knowing that you are consuming something in the present that cost you a lot less money in the past.
And so we begin to cycle into a physical goods inventory investment period. Other than the reasons stated above, why is this better than stashing away money?
First and foremost, it keeps some revenues flowing through the economic system. Purchasing an increased supply of Campbell's soup keeps them in business and it keeps you from going hungry should the future not look so bright. Plus, just as on any futures market, you are locking in your prices today for goods you will consume in the future, which is never a bad idea.
So what is something the government 'spendulus' package missed entirely? It is something that is never mentioned, and never allocated in the vast and deep gulf of $800 Billion dollars that is supposedly headed our way. Any wonder, then, why banks are not loaning the $350 Billion already given to them? There was no suggestion or directive given by the Federal Reserve on how that money should be loaned. A huge blunder in Uncle Ben's thinking and philosophy. Let me first start with a well known parable:
"And unto one he gave five talents, to another two, and to another one; to every man according to his several ability; and straightway took his journey.
Then he that had received the five talents went and traded with the same, and made them other five talents.
And likewise he that had received two, he also gained other two.
But he that had received one went and digged in the earth, and hid his lord's money.
After a long time the lord of those servants cometh, and reckoneth with them.
And so he that had received five talents came and brought other five talents, saying, Lord, thou deliveredst unto me five talents: behold, I have gained beside them five talents more.
His lord said unto him, Well done, thou good and faithful servant: thou hast been faithful over a few things, I will make thee ruler over many things: enter thou into the joy of thy lord.
He also that had received two talents came and said, Lord, thou deliveredst unto me two talents: behold, I have gained two other talents beside them.
His lord said unto him, Well done, good and faithful servant; thou hast been faithful over a few things, I will make thee ruler over many things: enter thou into the joy of thy lord.
Then he which had received the one talent came and said, Lord, I knew thee that thou art an hard man, reaping where thou hast not sown, and gathering where thou hast not strawed:
And I was afraid, and went and hid thy talent in the earth: lo, there thou hast that is thine.
His lord answered and said unto him, Thou wicked and slothful servant, thou knewest that I reap where I sowed not, and gather where I have not strawed:
Thou oughtest therefore to have put my money to the exchangers, and then at my coming I should have received mine own with usury."
The banks simply dug a hole and stored up the money for a hopefully brighter day, and largely because the fearful Investment Bankers at those banks would rather show a 3% return than a loss and be fired. Simple enough. They did not "trade with the same" and therefore in my opinion should return the money that we as taxpayers might find our own way to "receive mine own with usury".
But what if the Fed would have done something I don't recall ever being done during my lifetime? What if the Fed would have required that the banks themselves "purchase" inventory from businesses? Not for consumption, but merely for stashing away the inventories for better times. Production levels could be somewhat maintained, and then once the inventory was sold, the company would return the loaned money to the bank and repay the loan. This would be like the bank purchasing a future in inventories from companies in many different industries. Banks working in partnership with companies in this way would ensure that money was flowing into the system where necessary - at the corporate and small business levels, and would ensure that the businesses themselves were using the loans to maintain production. By maintaining production, the business would be able to continue similar or current levels of production, while the bank would be aquiring inventory assets. Assets, which unlike other futures or investments, are not traded on day to day markets and would be aloof from catastrophic market swings.
In fact, the actual production would not necessarily have to occur. The future could be an option that gets exercised later, just as we have with some futures traded on the MERC. It could be a contract that at some point the product will need to be produced, however current staff still remain with their jobs. However I like the idea of physical inventory production because it is more immune from the failures of futures contracts and options.
By adding to stockpiles now when prices are lowered, with funding coming from partnered co-operation with banks, the US would be preparing itself for the future turnaround, and would stave off the seemingly downward circular spiral of Corporate Capital Management. That idea follows the normally prudent logic of the following:
The Firm: company orders are down, spending must freeze
The Household: firm spending is frozen. I must save.
The Economy: Production is down. Consumer Spending is down.
The Firm: company orders are continuing downward, layoffs are in order
The Household: I lost my job, I have no money to spend
The Economy: Layoffs abound, Consumer spending plummets
...
Eventually following this senario, the economy will depress, and both prices and values will continue downward even as currency deflates.
The above scenario is the main emergency issue in our economy today. Forget for a moment the bad mortgages, failed institutions, and trillions in lost equity. That to me is not the emergency of the moment. That is the damage that will require the tools of surgeons. Right now we need to stop the bleeding. And the above scenario points out two main factors to me as I see it:
Production and Consumer Spending, both of which, when viewed with the goggles of ceteris paribus, seem to be directly proportional.
So, invest in building up inventories, and production will be maintained. Maintain or increase production, maintain or increase consumer spending. And as any futures investor knows, a big sign of future confidence and possible growth is seeing a business increase their inventory. And the last added benefit is market-enabled price stabilization. Since stockpiles are increasing, prices will be moderated. Especially if most of the inventory is put in reserve where it is not available to go to market. (putting it all available to market will simply create a firesale - which is the opposite of what we want). This is similar to what oil companies do when they cap a well. They are putting those daily barrel production numbers in a reserved inventory, where it is not available for purchase until a later date. And we all know that oil companies spend hundreds of billions of dollars buying these oil reserves, so this idea is not unfounded. And since they seem to be some of the only companies making money or even coming close to breaking even, the logic would be good for banks - and the Fed for that matter - to follow.
Higgins somehow pulled this idea off with much of his own capital. During nearly the entire Great Depression, while asking the military for a contract to purchase the Higgins boats, he produced and stockpiled thousands of boats that he hoped he would sell to the military in the future. 10 years later that date finally came, and his stockpile singlehandedly won the war. For 10 years he never saw a return on most of his inventory, even while maintaining production, costs of materials, and business costs. Yet the booming profits that came from being ready to meet the military's enormous demand for higgins boats paid Higgins unfathomable sums of money and success.
Savvy capitalists have done it before.
Maybe 'spendulus III' will get it right.
Tijs Limburg
Chairman and CTO of DMX - Digital Media eXceleron, Inc.
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The "Don't Tread on Me" Flag: The First Navy Jack is enjoying renewed popularity these days thanks to an order from the Secretary of the Navy that directs all U.S. Navy ships to fly the First Navy Jack for the duration of the War on Terrorism.
Wednesday, February 18, 2009
Friday, February 06, 2009
Response: KEYNESIAN FALLACY
Thanks Steve, that was a great response. I hope you don't mind these discussions as I think they are extremely stimulating and educational. I am reminded of the letters that traversed between Newton and Leibniz and contributed to the advent of calculus. I may not have been as clear as I thought in my letter (lunch breaks are only so long), but I am a staunch advocate of the theories of Adam Smith, and heavily disagree with Keynesian Economics. However, I do not believe government should have the power they seem to think they have at manipulating the "invisible hand" Smith used in his theory. I think Smith's ideas would work much better if the capitalists of the world would be able to take back some control over the economy. Not necessarily through laws or laissez faire poicies, but through the pure power of capital. It is Adam Smith himself who said "It is not by augmenting the capital of the country, but by rendering a greater part of that capital active and productive than would otherwise be so, that the most judicious operations of banking can increase the industry of the country." Unfortunately, even institutions advocated by these same capitalists who oversaw great capital expansions, such as J.P. Morgan who helped institute the Federal Reserve, have been infiltrated with too much government control in my belief to render the optimum productive use of this capital toward the increase in industry.
I apologize for my philosophizing, but I have always been attracted to and fundamentally rooted in philosophy, which is my prime motivation for learning and innovating. My favorite lectures in any subject are always the ones involving theory. My personality then leaves the execution of those theories to others who are better executors. I know you will all agree that is true.
Tijs Limburg
I apologize for my philosophizing, but I have always been attracted to and fundamentally rooted in philosophy, which is my prime motivation for learning and innovating. My favorite lectures in any subject are always the ones involving theory. My personality then leaves the execution of those theories to others who are better executors. I know you will all agree that is true.
Tijs Limburg
Tijs,
I've written two responses to your email, one focused on the technical aspects of your economic analysis, and one on the philosophical foundations and ramifications. I hope our dichotomy of views is helpful to others who read these emails as well as beneficial to each of us in our pursuit of knowledge, independence and freedom.
