Government Spending

Economic Model That Estimated That the Stimulus Would Create Jobs Now Says It Did

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Before the stimulus was passed, White House officials touted estimates that said that blasting cash into the economy would give the economy a boost and help create jobs. Now, lo and behold, a report from the administration's Council of Economic Advisers says that, yes, in fact, the stimulus has worked largely as expected. How did the CEA come to this conclusion? By plugging numbers into an economic model very similar to the one they used to predict that the stimulus would create jobs. Thanks to the model's reliance on multipliers—which predict that each dollar of government spending will produce more than a dollar of economic activity—the result is that money spent is assumed to have generated beneficial effects.

Let me see what my model says…

As economic prophesying goes, this is a rather clever trick; the initial prediction is basically guaranteed to on target, or pretty close. But as reliable information about the effect of the stimulus, it's about as useful as a psychic hotline. As Harvard economics professor Greg Mankiw explains:

The CEA took a conventional Keynesian-style macroeconomic model and used those set of equations to estimate the effect the stimulus should have had. Essentially, the model offers an estimate of the policy's effect, conditional on the model being a correct description of the world. But notice that this exercise is not really a measurement based on what actually occurred. Rather, the exercise is premised on the belief that the model is true, so no matter how bad the economy got, the inference is that it would have been even worse without the stimulus. Why? Because that is what the model says.  The validity of the model itself is never questioned.

As the CEA report notes on page nine, it's actually rather similar to the Congressional Budget Office's reporting on the stimulus, although CBO director has been up front enough about his organization's methodology to caution that his office's reports do not constitute an independent check on the initial predictions. In the end, the best we can say about the stimulus is that no one really knows if it's working, or how well. So every time a government official touts the economic benefits of the stimulus, it's worth remembering that a prediction that a program would work is not the same as proof that it does.

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  1. Does ANYONE really buy this? Even the Administration and media hacks who shovel this stuff MUST realize how badly it stinks.

    1. This report is real dynamite! Ever since this scandalous report came out, dozens of people have reportedly committed suicide, including the terminally ill 63-year-old Virginia Jenkins and the chronically unemployed 54-year-old Peter Reilly.

    2. I bought it, but I used stimulus money, so…

  2. I would have used Professor Marvel.

    1. “Why, anybody can have a brain. That’s a very mediocre commodity. Every pusillanimous creature that crawls on the Earth or slinks through slimy seas has a brain. Back where I come from, we have universities, seats of great learning, where men go to become great thinkers. And when they come out, they think deep thoughts and with no more brains than you have. But they have one thing you haven’t got: a position in the Obama administration.”

  3. “According to my model, my model is correct. You just have to assume the can opener.”

  4. “Capitalism is the extraordinary belief that the nastiest of men, for the nastiest of reasons, will somehow work for the benefit of us all.”

    Fuck Keynes.

    1. Well, he was a pretty nasty man, and he sure as shit didn’t work for our benefit. So fuck him.

    2. “Capitalism Statism is the extraordinary belief that the nastiest of men, for the nastiest of reasons, will somehow work for the benefit of us all.”

      So close, yet so far.

      1. Hahaha you’re great at that! Long live the del tag!

    3. Oh, they’re fucking Keynes right now. Willingly and enthusiastically. And he’s fucking all of us, unwillingly and hatefully.

      1. And from everything I know of Lord Maynard, he’s loving every inch of it.

  5. The validity of the model itself is never questioned.

    Why would you do something like that?

  6. So can anyone here explain the how we went from hemorrhaging 400,000 jobs per month in the beginning of the crisis to modestly adding jobs each month since the stimulus legislation? Correlation doesn’t prove causation, but there’s got to be some explanation.

    1. Because recessions cause job losses and recoveries cause job gains?

      It’s happened every time before. Why wouldn’t it happen this time?

      1. In fact, to be cynical — and the more crap that comes out of the Administration’s mouth the more cynical you should rightly become — the Administration’s economists knew that recessions end themselves, but realized that recessions also make great excuses to pass crisis-based legislation.

        1. So they pretended there was more of a crisis than there actually was in order to pass politically toxic legislation that apparently served no useful purpose.

          Yes, that makes complete sense.

          1. HAHAHAHAHAHAHAHAHA

          2. It served a purpose – it gave them more power, which is all they care about. We’re going to get hit with a “double-dip” early in 2011, if not sooner, thanks to the moronic bullshit legislation that’s been passed.

          3. It makes perfect sense, Tony. Otherwise, they wouldn’t have invented the expression “Never let a good crisis go to waste”.

            It’s about power, Tony. Nothing more.

          4. I wouldn’t disagree with the notion that said legislation “serves no useful purpose”, but that comes from my perspective as someone who likes legislation to serve the bulk of mankind in positive ways.

            However… All that legislation – if looked at from the lens of politicians & their biggest supporters – served AMAZINGLY “useful” purposes all around!

            It’s just that the purpose was to give a select group of individuals massive amounts of new power, which they could then use to benefit their buddies in investment banking, labor union management, auto manufacturing, etc.

            1. Thank you guys for proving me right by being absolutely ridiculous.

              1. No, we should be thanking you for being so ridiculous you crossed the line twice.

              2. Politicians passing legislation which concentrates their power? Reeeeeeeeeeeeeeeeeeediculous!

              3. How was any of what I said ridiculous? Are you really not aware that this kind of thing happens constantly?

                GM? Goldman Sachs? Google? Serious Materials?

                Honestly this list is enormous… And it happens at the local level constantly as well.

                And of course, there’s the entire history of political machines in the United States:

                Tammany Hall
                Byrd Organization

                Yeah… No, what I said was really stupid and baseless.

          5. I’m going to go old school here.

            Shut the fuck up, Tony.

            BTW, where the hell has Xeones been?!

          6. The pretended there was more of a crisis than there actually was in order to ram through legislation that had nothing to do with the crisis itself. See healthcare.

            By the way, you might find this famialiar. 9/11, Iraq, you know.

            1. I guess we can agree to disagree about whether paying double the rest of the world for less universal healthcare is a crisis… but it’s a fact that health costs are one of the biggest contributors to fiscal insolvency. Besides, he explicitly campaigned on healthcare reform and still got elected, so fucking waaaah.

              Do you think everyone was lying when they warned about a 2nd Great Depression? I’m just trying to gauge the level of delusion libertarians are engaging in to justify their counterfactual beliefs.

              1. but it’s a fact that health costs are one of the biggest contributors to fiscal insolvency.

                You can say that again.

              2. “Paying double the rest of the world for less universal healthcare.”

                This is a claim I just don’t understand. What if Americans paid more than double the rest of the world for cars? Would we then have a “automotive crisis” that could only be fixed by requiring American citizens to purchase automobiles, as if that would DECREASE what we’re paying for cars?

                Now before you get your undies in a bundle that cars =/= health care, thank you, I know, shut up.

                My point is that couldn’t the amount we spend on health care 1) reflect a desire for more health care; or 2) reflect how much richer we are than the rest of the world? Rich people demand more of the goods that they like, and staying alive just happens to be one of those goods.

