Capital Markets

False Cures for the Recession

Why the bailout won't work

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Times of emergency produce demands for action, and Barack Obama does not need to be urged twice. Weeks before taking office, he wants Congress to pass a fiscal stimulus bill costing half a trillion dollars or so, and his allies on Capitol Hill will undoubtedly give it to him. Amid a recession that some fear will spiral into a depression, no one wants to be accused of doing too little.

Obama's plan is expected to call for a host of remedies—including extended unemployment benefits, aid to state governments, more infrastructure spending, and a middle-class tax cut. It brings to mind the character in Stephen Leacock's humorous novel Gertrude the Governess, who "flung himself upon his horse and rode madly off in all directions."

Even many conservatives, however, want Washington to deploy fiscal weapons. Economist John Taylor of Stanford University and the Hoover Institution, an adviser to John McCain's campaign, says it "would be a significant stimulus to the economy" if the incoming president were to extend the Bush tax cuts.

There are only two drawbacks to the proposals offered by both the right and the left. First, they would cost a lot of money, either in lost revenue or additional federal expenditures, further bloating our gargantuan national debt. That cost would be worthwhile if it were essential to stave off a total economic collapse. But there is a second problem: These plans are not likely to work.

Shoveling cash into various public programs sounds like a surefire way to boost total demand and thus juice the economy. But the money doesn't sprout from trees in Tim Geithner's backyard. Any funds it wants to spend, the government will have to borrow. The people who lend the money will no longer have it to spend. So the total amount of spending may not change much, if at all.

Timing is another glitch. Putting crews to work on roads and bridges doesn't happen overnight—plans have to be approved, bids have to be solicited and contracts have to be signed. The Department of Transportation says that even with projects that are primed and ready, only one-fourth of the money gets spent in the first year. By the time an infrastructure program gets rolling, the downturn will almost certainly be shrinking in the rearview mirror.

If there are worthy projects out there, now is a good time to do them. But all we should expect in return is a better infrastructure a few years from now, not a stronger economy next May.

Tax cuts also promise disappointment. The Bush administration claimed its 2001 tax cut had a tonic effect on a weak economy, but it turns out that most of the money went to increase savings or reduce debt, not to unleash spending. Likewise with this year's tax rebates.

Even some experts who favor keeping tax rates low doubt that extending the Bush tax cuts beyond 2010 would do anything for the economy right now. "As a tool for dealing with this crisis, I don't know," Nobel Laureate economist Robert Lucas of the University of Chicago told me. "It's misleading to advertise them as an anti-recession device."

In fact, it's misleading to advertise any fiscal policy as an anti-recession device. University of California, Berkeley economist Alan Auerbach examined all the different tools that have been tried in the last 50 years and found "little evidence that these effects have provided a significant contribution to economic stabilization, if in fact they have worked in the right direction at all."

Everyone wants to do something. But holding off on a fiscal stimulus package wouldn't exactly mean doing nothing. Monetary policy has historically had a more potent and predictable effect on the economy than fiscal policy, and in recent months Ben Bernanke has been spraying money with a fire hose—cutting interest rates, boosting bank reserves 15-fold since August and taking radical steps like buying up short-term commercial debt.

All those steps will pay off, but they take time. Adding fiscal measures would probably be superfluous. If you want to go to the 10th floor on an elevator, punching the button over and over won't get you there any faster. We can throw a lot of money at the recession, but in the end, what we'll get is no hastening of recovery and a big stack of bills.

COPYRIGHT 2008 CREATORS SYNDICATE, INC.

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  1. “In his latest column, Steve Chapman explains why the bailout won’t work.”

    Hmmmm. I think you mean “In his latest column, Steve Chapman claims that Obama’s plans for fiscal stimulus won’t work.”

    The “bailout,” which is going on right now under the Bush Administration, is entirely different from Obama’s plans. Steve quotes one economist to “prove” that economic stimuli don’t work. I’m sure that he could find a couple who would argue the other way, if he looked hard enough.