Technical response:
The use of Keynesian economic theory whenever there is a recession or depression is an attempt to provide a modulus for changing not only the current economic situation but the cultural and political foundations that created the economic situation in the first place.
Keynes' first and most fundamental assumption is that the Adam Smith concept of the individuals "self-interested invisible hand" is at fault for the chaotic cycles in economies and is insufficient to maintain or bring about equilibrium. As the son of an economist and a brilliant intellectual, Keynes was well-schooled in the social philosophies of the early 20th century. As a result, he held the belief that government, particularly big spending government, could have a more positive effect on smoothing out the cycles of economic expansion and contraction, cycles that wreaked havoc on social and political stability. Government could accomplish this by deficit spending to generate consumption and thereby employment during an economic contraction. To this end, modern liberal economists, who typically have a strong socio-political agenda, propound this theory not only as valid but critical to the survival of the nation. Unfortunately, it is effective at appeasing the fears and appetites of the "special interest" class while placating the desires for fairness among the middle class. But is it valid? The clear answer is no.
Nature provides the clearest reproof of the theory by the simple responses to negative environmental factors by all flora and fauna. Built into all successful life forms (whether you believe in evolution or God) is a mechanism that enables them to store up reserves in times of plenty and to consume those reserves in times of scarcity. In the macro-economic environment, people will acquire material goods, homes, car's etc., when times are good and shed them when times are bad, or at a minimum refrain from purchasing them when times are tough. We add the concept of payment over time for the acquisition of goods to the equation and it gets a bit more complex as now we have the ability to anticipate an upswing in prosperity and get what we want ahead of time and stave off the wolf at the door by trying to pay off debt when times get tough. But in all of these systems, there is a limiting factor: the ability to acquire and store reserves and the time it takes to consume and shed them. And economic history shows that the same thing impacts the Keynesian concept of government consumption: the amount of time it takes for government to impact or change the fundamental structure of the economy in terms of production and consumption far exceeds the typical cycle times for expansion and contraction. As a result, we become saddled with government programs that arrive too late, do too little, cost too much, last too long, and saddle the future with the debt of the past. Talk about trickle down economic theory!
So why so many advocates of the Keynesian theory? Because, at its core, it provides a roadmap not for economic recovery but for socio-political change. It posits that government will know better than the individual how to control and influence the economy and, therefore, should involve itself not only in consumption but production and distribution. And remember, "He that controls Arrakis, controls the Spice, and he that controls the Spice, controls the Universe." It empowers those who govern with an intellectual supremacy that masks their real agenda, thereby allowing them to indulge their political ambitions without obvious exposure to the electorate. In a word, economic deception. Not unlike the shenanigans of Wall Street and their bogus securitization of mortgages.
Now onto the trickle-down tax rebate theory. It is, in fact, not trickle down at all but a flood. The most effective way to win a war is to overwhelm the enemy. This implies that arming every available citizen will give you the best chance of killing the enemy. The problem is that, once armed the citizens will shoot what they believe is the enemy, which may or may not be what the real enemy is. In the case of the tax rebate and the nonsensical assumption by government that everyone would go out and spend it on durable goods, the people clearly showed exactly what they thought the enemy was - their debt. Everyone knows that if you don't pay your bills, somebody's going to come and take your paycheck, take your car, take your house. And business is the same way. Amazing that people are smart enough to use an umbrella to keep the rain off when it's raining instead of using it to balance on a wet tightrope. But it has a silver lining – lower debt now means greater purchasing ability in the future. All economists need to do to know what people will do is to get out of their ivory towers and note whether or not it's raining! But, you say, this doesn't stimulate the economy. Well congratulations, you're right. Throwing money around doesn't stimulate anything but greed. Economic stimulation always comes as a result of market demand regardless of whether you're a Keynesian, Smithite, or Luddite. The trick is how to create the demand, which leads us to a review of your fearful consumer.
The concept of consumer and investor control is based on the assumption that neither party can control themselves. Smith weighed this concept in his Theory of Moral Sentiments and concluded that man can make choices beneficial to society precisely because he can see in the mirror that society will benefit him. In today's economic environment, the consumer is fearful not out of ignorance but out of experience. He is reminded every day of the woes of the stock market, of the ever increasing unemployment, of the incredible escalation of national debt. Everywhere he looks, he sees the onset of winter and this is his last chance to gather in the harvest. It's interesting to note that seasons significantly impact consumer confidence. I believe it is built into our genetic code. But I digress. When analyzing how to reconcile the fearful consumer or investor with the need to increase market demand, we have to look simply at what motivates a man. At his core, he has a need for food, shelter, and sex (reproduction, technically speaking). If he is fearful of loosing any of these three things, he will go into survival mode, storing and stashing whatever he can. If, however, we can reduce his fear and help him to see that the rain will stop, we can motivate him to venture out of the nest again to indulge some of his higher desires. The biggest problem is that it is still raining and government spending is a big part of the storm. The reason for the tax deductions on home mortgages is because we have to compete with the government for available credit and it was a Keynesian incentive to increase home ownership in the post WWII economy. I believe that, if the government would reduce it's consumption, reduce it's taxation, and reduce entitlements, the consumer would be instantly encouraged and would literally come out of hiding, along with the investors.
But I don't see that happening, do you?
So what about your analysis of Expenditure based GDP? We're probably in agreement as to the status of the first two items, Consumption and Investment, although I believe we diverge on their cause and effect. And the initial discussion of Keynesian vs Smithian economic theory pretty well establishes our differences on the Government Expenditure part. So let's investigate the Net Exports concept. While you spent a good deal of time discussing globalization, game theory, and Nash's equilibrium, you appear to have missed the most fundamental part – our economy is no longer based on the exportation of goods but on the consumption of goods. This has come about because of the transfer of technology and industry developed in the US to other countries who are not bound by the same socio-eco-political rules (and that's eco as in ecological, not economical) nor have had to pay the price for industrial revolution in terms of time, capital outlay, or environmental impact. As a result, they are able to produce oil, durables, etc., far cheaper than we can, even if we were to choose to return to an export based economy. The upside is that we have steadily increased our standard of living. The downside is that, in our pride, arrogance, and self adoration, we have put ourselves into environmental and political straight jackets that are all but impossible to get out of. And just like the Chinese who lost the silk trade to thieving Indians who stole their great secret of the silk worm, we have yielded our industrial strength to the competition in order to appease our environmental guilt. As a result, the ability to rapidly increase exports as a correction to the economic downturn is virtually impossible. But that is a global view. If we look internally, we still possess the ability to produce and trade internally in a way no other country can. Freed from government restraint and the ridiculousness of the sue-happy eco-extremist left, we could produce all of our own food, fuel, and shelter far cheaper than any exporting country. And we could do it with reasonable conservation and environmental stewardship. And from this most stable of all economic bases, we could do some of what you suggest – export value added goods and services. But don't kid yourself, the export genie is out of the bottle and has returned home to its master – China, the worlds greatest exporter for more than two thousand years.
So, what can we do now? I believe that the first thing we need to do is to stop pretending that some grandiose economic theory justifying outrageous government spending and expansion will in anybody's universe result in improved economic stability and prosperity. The second thing we need to do is reduce the size of government at all levels and give economic power back to the people in the form of earnings retention, resulting in the triggering of the first and strongest pillar of the expenditure based GDP - consumption. The next thing we need to do is to allow the recession to do it's job – collapse of businesses that are inefficient and outdated, reduction of extravagant salaries, bonuses, and dividends, smaller meal portions at restaurants, over-stocking in stores, general consumer wastefulness, political pay-offs and paybacks, a return to thrift and self-reliance, pain and suffering sufficient to change hearts and minds, etc., all of which I refer to as the leaning and weaning of America. And lastly, but most importantly, the re-education of the American people as to both the rights and responsibilities of constitutional governance and individual agency. Is this an economic theory? I believe it is – it is the theory that good people, when left to their own devices and with full responsibility and accountability, will do good things not only for themselves but for their neighbors, their country and their God. Not because they are forced by might or compelled out of fear, but because they choose good over evil.
Philosophical Response:
Don't warp out at me but you're at it again. Over intellectualizing the theories leads to getting caught in the trap. As you've heard me say before, regardless of what a man says or claims to think, watch what he does and where the money, power, and sex go.