                I bet we spend much more on life insurance, home insurance, etc than rest of the world. Are we facing crises in these industries that demand government intervention?

                No. If we’re spending too much on health care, it’s because third parties pay for health care services. It’s pretty obvious that the solution to this ‘crisis’ isn’t to just have the government be the 3rd party.

                If the reason you want Obamacare is to expand coverage, then fine, just say that. Don’t give me that reducing spending garbage.

                P.S.- Obamacare won’t even bring universal coverage. http://www.cato.org/dailypodca…..st_id=1194

                1. Corey,

                  Health care is of course much different than cars in that its costs are socialized whether you like it or not (assuming you believe that anyone who is injured or ill should be treated whether they can afford it or not). The rest of the civilized world has figured out how to provide universal access to decent healthcare at half the cost. Us not doing something about it is just being stubborn and stupid.

                  I know Obamacare won’t achieve universality. That’s because health insurance whores in Congress wouldn’t let a robust program pass.

                  1. HA… the “health insurance whores” just got an immensely good deal, you moron.

                    They wanted *exactly* what they got, and that was not only inevitable, it’s exactly a perfect example of the point I made above that you called “ridiculous”.

                    Additionally, what you think of as “universal health care” is not what you think it is. Yet another fine example of your many missed opportunities not to be a complete retard.

    2. What jobs have been “added each month”? Please provide objective evidence and quantification of these jobs. Leave out the census and other government jobs.

    3. The rate of private sector job addition in this “recovery” is historically very low. Map this recession against others, and you will see that this recession/recovery is anomalous.

      When trying to explain an anomaly, you naturally look for what’s different. What’s different this time?

      (1) The various stimulus packages.
      (2) Unprecedented state involvement in the economy (auto industry bailouts, 2,000 + page bills on healthcare and finance, the pending thousands of pages of regulation for those sectors, etc.).

      Correlation between what these different inputs and the anomalous outputs is not, necessarily causation.

      But it is very suggestive.

      1. It’s the same with the Great Depression stuff and something that’s never made any fucking sense to me at all.

        You look at all the other various recessions/depressions throughout history, and they last about a year. Even with modest government intervention and even with some serious monetary issues preceding some of them, the longest most would last was 18 months – 2 years.

        The one time we had an essentially 15 year depression, was the first time our government really got heavily involved.

        Yet somehow, in popular mythology, that was what saved us??

        We never had a depression that came anything close to that before, and it’s not like there was much of anything unique about the initial crash either… The only thing that changed, was government response.

        But somehow we want to emulate that? What?

        1. There was a worse one. The 1873 depression lasted about three years. And it was horrible. But even it didn’t last as long as the one in the 1930s.

          And from their perspective the 1930s were a golden age. Sure everyone was poor and there was untold misery. But they got to inflict their vision of society on the rest of us. Other people’s misery is a small price to pay for that.

          1. Yeah… Well, I was generalizing, the vast majority weren’t over a year – but of course a few got bigger.

            That said, anyone who ever looks into the earlier depressions should also always take a look at the monetary policy/monetary history preceding the event, and people should always look at government responses like tariffs & other protectionism/interventions that contributed to prolonging the depressions.

        2. Sean
          Did unemployment rise to around 25% in those earlier depressions/recessions?

          1. Yes they did. Go back and read about the 1873 crash or the 1836 caused by your good buddy and Democratic Party founder Andrew Jackson. In that one 40% of the banks failed. And there was no FDIC to make good on the deposits. The 1873 one gave us the terms “tramp” and “bum” describing the thousands of out of work civil war veterans roaming the countryside. And the 1873 one was world wide. It pretty much ended the AustroHungarian empire as a world economic force.

            1. I recently read a column by Thomas Sowell where he pointed out that unemployment rate after the stock market crash of 1929 topped out at 9% and was headed back down toward 6% UNTIL the government started meddling in the economy – first under Hoover (Smoot-Hawley tarrifs and tax increases) and then under FDR (“New Deal”). After that, the unemployment rate shot up and never went below 20% for the rest of the 1930’s.

              So far from “saving” the country from the Great Depression – it was government meddling in the economy that created it to begin with.

              1. AKA “the Roosevelt Recession”

    4. We didn’t modestly add jobs “since the stimulus”. Any more than the water pump on my truck exploded “since the stimulus”.

      Tony, once again, we need only use the government’s own prediction for what unemployment would do with stimulus vs. without stimulus. The government’s own predictions failed, and failed miserably.

      That means it’s just as easy for us to claim that what (paltry little) job creation there has been since the stimulus has happened in spite of the stimulus.

    5. Not to sound callous or anything, but unemployment isn’t the most important measure of the economy.

      We can thank Keynes and the populists for this fixation with unemployment since it constitutes half of his balancing act that the Fed pretends to operate.

      The real measure of the economy comes in the form of capital, credit, and interest rates. And right now, our capital and credit are completely screwed thanks to an ever meddling Fed and their arbitrarily low interest rates.

      What the gov’t is doing to fix the economy is equivalent to trying to fix the leaks in a colander by pouring in more water. It doesn’t work and eventually you run out of water.

    6. Re: Tony,

      So can anyone here explain the how we went from hemorrhaging 400,000 jobs per month in the beginning of the crisis to modestly adding jobs each month since the stimulus legislation?

      Can anyone spell post hoc reasoning?

    7. Re: Tony,

      Correlation doesn’t prove causation, but there’s got to be some explanation.

      The explanation must be invariably some really complicated shit, Tony, if what YOU have said before that the “economy is much more complicated than that” is true. It certainly cannot be as easy as “government spending = jobs”. That would be too easy, right?

      Your own words, coming back to bite you in the ass.

      1. Funny thing about libertarians, you think the economy is simpler than it is, yet can’t seem to understand basic arithmetic.

        1. Hey Tony, the Clinton recession ended and the unemployment rate went back down soon after Bush cut taxes on us. Therefore, Bush’s tax cuts must have gotten us out of the recession, right?

          Well, at least by your logic, they must have.

          A lot of this happened after 9/11, so Bush must have been inspired by 9/11 to cut taxes, which in turn ended the recession and increased employment, so 9/11-style events must be good for the economy, right?

          And Clinton helped 9/11 to happen through neglecting national security, so neglecting national security obviously causes the economy to improve by causing 9/11 events, right?

          Hey, what do you know? I just proved that Clinton was good for the economy… in more or less the same way he was good for Republicans.

          And I proved it all just by using your logic.

          1. I like your handle, good sir.

        2. Libertarians think the economy is extremely complex. It’s the liberals and Keynesians who think it’s simple. Have you read anything written by a libertarian, ever? Start with “The Use of Knowledge in Society” by Hayek, because you clearly haven’t.

        3. Re: Tony,

          Funny thing about libertarians, you think the economy is simpler than it is, yet can’t seem to understand basic arithmetic.

          Look who’s talking, buster – the one insinuating “Spending = jobs!”

    8. There were strong economic recoveries that took place in the 1870’s and 1880’s with no government support, no central bank, and surpluses not deficits. Now that I think about it, something similar occurred in the 1890’s.

