Economics

The New Powerlessness: Even Better Than the New Normal

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"What, if anything, will the Fed do," Mike Larson asks at DailyMarkets.com, "if the economy craps out again?" The long answer is that there's not a lot the Fed can do with the next quantitative easing campaign that it hasn't already done with the first. The short answer is who cares:

But again, my answer is that whether the Fed goes hog wild printing money or not, it won't matter much to the real economy. It'll probably boost gold prices. It'll likely hammer the dollar. And it could temporarily boost stocks, even in the face of lousy fundamentals.

But all the kings horses, all the kings men, and even a further ballooning of the Fed's balance sheet—currently around $2.3 trillion vs. $900 billion before the credit crisis burst onto the scene—won't matter to most Americans.

Private companies aren't firing workers and hoarding cash because interest rates are too high. They're doing so because there's too much factory and labor capacity.

Consumers aren't cutting back on spending because loans are too expensive. They're doing so because they just went on the wildest debt-fueled spending binge in U.S. history, and they're trying to repair their balance sheets.

Look, we've had twin bubbles in stocks and housing over the past decade and a half. They both popped. The fallout will be with us for a long, long time.

Nicely said.

It's poignant that the Fed really has been doing everything right by Chairman Ben Bernanke's lights. In May, when talk of recovery was still bringing rubes into the tent, the Fed's balance sheet peaked at $2.333 trillion. Bernanke actually managed to reduce it slightly in the following weeks. But now he's gone off that diet.

As always, 'twas beautiful land what killed the beast. Foreclosures and sob stories are still piling up, and the real estate market is plunging so fast it's now clear the whole country is built on an Indian burial ground. In an effort to stop real estate from going where it wants to go, the Fed is rapidly buying up mortgage-backed securities. Soon the Fed will reach its current commitment to buy $1.25 trillion in debt from the former GSEs Fannie Mae and Freddie Mac.

Here's a metaphor I haven't seen used in the context of the Great Credit Unwind: Bernanke is now entering the second of two hot dog-eating competitions, but in this round buns and condiments are included. Much as I'd like to say this is going to be the hot dog-eating competition where somebody actually explodes, I think Bernanke will pull it off. The world hasn't lost its taste for American debt, and America hasn't lost its taste for running it up. Yes, yes, it can't go on forever, but for the Fed's purposes it only needs to go on until they can claim the Great Repression is over and have somebody believe them.

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  1. the whole country is built on an Indian burial ground.

    If the whole country is California, Arizona, Nevada, Florida, and Michigan, then yes.

    There was no housing bubble in North Dakota or upstate NY.

    1. My right hand is doing great. My feet however, are tied to 600 pounds of cinder blocks and my boat is about to sink.

      1. Cut off your feet. Duh.

    2. This is unfair to Indian burial grounds.

    3. Texas stayed out of the housing bubble and it’s economy is almost back to where it was pre bubble.

      1. Shush! Haven’t you ever heard the saying that if you have something good going, don’t tell anyone?

  2. Private companies aren’t firing workers and hoarding cash because interest rates are too high. They’re doing so because there’s too much factory and labor capacity.

    The federales need to start randomly buying stuff and destroying it. Maybe the Presidential Suit and his sidekick “Comedy Relief” can go back to that window factory in Chicago, and bring their hammers.

    The Marines can always use some more V22s.

    1. Buying it first is going to be bad for the deficit.

    2. Well, I guess we could start by breaking every window in Washington DC… with nuclear bombs.

      1. Doctors need work too so no need to stop at windows in DC.

    3. There’s never a terrorist attack when you need one.

    4. Your killing me.

  3. You know you could just start posting articles repeating, “We’re fucked.” over and over.

  4. Sounds like the classic crisis of capitalism to me. There has to be a better way.

    1. Nope. There is no better way.

    2. I’m sort of indifferent on the whole thing.

      1. I think we should just do what’s popular.

        1. 🙂

        2. Things will balance out eventually.

          1. FUCK YOU!

            1. What’s capitalism?

        3. Don’t know about you guys, but I’m peaked just thinking about it.

    3. Surely that way is to have the workers seize the means of production.

      Cause you know, the workers will know what to produce. Who need price signals?