    I think I remember that the sainted Ronald Reagan relied on a stimulus package (though he didn’t call it that, of course) of whopping tax cuts and whopping increases in government spending (all in the defense sector, of course). And I think it worked, too.

  2. Shorter first comment:
    “The right people aren’t in charge yet”

  3. All of the steps are not going to pay off. In fact, they have never paid off. We have been wading through an endless struggle to save a system that is impossible. People are really not grasping the enormity of what we are about to experience. I am not certain why the current state of the global economy is such a mystery. It’s a simple cause and effect relationship that has been manifesting for over three decades. A paper (or fiat) economic system cannot survive. This is an unfeasible condition and no such system has succeeded throughout the entire history of humanity. Added to this unimpeachable reality is the chaos that is created by egoistic influences affecting the global market. It doesn’t even matter at what level these egoistic influences are impacting our future. There’s the day-to-day pleasure seeking/desire-fulfilling routine we all act out almost every moment we breathe. We satisfy one desire, experience the very brief pleasure, and we immediately begin the pursuit of the next target we believe will satiate our need to reach a permanent state of pleasure-filled bliss…..whatever that means. Then, there’s the business person who takes down a billion dollars one year. But there’s no real time to enjoy it because they’re already trying to determine why they didn’t make two billion. The same rule applies to world government/political leaders. The pursuit of power and influence is at the expense of societal stability. In the midst of this individual pursuit of self-pleasure we have lost our connection with each other. The degree to which we pursue material/physical/psychological satisfactions is no less impacting than anything that may or may not have been done by Wall Street or some government entity. No matter how we cut it, an individual is a component of society and every act and/or thought by every individual will impact the society. No economic model will succeed unless it is based on the precept that humanity is the irreducible primary, not the individual. We seemingly cannot grasp, although it is becoming apparent to some, that all of our failures throughout the generations are because we do not have a correct understanding of the purpose of humanity. Even with all of the advances in medicine, technology, and science, we still have not improved how human beings relate to each other. We are out of balance with Nature. There are no fixes for the current global economic crises in any context that is generally understood. The fix exists only in how we connect with each other. When we can make that correction, the environment that allowed the current economic chaos cannot exist. We need to enter a new mode of thinking and take pause to consider the ice under our feet. It’s starting to get very thin. I came across a very interesting perspective that gives us something to consider when trying to understand how we have arrived to our present difficulties: Michael Laitman, PhD, http://www.laitman.com/2008/10/the-financial-crisis-an-analysis/

  4. Isn’t Chapman burying his lede? Way into the article he claims:

    In fact, it’s misleading to advertise any fiscal policy as an anti-recession device.

    Well then let’s evaluate the fiscal policy independent of the recession. According to the rest of his piece various proposed fiscal policies will: a) Not affect spending much; b) begin to improve national infrastructure just in time for an improving, post-recession economy to take advantage; c) increase personal savings and debt reduction. All of this will occur alongside a monetary policy that will eventually fix the economy, as monetary policy is preferable to fiscal policy in managing a recession (which Chapman takes as a given, since he doesn’t quote an economist to back up this point as he does for all the other points mentioned above).

    So where’s the downside?

    Also, what SIV said what Alan Vanneman said.

  5. The “bailout,” which is going on right now under the Bush Administration, is entirely different from Obama’s plans

    You mean The Bailout? stops on January 20th? Huzzah!

  6. First, they would cost a lot of money, either in lost revenue

    I love the implicit assumption by semi-retarded statists that the government somehow has a claim to our money. If we cut taxes, that “costs” the government money through lost revenue. Sorry, but that’s just not true. That’s like claiming my not purchasing products from GM costs them money through lost revenue. Oh, yeah, tax cuts are also subsidies! And lost revenue! OMG! Tax cuts are teh evil!