The attached article by Dick Armey from the Wall Street Journal yesterday is one of the best "exposures" to the reasons behind the current use of Keynesian Economic Theory to justify the "stimulus" mentality sweeping the nation. As with most theories, one must look carefully at the motivation behind the developer of the theory and his associated proponents.
I've also included an article by Robert Reich on Keynes that gives you background on the man and his philosophies from one of the most liberal, interventionist, and, I believe, evil men in modern political times.
As I analyze Keynes economic theory and his life experience, two very powerful views come together and into focus. Keynes firmly believed in the idea that an intellectually independent mind could throw tradition, experience, and history to the wind and come up with some better solution than the old tried and true. He also believed that those so "enlightened" intellectuals should be given authority over other men's assets and lives in order to provide greater social harmony and put an end to both the economic and war cycles that plagued Europe for a thousand years.
The current use of his theories is not because they are correct in the slightest but because, as Dick Armey so clearly puts it, it gives those who gain power from politically motivated spending the intellectual cover to dupe the middle and "special interest" classes into believing them. As with all intellectual deception, it is insidious, contagious, and damning because, at it's heart, it is an attempt to usurp the agency of man, co-opt his future and dreams, and garner power, glory and honor (and thereby money and sex) unto the deceiver.
I recommend reading both articles and then the following:
Moses 4:1-4
- And I, the Lord God, spake unto Moses, saying: That Satan, whom thou hast commanded in the name of mine Only Begotten, is the same which was from the beginning, and he came before me, saying—Behold, here am I, send me, I will be thy son, and I will redeem all mankind, that one soul shall not be lost, and surely I will do it; wherefore give me thine honor.
- But, behold, my Beloved Son, which was my Beloved and Chosen from the beginning, said unto me—Father, thy will be done, and the glory be thine forever.
- Wherefore, because that Satan rebelled against me, and sought to destroy the agency of man, which I, the Lord God, had given him, and also, that I should give unto him mine own power; by the power of mine Only Begotten, I caused that he should be cast down;
- And he became Satan, yea, even the devil, the father of all lies, to deceive and to blind men, and to lead them captive at his will, even as many as would not hearken unto my voice.
The acknowledgement, ennoblement, and empowerment of the agency of man, along with the requisite accountability and responsibility, in our constitutional form of government is what has made us powerful, wealthy, independent, and resistant to the political machinations of other nations and peoples.
Unfortunately, we (as a society, not necessarily individually) have abused that agency of late and have taken more than our share while selling our birthright for a bowl of pottage. As a result, we are faced with accepting and dealing with the consequences. To remove the consequences and the associated pain is to deny society the opportunity to repent, change, and improve and to ultimately usurp the agency that we have suffered so long and fought so many wars to obtain and defend.
From the macro economic view, getting government out of the way has a much more powerful effect than getting them more involved. I think that if you carefully examine the results of government consumption to stimulate the economy in terms of the increase in the size of government and the loss of individual control, you will find exactly the opposite of what you claim. In every case, the recessions have been prolonged due to governmental "stimulation." To use your medical analogy, we treated the pain caused by a cancer but failed to remove the cancer infecting us. And as a result, the cancer has grown with each successive cycle to the point that we are now facing a global economic collapse.
And what is that cancer? The cancer of covetousness, gluttony, self-indulgence, and self-centeredness.
And what is the cure for us in the US? The purging fire of suffering, loss, and humiliation, coupled with the most powerful redemptive construct in government ever know to man – bankruptcy.
This is what has enabled Americans to take risks, fail, and try again. Is it tough? Yes. Is it uncomfortable, Yes. But it enables us to keep the hold of the greatest source of growth, liberty, and prosperity – our individual agency.
This is also what will most effectively turn the political tide. If those who have robbed the middle and upper class, who would rob from our children and grandchildren to pay for their political promises to the "special interest class" are cut off from their drug supply and can no longer feed the habit, the "special interest class" will turn on them like a shark to a bleeding swimmer. And who will be there to take care of the reasonable needs of the "special interest class?" Hmmm, let me think. Would it be those who already give 3 to 1 over their liberal counterparts? Indeed, it will be those whose self-reliance has made them prosperous, who know the struggles of life first hand, and who have suffered enough that they would that no one else should suffer. It is they who will feed the hungry, clothe the naked, visit the sick and afflicted because they will have the desire, prosperity, and agency to do it.
If you're still with me and have read the article by Dick Armey, I think you will see that putting the needed recovery in the hands of the individual by reducing taxes – and the requisite REDUCTION in federal spending – is far faster, powerful, and lasting than anything the government could possibly spendulus. Yes, people will conserve, pay off debt, and save instead of spending but that is what we should have been doing anyway. And in the end, we will return to what has made us the greatest nation in history – a nation of individuals who can not only provide for themselves but willingly for their neighbors, who can rise from the ashes of defeat to try again and again, a people who will individually and collectively grow and learn, innovate and expand, protect and defend, live and let live.
It's not just a dream, it's the true path and where we need to be.
Individual agency, my friend, is not just an inalienable right, it is the key to true economic freedom and stability.
Thanks,
Steve Dupaix
Thursday, February 05, 2009
Thoughts on the KEYNESIAN FALLACY
My Two Cents
Interesting that Dick Morris would bring up John Maynard Keynes in his article. We just discussed Keynesian Economic Theory last night in my Macro Economics class. What I find interesting about Keynesian Economic Theory, is that the focus is more on demand management than the Smith-like theories of self-interested consumers being the drivers of the economy.
One must ask, why does Keynesian Economics crop up every time there is a recession or depression, and why do we always return to the long debate between "trickle-down effect" and Compensatory Government Stabilization policy during these times?
In my opinion it is largely due to the fact that spending effects of "trickle-down" tax rebates to consumers are extremely hard to predict. Economists can no more say that one person will put their check into a purchase of a durable good (tv, refrigerator, car, etc) than into savings (bank accounts, paying off debts, or investing in stocks). And the effects of Compensatory policies can take years to evaluate and have very few control features for the measurement of success. Take a look at the recent tax year of 2008. We've had opportunities to examine both types of policy. We had a tax rebate for consumers and an additional tax deduction for Capital Investment from businesses. Neither has worked much in the way of stimulus to this point. Most Americans used their stimulus check to pay down debts as did most businesses.
We had 350 Billion (and much more injected from the Fed) of Government spending, which all of the analysts are saying ended up in savings as well, not in stimulus. I think Paulson made a huge error in bypassing the heart attack by purchasing equity in the banks rather than stinting the arteries to remove the blockage by purchasing and holding the bad debts. That's where Reganists got the S&L issue in the 80's correct.
In other words, the way I'm evaluating the current situation is this: While normally consumer and investment control are the best policies, putting too much control in the hands of a fearful consumer equates to increased savings. Putting too much control into semi-nationalization of firms and investments equates to increased savings. Expenditure GDP is based on four components: Consumption, Investment (Capital Investment), Government Expenditures, and Net Exports. We've discuessed the first two and found the net result to be toward savings. There are only two parts left in the overall GDP equation: Government Expenditures and Net Exports.
We've used government consumption in one form or another in nearly every economic downturn including the Great Depression, and the results are arguable as to their success; I am one to believe they mostly worked in each case, some more than others (I believe the Republican based expenditures worked better than their Democratic counterparts).
So why don't we figure out a way to do something untested, and revitalize our Net Exports? To me, that is the part of the equation that has gone unnoticed, yet in my mind has great untapped potential to energize the economy, create jobs, and transfer large sums of wealth back into the US economy. In my mind, there is a key difference between our situation now and the situation in the early 1930's. In that time the economies of nations were not nearly as global. Today they are, and if you look around, all of the economies in the world are trying to lean on government spending to increase GDP and swing things around. Today's globalized economies are all after one thing: economic equilibrium. All of which is a good self-interested ideal, but in the context of game theory, this "co-operation of nations" to spend their government capital would be something close to Nash Equilibrium. Nash Equilibrium does not always stand to benefit the whole group, and if one player finds a strategy that can break from this equilibrium, they can usually make the biggest gains. So, if every player in the global economic game has tried and is trying manipulations of the first three GDP components, naturally I think that everything we do in an effort to remake our economy should focus either implicitly or explicitly on increasing the Net Export number - beat the competition to increased exports, and we win the game. Somewhat of a Net Exports "Arms Race". Who really cares right now how much we sell to each other domestically. We can sell insurance to one another all day but if there is nothing to insure it profits no one.