    9. How did all the recessions and depressions (that used to be called “panics”) that occured in the nation’s history before the “New Deal” interventionist era come to an end?

      Becuase they all did – without government intervention.

      1. Of course… just a lot more slowly and with a lot more misery.

        1. More slowly?

          Bullshit.

          The Great Depression lasted longer than any of the earlier depressions and it was the first one where government deliberately intervened in the economy in a major way.

          Now THAT is no coincidence.

    10. Tony’s entire thesis:

      The job loss bottomed out two years after the stimulus package! Therefore, if we pass another stimulus package, uh… job loss will bottom out again in two years!

    11. recessions natural correct themselves. We had plenty of them before keynsian stimulus. Its justa matter of whether policy can make them correct faster. Even the admin’s basline forecast showed the unemployment rate peaking out in absence of the stimulus. As far as job losses are concerned we were already decelerating before the stimulus was even passed.

    12. how bout this, tony? economic activity is cyclical, even when the activity in question is 3rd standard deviation type stuff. whether you put money back in people’s hands directly (the better approach) or the government spends $787B via “programs” subject to the usual waste/graft/bureaucratic delay, 400,000/month losses were of that moment in time. the difference is that the former choice would resonate well with an electorate. the latter, difficult to see from the perspective of an average citizen, and in the face of unyielding unemployment, looks like chicanery on the part of an arrogant president/congress.

  7. Can you prove this didn’t happen? …God help us – in the future.

  8. Does anyone believe any of the numbers coming out of Washington anymore?

    1. Only Tony.
      And Chad.
      And Max.
      And maybe one or two other regulars around here.

  9. Isn’t this similar technique used in some global warming research?

    1. No.

      1. Concur. Before running any simulations for future warming, the models are tested against historical climate numbers. If a model can’t replicate the past climate changes, then it’s adjusted until it can.

      2. Why not? If it’s good enough for the Obama Administration’s economic team, it must be good enough for the climate.

    2. Yes.

      Actually, not quite, most of the proxy reconstructions make use of cherry-picking of data as well.

  10. So can anyone here explain the how we went from hemorrhaging 400,000 jobs per month in the beginning of the crisis to modestly adding jobs each month

    Trees don’t grow to the sky, as they say. Eventually, you run out of people to lay off; once you have eliminated the superfluous and inefficient, you start to rebuild.

    1. So in other words, you’re just pulling something out of your ass in a desperate attempt not to give Obama or his government credit for anything.

      1. Suderman has plenty more up his ass, believe me.

        1. Fucking ugly men. You don’t give a fuck so much as they pay your rent.

      2. And how is the Big Lie(tm) of “saving or creating” jobs not the very definition of “pulling something out of your ass”?

      3. Credit for what, exactly? Credit for doing exactly the opposite of what he should be doing? Credit for trying to generate short-term results on arbitrary measurements of the economy by mortgaging the long-term viability of the currency?

      4. So in other words, you’re just pulling something out of your ass in a desperate attempt not to give Obama or his government credit for anything.

        The essence of a recession is that a significant number of producers discover that consumers aren’t buying what they are making. Layoffs happen when those producers cut back their production. Recovery is when those producers or new producers discover what consumers really want and staff up to produce those new goods and services.

        This is basic economics, not something pulled out of anyone’s ass.

        In this case the recession occurred due to an overproduction of houses and financial instruments. Obama’s response has been exactly wrong: keeping people in houses they can’t afford and bailing out a financial industry that by all rights should be cut in half.

        The stimulus is a sideshow that diverts attention and investment from things people actually want toward things that legislators and governors want. It can only hamper the real economic recovery.

        1. I almost agree with you, except you leave out negative feedbacks. You present no reason to guarantee that demand will replenish itself and that we will return to full employment any time soon, except blind faith. The only thing that’s known to work to fill gaping holes left in demand by the onset of a depression is government spending. Was everyone predicting a second Great Depression wrong?

          1. You present no reason for us to believe that government intervention has done anything but throw good money after bad. Government spending (and meddling) hasn’t done anything but widen the gaping holes in the supply of employment. Almost nobody can afford to hire new workers with all this oppression from your beloved state, and it’s only going to get worse.

            Better check that crystal ball of yours, O Tony Rama; The Great Recession ain’t over yet!

          2. amazing that you can, with a straight face, advocate some keynesian strategy in the face of the absolute failure of said over the last two years. maybe we should just keep blaming bush/cheney? keynes failed, man up and witness it. how about letting some other ideas have a chance, like low tax burden, robust capitalism. maybe try telling business owners and other job creators that you’re going to get out of their way, lower their burden, allow them to prosper in their own interest….

            oh wait, that does nothing for the legacy of our preening president. i get it, back to the drawing board; let’s just defer to the “smartest guy in the room”, as if he actually did anything at harvard other than skate by….

      5. U6 is 17%.

      6. I’ll give Obama “credit” for over-reaching and expanding government interference in more parts of our lives, spending money we don’t have (Bush did, too), trying to wreck the health care system, expanding government employment at the expense of private enterprise and a few other things too.

        A question for government spending advocates. If a dollar spent by government has a multiplier effect, wouldn’t that same dollar spent by private enterprise or ordinary citizens have the same effect, or are government dollars magical in some way?
        Or is it that if the government lets people and companies spend their own money, government couldn’t direct it to favored groups and constituencies?

        1. Depends on where those government dollars are going. Give it to someone who’s unemployed, and they’ll spend it. Give it to a millionaire in the form of a tax cut, and they probably will sock it away. The entire point is that the private sector is contracting, so something has to make up for it. The entire point is getting money in the hands of people who will spend it.

          1. And where does the millionaire sock it away? His mattress? His sock drawer?

            1. It’s a pie. The millionaire got a bigger piece, there’s less left over for you and me.

              1. Oh, duh, I forgot that the pie only expands when the government spends money.

              2. It’s a pie. The millionaire got a bigger piece, there’s less left over for you and me. At least, that’s the “reasoning” of that retard Tony.

            2. They’re just more able and thus apt to save rather than spend.

              1. And how do they save money, Tony?

                Do they hide it?

                1. Damn those filthy rich! Always burying money in coffee cans! Tony, do you always walk around with a metal detector, looking for these fabled savings?

                2. Tony will never, ever comprehend the world beyond it’s surface level manifestation… As such he will never stop to think about what happens to money when it’s invested or saved, and he won’t ever be able to realize that taking from one tax-payer, who would have saved or spent his earned income on something of his choice – to give to a non-taxpayer to spend or save on something of their choice, doesn’t grow the wealth of a nation at all… He will never grasp that he’s playing a game of musical chairs, even when the music stopped 2 years ago and really hasn’t started up again.

              2. They’re just more able and thus apt to save rather than spend.

                Did it ever ocdur to you that this may be why they have money?

                But all snark aside, Tony, you do realize that “millionaires” don’t save money, they invest it. Yes, some may be fairly low risk instruments, but if they put the money in the bank, that increased the banks capital and thus reduces the banks exposure to FDIC regulators, no? How is that “bad” for the economy?