  7. Steve Chapman underestimates the importance of fiscal policy. It was the Hoot-Smawley Tariff that caused the initial drop in the stock market and then, yes, it was the federal reserve who contracted the money supply because they didn’t monetize the gold flowing in from Europe. This time around it might be just as important because it was caused by an over-eager fed who sprayed the economy with money and built up a mountain of debt. We need those tax cuts, not only because it’s our money, but because we need to pay down our debts and start over. If debt is a liability for a single person it’s a liability for a nation.

    I’m also disappointed that he thinks that the fed doing what it has been doing all but at a greater degree will help. If you look at the history of monetary policy, inflation in the economy comes about two years after inflation of the money supply. The last time we knew the actual amount of money in the economy it had increased about 15%. Now they have stopped telling us these statistics because they know what it means. This isn’t going to be the Great Depression nor stagflation but something probably much worse.

  8. This week’s Chapman is better than anything I’ve heard or read out of the MSM. But he still doesn’t get it.

    Things like “By the time an infrastructure program gets rolling, the downturn will almost certainly be shrinking in the rearview mirror.” don’t take into account how all the “stimulus” is likely to deepen and extend the crisis. And that would also include “stimulus” like infrastructure programs.

    As an advocate for responcible fiscal policy Steve is too much of a lightweight.

  9. In fact, it’s misleading to advertise any fiscal policy as an anti-recession device. University of California, Berkeley economist Alan Auerbach examined all the different tools that have been tried in the last 50 years and found “little evidence that these effects have provided a significant contribution to economic stabilization, if in fact they have worked in the right direction at all.”

    Duh! It’s a recession. They happen. They suck. They end. Saddling our children with more debt is neither moral nor very effective. This is the twelfth recession since the end of WWII. In all of the previous ones the citizenry has not been reduced to cannibalism, have not fomented a violent revolution nor have they thrown any virgins into volcanos.

    The politician’s mantras –
    Gentlemen, we have to protect our phoney baloney jobs.

    When in trouble, or in doubt
    Run in circles, scream and shout.

  10. Opening everywhere, January 21, 2009.

    Bailout Maximum Overdrive!

  11. The Bush administration claimed its 2001 tax cut had a tonic effect on a weak economy, but it turns out that most of the money went to increase savings or reduce debt

    And please, could somebody explain to me why that would be bad?

  12. And please, could somebody explain to me why that would be bad?

    Not bad, just ineffective for stimulating the economy. The extra savings and reduced debt in the private sector was more than balanced by the increased government debt. Stimulus packages only affect the big picture work if people spend the money.

  13. delete work in my last sentence.

    Preview makes you look smarter than subsequent corrective postings do.

  14. Savings are, generally speaking, the same as funds available for investment. This is what drives me nuts when people run around whining about how the rich have too much money; that money isn’t buried in the back yard, it’s invested. It has been put to use by businesses which need working capital to make more money.

    Deleveraging (paying down debt) allows you to restructure your balance sheet in order to put resources to more efficient use.

  15. J sub D,

    I must take issue with your remarks. I believe virgins were indeed tossed into volcanoes during the late 70s recession.

  16. I must take issue with your remarks. I believe virgins were indeed tossed into volcanoes during the late 70s recession.

    Only ugly ones.

  17. “And please, could somebody explain to me why that would be bad?”

    Well, we all saw how well years of increasing public and private debt worked out. Why would any sane person want to stop now?

  18. “Only ugly ones”
    I always thought that they were used in early biofuel experiments.

  19. And please, could somebody explain to me why that would be bad?

    Not bad, just ineffective for stimulating the economy. The extra savings and reduced debt in the private sector was more than balanced by the increased government debt. Stimulus packages only affect the big picture work if people spend the money.

    Of course, extra savings is just another word for increased investment, unless that money is held in cash stuffed into a mattress.

    I would think that an increase in savings and investment would always be good for the economy, in the long run. Maybe higher spending gets you more of a short-term pop, but if that higher spending is funded by debt (either at the private or government level), isn’t it probably harmful, on net, in the long run?