How can we increase the Net Exports component of GDP? Create a revitalized financial system that foriegn investors are attracted to investing in (import currency holdings (not loans), export financials), produce and use more domestic energy (decrease energy imports), export energy resources, aquire foriegn companies (exchange of currency, export of business processes), help "manufacture ready" products and projects get to market (export products other nations need but don't have), create new breakthrough technologies (export US made technology), create and export US made media demand, export "Value Added Products" (especially ones that use materials that can be created easily within our own economic borders), etc., etc.
I think the biggest component of Net Export revitalization would be to export energy and energy resources that are new and high tech, and that are produced by technology that only the US has, or harvesting energy resources from places (such as space) that the US has superior control over.
Here's to winning the GDP race of the 21st century.
Tijs Limburg
Interesting that Dick Morris would bring up John Maynard Keynes in his article. We just discussed Keynesian Economic Theory last night in my Macro Economics class. What I find interesting about Keynesian Economic Theory, is that the focus is more on demand management than the Smith-like theories of self-interested consumers being the drivers of the economy.
One must ask, why does Keynesian Economics crop up every time there is a recession or depression, and why do we always return to the long debate between "trickle-down effect" and Compensatory Government Stabilization policy during these times?
In my opinion it is largely due to the fact that spending effects of "trickle-down" tax rebates to consumers are extremely hard to predict. Economists can no more say that one person will put their check into a purchase of a durable good (tv, refrigerator, car, etc) than into savings (bank accounts, paying off debts, or investing in stocks). And the effects of Compensatory policies can take years to evaluate and have very few control features for the measurement of success. Take a look at the recent tax year of 2008. We've had opportunities to examine both types of policy. We had a tax rebate for consumers and an additional tax deduction for Capital Investment from businesses. Neither has worked much in the way of stimulus to this point. Most Americans used their stimulus check to pay down debts as did most businesses.
We had 350 Billion (and much more injected from the Fed) of Government spending, which all of the analysts are saying ended up in savings as well, not in stimulus. I think Paulson made a huge error in bypassing the heart attack by purchasing equity in the banks rather than stinting the arteries to remove the blockage by purchasing and holding the bad debts. That's where Reganists got the S&L issue in the 80's correct.
In other words, the way I'm evaluating the current situation is this: While normally consumer and investment control are the best policies, putting too much control in the hands of a fearful consumer equates to increased savings. Putting too much control into semi-nationalization of firms and investments equates to increased savings. Expenditure GDP is based on four components: Consumption, Investment (Capital Investment), Government Expenditures, and Net Exports. We've discuessed the first two and found the net result to be toward savings. There are only two parts left in the overall GDP equation: Government Expenditures and Net Exports.
We've used government consumption in one form or another in nearly every economic downturn including the Great Depression, and the results are arguable as to their success; I am one to believe they mostly worked in each case, some more than others (I believe the Republican based expenditures worked better than their Democratic counterparts).
So why don't we figure out a way to do something untested, and revitalize our Net Exports? To me, that is the part of the equation that has gone unnoticed, yet in my mind has great untapped potential to energize the economy, create jobs, and transfer large sums of wealth back into the US economy. In my mind, there is a key difference between our situation now and the situation in the early 1930's. In that time the economies of nations were not nearly as global. Today they are, and if you look around, all of the economies in the world are trying to lean on government spending to increase GDP and swing things around. Today's globalized economies are all after one thing: economic equilibrium. All of which is a good self-interested ideal, but in the context of game theory, this "co-operation of nations" to spend their government capital would be something close to Nash Equilibrium. Nash Equilibrium does not always stand to benefit the whole group, and if one player finds a strategy that can break from this equilibrium, they can usually make the biggest gains. So, if every player in the global economic game has tried and is trying manipulations of the first three GDP components, naturally I think that everything we do in an effort to remake our economy should focus either implicitly or explicitly on increasing the Net Export number - beat the competition to increased exports, and we win the game. Somewhat of a Net Exports "Arms Race". Who really cares right now how much we sell to each other domestically. We can sell insurance to one another all day but if there is nothing to insure it profits no one.
How can we increase the Net Exports component of GDP? Create a revitalized financial system that foriegn investors are attracted to investing in (import currency holdings (not loans), export financials), produce and use more domestic energy (decrease energy imports), export energy resources, aquire foriegn companies (exchange of currency, export of business processes), help "manufacture ready" products and projects get to market (export products other nations need but don't have), create new breakthrough technologies (export US made technology), create and export US made media demand, export "Value Added Products" (especially ones that use materials that can be created easily within our own economic borders), etc., etc.
I think the biggest component of Net Export revitalization would be to export energy and energy resources that are new and high tech, and that are produced by technology that only the US has, or harvesting energy resources from places (such as space) that the US has superior control over.
Here's to winning the GDP race of the 21st century.
Tijs Limburg
KEYNESIAN FALLACY
By DICK MORRIS
Published on TheHill.com
<http://reports.dickmorris.com/t/282430/7907599/1954/0/?u=aHR0cDovL3d3dy
50aGVoaWxsLmNvbS8%3d&x=be99d77b> on February 3, 2009
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52b3RlLmNvbS9tbXBfcHJpbnRlcmZyaWVuZGx5LnBocD9pZD0xMzYz&x=4a5fec08>
There are very few economists who really buy into Keynesian theory
anymore. Instead, the idea of "rational expectations" has taken its
place. The difference between the two approaches is essential to
understanding why Obama's stimulus package won't work.
Keynes felt that people would react automatically to a few dollars in
their hands. Consumers would run out and buy new products, and
businessmen, seeing the uptick in sales, would rush to open new plants
and hire new workers who would, in turn, generate more demand.
But that's not the real world. In reality, consumers, knowing there are
hard times ahead, save any money they get either by salting it away or
by paying down their debts and bills. That's why the personal saving
rate in the last quarter of 2008 was the highest in six years and
spending on residential construction was down 22 percent over the past
year. And the savings rate rose from 2.8 percent in November 2008 to 3.6
percent in December as the storm clouds grew grayer. And, in the real
world, banks hang onto their money for fear of making bad loans, no
matter how many bailouts or stimulus packages Washington passes.
Order a copy of FLEECED. Click here now!
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According to the Federal Reserve Board of St. Louis, the Fed is now
holding upwards of $1.7 trillion for American banks, more than twice
what it had in its vaults at the start of 2008. How did the Fed get the
money? Congress voted the Troubled Asset Relief Program (TARP) package
of bailout funds. The Fed purchased bank assets to get liquidity onto
their balance sheets. What did the banks do with the money? They gave it
right back to the Fed to hold in its vaults. They didn't lend it out.
They didn't use it to stimulate the economy. They are using it for a
nest egg to tap when times improve. Just like the theory of rational
expectations says they would.
If banks, suddenly awash in capital, don't decide all is fine and rush
to lend money; and consumers, given a tax cut or a pay raise, don't rush
to buy a flat-screen TV, then what good will the stimulus package do?
Not much. It is not until there is evidence that the underlying problem
-- massive personal and corporate debt -- is being solved that any
degree of confidence will return. And, without confidence, the rational
expectation theory means people sit on their money.
But the package will do a whole lot of harm by piling up capital that
people won't spend, banks won't lend and businesses won't invest. When
confidence rises and the money comes out of hiding, watch out for the
massive inflationary pressures all that extra cash will unleash.
Obama's stimulus package won't stimulate much except inflation down the
road, which will, in turn, mean the onset of another round of high
interest rates and renewed recession to check the inflation.
Republicans should defeat the stimulus package and then negotiate a much
smaller bill that emphasizes tax cuts and avoids the pork-barrel feeding
frenzy Obama has unleashed. You can see the stimulus package rotting
away before our very eyes.
People are turning against it as they see the things on which government
will now be spending money, just as they turned against Clinton's more
modest $35 billion stimulus package in 1993. Republicans should stay
away in droves. On this issue, they can recapture something they have
lost over the past eight years -- the mantra of less spending and
smaller government.
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Click here now!