                One begins to think that you have a very bi-polar world view on money streams in the mission of spurring “growth”:

                Privately spent = bad.
                Publicly spent = good.

                Yes, you could argue that libertarians have the opposite polar view, but history bears out that our view on balance is more accurate.

                1. Yeah but they weren’t investing it in useful things or economically stimulating things, they were investing it in a giant casino, whose inevitable crash placed the costs on average people.

                  I don’t have the binary thinking you accuse me of. I have nothing against the private sector. I just don’t think efficiency, let alone justice and fairness, always emerge from it naturally.

                  1. They responded rationally to the incentives put in place by the Fed and Congress. The housing bubble didn’t just magically appear.

                  2. Has there ever been a regulation proposed by Democrats that you opposed?

                    Didn’t think so.

                  3. Yeah but they weren’t investing it in useful things or economically stimulating things, they were investing it in a giant casino, whose inevitable crash placed the costs on average people.

                    There’s that binary thinking…

          2. The entire point is that the private sector is contracting, so something has to make up for it.

            There’s a process which naturally occurs, Tony, where millions of individuals making decisions in their own self interest will cut the ineffeciencies out of their personal fiefdoms, thus strengthening the economy by spending money on productive things.

            If money is taken away from me (an employed, productive individual) and given to unproductive sectors which should be failing (American automotive industry, Segway Inc., etc), this reduces my productivity and continues flushing it away in already unproductive endeavors.

            This notion that only Leaders with Plans can spend this money wisely is laughable at best.

          3. Depends on where those government dollars are going. Give it to someone who’s unemployed, and they’ll spend it to pay off their creditors for their last spending binge, or maybe to buy gasoline so they can drive to job interviews… if there are any. Give it to Stop stealing it from a millionaire in the form of by passing a tax cut, and they he (or she) probably will sock it away in their his (or her) bank account, whereupon the bank will then lend it out at interest to credit-worthy risks, such as people looking to start or grow a small business; either that, or they’ll use it to expand their own business, bringing lots of new opportunities for employment to the market. The entire point is that the private sector is contracting because it’s hungover from getting drunk on retarded government spending, so something such as spending cuts, deregulation, and other austerity measures has to make up for it. The entire point is getting keeping money in the hands of people who will spend invest it wisely.

      7. Quit trying to impersonate a sentient being, Tony.

        You’re just not going to be able to pull it off.

  11. Yes, that’s it exactly.

  12. They’re hiring on K Street.

  13. “Thanks to the model’s reliance on multipliers?which predict that each dollar of government spending will produce more than a dollar of economic activity?the result is that money spent is assumed to have generated beneficial effects.”

    I’ve heard this so many times, from so many people, yet it just gets funnier with every repeat.

    1. Robert Barro. I would do a BARRO BARRO BARRO type thing but I already have a schtick like that.

      .4 to .8 MAX for the multiplier, and in most cases his measurements have shown it to be effectively zero.

    2. multiplier logic assumes that government spending exist outside of time and space.

      So it goes something like this — if the economy is not at full capacity (defined as a peak performance on an arbitrary graph independent of the circumstances that arose to get it there), or full employment (also arbitrarily defines) than the normative laws of economics in regard to opportunity cost no longer apply and in that circumstance government spending will have a stimulative effect even beyond what the private market would be capable of doing in normal times.

      What it ignores is time and space. The government is not an independent agency outside of the normative economy, but it too is in the shit hole. Opportunity cost do not arbitrarily go away in any circumstance, in fact, it is more difficult to countervail them during a recession. The baker not only can’t afford the tailor made suit that he was going to buy before his window was broken, but he can’t afford paying the glazier for the window either (Yay for the duck tape industry! Vulgar Keynesians would cheer).

      1. I think for the multiplier effect to work, you’d have to have a shortage of currency shortage, no barter, and price controls.

        At least that’s the conditions Paul Krugman’s proof of Keynesianism required…

  14. Tony, for me has long passed into effectively “Troll” status. He’s had a thousand opportunities to educate himself, and a thousand more to learn that part of making sound arguments is not just constructing proper syllogisms but making sure that the underlying premises are correct in the first place.

    He hasn’t learned either.

    As a result, we could sit here and run around in circles all day pointing out that it’s nothing but question begging (in the real sense) to have a model based on multipliers “predict” something that you can’t measure in reality – and then to claim success by using the same model with new data.

    That methodology makes no sense at all, but as one recent Mises Inst. article put it, is a result of “physics envy”.

    Social sciences – in which economics can most certainly be categorized – are not well-suited to calculus… Because the variables in play are human beings who each have their own individual motivations and cannot be simply reduced down into aggregates without basically destroying every aspect of quality analysis in the process. This mistaken methodology is precisely why in 2005 Bernanke was saying everything was fine, and why in 2007 he and most everyone else were shocked.

    Their models are useless because they’re based on horrendously flawed premises… So any amount of going back now and re-using the same idiotic models to “prove” something for which there is absolutely no real-world data is patently insane.

    There is no substitute for real data, and Tony – were he not a complete moron – would be able to look at real data and point to where jobs had actually increased in the last year in the private sector.

    Government jobs – since they are paid by taxpayers are not additive. Even worse, they’re most often destructive as almost invariably, their only “product” is more rules inhibiting people from being free to choose their own lives… See: Financial regulation that’s about to get signed.

    1. “He’s had a thousand opportunities to agree with my basic axioms and ideas”

      FTFY

    2. “Social sciences – in which economics can most certainly be categorized – are not well-suited to calculus… Because the variables in play are human beings who each have their own individual motivations and cannot be simply reduced down into aggregates without basically destroying every aspect of quality analysis in the process.”

      I can’t agree with this. Things like suicide and crime rates can be fairly reliably predicted and they involve human actors.

      1. Re: MNG,

        I can’t agree with this. Things like suicide and crime rates can be fairly reliably predicted and they involve human actors.

        Uh, right. One can predict what a person will do in the future.

        Take your Thorazine and go to bed, MNG. You’re hearing things.

        1. You can predict aggregate behavior, such as the examples I gave.

          1. No, you can’t.

            You can observe trends, and make loose, axiomatic correlations. And often times those generalizations can serve you reasonably well for day to day choices.

            That is absolutely, in no way, a substitute for real information about what each individual thinks and believes, or what is motivating them to act in specific circumstances – which is exactly the information macro models pretend to override in most cases.

            This leads planners to believe that they can simply select “the best” interest rate, or the “best” allocation of resources – without having any metric whatsoever to find out what the people who are now being deprived of the right to choose for themselves think, want or need.

            If you want to say, axiomatically, that people respond to incentives, I’m all for that. Thus the classic “the more you pay for the more you get” lines are born and play out fairly accurately – but not 100% of the time.

            The problems really come when a small group of people take it upon themselves to start making decisions for billions of us using models like the one covered in the article here – overriding individuals’ own choices and ignoring their massive epistemological limitations.