  20. R C Dean,
    Well, according to DannyK, something being good in the long run isn’t sufficient justification for it.

  21. I, of course, intend to bring that up if he ever claims global warming legislation is necessary for “Teh Childrun”.

  22. RC Dean,

    The “problem” with savings is that it takes time for the savings to show up as future consumption.

    Short term thinkers like Krugman see people foregoing present consumption for future consumption and see this as a potentially permanent reduction in consumption.

    That’s why they panic about people increasing savings: they don;t understand that the fuel of real economic growth is the willingness of people to forego present consumption in exchange for investing in capital goods that improve production in the future.

  23. It’s nice to see all these libertarians patting themselves on the back for a supposed concern for the “long run”. But where is that concern when our planet is at stake? You’re very quick to skewer government efforts to shorten recessions by pointing out that savings won’t be as high, but what about the high levels of pollution that are currently destroying our planet?

  24. If I were king, I would issue a decree requiring the schools to teach the difference between an “investment” and an “expense”.

    And I would have Paul Krugman beheaded.

  25. @PBrooks-Paul Krugman is a better economist than you’ll ever be. His only “crime” is disagreeing with your wingnut sentiments. I guess by that standard you’d have the majority of people killed. What a fucking scary individual you are.

  26. “Free minds” indeed.

  27. “… but what about the high levels of pollution that are currently destroying our planet?”

    For starters, please don’t reproduce.

  28. I predict that instead of tax breaks or refunds the federal government will begin issuing gift cards for various preferred stores. In order make sure the money’s being used for the “right reasons,” of course, not silly things like savings or debt reduction.

    God help us all.

  29. That’s why they panic about people increasing savings: they don;t understand that the fuel of real economic growth is the willingness of people to forego present consumption in exchange for investing in capital goods that improve production in the future.

    JUNKIE ECONOMY!
    JUNKIE ECONOMY!

    Everybody that complains about people or institutions “hording” money by putting into savings and not “stimulating” the economy by spending it, is exactly like telling a junkie that then need to keep injecting heroin into their veins because that’s the only thing that makes them feel better.

    Of course increasing savings and reducing spending is going to slow down the economy. It’s the painful withdrawal we need to go through before we can get healthy. If the government keeps going the way it has been, we are in serious danger of overdosing.

  30. “I think I remember that the sainted Ronald Reagan relied on a stimulus package (though he didn’t call it that, of course) of whopping tax cuts and whopping increases in government spending (all in the defense sector, of course). And I think it worked, too.”

    The tax cuts were more than just stimulus. They created incentives for savings and investment and work. That combined with Volker finally killing inflation set the stage for the recovery. The defense spending did nothing to improve the economy. It was certainly necessary and helped win the cold war but it didn’t stimulate the economy. It just moved money around. Further, there was a big round of tax increases in 1982 during the teeth of the recession. Fortuneately, they were not enough to offset the good incentive effects of the 1981 tax decreases.

  31. “It’s nice to see all these libertarians patting themselves on the back for a supposed concern for the “long run”. But where is that concern when our planet is at stake? You’re very quick to skewer government efforts to shorten recessions by pointing out that savings won’t be as high, but what about the high levels of pollution that are currently destroying our planet?”

    If we forgo consumption now to increase savings, this will decrease pollution *right now*. As technology increases, resources will be used more efficiently (ergo, less waste), resulting in decreased pollution *later*. CO, you should be all over increased saving!

  32. “… but what about the high levels of pollution that are currently destroying our planet?”

    *Yawn*

  33. I don’t beleive that tax cuts insofar as they work as stimulus do a damn thing for the economy. If you just give back money randomly in tax cuts like Bush did last spring, it doesn’t help one bit. Indeed, we were in a recession last spring and are still in one now. The tax cut stimulus did nothing. The only way tax cuts work is when you cut them at the margins so that people have more incentives to save, invest and work. But to do that you have to “gasp” let rich people keep more of the money they earn. We can’t have that. Better to be equally poor than unequally wealthy.