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Wednesday, December 10, 2008
Re: FW: OBAMA'S STIMULUS PLAN WON'T STIMULATE
I would think that as long as the projects involve a high percentage of workers in construction, technicians, minerals and mining, transportation of goods, and education, the likelihood of them paying down debts first is less. Not that they have little debt, like the people in Morris's example, but because they are still living paycheck to paycheck, which is a more important issue to them than debt. I would also think that a good portion of these workers don't own homes, meaning that their landlords will be the ones to decide where the money that is generated is spent, as they would be the prime beneficiary, and the second and third being the entertainment industries (they still need their satellite tv subscriptions and movies), and the technology industries (HD is no good on a small screen).
Landlords are probably more ready to continue using the income these renters send them as investment income, growth income, and using it for leisure and acquiring other goods, which is good for fudiciary reasons. Landowners typically buy what are classified as durable goods. Machines, appliances, etc. Those are the prime goods for a manufacturing economy, because the manufacturers can demand a good price for them.
And, best of all, it keeps these workers in their apartments on their own money, and out of the workers' unemployment insurance and welfare streams. Which goes to help ensure property values stabilize. In Japan's crisis, property values continued to decline even though interest rates to buy property were 0. You can't buy property or even rent it from a landlord if there are no jobs. And if property owners can't get payment for their property, they can't create jobs so that people can rent or buy. Infrastructure takes care of both sides. It bouys property values, and stabilizes the job market, while increasing the capacity for investment well into the future.
However, we should note that any infrastructure project run by a corporation will be more economical and less costly than one run by a beaurocracy. The Internet is a good example of this. The government saw that privatizing it's control would be much better than controlling it within government. This can be said of the utilities, rail, and space industries as well. Imagine if the government would have built the transcontinental railroad without bonding it to the railroads to build and eventually own.
(Sorry, this got really long)
--
Tijs Limburg
Chairman and CTO of DMX - Digital Media eXceleron, Inc.
Get eXcited!
www.dmxed.com
Blogs:
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The "Don't Tread on Me" Flag: The First Navy Jack is enjoying renewed popularity these days thanks to an order from the Secretary of the Navy that directs all U.S. Navy ships to fly the First Navy Jack for the duration of the War on Terrorism.
Landlords are probably more ready to continue using the income these renters send them as investment income, growth income, and using it for leisure and acquiring other goods, which is good for fudiciary reasons. Landowners typically buy what are classified as durable goods. Machines, appliances, etc. Those are the prime goods for a manufacturing economy, because the manufacturers can demand a good price for them.
And, best of all, it keeps these workers in their apartments on their own money, and out of the workers' unemployment insurance and welfare streams. Which goes to help ensure property values stabilize. In Japan's crisis, property values continued to decline even though interest rates to buy property were 0. You can't buy property or even rent it from a landlord if there are no jobs. And if property owners can't get payment for their property, they can't create jobs so that people can rent or buy. Infrastructure takes care of both sides. It bouys property values, and stabilizes the job market, while increasing the capacity for investment well into the future.
However, we should note that any infrastructure project run by a corporation will be more economical and less costly than one run by a beaurocracy. The Internet is a good example of this. The government saw that privatizing it's control would be much better than controlling it within government. This can be said of the utilities, rail, and space industries as well. Imagine if the government would have built the transcontinental railroad without bonding it to the railroads to build and eventually own.
(Sorry, this got really long)
On Wed, Dec 10, 2008 at 3:34 PM, Limburg, Garth <Garth.Limburg@slcgov.com> wrote:
What is your take on Morris' claim that even funding good infrastructure projects, the workers who benefit by building them will again spend most of the paycheck on existing debt thus doing little as an economic stimulus. Morris seams to favor direct tax cuts instead to businesses and individuals in order to lower overhead costs and put money into investor's pockets so they can invest in building the economy. What are your thoughts on this approach? I need to hear from my economic panel.
Also, Nevin is having difficulty getting affordable travel to NO and may put his two bowl tickets up for sale.
From: Tijs Limburg [mailto:tijis311@gmail.com]
Sent: Wednesday, December 10, 2008 3:12 PM
To: Limburg, Garth
Cc: Eric Limburg
Subject: Re: FW: OBAMA'S STIMULUS PLAN WON'T STIMULATE
I think Morris's take on this is fairly accurate. For one, I didn't agree with the stimulus we got earlier in the year, so I used it to pay off credit card debt, just as he says. While I am now practically debt free, this doesn't help the country or uncle sam very much.
Two, he's right about infrastructure projects. They take forever. look at how long it took to get Legacy Highway, 1-80 reconstruction, and UTOPIA. It took over 30 years to get practically universal cell phone coverage, and that was mostly privately funded. Cities like Saratoga Springs, Harriman and Eagle Mountain don't have cable service yet.
However, as we discussed with Nevin, there are already projects planned and ready to go that are already in the pipe. This renewed funding could be immediately applied to those projects to ensure they don't get halted when governors like Huntsman want to take a quick axe to their budgets.
Industries are created and destroyed on infrastructure. Lincoln was a genius because he saw that the only way to get all of that gold wealth generated in the 49er gold rush from the West coast to the East coast where it was needed in treasury to pay for war debts was to build a railroad so that Californians could buy products manufactured and grown in the East, and thereby tranferring their gold. This started a whole new shipping industry dominated by the age olds like Wells Fargo and Burlington.
FDR saw the same thing with the Tenessee Valley project and the building of dams. Ike saw it in building interconnecting highways that spawned the new 'cowboy' industry of trucking and distribution giants such as FedEx and UPS, as well as a mammoth auto industry and dependence on oil. And Kennedy's spending on NASA and the creation of the space infrastructure industry revolutionized the communications industry which affects are still being discovered. Google maps and GPS, anyone?
Japan tried coming out of a deep recession without spedning on infrastructure. This resulted in stagflation that took 10 years to overcome.
I recommend the book Building Wealth, by Lester C. Thurow for any that are interested. I began reading it again and I am glad to see that the Federal Reserve is following a lot of the recommendations in the book. I think we are on the right track to turning this thing around.
TijsOn Wed, Dec 10, 2008 at 2:24 PM, Limburg, Garth <Garth.Limburg@slcgov.com> wrote:
We have talked about this issue. Here is Dick Morris' take on it.
-----Original Message-----
From: Dick Morris Reports [mailto:subscribers@dickmorris.com]
Sent: Wednesday, December 10, 2008 1:51 PM
To: Limburg, Garth
Subject: OBAMA'S STIMULUS PLAN WON'T STIMULATE
OBAMA'S STIMULUS PLAN WON'T STIMULATE
By DICK MORRIS
Published on TheHill.com
<http://reports.dickmorris.com/t/215670/7907599/1954/0/?u=aHR0cDovL3d3dy
50aGVoaWxsLmNvbS8%3d&x=65c6beb1> on December 9, 2008
Printer-Friendly Version
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52b3RlLmNvbS9tbXBfcHJpbnRlcmZyaWVuZGx5LnBocD9pZD0xMjQ5&x=be30cbbf>
The economic stimulus plans unveiled by President-elect Obama over the
weekend won't do much to help the economy. But they will vindicate all
the dreams of liberal Democrats for higher government spending.
Get Palin's Book, Just Pay Shipping
<http://reports.dickmorris.com/t/215670/7907599/4174/0/?u=aHR0cHM6Ly93d3
cubmV3c21heHN0b3JlLmNvbS9ubV9tYWcvc2FyYWguY2ZtP1BST01PX0NPREU9NzJBRC0x&x
=30f1a6f6> Of course, the basic choice facing any politician
seeking to stimulate a moribund economy is whether to catalyze the
supply side with tax cuts on business or the demand side by way of
spending increases. Obama obviously made that choice years ago: He will
work the demand side.
But once a leader makes that decision, he faces another: Will he
emphasize important and valuable public works projects or will he just
try to pass out the largest amount of money possible? By announcing that
he is not "going to throw money" at the economy in the hopes of getting
a pulse, Obama signals that he will stress the former approach and fund
important public works such as school reconstruction, fiber optic
cables, alternative energy generation and the like.
The problem is that such projects take a long time to plan and longer to
build. Their immediate economic impact is highly attenuated.