            1. You can, for instance say that, generally speaking offering 99/100 people the choice of receiving $2,500 or a common house-cat, the vast majority of people are likely to take the $2,500… Yet just yesterday, I was going for a walk and a woman putting up flyers made sure I noticed that she was offering a $2,500 reward for her cat.

              I’m sure this seems off topic to some, but it’s an issue of the subjective nature of value. Everyone makes different judgments of how much they are willing to give up to get something they care about.

              So pretending you can aggregate everything and then just apply some calculus and determine the future, is utterly stupid.

              All you can really do is say – with limited certainty, I might add – that if X happens, then probably Y will result, assuming A, B & C.

              Coming out and touting models as proof of success of the earlier models is just compounding fallacious thinking.

              1. my bluetick coonhound died last week. i’d pay a lot more than 2500 to have him back.

                1. I don’t doubt it… However, I would not pay even $2,500 for your coonhound. However, I’m sorry for your loss.

          2. Re: MNG,

            You can predict aggregate behavior, such as the examples I gave.

            “Aggregate behavior”? You read too many of Asimov’s Foundation books.

      2. Except nobody can accurately explain why crime rates fell in the 90’s even though we’ve had more than a decade to research all of the factors.

  15. I work with mathematical models all day long. If I go to my boss and say “my model is validated because I ran it through another model and everything matched” he’d tell me to get the fuck out of his office and come back with some empirical data. And he’d be right.

    1. My old engineering boss would have fired me.

    2. This is always the funny thing to me about math & (theoretical) physics people vs. engineers… And why I have to prefer engineers in general.

      1. Engineering produces a sort of brutal pragmatism in practitioners. At the end of the day, things either work or they don’t. There’s not a lot of middle ground, and engineers who make things that don’t work don’t stay in the profession long.

  16. Rather, the exercise is premised on the belief that the model is true[…] The validity of the model itself is never questioned.

    Quack-economics, in a nutshell.

    Kiddies, one cannot model a complex system, one can only deduce the rules that governs it, not unlike evolution, flocks, and other chaotic systems.

    1. Actually, it’s worse than that. What the government has done here is ignore all contrary data and just pretend that the model is working as predicted and that we should be patting them on the back for all those predicted jobs that have yet to materialize because the model says they’ve materialized.

      It kind of reminds me of a scene from the original The Producers movie where they showed some scenes from the actual “Springtime For Hitler” play beyond just the opening number. In one scene, Hitler (played by the brain-damaged hippie) is complaining about how badly the war is going, so he sends an order down the chain of command to bring in Joe Goebbels to cheer him up. In comes Joe Goebbels and announces: according to the latest polls, we’re winning the war!

      A big cheer goes up from Hitler and his officers and the audience bursts into laughter; which is what we ought to be doing every time a big cheer goes up from this pathetic administration and its stooges.

  17. But Obama is like a butterfly, gently stirring floral-scented currents of happiness, which will raise a tsunami of deeply satisfying green jobs and gushers of living wages!

  18. Hey, Tony, there’s at least 1K more bureaucrats looking into your life now.

    (Does Tony have HC insurance? Where’s Tony spending money on his credit cards? I wonder how Tony will like us resetting his thermostat for him while he’s sleeping?***

    Anyway, I guess we can all get jobs selling rotten apple cores or gravediggers. Or I know!

    I wanna be the guy in the hospital that says: “Sorry, bub, you can’t have that lifesaving surgery. It’s not rationing. It’s SMART care because we’re smart people. So, uh, paper or plastic coffin?”

    ***If CA REEGULLATTOOORSSSS! have their way. Magical regulators half unicorn, half free health care, but with twice the raw awesome power of Michelle Obama’s arms, that is.

  19. But he also says the midterm congressional elections could come down to “a choice between the policies that got us into this mess and my policies that got us out of this mess.”

    Our erudite President. Imagine if Sarah Palin had said such a thing.

    1. Well, her haters would pretty much say very much the same things they say about her now.

      The difference is that some of them would actually be true for a change…

  20. Double fuck Keynes in the ass. The problems with Keynesians is that their theories are perpetuated by the belief that some people are greedy. So they want to put people (who are never greedy, mind you) in power to regulate that greed and fuck up the economy with their rules and then spend our money for us so they can claim they fixed the economy. Then they blame the problems on free market capitalism (which we don’t have).

    Fuck that! Give me a free market any day of the week. That is the only system that recognizes that EVERYBODY is greedy.

    What is the saying? Better to have 1000 bad men run free than to have 1 bad man in power.

    1. Absolutely. This short video puts it a big more eloquently.

      1. big = bit

        Where’s the government regulator for my typing?

  21. The Fatal Conceit is alive and well, I see.

  22. As I’ve said, the left seems to think that stimulus money works like the law of attraction. Money magically produces extra money when the government spends it, yet somehow taxes have no effect on consumer spending.

    I’ve had this argument with Democrats before. They seriously believe that marginal increases in consumer prices due to taxes don’t cause consumers to spend less. Yet they also think that when those same tax dollars are spent, it has a multiplier effect.

    It’s flat out magical thinking.

    1. I.e….

      The state can just keep taxing and spending, and taxes have no negative effect, yet spending has a positive effect. So if the government does this a lot, what you get is the equivalent of an economic perpetual motion machine. A magical money pump. You can magically create money just by having the government tax it and then spend it.

      1. Are you doubting the magical power of Obama’s rainbows and unicorns?

      2. You can in theory have a perpetually healthy economy by having government step in to correct for market imbalances. One of the primary causes of our current economic conditions is simply that all the wealth has been concentrating at the top, meaning less disposable money for everyone else, meaning less demand. Contrary to libertarian/Republican fairy tales, giving more money to already rich people doesn’t do a whole lot to create or maintain growth. So as long as we have a distribution that promotes consumption at all levels, things should be ok. Just because that might require government intervention doesn’t make it evil. Who ever said the natural state of the market (or the market as gamed by the rich and powerful) is the fairest possible and most just distribution?

        1. You can in theory . . .

          And what about reality?

          1. I thought this was a libertarian site…

            1. That was almost funny.

        2. You can in theory have a perpetually healthy economy by having government step in to correct for market imbalances.

          Who are the Leaders with Plans you’re going to trust to:

          1. Define a market imbalance.
          2. Identify a market imbalance.
          3. Spend money in JUST the right way to “correct” the market imbalance.

          Please list in order of most trusted to least trusted.

          1. Liberal Democrats –> Corporate whore Democrats –> Republicans.

            1. Wow, not a single one of those would have made my list.

              Whelp, unfortunately for you, the first two are currently in reverse position. Corporate Whore Democrats are running everything, then I suspect Republicans come a close second, and last are actual liberal Democrats.

              1. Agreed, and they compose my list because they’re the only ones we get to choose from.

            2. Republicans–>RINOs–>Democrats–>Socialists.

              1. Entrepreneurs & Independent Business Owners & Venture Capitalist > Hedge Fund Mangers > Bond Holders > Hacks of either major party

                (not sure why you would use the pointer access (->) sign)

                1. A C++ joke. Nice.

                2. (not sure why you would use the pointer access (->) sign)

                  We’re hoping to generate an exception error and shut down the economy.