  34. Concerned Observer,

    The Earth will probably be around long after the human race is extinct.

    Now, you probably were being hyperbolic and were asserting that human beings are rendering the Earth uninhabitable. I don’t buy that – I haven’t read any credible reports to that effect. Most of the credible reports argue that if not halted climate change will prompt migration of people and cause huge social/economic dislocation.

    That is that climate change poses a economic/political challenge. Only active mismanagement of the challenge would cause the extinction of the human race or even the death of a substantial portion of it. I haven’t yet read a credible case that a do nothing policy will not result in a substantial number of deaths. I personally think that the brakes on production that are conventionally proposed to ‘mitigate’ climate change are far more harmful and deadly than allowing people to make their own choices.

    In the end, I think you guys who are convinced that somehow you will be able to keep the Earth’s climate in the narrow band it has occupied in the last 7,000 years are showing a great deal of hubris and illogic.

  35. What tarran, you think it is hubris to believe that mankind is responsible for every climate change? Next you will be telling me that crops fail for reasons other than mother nature and the Gods being angry at us.

  36. Carp, it should ahve been: I haven’t yet read a credible case that a do nothing policy will result in a substantial number of deaths.

  37. But global warming is making the earth uninhabitable! It’s melting my brains!

  38. John, it’s people like you who make our earth mother angry and cause draughts in Zimbabwe!

  39. I alone hold the knowledge granted by the Earth Mother. You should all show us the respect we deserve!

  40. What’s becoming increasingly apparent, and missed by the article, is that we are moving into a Nominal Growth over Real Growth period similar to the 1970’s. After a brief bout of deflation we will move into a long period of high inflation. This will erode the size of all debts, public and private, and bail out upside down homeowners.

    This will be partially accomplished through the “quantitative easing” the Fed has begun through which the Fed will buy back outstanding Treasury debt and monetize it. This is also how the Treasury will finance the fiscal spending and while debt levels will increase in Nominal Terms they won’t so much in real terms.

    It will suck for those of you who, like me, have no debt.

  41. I haven’t posted here yet, wingnuts!

  42. I’Kaho o’ Clast,
    Perhaps I should go out and buy myself a McMansion financed with heavy debt?

  43. I am teh concerned observer!

  44. No! I am!

  45. They are both liars! I am teh concerned observer!

  46. The concerned observer is my evil twin.

  47. Perhaps I should go out and buy myself a McMansion financed with heavy debt?

    That’s what a RealAmerican would do.

  48. I AM TEH CONCERNED OBSERVER!

  49. I am TEH CONCERNED OBSERVER!

  50. John,

    To be honest, one of the things that bothers me about the conservationist response to climate change is that a fundamental question is never asked.

    What if the climate change that we are causing had occurred, but 10,000 years ago? What political arrangement would have maximized human wealth and happiness? I am convinced that a political order based on social and economic freedom would produce the happiest and most wealthy human civilization possible on such an altered Earth.

    On any steady state Earth that supports human life people will accept the idea that free economies and societies are best.

    But if that’s the case, why not in a dynamic Earth that remains habitable? Once people develop models that are useful for making climactic predictions, individuals or organizations can make rational calculations as to how optimally to employ their resources in light of this knowledge.

    Without this knowledge, any attempt to control the Earth’s climate is doomed to failure.

    Thus, I think that the conventional reflexive response to the specter of climate change is completely wrong. If a free society cannot tackle the problem, than a centrally planned one cannot either, in fact the centrally planned one is doomed to do a worse job!