In all federal capital projects, only about one-quarter of the funds
appropriated are actually spent in the fiscal year. It just takes that
long to plan, engineer and begin construction. And for every $6 spent in
the last stimulus package, only $1 actually got spent on goods or
services. Five dollars out of every six in the Bush stimulus package of
2008 went to pay down debt, mortgage or credit card or student loan or
home equity, and not into the acquisition of new products or services.
So, do the math. If only 25 cents out of every dollar actually is spent
in the fiscal year, and only one-sixth of that sum actually gets spent
by the workers who get paid on new goods and services, only about 4
cents from every dollar actually stimulates the economy. And who says
those 4 cents will be spent on domestically produced products? A lot of
the stimulus will just feed Chinese imports, particularly with their low
prices.
FDR faced just this problem in combating the Great Depression. In the
National Recovery Act (NRA), Roosevelt set up the Public Works
Administration (PWA) headed by Interior Secretary Harold Ickes (the
original one). Ickes was a stickler for making sure nothing was wasted
and in keeping the costs down. He managed a spectacularly successful
public works program and built, without scandal or corruption, some of
our most important national infrastructure. But he took his sweet time
doing so. The economic stimulation was slow in coming.
Exasperated, FDR did an end-run around Ickes and set up the Works
Progress Administration (WPA) under Harry Hopkins. WPA spent its money
quickly and on projects involving little overhead or preparation. My
mother got a WPA job teaching English to foreigners. Virtually all the
WPA funds were spent in the fiscal year and the stimulative effect was
immediate.
But in opting to go the Ickes route, Obama will find that he leaves a
legacy of important contributions to our national infrastructure, but
little in the way of real economic stimulation.
While a WPA-type approach might hasten the ameliorative impact of the
stimulus package, Obama still faces the conundrum that most of those who
get extra paychecks as a result of his spending will use the money to
climb out of debt. In the '30s, credit cards didn't exist and consumer
debt was very limited. Most people lived paycheck to paycheck. Extra
money equaled extra spending. But now that most consumers will use money
to pay down their debts, not to spend it, demand-side stimulation has
its limitations. But Obama's ideology won't allow him to indulge in tax
cuts "for the rich," which might work to get us out of the depression
faster.
<http://reports.dickmorris.com/t/215670/7907599/2120/0/?u=aHR0cDovL3BvbG
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Get eXcited!
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The "Don't Tread on Me" Flag: The First Navy Jack is enjoying renewed popularity these days thanks to an order from the Secretary of the Navy that directs all U.S. Navy ships to fly the First Navy Jack for the duration of the War on Terrorism.
--
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Chairman and CTO of DMX - Digital Media eXceleron, Inc.
Get eXcited!
www.dmxed.com
Blogs:
http://phystrings.blogspot.com/
http://getoutofthedark.blogspot.com/
The "Don't Tread on Me" Flag: The First Navy Jack is enjoying renewed popularity these days thanks to an order from the Secretary of the Navy that directs all U.S. Navy ships to fly the First Navy Jack for the duration of the War on Terrorism.
Re: FW: OBAMA'S STIMULUS PLAN WON'T STIMULATE
I think Morris's take on this is fairly accurate. For one, I didn't agree with the stimulus we got earlier in the year, so I used it to pay off credit card debt, just as he says. While I am now practically debt free, this doesn't help the country or uncle sam very much.
Two, he's right about infrastructure projects. They take forever. look at how long it took to get Legacy Highway, 1-80 reconstruction, and UTOPIA. It took over 30 years to get practically universal cell phone coverage, and that was mostly privately funded. Cities like Saratoga Springs, Harriman and Eagle Mountain don't have cable service yet.
However, as we discussed with Nevin, there are already projects planned and ready to go that are already in the pipe. This renewed funding could be immediately applied to those projects to ensure they don't get halted when governors like Huntsman want to take a quick axe to their budgets.
Industries are created and destroyed on infrastructure. Lincoln was a genius because he saw that the only way to get all of that gold wealth generated in the 49er gold rush from the West coast to the East coast where it was needed in treasury to pay for war debts was to build a railroad so that Californians could buy products manufactured and grown in the East, and thereby tranferring their gold. This started a whole new shipping industry dominated by the age olds like Wells Fargo and Burlington.
FDR saw the same thing with the Tenessee Valley project and the building of dams. Ike saw it in building interconnecting highways that spawned the new 'cowboy' industry of trucking and distribution giants such as FedEx and UPS, as well as a mammoth auto industry and dependence on oil. And Kennedy's spending on NASA and the creation of the space infrastructure industry revolutionized the communications industry which affects are still being discovered. Google maps and GPS, anyone?
Japan tried coming out of a deep recession without spedning on infrastructure. This resulted in stagflation that took 10 years to overcome.
I recommend the book Building Wealth, by Lester C. Thurow for any that are interested. I began reading it again and I am glad to see that the Federal Reserve is following a lot of the recommendations in the book. I think we are on the right track to turning this thing around.
Tijs
--
Tijs Limburg
Chairman and CTO of DMX - Digital Media eXceleron, Inc.
Get eXcited!
www.dmxed.com
Blogs:
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http://getoutofthedark.blogspot.com/
The "Don't Tread on Me" Flag: The First Navy Jack is enjoying renewed popularity these days thanks to an order from the Secretary of the Navy that directs all U.S. Navy ships to fly the First Navy Jack for the duration of the War on Terrorism.
Two, he's right about infrastructure projects. They take forever. look at how long it took to get Legacy Highway, 1-80 reconstruction, and UTOPIA. It took over 30 years to get practically universal cell phone coverage, and that was mostly privately funded. Cities like Saratoga Springs, Harriman and Eagle Mountain don't have cable service yet.
However, as we discussed with Nevin, there are already projects planned and ready to go that are already in the pipe. This renewed funding could be immediately applied to those projects to ensure they don't get halted when governors like Huntsman want to take a quick axe to their budgets.
Industries are created and destroyed on infrastructure. Lincoln was a genius because he saw that the only way to get all of that gold wealth generated in the 49er gold rush from the West coast to the East coast where it was needed in treasury to pay for war debts was to build a railroad so that Californians could buy products manufactured and grown in the East, and thereby tranferring their gold. This started a whole new shipping industry dominated by the age olds like Wells Fargo and Burlington.
FDR saw the same thing with the Tenessee Valley project and the building of dams. Ike saw it in building interconnecting highways that spawned the new 'cowboy' industry of trucking and distribution giants such as FedEx and UPS, as well as a mammoth auto industry and dependence on oil. And Kennedy's spending on NASA and the creation of the space infrastructure industry revolutionized the communications industry which affects are still being discovered. Google maps and GPS, anyone?
Japan tried coming out of a deep recession without spedning on infrastructure. This resulted in stagflation that took 10 years to overcome.
I recommend the book Building Wealth, by Lester C. Thurow for any that are interested. I began reading it again and I am glad to see that the Federal Reserve is following a lot of the recommendations in the book. I think we are on the right track to turning this thing around.
Tijs
On Wed, Dec 10, 2008 at 2:24 PM, Limburg, Garth <Garth.Limburg@slcgov.com> wrote:
We have talked about this issue. Here is Dick Morris' take on it.
-----Original Message-----
From: Dick Morris Reports [mailto:subscribers@dickmorris.com]
Sent: Wednesday, December 10, 2008 1:51 PM
To: Limburg, Garth
Subject: OBAMA'S STIMULUS PLAN WON'T STIMULATE
OBAMA'S STIMULUS PLAN WON'T STIMULATE
By DICK MORRIS
Published on TheHill.com
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50aGVoaWxsLmNvbS8%3d&x=65c6beb1> on December 9, 2008
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The economic stimulus plans unveiled by President-elect Obama over the
weekend won't do much to help the economy. But they will vindicate all
the dreams of liberal Democrats for higher government spending.
Get Palin's Book, Just Pay Shipping
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cubmV3c21heHN0b3JlLmNvbS9ubV9tYWcvc2FyYWguY2ZtP1BST01PX0NPREU9NzJBRC0x&x
=30f1a6f6> Of course, the basic choice facing any politician
seeking to stimulate a moribund economy is whether to catalyze the
supply side with tax cuts on business or the demand side by way of
spending increases. Obama obviously made that choice years ago: He will
work the demand side.