      1. How about co-ops? Let’s have capitalism, only let’s add democracy to it.

        1. BWAHAHAHA!

        2. What’s stopping you?

          I see plenty of co-ops. Just not ones that are terribly sucessful. Mostly due to their lack of interest in profitability.

        3. Tony, ever read any histories of Yugoslavia? Specifically, from the mid 70’s to the mid / late 80’s?

    4. We tried the “better way.” (Fannie, Freddie et al.) That’s why there’s a crisis.

    5. Who wants ice cream?

    6. Sounds like Max got caught with a dick up his ass again…

      1. That really gives him too much credit.

    7. Actually, there’s one thing Austrians and Communists always agreed on…

      There’s this thing called the economic cycle.

      From Marx on, socialists and communists believed that the downside of the economic cycle would always bring about more government and ultimately the rise of the proletariat.

      The Austrians noted too that governments often do the stupidest things possible on the downturn in the economic cycle. …I think they see themselves as something like Galileo trying to explain to the Pope that the sun doesn’t really orbit the earth.

      …I bet it takes the US Government longer to listen to them than it took for the Catholic church to admit the sun doesn’t orbit the earth though, but if even Max understands that downturns in the economic cycle are unavoidable, maybe there’s hope!

      Hey, Max, why don’t you concentrate on communicating that sentiment to that idiot of a president running things right now?

      Economic downturns are inevitable. Bravo! …and the last thing we need is a government that’s willing to squander our future earnings on trying to avoid the unavoidable.

      By the way, as of Friday, the Fed was saying that more stimulus may be needed!

      *canned laughter*

      1. Depressions aren’t inevitable, and if government can’t prevent them, what is it good for? Don’t answer that.

        I just can’t tolerate, morally, working and middle class people suffering as a result of elites screwing things up.

        1. No, they’re not inevitable. People like you vote for policies that bring them about.

          1. Uh huh. Which is why the happen everywhere, under all forms of government that have ever been tried, including ones far more “limited” than anything on earth today.

            1. The financial boom bust cycle is impossible under a 100% reserve banking system.

        2. Depressions aren’t inevitable, and if government can’t prevent them, what is it good for?

          ABSOLUTELY NOTHING!

        3. Given the number of working and middle class foreclosure sob stories the left keeps digging up, it wasn’t just the elites who screwed up. Buying more house than you can afford counts as screwing up too.

          This fuckup transcends class. The main dividing line between the fuckups and the victim of the fuckups seems to be level of responsibility and maturity; some of us chose to rent rather than buy based on the expectation of an eternal housing boom.

          1. This fuckup transcends class.

            Fannie Mae and Freddie mac are elites. And they told everyone to buy a house they could not afford and gave them the loan to do it.

            How is that not the elites fault?

            1. You still didn’t have to buy the house. Still your fault.

        4. IMO, they are not only inevitable, but desirable.

          Recessions and depressions act at moments to regroup and reassess one’s prorities. Whne times are bad, every business, every individual trims the fat from their budgets, searches for cheaper suppliers, eliminates products that aren’t in demand and seeks new opportunities.

          Just for example, take cable versus sctreaming video. A lot of people are probably looking at they cable television bill and thinking “do i really need 60 channels of bullshit, when I can watch any more I want on netflix?”

          Or they are thinking “do I need a $50/month cell phone plan, when i can buy pre-paid?” “Do I need a land line, when I can do VoIP?”

          Or they are thinking about their monthly food budget, and deciding to cook their own meals instead of eating out. Or they are turning off the lights to save on electricity.

          The same thing SHOULD happen to governments, except they take their money by force … but that’s another argument.

          1. “IMO, they are not only inevitable, but desirable.”

            There are so many things to like about Hazel.

            Don’t be humble about that opinion!

            If there were ever a cycle as the Austrians described, this was the one. Low interest rates led people to misinvest their money in all sorts of things–especially housing and mortgage backed securities.

            …which isn’t to say those investments were irrational given what we knew at the time. Usually, you expect to see high inflation before a cycle turns, but there wasn’t anything bad going on with consumer behavior or inflation when this whole thing started…

            It was all about misinvestment.

            There are things we can do to make it easier for that misinvested money to be reallocated, but there was nothing we could have done ahead of time. People made bad investments for good reasons before, and God willing, they’ll make bad investment for good reasons again.

            If it wasn’t that way, you could just buy any stock you wanted–risk free!