    Now, one could argue, as concerned observer is doing, that allowing the climate to vary could result in the extinction of the human race, or the deaths of a substantial portion of it. I have yet to see a credible case made by scientists that this is true. I am willing to entertain such arguments. To date, all the plausible scenarios I have seen advanced result in a habitable Earth

  51. I am concerned observer, eh.

  52. I am concerned observer

  53. STOP SPOOFING ME!!!!!!!

  54. No! I am!

  55. How do you think I spent the weeks before the election? I am teh concerned observer!

  56. Yo soy el “concerned observer”.

  57. Fools! The bailout is necessary to grow the economy to pay for future bailouts!

    “ACTION IS REQUIRED!!! WE MUST HAVE SOME ACTION!!!”

  58. I am all things Lefty!

  59. I hereby declare interest rates to be set at 4.5% indefinitely.

  60. Something must be done. And where the hell is my bailout?

  61. Whoever is doing the troll parodies was annoying until the Hugo Chavez one. Now I think it’s comic genius.

  62. Can I come in now?

  63. Naga

    You didn’t like the Krugman post?

  64. “Thus, I think that the conventional reflexive response to the specter of climate change is completely wrong. If a free society cannot tackle the problem, than a centrally planned one cannot either, in fact the centrally planned one is doomed to do a worse job!”

    Exactly. The world has been much hotter and much cooler than it is now and life went on. Mankind has built cities in the middle of deserts, swamps, frozen wastelands and all sorts of places where he probably has no business living. That is what mankind does; applies his intelligence to make the uninhabitable habitable. The idea that mankind won’t be able to adapt to a warming earth is ludacis. I often wonder what these people think about space travel? If mankind can’t live on an earth 10 degrees warmer than now, how is he ever going to live on Mars or in the cold of deep space? Better to do nothing and adapt if necessary than spend ourselves into poverty and be just as likly to make things worse as we are to make things better.

  65. Concerned Observer is my evil twin!!

  66. John, you misspelled “ludicrous”.

  67. Spoof troll,

    How can people view my glorious comments with all your trolling in the way? LOL!

  68. damn

    concerned observer interjector

  69. Strange that LoneWacko isn’t being parodied.

  70. The bailouts aren’t doing anything useful, because they haven’t gone to the source of the problem: illegal immigration.

  71. the sainted Ronald Reagan

    Let me guess: you think this is a conservative website.

  72. LONEWACKO!!!!!!!!!!!!!!!!!

    *shakes fist in air*

  73. Rob Taylor, just FYI, I suspect that your comments were insightful, but they were unreadable. You needed some paragraph breaks in there, or, better yet, brevity.

  74. The bailouts aren’t doing anything useful, because they haven’t gone to the source of the problem: illegal immigration.

    Because nothing fucks up your economy faster than a big ol’ pool of cheap labor.

  75. “Because nothing fucks up your economy faster than a big ol’ pool of cheap labor.”

    That just causes people to compete too hard and sell things at lower prices depriving union members of their jobs.

  76. Whoa! John! Where did that anti-union comment come from? What are you tryin’ to do? Have the real(???) concerned observer come in on this thread and have him go FULL RETART on everyone?

  77. I’m sitting here, watching the AutoBailout coverage on CNBC. Phil LeBeau, so-called “auto industry analyst/ reporter” is frantically, desperately, rah-rah-ing for the bailout. This guy is obviously suffering from a severe case of Stockholm Syndrome, and should seek professional help.

  78. I know someone at Reason has read Keynes. Someday, that person will write a commentary on the economic crisis, and I will be happy.

    Steve Chapman manages to write a whole article without ever talking about liquidity traps or the ZIRB. Why did he bother?

  79. Steve Chapman manages to write a whole article without ever talking about liquidity traps or the ZIRB.

    Because it was a theory absolutely discredited by the staglflation of the 1970’s?

    Astronomers talk about planetary science without wasting their words on epicycles too.

  80. DannyK, please fill in the gaps and explain the role of liquidity traps and ZIRB in this economic crisis.

  81. I am teh Concerned Obsever!

  82. I don’t love concerned observer any more than the next guy, but can you please put in something to prevent spoofing on this website. It’s really uncool.