But once a leader makes that decision, he faces another: Will he
emphasize important and valuable public works projects or will he just
try to pass out the largest amount of money possible? By announcing that
he is not "going to throw money" at the economy in the hopes of getting
a pulse, Obama signals that he will stress the former approach and fund
important public works such as school reconstruction, fiber optic
cables, alternative energy generation and the like.
The problem is that such projects take a long time to plan and longer to
build. Their immediate economic impact is highly attenuated.
In all federal capital projects, only about one-quarter of the funds
appropriated are actually spent in the fiscal year. It just takes that
long to plan, engineer and begin construction. And for every $6 spent in
the last stimulus package, only $1 actually got spent on goods or
services. Five dollars out of every six in the Bush stimulus package of
2008 went to pay down debt, mortgage or credit card or student loan or
home equity, and not into the acquisition of new products or services.
So, do the math. If only 25 cents out of every dollar actually is spent
in the fiscal year, and only one-sixth of that sum actually gets spent
by the workers who get paid on new goods and services, only about 4
cents from every dollar actually stimulates the economy. And who says
those 4 cents will be spent on domestically produced products? A lot of
the stimulus will just feed Chinese imports, particularly with their low
prices.
FDR faced just this problem in combating the Great Depression. In the
National Recovery Act (NRA), Roosevelt set up the Public Works
Administration (PWA) headed by Interior Secretary Harold Ickes (the
original one). Ickes was a stickler for making sure nothing was wasted
and in keeping the costs down. He managed a spectacularly successful
public works program and built, without scandal or corruption, some of
our most important national infrastructure. But he took his sweet time
doing so. The economic stimulation was slow in coming.
Exasperated, FDR did an end-run around Ickes and set up the Works
Progress Administration (WPA) under Harry Hopkins. WPA spent its money
quickly and on projects involving little overhead or preparation. My
mother got a WPA job teaching English to foreigners. Virtually all the
WPA funds were spent in the fiscal year and the stimulative effect was
immediate.
But in opting to go the Ickes route, Obama will find that he leaves a
legacy of important contributions to our national infrastructure, but
little in the way of real economic stimulation.
While a WPA-type approach might hasten the ameliorative impact of the
stimulus package, Obama still faces the conundrum that most of those who
get extra paychecks as a result of his spending will use the money to
climb out of debt. In the '30s, credit cards didn't exist and consumer
debt was very limited. Most people lived paycheck to paycheck. Extra
money equaled extra spending. But now that most consumers will use money
to pay down their debts, not to spend it, demand-side stimulation has
its limitations. But Obama's ideology won't allow him to indulge in tax
cuts "for the rich," which might work to get us out of the depression
faster.
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Palin's Book, Just Pay Shipping
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The "Don't Tread on Me" Flag: The First Navy Jack is enjoying renewed popularity these days thanks to an order from the Secretary of the Navy that directs all U.S. Navy ships to fly the First Navy Jack for the duration of the War on Terrorism.
Wednesday, November 05, 2008
Reply: The Election, my final reflections
The thing that makes me more calm are the statistics for voter turnout. This time America really did come out and speak their voice, with over 110 million votes and over 66% voter turnout. I believe in the democratic-republic system so geniusly prescribed by Jefferson, Adams, Franklin, Washington, and the other founding fathers, and if that system elected Barack Obama in the end, then I believe as all of you do that we can only rally behind our new president in patriotism, supporting him where we agree and opposing him where we differ in ideals.
Something else I realized last night. I really can't complain about my life so far, most everything has been good. There are a few notable catastrophic events that took place such as the Gulf War, the Oklahoma City bombing, 9/11, and Columbine, but overall the economies have always been good, there has never been a draft, and the information revolution occurred while I was still young, so I have been able to be a participant in practically the whole of it.
Interestingly, I was born during the Regan administration which totaled the first 5 years of my life. Then we had Bush senior, making 9 years of my life under a Republican president. Then we had Clinton for 8 years, and then Bush for another 8 years, totaling 17 of my 25 years under a Republican. With this in mind I am interested to see what 4 added years to the democrat side of the equation will bring. I will be 29 when the next election for president is held. What am I going to accomplish for myself, my family, and my country in those 4 years?
It will be interesting to see if other Americans are asking the same questions about themselves ("ask what you can do for your country") or if they will be asking what their new president and government will do for them ("ask what your country can do for you"). While I am excited to see that Americans on both sides became more involved this time, they have yet to prove that they will stand up and take action for themselves to improve their lives and their situation. I guess time will tell.
Tijs
Something else I realized last night. I really can't complain about my life so far, most everything has been good. There are a few notable catastrophic events that took place such as the Gulf War, the Oklahoma City bombing, 9/11, and Columbine, but overall the economies have always been good, there has never been a draft, and the information revolution occurred while I was still young, so I have been able to be a participant in practically the whole of it.
Interestingly, I was born during the Regan administration which totaled the first 5 years of my life. Then we had Bush senior, making 9 years of my life under a Republican president. Then we had Clinton for 8 years, and then Bush for another 8 years, totaling 17 of my 25 years under a Republican. With this in mind I am interested to see what 4 added years to the democrat side of the equation will bring. I will be 29 when the next election for president is held. What am I going to accomplish for myself, my family, and my country in those 4 years?
It will be interesting to see if other Americans are asking the same questions about themselves ("ask what you can do for your country") or if they will be asking what their new president and government will do for them ("ask what your country can do for you"). While I am excited to see that Americans on both sides became more involved this time, they have yet to prove that they will stand up and take action for themselves to improve their lives and their situation. I guess time will tell.
Tijs
--
Tijs Limburg
The Election, my final reflections
A letter I received in regards to the election last night.
Dear Friends,
You know that I was quite passionate about the presidential elections. Today, the day after, I am quite mellow about it, and at peace. I listened well to both speeches last night following John McCain's concession to Barack Obama. I want to follow what McCain said that we should all do as Americans, and that is work together to solve our problems. I believe McCain delivered the most dignified, classy, generous, respectful, and positive concession speech that I have ever heard from a candidate. I also believe that President-Elect Obama's speech was truly inspirational and that he positively reached out to all Americans, and I want him to succeed in what he said. He absolutely must come more to the center of the political arena to accomplish what he promised, and I will remain a conservative with the values that I have to help in my small way to be a voice to bring about a greater America. I invite all of you to join me in that, or to just do what your own desires dictate to contribute to the cause of a more righteous behavior in our government and across this great land of the free.
Your friend,
Nevin
Dear Friends,
You know that I was quite passionate about the presidential elections. Today, the day after, I am quite mellow about it, and at peace. I listened well to both speeches last night following John McCain's concession to Barack Obama. I want to follow what McCain said that we should all do as Americans, and that is work together to solve our problems. I believe McCain delivered the most dignified, classy, generous, respectful, and positive concession speech that I have ever heard from a candidate. I also believe that President-Elect Obama's speech was truly inspirational and that he positively reached out to all Americans, and I want him to succeed in what he said. He absolutely must come more to the center of the political arena to accomplish what he promised, and I will remain a conservative with the values that I have to help in my small way to be a voice to bring about a greater America. I invite all of you to join me in that, or to just do what your own desires dictate to contribute to the cause of a more righteous behavior in our government and across this great land of the free.
Your friend,
Nevin
Tuesday, November 04, 2008
Politics and Halloween
--
Tijs Limburg
Chairman and CTO of DMX - Digital Media eXceleron, Inc.
Get eXcited!
www.dmxed.com
Blogs:
http://phystrings.blogspot.com/
http://getoutofthedark.blogspot.com/
The "Don't Tread on Me" Flag: The First Navy Jack is enjoying renewed popularity these days thanks to an order from the Secretary of the Navy that directs all U.S. Navy ships to fly the First Navy Jack for the duration of the War on Terrorism.
Monday, November 03, 2008
Fox Poll: McCain Tied in Key States
Again, Dick Morris predicts if Obama is at 49% or below and undecided
voters break for McCain, McCain wins.