            No government can ever do things to make it impossible for people to make bad investments in the future and make it so we won’t have downturns in the economic cycle–but they can make it harder to reallocate investments. …which is what Barack Obama has done. That does make it harder to climb back out of the hole once we fall in.

            They’re going to tax a lot of gains as ordinary income now–that decreases the incentive to invest money and capital. The cap gains tax is about to go through the roof–why wouldn’t increasing the costs associated with investing decrease investment?

            Stupid, stupid things the Obama Administration is doing/has done that has nothing to do with why the economic cycle turned, but most certainly makes it harder to climb back out of the hole.

            There are things you can do to increase consumer purchasing–which would help climb back out of the hole. If they slashed income tax rates, people would have more money to spend–that’s the kind of thing that makes economies grow. But nooOOOOOOOoooooo!

            Anyway, people get confused about what the government can and cannot do. Just because there are things they can do to help us climb out of the hole doesn’t mean there’s anything they can do to make sure we don’t fall into another one. We will.

            And you’re absolutely right–that’s a feature and not a bug!

            Can you imagine how much worse the misinvestment would have gotten if the markets hadn’t been there to enforce reality? It was bad enough as it was–what if it had gone on longer? We can’t avoid falling in the hole–but the hole could have been made a lot deeper.

            That’s one of the big differences between us and the Soviet Union. They’re still trying to dig themselves out of that hole. That’s why Japan’s economy stagnated for twenty years–they’re just barely starting to drag themselves out of that state sponsored hole!

            1. So, Ken: why does past malinvestment require that ten million workers sit idle today?

              Austrian economics has neither an explanation nor a cure for this problem.

              1. Why don’t think of workers as investments?

                People were willing to finance the salaries of millions of people as bankers and mortgage brokers and real estate agents, etc., etc…

                Those investments need to be reallocated–just like the cash.

                You can make it harder to hire new people–or not.

                1. Ken, those represent a tiny sliver of the unemployed, most of whom have precisely zero connection with the bubble.

                  1. And it’s just an example. Once consumer spending slowed, all kinds of marginally profitable employees became unprofitable.

                    The point is that all those people have to be redeployed just like investment dollars, and from what I can tell, the same rules apply.

                    Labor is a resource. Why would the rules be any different?

                  2. Ken, those represent a tiny sliver of the unemployed, most of whom have precisely zero connection with the bubble.

                    They may not be associated with the bubble, but they may be associated with other malinvestments that are exposed and squeezed by the downturn.

                    That’s part of the recession’s positive effect of clearing out the dead wood.

                    For instance, employees of Hollywood video. they had nothing to do with the real estate bubble, but the recession is prompting consumers to switch from rental stores to online, Netflix, and kiosk rental. Out with the dead wood. Consumers tighten their budgets and seek more efficient ways to do things. Individual decisions at a local level cause macro changes to reallocate resources in a more optimal way.

              2. why does past malinvestment require that ten million workers sit idle today?

                Because it’s not clear how to efficiently make use of their labor. Government make-work programs are inefficient because they require borrowing that takes a large amount of money out of the future to overpay for unnecessary work in the present. (The work is unnecessary because no one is willing to pay for it voluntarily.)

                As an analogy, human digestion and cellular metabolism only makes use of less than 35% of the chemical energy available in our food. Why do we tolerate this incredible inefficiency? Because we don’t know how to do it any better, and an attempt to increase the efficiency is probably going to make things worse.

              3. So, Ken: why does past malinvestment require that ten million workers sit idle today?

                Austrian economics has neither an explanation nor a cure for this problem.

                Sure it does,

                Government intervention prevents wages from falling to a clearing point.

                The only thing government can do to expdite that process, after eliminating all of the current interventions, is to liberalize bankruptcy so that debt is not an impediment to people accepting lower wages.

              4. How do you not already know the answer to that question, you idiot?

                Do you honestly think that 10 years of malinvestment and workers training to have careers in industries that cannot support them can simply reallocate themselves overnight?

                Besides which, I already answered that very question on the thread the other day.

                I grow so tired of how purposefully obtuse you are, Chad.

          2. Wrong, Hazel.

            The LAST thing you want is the government cutting when everyone else is cutting. That amplifies the business cycle and can cause the negative feedbacks to overwhelm the system.

            On the contrary, the government needs to act counter-cyclically. This means spending now, and taking away the punch bowl when things get good.