  83. I’m not very clever. It embarasses me when clever people make me feel inadequate. It’s not fair. We need a law to keep me from feeling inadequate.

  84. But seriously, it’s cute at first, then it takes up half of the thread. Like Tribbles. It’s worse than the trolls in some ways.

  85. The “bailout,” which is going on right now under the Bush Administration, is entirely different from Obama’s plans.

    Entirely different? ENTIRELY different?

    Steve quotes one economist to “prove” that economic stimuli don’t work. I’m sure that he could find a couple who would argue the other way, if he looked hard enough.

    Yes, he could have found another “economist” who would argue “the other way”. A one Henry Paulson, for instance. Also the entire financial analyst staff at Goldmann-Sachs. Plus, there a whole bunch of auto execs over at GM and Chrysler that think Obama’s plan is hunky dorey.

  86. Sorry for the faiure on the closure of the tags. My bad.

    I will use the preview button.
    I will use the preview button.
    I will use the preview button.

  87. How nice, you have to make your own trolls to make yourselves feel better.

    I’d like to point out your troll standards are pretty low.

  88. I guess pointing out Reason’s deterioration makes you a troll

    I guess calling attention to someones boner for union busting makes you a troll

    I guess not accepting the governments definition of a recession makes you a troll

    but please, don’t let me get in the way of your need to act like children.

  89. It should be noted there is a difference between borrowing money to fund infarstructure, and borrwoing money for consumption. One is an investment which generates future benefits and thus is reasonable to borrow for, the other is not. We’ve been putting off investing in infastructure for too long. But it’s the backbone for our economy.

  90. STOP SPOOFING ME!!!!!!!

    I agree. CO is way off in the weeds most of the time, but spoofing him to make him look a Krugman fan is terribly unfair.

    -jcr

  91. J. C. Randolph,

    Oh no you didn’t!

    *snaps fingers*

  92. Shoveling cash into various public programs sounds like a surefire way to boost total demand and thus juice the economy. But the money doesn’t sprout from trees in Tim Geithner’s backyard. Any funds it wants to spend, the government will have to borrow.

    Actually, Steve, money does grow on trees in Tim Geithner’s backyard, his backyard being the Fed. Ben Bernanke calls harvesting and distributing this green foliage “quantitative easing”.

    So the government can spend without borrowing. That is precisely the root of our problems.

  93. “I know someone at Reason has read Keynes. Someday, that person will write a commentary on the economic crisis, and I will be happy.”

    Yes. Someday, we will also see an article based on theory of the ether as the medium for electromagnetic radiation.

  94. And what about caloric, huh? And epicycles?

  95. Oh, please. All this babble boils down to one thing, and one thing only:

    If your income is X, and you arrange to borrow X+1, with the promise to pay back X+2, you’re going to eventually get in trouble.

    Our government does this.
    Our credit card users do this.
    Our mortgage holders do this.

    That’s what is destroying the economy. Not that the money is paper; not that the government does this or that (or doesn’t); not that we’re taxed.

    It is this constant doing beyond our means that is so corrosive and unsustainable.

    Close the military bases overseas. Bring those people home. Stop spending (borrowed) money to be the world’s policeman. Ignore Iraq, Iran and Afghanistan. Stop sending (borrowed) money out as foreign aid. If another country wants money from us, let them provide something in trade that is worth the money.

    That’s how you make this country fiscally healthy. Printing more (borrowed) money isn’t going to do it; bailing out failed business models with (borrowed) money sn’t going to do it; letting 40% of the country go without medical care isn’t going to do it either, libertarian outlook or not. Educate the people, make sure they’re as healthy as possible, stop all this warmongering behavior, stop borrowing against a future that never comes, and things will improve.

    But…

    That’s not gonna happen. So buy guns, staples, and get ready. At any one moment, we’re no more than 24 hours from panic. When the food gets scarce, you’re going to be living in a new country, in the “very interesting” Chinese sense of the phrase.

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