Check this out. Hope Fox News is right!
| Breaking from Newsmax.com |
| Fox Poll: McCain Tied in Key States A just-released Fox News poll of 1,000 voters in each of six key states shows Republican presidential candidate Sen. John McCain making major last minutes strides to pull even with his Democratic rival, Sen. Barack Obama. While Obama leads in two of the battlegrounds states, the candidates are now tied, or within 1 point of each other, in four others, according to the Rasmussen Reports survey. In Ohio, one of the states that McCain's supporters believe they have to win, McCain has pulled dead even. Obama and McCain are now tied in Ohio, at 49 percent apiece. Here are the results from the Fox News poll: Colorado Obama 51 McCain 47 Florida McCain 50 Obama 49 Missouri Obama 49 McCain 49 N. Carolina McCain 50 Obama 49 Ohio Obama 49 McCain 49 Virginia Obama 51 McCain 47 The poll has a plus or minus margin of error of 3 percent. Sponsored Note: The GOPtrust.com can still buy TV ads in key swing states — help them now and donate...Go Here Now |
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Tijs Limburg
Chairman and CTO of DMX - Digital Media eXceleron, Inc.
Get eXcited!
www.dmxed.com
Blogs:
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http://getoutofthedark.blogspot.com/
The "Don't Tread on Me" Flag: The First Navy Jack is enjoying renewed popularity these days thanks to an order from the Secretary of the Navy that directs all U.S. Navy ships to fly the First Navy Jack for the duration of the War on Terrorism.
Thursday, October 30, 2008
There's hope!
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--
Tijs Limburg
Chairman and CTO of DMX - Digital Media eXceleron, Inc.
Get eXcited!
www.dmxed.com
Blogs:
http://phystrings.blogspot.com/
http://getoutofthedark.blogspot.com/
The "Don't Tread on Me" Flag: The First Navy Jack is enjoying renewed popularity these days thanks to an order from the Secretary of the Navy that directs all U.S. Navy ships to fly the First Navy Jack for the duration of the War on Terrorism.
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While out this afternoon, and while listening to Hannity, Dick Morris came on and told everyone:
1) It's a 3% race nationwide
2) Don't pay attention to the state polls because they are old
3) undecided independents are swinging McCain, because they have not yet gotten comfortable with Obama
4) reptrust.com has raised $4M for their Reverand Jeremiah Wright/Obama Ad, and hope to have $6M by end of today, to run these ads nationwide over the weekend
5) Said that watch for Monday, and if Obama is at 48% nationwide (giving Nader et al about 1%) he loses, no matter what it shows McCain is at then. Reason: last minute deciders on the eve of the election, like a marriage having had troubles, will decide to stay with the marriage the next day because they can't trust what the future will bring (and they obviously have not decided at that point to go with the obvious change agent, Obama)
6) Is not predicting a McCain victory at this point, 5 days out, but says there is hope in Virginia, Ohio, Florida, and others, but he admits that Obama did himself some good last night with the est. 40 M viewers
7) Said McCain's adds are working, he has matched Obama in key states, and is causing people to question the change if Obama is as radical as he is being made out to be.
8) Says there is hope
Nevin, with my political take for the day, group pundits!
"We should be too big to take offense, and too noble to give it"
Abraham Lincoln.
Nevin Limburg, CEcD
Business Development Manager
Economic Development / Redevelopment Agency
West Valley City, Utah
Office: 801-963-3322
cell: 801-232-0264
Nevin.Limburg@wvc-ut.gov
1) It's a 3% race nationwide
2) Don't pay attention to the state polls because they are old
3) undecided independents are swinging McCain, because they have not yet gotten comfortable with Obama
4) reptrust.com has raised $4M for their Reverand Jeremiah Wright/Obama Ad, and hope to have $6M by end of today, to run these ads nationwide over the weekend
5) Said that watch for Monday, and if Obama is at 48% nationwide (giving Nader et al about 1%) he loses, no matter what it shows McCain is at then. Reason: last minute deciders on the eve of the election, like a marriage having had troubles, will decide to stay with the marriage the next day because they can't trust what the future will bring (and they obviously have not decided at that point to go with the obvious change agent, Obama)
6) Is not predicting a McCain victory at this point, 5 days out, but says there is hope in Virginia, Ohio, Florida, and others, but he admits that Obama did himself some good last night with the est. 40 M viewers
7) Said McCain's adds are working, he has matched Obama in key states, and is causing people to question the change if Obama is as radical as he is being made out to be.
8) Says there is hope
Nevin, with my political take for the day, group pundits!
"We should be too big to take offense, and too noble to give it"
Abraham Lincoln.
Nevin Limburg, CEcD
Business Development Manager
Economic Development / Redevelopment Agency
West Valley City, Utah
Office: 801-963-3322
cell: 801-232-0264
Nevin.Limburg@wvc-ut.gov
--
Tijs Limburg
Chairman and CTO of DMX - Digital Media eXceleron, Inc.
Get eXcited!
www.dmxed.com
Blogs:
http://phystrings.blogspot.com/
http://getoutofthedark.blogspot.com/
The "Don't Tread on Me" Flag: The First Navy Jack is enjoying renewed popularity these days thanks to an order from the Secretary of the Navy that directs all U.S. Navy ships to fly the First Navy Jack for the duration of the War on Terrorism.
Experiment: Obama's IRS (Income Redistribution Service)
All,
I read this note today that was posted by one of my friends. The 'experiment' is a good example of what will happen when people realize what they voted for if Obama becomes president:
Yesterday on my way to lunch I passed a homeless guy with a sign that read 'Vote Obama, I need the money.' I laughed.
Once in the restaurant my server had on a 'Obama 08' tie, again I laughed as he had given away his political preference – just imagine the coincidence.
When the bill came I decided not to tip the server and explained to him that I was exploring the Obama redistribution of wealth concept. He stood there in disbelief while I told him that I was going to redistribute his tip to someone who I
deemed more in need--the homeless guy outside. The server angrily stormed from my sight.
I went outside, gave the homeless guy $10 and told him to thank the server inside as I've decided he could use the money more. The homeless guy was grateful.
At the end of my rather unscientific redistribution experiment I realized the homeless guy was grateful for the money he did not earn, but the waiter was pretty angry that I gave away the money he did earn even though the actual
recipient deserved money more.
I guess redistribution of wealth is an easier thing to swallow in concept than in practical application.
-Anonymous
While Republicans like Ron Paul wanted to do away with the IRS, Democrats like Obama just wants to change the meaning of the name, to Income Redistribution Service.
Pass it on.
--
Tijs Limburg
Chairman and CTO of DMX - Digital Media eXceleron, Inc.
Get eXcited!
www.dmxed.com
Blogs:
http://phystrings.blogspot.com/
http://getoutofthedark.blogspot.com/
The "Don't Tread on Me" Flag: The First Navy Jack is enjoying renewed popularity these days thanks to an order from the Secretary of the Navy that directs all U.S. Navy ships to fly the First Navy Jack for the duration of the War on Terrorism.
I read this note today that was posted by one of my friends. The 'experiment' is a good example of what will happen when people realize what they voted for if Obama becomes president:
Yesterday on my way to lunch I passed a homeless guy with a sign that read 'Vote Obama, I need the money.' I laughed.
Once in the restaurant my server had on a 'Obama 08' tie, again I laughed as he had given away his political preference – just imagine the coincidence.
When the bill came I decided not to tip the server and explained to him that I was exploring the Obama redistribution of wealth concept. He stood there in disbelief while I told him that I was going to redistribute his tip to someone who I
deemed more in need--the homeless guy outside. The server angrily stormed from my sight.
I went outside, gave the homeless guy $10 and told him to thank the server inside as I've decided he could use the money more. The homeless guy was grateful.
At the end of my rather unscientific redistribution experiment I realized the homeless guy was grateful for the money he did not earn, but the waiter was pretty angry that I gave away the money he did earn even though the actual
recipient deserved money more.
I guess redistribution of wealth is an easier thing to swallow in concept than in practical application.
-Anonymous
While Republicans like Ron Paul wanted to do away with the IRS, Democrats like Obama just wants to change the meaning of the name, to Income Redistribution Service.
Pass it on.
--
Tijs Limburg
Chairman and CTO of DMX - Digital Media eXceleron, Inc.
Get eXcited!
www.dmxed.com
Blogs:
http://phystrings.blogspot.com/
http://getoutofthedark.blogspot.com/
The "Don't Tread on Me" Flag: The First Navy Jack is enjoying renewed popularity these days thanks to an order from the Secretary of the Navy that directs all U.S. Navy ships to fly the First Navy Jack for the duration of the War on Terrorism.
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