            1. Or maybe it could be small in the midst of booms and busts, so it doesn’t affect the business cycle at all. That’s a lot more plausible than a democratically-elected government taking away anyone’s punch.

            2. As if the political will to take away the punch bowl will be there when things get good.

            3. The LAST thing you want is the government cutting when everyone else is cutting.

              The government gets all of its revenue from the private sector – the people who are creating wealth.

              Taking away money from people who are creating wealth (or who have savings, if done through inflation) and giving it to politically connected assholes who take a big cut, then pay a few people to dig ditches and fill them back in is the height of stupidity.

              Since recessions are due to the mis-allocation of funds, having the government deliberately mis-allocate more funds slows down the recovery. The government “stimulus” distorts the signals the market sends.

              1. “Since recessions are due to the mis-allocation of funds, having the government deliberately mis-allocate more funds slows down the recovery.”

                That’s crazy talk!

                I suspect it’s worse, too, if the government misallocates funds to the same place the markets punished investors for putting them in the first place…

                If the market’s telling investors, “No, you shouldn’t have put your money in mortgage backed securities, etc.”, then the last place the government should put $700 billion is in mortgage backed securities, etc.

                I’m just sayin’.

              2. Why do you assume government money is mis-allocated?

                It is patently obvious that the marginal spending of the private market (the SUV/McMansion/ChineseShit conconction we all know and love) is far more of a mis-allocation that what the government’s marginal spending is on (UI benefits, cops, teachers, firefighters, infrastructure maintanance, etc).

                It seems beyond your comprehension that perhaps, just perhaps, the private market wastes money on stupid things. Instead, you assume that it is perfect, and therefore cannot be beaten by any possible spending. If this appears to be in complete and utter defiance of facts or common sense, it is only because we are not wise enough to understand your god’s perfection. He must be working in mysterious ways if building McMansions in the desert is a better use of our resources than filling potholes and educating our kids.

                1. Yeah, God forbid that I get to choose what I spend the money I earn on, when obviously those choices should be made by my betters.

                  Chad, whether or not you think that spending money on “SUV/McMansion/ChineseShit” is a waste of money is irrelevant. It’s not your money. It’s not your decision to make. Would you like it if I decided I could spend your money better than you?

                2. Why do you assume government money is mis-allocated?

                  Because the government is not responding to price signals. It’s only responding to political incentives, which are a far rougher measure of demand than price signals. The market aggregates consumers demands far more effectively than the political process, which is at best a highly contrived and easily manipulated system that skews incentives towards the needs of a tiny number of swing voters in a few key states.


                  It is patently obvious that the marginal spending of the private market (the SUV/McMansion/ChineseShit conconction we all know and love) is far more of a mis-allocation that what the government’s marginal spending is on (UI benefits, cops, teachers, firefighters, infrastructure maintanance, etc).

                  You are cherry picking your examples. What is consuming the most government resources today? It’s not firefighters, cops, or teachers. It’s entitlements. Social security, medicare, medicaid.

                  I’m sure you also understand that we argue that the misallocation of resources towards things like hoiusing is, and has been, caused by distortions created by government intervention. You can’t deny that the government has promoted homeownership as a matter of explicit policy for decades. Otherwise we wouldn’t have a home mortgage interest deduction, or the GSEs.

                  But the reason I’m not going to argue that the market allocates resource optimally, is because the optimal is basically unknowable. Every individual’s optimum is different. Every individual should be permitted the freedom to locally optimize his or her resource allocations, in a process of free negotiation and coordination with others. You are free to pool your resources and create health co-ops if you want. Nobody is stopping you. This process tends to result in a much closer approximation to a global optimum than anything that could possibly devised by the hackneyed, emotion-driven system that is the democratic process.

                  1. Wrong, Hazel. It is PRECISELY the marginal spending that matters. If we move a dollar from the private sector to the public sector, the private sector gives up it’s LEAST valuble dollar (some entertainment dollar or piece of junk). The public sector then spends it on whatever is under current consideration for more spending, which at the moment is the types of things I listed.

                    Dollars spent on basic food and clothes on one side, or FICA on the other, are irrelevant, because they are going to be spent either way.