            3. Liberal Democrats and Corporate Whore Democrats are one in the same. You’re the guy constantly telling us how it was necessary to shovel money to the financial and automotive companies.

              1. The difference Jordan is that liberals would base those subsidies on what is healthy for working people, while the corporate whores base it on who contributes most to their campaign.

                1. Yeah, that’s totally what TARP and the UAW bailouts were about. Totally.

                  1. Not to mention continuing to pour money down the Fannie and Freddie rat holes.

                  2. I thought we agreed the liberals weren’t in charge.

                    1. Um, you supported both TARP and the UAW bailouts.

                    2. When I said I didn’t want to give money to corporate whores, I didn’t mean GM or the Democrats. I want lots of money to go to my side’s corporate whores!

        3. One of the primary causes of our current economic conditions is simply that all the wealth has been concentrating at the top, meaning less disposable money for everyone else, meaning less demand. Contrary to libertarian/Republican fairy tales, giving more money to already rich people doesn’t do a whole lot to create or maintain growth.

          [citation needed]

          Who ever said the natural state of the market (or the market as gamed by the rich and powerful) is the fairest possible and most just distribution?

          Who the fuck cares if it’s “fair.” You don’t even know what “fair” means because there are about a bazillion different ways it could be defined.

        4. Contrary to libertarian/Republican fairy tales, giving more money to already rich people doesn’t do a whole lot to create or maintain growth.

          Why not? So, rich people invest their money instead of spending it. Why is that bad? As I understand it, the market right now is suffering from a lack of available capital (because the banks’ reserve capital was invested in housing). If “the rich” had more money to invest in industry, which is to say, if there was more capital available in the banks, then the economy would benefit. Even if the rich guy just spends it on a yacht, the yacht building industry employs lots of people and it should have exactly the same “multiplier”, in theory.

          Basically your arguing that money isn’t useful unless it’s used for consumption. That investment and savings are economically useless.

          So as long as we have a distribution that promotes consumption at all levels, things should be ok.

          Yet another round on the consumer-based, consumption-driven economic treadmill? The one that says American consumers must keep borrowing and buying playstations? Come on. That is a dying paradigm and you know it.

          A philosophy that is based on the idea that everyone must keep spending money they don’t have, because somehow the demand will magically produce extra goods is fundamentally flawed and doomed.

          1. Hazel,

            Saving is great, but it’s not stimulative. I wish that more people had enough extra cash so that they could save a decent amount.

            In fact, I wish more people had enough money so that they could actually pay for the things they want. You bring up a good point: most of the alleged economic health of the Bush years (and before) was illusory. It was based on cheap credit. Now I’m not for distributing wealth downward willy-nilly so that people can afford Playstations, but I am for distributing it downward so that the economy as a whole is healthy and sustainable. Eventually even those at the top suffer if fewer people can afford to buy their products.

            1. Saving is great, but it’s not stimulative.

              Actually, it is stimulative, because as has been pointed out to you a million times, savings get invested.

              1. Maybe, my only point is that a dollar in the hands of someone who will immediately spend it on consumer goods is more stimulative than a dollar in the hands of someone whose spending habits probably won’t change at all as a result.

                1. No it isn’t, you dolt. Business capital doesn’t grow on trees. I understand that in your world, there would be no growth because you’d subsidize every inefficient business under the sun that threatens to fire a worker and thus starve newer, more efficient enterprises of capital, but that’s not how it works in a dynamic growing economy.

                2. That’s some impressive level of stupidity you got goin there, Tony.

            2. And the stimulus isn’t based on credit? All you are doing is displacing consumer debt to government debt here.

              I disagree that savings isn’t stimulative. Savings is the best long-term stimulus. Really, the MOST properous society would be one where people ONLY consume what they need. the rest would be invested. And because consumers are only buying things they need, the type of things it would be invested in would be more essential. Encouraging consumers to spend mindlessly effectively encourages producers to produce mindless consumer goods. Encouaging consumers to save and spendwisely on what they really need changes the types of things that will get produced and reorients the structure of the economy in healthy ways.

              1. This.

                Plus, Tony, you really need to learn about “time preference of money”.

                Credit only exists – at least out here in the real, non-government world – because some people earned more than they spent and set the rest aside instead of being the bovine consumerists that Hazel noted above and which you have been here, stupidly agitating for.

                That credit – actually based on real wealth created, instead of currency devalued (as happens when the Fed prints a shitload of money and artificially pushes down interest rates) – goes into different projects based on signals provided by interest rates, which are related to how much credit is available.

                Like anything else, if there’s plenty of money in people’s savings accounts ready to lend out – interest rates are low & money is fairly easy to borrow. This encourages short-term spending, on the assumption that the interest rate is low and is easy to pay back.

                Now, once that money runs out – in a sane economy, interest rates would go up.

                Not so in America! Why? Because the interest rates are controlled by a central authority.

                So instead of slowing down spending, and starting to under-consume again by saving & investing, people go on buying more than they can afford and all on borrowed money. This is, by it’s very nature, entirely unsustainable.

                Which we saw clearly just a couple years ago.

                Now… Here’s the other thing… When interest rates are high, that encourages *only* those who are going to make significant returns on the money to borrow it. So instead of getting that new Sears card, you and me and most of us save our pennies for the new washer & dryer set. Whereas, someone who either A. can afford to bear a higher level of risk, i.e. someone who’s rich, or B. an entrepreneur starting a business with a good plan to make a fair bit of money by producing something people value, will borrow in the service of creating more wealth in the long term.

                That’s how real production happens… Using personal or borrowed SAVED MONEY (not printed money!) to create a new business or expand an existing one.

                The factories that provide people with jobs don’t just magically appear overnight. They’re long term projects that just don’t happen in a consumer-driven economy where all the available credit has gone into the hands of some 15 year old shopaholic.

      3. I sure wish my boyfriend would stop eating so much corn.

    2. As I’ve said, the left seems to think that stimulus money works like the law of attraction. Money magically produces extra money when the government spends it, yet somehow taxes have no effect on consumer spending.

      It’s worse than that. Leaders with Plans believe that MY spending has NO multiplier effect, yet taking away my (so-called) surplus dollars and giving it to GM somehow magically results in the Mysterious Municipal Stadium Multiplier Effect.

      1. If the American auto industry had failed, I’m sure you guys would be celebrating it as a glorious wonderful market correction, rather than bitching about how it’s all Obama’s fault.

        1. I’m not sure I get your point.

          When GM can’t build a car with gaskets that seal a drop of oil or control their labor cost in any way that resembles fiscal sanity, why do they deserve my money? What about that scenario morally justifies the forced transfer of my money to a private company?

          The auto industry failure isn’t Obama’s fault, and I’m not sure if anyone here has ever postulated that.

          The auto industry’s failure is their own problem, and out of the market correction of collapse would have been born a newer, faster moving, more innovative industry, rehiring many of those same workers (at albeit more sane compensation rates) and retasking parts suppliers to provide services to said new industries.

          Bottom line: If the bowling alley down the street fails, the city council doesn’t demand the taxpayers of my city bail them out, they fail, and people lose their jobs. Too Big to Fail is a morally (and logically) bankrupt concept.

          1. In normal economic conditions I’d totally agree with you. In a massive contraction I’m not sure you can rely on the market replenishing those jobs on its own when the whole problem is plummeting demand. As jobs go, demand falls still, creating a vicious downward spiral. The economic crisis was not the time to let entire industries fail out of fealty to the free market gods.

            About TBTF… I think a lot of you guys look at it the wrong way. TBTF isn’t an imprimatur granted arbitrarily by government to favored industries, it means literally too big to fail, meaning its failure would take the entire economy down with it. I agree that there shouldn’t be any private company that can be described thus, but that requires breaking such companies up into entities that aren’t TBTF.

            1. However, I’m not totally against subsidizing domestic auto manufacturing or other domestic industries… patriotism and all that. Other countries do it.

              1. “Other countries do it.”

                What, are you 9?

            2. And bailing out industries just to keep people employed producing products consumers don’t want to buy is another sort of vicious spiral. You take money away from industries that are profitable, thus making them less profitable, less likely to expand, thus making it harder for the REAL economy to recover. So you end up with the government supporting a false economy. An economy composed of people producing and consuming obsolete or unneeded products just so they can have jobs, so they can buy the government-subsidized products they don’t really want at reduced prices.

              Meanwhile, you siphon money away from profitable industries that mgiht expand, and create a permanent lobby for the subsidized industry.

              Look at farm subsidies. We’re still handing them out 80 years later. Do you realy think the auto bailouts are just going to stop when “things get better” ?

              1. If the private sector is growing on its own, I expect emergency bailouts and the subsidizing of employment not to be necessary. But it wasn’t growing, it was contracting, because of a massive market failure.

        2. So what’s your point? I’d be celebrating the death of a parasitic industry that doesn’t produce anything of value and yet expects us to feed and care for it; you know, kind of like all remaining 0bama supporters. 0bama is to blame, but not for GM’s failure; he’s to blame for spending huge sums to draw out its miserable failure as long as possible, and for thereby tying up in this worthless endeavor a lot of resources the rest of us could be enjoying now. Every government handout is stealing our resources and handing them over to corporate fat-cats of the very kind you pretend to abhor, which is all the more proof that you’re a liar. You love giving money to parasites because you are one.

          Those blood-sucking bastards would be out on the street in rags and starving where they ought to be if it weren’t for their parasitic know-nothing retard shills like you, Tony. Real recovery begins with firing all your commie asses and kicking them to the curb so we can afford to hire people who know what they’re talking about and will actually produce something of value.

          Recession is when my neighbor loses his job. Depression is when I lose mine. And recovery is when parasites like you are taken out and shot.

          1. I’m not concerned about the CEOs. I’m sure they’ll be just fine regardless. I’m concerned with the massive labor force that would be put on the streets, reducing spending power, decreasing government revenue, and draining social programs. This crisis was not caused by workers, but they will be the first to suffer.

            1. Oh, they’ll be just fine now… thanks to that huge bailout they got from you.

              And stop pretending to be concerned about what “would be” you hypocrite! Every last one of those things that “would be” already is thanks to you parasites: private spending power and government tax revenues have already gone to hell, the social programs are already drained (and demanding another bailout; die, you damned social programs, why won’t you die!?) and a massive labor force of workers is out suffering on the streets while fat leeches like GM and the 0bama administration continue to draw their unearned paychecks.

              May worms chew your bloated carcass in Hell forever as punishment for your pretending to care about your victims just so you could oppress them a little more, you blood-sucking bastard!

              1. Maroni,

                Get back to me when you’ve commissioned your first gas chamber so I can notify the authorities that we have a genocidal lunatic in our midst.

                1. We frugal patriots don’t waste money executing fascists like you with fancy chemicals or gasses. Rope is cheap, and hanging the worm-eaten corpses of treasonous statists such as yourself up in public sends a powerful message to your fellow traitors. The “authorities” should be grateful if voting them out of office on their asses is all we rightful rulers of this country do to them for the atrocities they’ve committed against us. Among our authority is the right to have them hanged for traitors, which is what both they and you are.

            2. So the buggy whip factories should have been kept open, so that buggy whip workers would continue to spend their earnings, thus maintaining the health of the economy. Right.

              Surely even YOU realize how obviously wrong the philosophy that says “we much keep people employed, doing ANYTHING, so they can keep spending” is?

              Surely even YOU realize that you have to actually PRODUCE USEFUL GOODS to have a healthy economy, right? And the more people producing useful things, things that other consumers WANT, the fewer people doing government make-work the better, right?

              1. Tony has absolutely no understanding of how wealth is created.

              2. Cars aren’t useful?

                I’m distinguishing between normal economic times, in which I’m fine with companies going belly-up if they aren’t responding to the market smartly, (and in which workers have other options), and the economic crisis, wherein putting massive amounts of people on the streets would exacerbate the problem. Your devotion to the magical efficiency of consumer demand doesn’t matter much if nobody is consuming.

                1. Your devotion to the magical efficiency of consumer demand doesn’t matter much if nobody is consuming.

                  And people can’t consume when they are awash in debt and no wealth is being produced. Creating more debt by subsidizing unproductive assets does not help. Employers will not start hiring again until capital has been redirected to productive uses. These bullshit policies are actively hindering that. In fact, that is the entire goal of these policies.

                2. Cars aren’t useful?

                  Not this one.

                  Nor this one.

                  Yet as the logic being twisted, these two cars should still be produced at any cost… nay SUBSIDIZED lest someone lose their job and quit spending.

                  1. I’d prefer electric car manufacturing be subsidized, heavily. At least enough to make up for the free lunch polluting ones get by not factoring in that cost.

                    1. I want to give huge piles of money to politically connected corporate fat cats to make inefficient cars that people won’t buy. Wasting labor and materials while polluting the environment in order to produce completely worthless toys that nobody but a few eco-fascists will ever actually use will sure show those free-market bastards what amateurs they are at polluting everything!

                3. Exactly what Article of the Constitution is it that delegates any power to the federal government to be trying to “manage” the unemployment rate in the first place?

                  1. Cars aren’t useful?

                    If you are producing more cars than people want, the extra cars are not useful.

                    I’m distinguishing between normal economic times, in which I’m fine with companies going belly-up if they aren’t responding to the market smartly, (and in which workers have other options), and the economic crisis,

                    So, when does the “crisis” end? You realize that the government could maintain a constant crisis atmosphere to justify constant bailouts and subsidies to their favored clients, right?

        3. Actually, yes. I would be.

      2. That’s what I said. Only it’s worse. They not only think that your spending doesn’t have a multipier effect. They think that taking your money away doesn’t decrease your spending at all.

        Seriously. They argue that marginal increases in the price of appliances, does NOT cause consumers to buy fewer of them.

        1. They think that taking your money away doesn’t decrease your spending at all.

          It’s because they implicitly operate on the logic that whatever money they took from you was surplus money, and therefore not critical to your personal financials.