                    It is VERY obvious that the marginal government spending is more useful than the marginal private spending. On the other hand, most government spending is obviously better than the marginal private spending. In a lot of cases, if the government went out of its way to dig and fill ditches, even THAT would be a better use of the money than what the private sector manages to do with it.

                3. “Instead, you assume that it is perfect, and therefore cannot be beaten by any possible spending. If this appears to be in complete and utter defiance of facts or common sense, it is only because we are not wise enough to understand your god’s perfection.”

                  You’re not paying attention!

                  I would argue that the markets are better at predicting things–given the available information–than any other way known to man, but that’s hardly saying they’re perfect…

                  I’m the one that’s saying that the market is not perfect–and never can be!

                  That’s why it’s possible to overpay for things. That’s why it’s possible to lose money on investments. That’s why it’s possible to make bad investments for good reasons. That’s why it’s possible to be wrong.

                  So, back up for a second and look at what I’m saying without your preconceptions, if you don’t mind…

                  If the collapse of the credit markets due to home mortgages was the culprit, and that was the market’s way of cutting off new home construction and new lending, or in other words, the way the market tells people they’ve misinvested–then why would you throw more good money after bad?

                  Why do economies grow? A lot of it has to do with investment. A lot of it has to do with consumer discretionary income. When people, for various reasons, find that the necessities of life cost less, they have more money to do other things with. They save some of it. They spend some of it on movie tickets and automobiles. They invest some of it. All of those things are economic growth activities…

                  And when Bush and Obama squandered $700 billion on things the market was telling everyone they shouldn’t invest in? They took that money out of the hands of investors and consumers… They took it out of investors and savers and consumers future earnings…

                  That’s the seed corn.

                  That’s the money that makes the economy grow! Instead of the money going to to discretionary income or investment or savings? That went to bail out the bad investments of the past–not to make any more new good ones!

                  …and eating the seed corn? That has very real consequences in the very real economy.

                  I didn’t say that the markets were perfect. They’re unpredictable and imperfect–always have been and always will be. They’re like the weather. And if you’re trying to grow seed corn, ignoring the weather is really foolish.

                  Eating the seed corn is even dumber still.

                4. “It is patently obvious that the marginal spending of the private market (the SUV/McMansion/ChineseShit conconction we all know and love) is far more of a mis-allocation that what the government’s marginal spending is on (UI benefits, cops, teachers, firefighters, infrastructure maintanance, etc).”

                  Chad, somebody once described economics to me as, “the science of what makes people happy.” The point being that every VOLUNTARY exchange occurs because both parties expect to receive more benefit than they give up. Thus, every voluntary exchange is win-win as far as the individual is concerned. When the government takes one’s money by force and spends it on something that people weren’t willing to pay for in the private sector, the exchange ceases to be a measure of increased happiness.

                  You see, Chad. Think of it like this. 7 roommates are sitting in an apartment when one of them has an epiphany. He decides that it would be really cool if the apartment had a really bitchin sound system, which cost about 350 bucks. 4 of the roommates in total decide that this is a great idea, but the remaining 3 do not. The 4 roommates who like the idea decide that paying 87.5 dollars is too much, and agree that it would be more “fair” if each roommate pitched in 50. They then steal 150 dollars from the 3 who didn’t want the new sound system and purchase it and bring it home. The 3 roommates who didn’t want the sound system are livid, but the remaining 4 argue that it was only fair, because everyone will get to enjoy the music. Of course, Steve will usually decide what everybody listens to.

                  Also, Chad, don’t you understand that when GDP measure the involuntary exchange associated with government spending it is measuring the activity of money changing hands rather than any true increase in the happiness of the nation? Stealing money to prop up statistics is sub human.

                  1. ALso, what the hell makes a house a “McMansion” you pretentious fuck? If you live in anything bigger than a mud hut, you are living on more than you need.

                  2. Leave it to tkwelge to provide an example that contradicts his own ideology.

                    So, tkwelge, how exactly do you decide if the sound system is a net profit in this example, and how do you pay for it? THE MARKET CANNOT SORT THIS OUT, even among seven people who know each other.

                    Lol lol lol

                    You cited a public good (or in this case, possibly a public bad) as an example?

                    lol lol lol

                    Look at the positive and negative externalities! Oh dear, oh my!

                    lol lol lol

                    Look at al the free-rider problems! Oh dear, oh my!

                    lol lol lol

                    I have never seen you post anything that more strongly proves that you just don’t get it. You really are a true believer the Market God.

                5. “UI benefits, cops, teachers, firefighters, infrastructure maintanance, etc”

                  OK, and how about the other 99.8% of the budget?

                6. Cops, firemen and teachers? Why is borrowing yet more money to fund the highest paid, still working, young pensioned union workers going to decrease unemployment?

                  And, as if they aren’t mal investments anyways. Cops? Front line in the catch and release bureaucracy. Firemen? What fires? In my town we could fire ever firemen, and pay cash to every burned house and have 90% of the FD budget, and the firemen could concentrate on their other full time jobs. And teachers? Please. Everyone here prefers to hire leagals from Russia, Ireland, and Jamaica to work at McDonald’s. They are better educated and more able to handle the rigors of a picture cash register.

                7. If the potholes and children who live nearby are any indication then the “public” sector as you describe it is doing nothing but wasting money too!

            4. Yup, we need to spend a trillion more. Maybe a trillion a month. Thanks, Chad, for pointing out the error of our ways… apparently, we CAN spend our way to prosperity.

              And it’ll only cost us all a 90% tax rate. Every fucking one of us. If we still have jobs.

              1. Nahh! It’s called the Zimbabwe plan…..works great! Honestly LG I don’t know why you’re such a pessimist?! 😉

            5. Chad – “The LAST thing you want is the government cutting when everyone else is cutting. That amplifies the business cycle and can cause the negative feedbacks to overwhelm the system.”

              Fail

              Almost all government spending amounts to one sort or the other of breaking windows.

              Deadweight costs that are affordable in good times become lethal in bad times.

              Cutting government spending is the equivalent of a family eliminating its gambling expenditures when their income shrinks.

            6. On the contrary, the government needs to act counter-cyclically. This means spending now, and taking away the punch bowl when things get good.

              Except that the way that works out in practice is massive spending during bad times because “people are suffering,” and then when times are good, massive spending because there’s all this money around and it’s unfair that the needy don’t have enough of it.

            7. On the contrary, the government needs to act counter-cyclically. This means spending now, and taking away the punch bowl when things get good.

              $100 says when the economy is good Chad will still be advocating for more spending.

              1. If I could just get him to see that it’s not always clear when the bad times are about to hit…

                Really brilliant, well motivated people at Lehman and Bear went long on subprime in July of ’07–and for really good reasons!

                Lehman and Bear no longer exist because of those investments. If the incredibly well motivated, well paid people at those investment banks couldn’t tell exactly where we were in the cycle, then how is government supposed to know when to spend and when to let up?

                I don’t think Chad understands just how uncertain markets are. If I could get people like that to accept uncertainty, and markets being the best–albeit uncertain–predictor of the future, most everything else would fall into place…

                People like that won’t believe it though. They think there are people on Wall Street with computers and special programs or something–and they KNOW the future! They’re just not willing to tell the rest of us, for some reason–probably greed. They know when things are going up or down, and they never lose any money!

                Such people don’t exist of course. Ted Williams was famous for saying that baseball was the only profession where you only had to be right 3 times out of 10 for people to think you’re doing a great job, but being an investment guy comes pretty close…

                Being right 55% of the time can get you a decent return, but some people just refuse to believe that the future wasn’t always as predictable as yesterday! “Hindsight’s 20/20”; we hear that all the time, but people like Chad don’t seem to know what that means.

              2. I have noticed I haven’t heard much about the homeless. Must be a Republican admin type story.

        5. I just can’t tolerate, morally, working and middle class people suffering as a result of elites screwing things up.

          Then support limited government with fewer elites in the first place.

          1. “I just can’t tolerate, morally, working and middle class people suffering as a result of elites screwing things up.”

            Barack Obama squandered $350 billion of our future earnings on bailing out Wall Street investors.

            http://www.huffingtonpost.com/…..58292.html

            1. It’s been the same since Chrysler, Continental Illinois, Long Term Capital… always bailout the owners. By both parties.

    8. Yes, Maxism as written by Karl Max. We need more government spending, but not on the rich. It needs to be spent on the underprivileged college students who can’t find jobs and on the workers.

      1. As wrong as he was about so much–even he–understood that the economic cycle is inevitable.

        It’s not predictable like the seasons, but squandering resources trying to stop it is just as unreasonable.