  23. Re: Tony,

    You can in theory have a perpetually healthy economy by having government step in to correct for market imbalances.

    How would you know it wasn’t the government that created the imbalances in the first place? It would be like having the rapist manage the girls school.

    One of the primary causes of our current economic conditions is simply that all the wealth has been concentrating at the top, meaning less disposable money for everyone else[…]

    World, meet another nitwit who believes wealth = money.

    meaning less demand.

    Sure – people stop playing because a few people keep all the Monopoly money and they won’t give it back. That makes sense . . .

    Except it is not true.

    Contrary to libertarian/Republican fairy tales, giving more money to already rich people doesn’t do a whole lot to create or maintain growth.

    Contrary to what economics-illiterate authoritarians think, not one libertarian is saying that giving more money to the already very rich is the way to prosperity.

    So as long as we have a distribution that promotes consumption at all levels, things should be ok.

    As long as no party-pooper ever dares to mention the word “production”. No, we shall be ok as long as everybody consumes.

    Just because that might require government intervention doesn’t make it evil.

    No, it would just be question begging.

    Who ever said the natural state of the market (or the market as gamed by the rich and powerful) is the fairest possible and most just distribution?

    What’s the “natural state of the market”?

    1. Your point about “consumption” is especially remarkable to me of late, OM…

      It used to be, in my under 30 year old life time no less, that all manner of leftists (and a lot of our main culture critics like Carlin, etc. for that matter) were always up in arms about “consumerism” and “consumer” culture.

      Rightly so actually… Ish.

      Obviously most of them were actually just laying out the same old bullshit luddite anti-capitalist mantras of the 60s, but they were right that a country’s people cannot simply consume indefinitely without ever producing a damn thing.

      What’s even more astounding to me is how basic these ideas actually are.

      Tony and people like him have absolutely NO CLUE how economies grow & wealth is created. To them, as long as people are spending money, everything is ok… Part of this, obviously, comes from using idiotic measurements like GDP as proxies for economic well-being. Spend a ton, and GDP goes up – hooray!. Except in reality, we’re just using up goods, services & resources without adding anything new to the world so we’re actually getting constantly poorer.

      And of course the value of our currency, the fiscal insolvency of the nation, the unemployment situation and our economy’s world-standing all reflect those underlying problems.

      But no one in the merry band of idiots Tony seems to belong to has the slightest rudimentary understanding of how wealth is actually created, or that SAVED capital is needed in the form of investments for producers to be able to operate at all.

      I guess what really gets me is how all the people 2 years ago who freaked out about the stock market being all fake “monopoly money”, have never figured out that they’re only perpetuating the problems by getting their sense of economics exactly backwards from reality.

      1. Sean humor me, how are wealth and prosperity created?

        1. Production, you moron. That’s how wealth and prosperity are created. Production is the only way to create wealth and prosperity. The more resources are diverted to make stuff people neither need nor want (such as GM cars), the less actual production we have, and therefore the less wealth and the less prosperity. That’s why we need to do away with leeches and control freaks such as yourself: you’re destroying our economy and making everybody poorer with your fascist schemes.

        2. I guess I didn’t scroll down far enough – but if you go up a bit, I essentially explained it.

          Wealth & prosperity are created by people actually producing things that people value (as Maroni said). This can’t happen – or at least, it’s seriously inhibited – in a consumer/debt based economy… WHICH, perhaps I should note is precisely why the US has gone from the world’s greatest and wealthiest producer & creditor, to it’s largest debtor who imports more than we export.

          This is because instead of having a system where credit is based on real savings, we have a central planning authority which dictates he supply of money & interest rates. As a result, they are politically inclined to push for high inflation and continually easy/cheap credit by running the printing presses.

          Problem is, the wealth of the world (i.e. all the *stuff* people want & need to live) hasn’t increased one damn bit! Instead, only the amount of money has. So prices go up and up and up, while production actually stalls.

          As I noted above, really low interest rates encourage people to *buy*, not to save. And when they don’t save, they aren’t investing in the future. When they don’t invest in the future, entrepreneurs focus on short-term gains (i.e. all that “cheap chinese crap” Chad is always whining about), rather than on long-term development.

          If interest rates were significantly higher – dare I say – if they were at the real market rate, instead of whatever artificially depressed level Helicopter Ben has decided on today, you and I would have a harder time getting a Sears card, no doubt – however, our savings would actually be rewarded as would investment in new businesses and new factories, etc.

          Factories that actually produce things…

          Thus, when more “stuff” is produced, the world becomes wealthier as there are more goods and the same amount of dollars, rendering everyone’s money more valuable and increasing everyone’s ability to live at a high level. Additionally, it means more jobs as businesses are actually being created.

          What we’ve done in the US is encourage overconsumption, waste, and job loss. And that, by the way, is also what you’re idiotically arguing for right now as well.

          Let me simplify all this for you.

          Low interest rates = Spending/Consumption

          High(er) interest rates = Saving/Investment

          Absent massive intervention, these things play off each other fairly well… Interest rates go up, people start saving again, investing in the future, then when enough money has been saved up, rates start going back down and that money starts to get spent more freely… When rates are high, only people who have been (by various metrics) deemed to be sound investments are extended credit – this means investing in good new business plans, successful existing businesses and people with a long track record of high credit ratings.

          This is great – cause those people go off and start their businesses, create new wealth and employ people… Who in turn, take their salaries and continue to save a good deal of their money what with the high interest rates on their savings accounts.

          All while their money is appreciating in value as no one is fucking with the currency constantly, and the same amount of money is now chasing after vastly more available goods.

          All around WIN.

          Now… reverse all of that, and it’s what you’re arguing for. Everybody spend everything they have, don’t invest in the future, don’t worry about producing anything, and when you run out of money – print more and just pretend it doesn’t matter that you can’t eat paper.

  24. In all honesty, I can’t even believe people here even try to explain things to Tony. Is he really going to change his mind? Does he even have a mind? I continue to ponder these questions day in and day out.

    1. No, Tony has no mind, I learned that long ago. However, sometimes he’s good to use as a foil for lurkers who might be (honestly) asking some similar questions.

      1. Ah-ha! I’ve been defeated by my own self-interest (for which I’m sure Tony would hate me). I was only thinking of my own sore eyes after reading his questions. You; however, he should love, right? I mean, your intention is quite decidedly altruistic. I’m sure he wouldn’t mind being part of an educational opportunity for others.

  25. This conversation was fucking lulz.

    Sean, would you happen to be a follower of Austrian economics?

    1. Pretty much… Full disclosure; I’ve also written an article and done some media work for the Ludwig von Mises Institute.

      1. That’s awesome, I read on Cato yesterday that they just opened up a HUGE literature section.

        http://mises.org/literature.aspx

        To understand in better detail why Tony is a ‘tard, head on over.

        1. While we’re in the business of shamelessly plugging things, allow me to plug my new company – which does educational media production, starting with a two-part video series on the Bill of Rights. The first one’s available now and the second one should be up next week.

          CitizenA Multimedia Production

          Click “media” and then click on the thumbnail 😉

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