        That’s the way I see what Obama and Bush before him and a lot of people right now are trying to do. They’re trying to stop the birds from flying South for the winter–and they’re squandering our investment and consumer dollars to do it too!

        Investment and consumer dollars–that’s what we need more of. That’s what’s gonna get us out of the hole.

        You know how the press never seems to ask the President the question everyone wants to ask him? That’s my number one question that nobody ever asks the President!

        …Mr President, what have you done to encourage investment and consumer spending?

        *crickets*

        1. “Mr President, what have you done to encourage investment and consumer spending?”

          Given the economic environment we’ve been in since he was elected, Shouldn’t he ask himself that question every day?

          Bill Clinton, damn his heart, at least had a sign on his desk that said “It’s the Economy, Stupid!”

    9. Sounds like the classic crisis of capitalism to me. There has to be a better way.

      Give me a little time, Goddamn it! I’m a looking! Now, what does this gear do, Geitner? Maybe we can get Holder arrest a bunch of doctors? Biden, how are those purple nipples ans swirlies to the IPS owners?

      You see, we are hard at work, Max. Didn’t you put me in office to do exactly this? What makes you think you could do any better, asshole?

      If I’m not the right man, who the fuck is? You want to resurrect, Lenin is that it? Or, have me bring in Chavez.

      Goddamn, you can never please these twats!

    10. Sounds like the classic crisis of capitalism to me. There has to be a better way.

      Why is this a crisis?

    11. Well, Max, let’s name off the alternatives:

      Communism: Too messy. All that blood and whatnot.

      Socialism: Turns everyone into mediocre automatons. Slightly more freedom than communism, as in “you don’t get shot nearly as often for disagreeing with a socialist government”.

      So… you were saying?

  5. I’m removed from means opinion.

  6. Sometimes I’m glad I work in one of the best economically situated industries (tech) in the best economically situated cities (Austin) in the best economically situated state (Texas) in the country.

    1. And yet, despite that, you’re still surrounded by smelly leftist hippies who will have you first against the wall when the Revolution comes.

      1. (Smelly because, ya know, it is Austin in July)

      2. This assumes I’m not a leftist hippie…

        All humor aside, I’m always a little confused as to why people in “hard hit” areas don’t just…move. Sure there’s a small financial cost and a (potentially large) emotional cost, but, when viewed against the financial and emotional damage of prolonged unemployment, “moving to where the jobs are” would seem to be the better choice.

        1. The traffic sucks.

          1. Compared to where?

            With respect to Austin, its only really terrible if you live in the burbs. Of course the down side to not living in the burbs is you get less house for the money. Then again, you get the benefit of not living in a neighborhood of cookie cutter houses with an overbearing HOA.

            1. Then again, you get the benefit of not living in a neighborhood of cookie cutter houses with an overbearing HOA.

              What?!?! Without centralized land use planning people set up their own contracts and regulations to protect their property from incompatible uses!?!?

              You speak heresy sir.

            2. Weed is tough to find here. Maybe I should hang out with smelly leftists.

        2. Because Upstate New York weather is the best in the world. There’s anecdotal evidence to suggest it was the location of the Garden of Eden.

          1. And yet Syracuse cant get football players to come to school there.

    2. Um, Buddy: tech is being outsourced to China and India fast.

      And I wouldn’t brag about Texas’s deficits….you have some huge holes to fill for your next two year cycle.

      1. With the defining difference being the ability to fill those holes. Unlike cities and states following models you consistently support.

      2. Not if it involves creativity. Just ask American McGee how that went when he set up shop in China. Given Buddyglass’s locale and industry, he knows exactly what I’m talking about.

      3. Um, Buddy: tech is being outsourced to China and India fast.

        This fits well with my theory that a consequence of the benefits of classical liberalism forms the basis for socialism.

        The US for years followed classically liberal policies both social and economic. Which in turned produced a cornucopia of technological advancements. Chad, a socialist, sees these advancements going to others and immediately wants to implement a socialist scheme to fix this injustice….of course the end result is that we generate less technology.

        The irony of course is that China and India are not blind to the real reasons for the US’s success and have been liberalizing to clone that success.

        We shut down our freedoms out of envy for what we already have and china opens to freedoms out of greed for what they do not have.

    1. I really need another newspeak dictionary. My most recent version is six months old and obsolete.

      1. That’s doubleplusungood, J sub D. Non-duckspeakers may become unpersons, although you might not if you can touch your toes. They don’t call it the Ministry of Love for nothing…

    2. How many “not one dimes” is in this tax?

      1. I will paid in nickle increments to keep the “not one dime” promise.

      2. 10 trillion dimes aren’t one dime . . . or something.

  7. The world hasn’t lost its taste for American debt, and America hasn’t lost its taste for running it up”
    -Not totally true: China doesn’t want to buy any more US treasuries, and that’s the first domino:
    http://seekingalpha.com/articl…..y-holdings

    Eventually, people will just get sick of shitty interest returns on US debt and get into emerging market debt.

    1. So, a good investment would be the iraqi stock market, then?

    2. This can only mean one thing: he’s afraid of the possibility of the law being struck down by the courts (as it of course should be).

    3. I heard they were moving into yen denominated bonds. I can’t blame them. They might not get shit for interest, but they’ll avoid massive losses when the yuan appreciates against the dollar.

    4. Eventually, people will just get sick of shitty interest returns on US debt

      The only people that matter is Bernanke

  8. Kinda scary aint it. I mean think about it.

    Lou
    http://www.privacy-tools.be.tc

  9. Kinda scary aint it. I mean think about it.

    Lou
    http://www.privacy-tools.be.tc

  10. i thought robots had no fear?

    1. Only fools have no fear!

      1. And foolish robots worst of all.

  11. Sometimes, Tim, I almost think you libertarians are starting to get it. Almost.

    You are correct. The problem is over-capacity and lack of demand. The solution is for the government to print money and use it to hire people to do anything useful, rather than borrowing money in order to pay them slightly less to sit on their asses.

    And no, we don’t need to have people dig ditches one day and fill them in the next, or any other broken windows crap. There is an enormous amount of real work to do. I can absolutely assure you that if you helicopter dropped, say, $2000 per resident into every mayor in the countrys’ hands, with instructions to use it to build or fix something as soon as practical, there wouldn’t be a single one that doesn’t have a backlog of things to do that would easily swallow that much money. Another fun one would be to helicopter drop a billion dollars into the hands of each of the top 500 charities, with instructions to spend it within two years. Like the mayors above, I am sure any of them has a laundry list of good things to spend it on.

    Now, if I could just get the more wing-nutty of you to admit that your vaunted school of Austrian economics cannot explain the mass unemployment that follows malinvestment (let alone propose a cure other than to wait and hope it goes away), we might be getting somewhere.

    1. Pray for money dropping helicopters in one hand, shit in the other…

      In the real world where money dropping helicpoters do not exist, that money has to be taxed out of (presumably) productive activity to feed something like…helicopters to drop drop money out of the sky.

      1. Pray for money dropping helicopters in one hand, shit in the other…

        Now what?

    2. Chad, I can only smile at your childlike trust in the benevolence and competence of city governments. As annoyed as I get at your smug pronouncements here that are ultimately based on that trust, it pains me to have to argue against your faith.

      But, it’s very unlikely mayors are going to take such free money and spend it on necessary maintenance and infrastructure. They’re going to spend it on things that (a) are big, shiny, visible, and good to have named after you, and (b) benefit your friends and the other people who keep you in power. So, it’s going to be spent on swimming pools rather than sewer systems, playground equipment rather than electrical grid maintenance.

      1. The most likely scenario is it will be spent on keeping unionized public workers on the payroll, if it is a big city filled with Democrats. Shiny and visible doesn’t beat “sucking up to the people who got you elected”.

      2. Tulpa, I have gone to enough of my current town’s meetings to know that $2000 per head (roughly 2.5 million) wouldn’t even put a dent in the list of things that need to done. I am talking about things like fixing roads and storm sewers, and I live in a rich suburb!

        It’s worse in the poor little town where I grew up. A 100-year-flood just knocked out an important bridge (that was just re-built a few years ago), blowing a mile-wide hole in the city budget.

        Now, compare that with whatever you personally spend your marginal dollars on (chinese crap, penis-enhancing automobiles, giant houses where you can hide from your neighbors, whatever). Which brings more value to society?

        1. I’ve written enough budgets while in civil service to know that the chance of those numbers being bullshit is 99.98%.

          Why is this little town maintaining a bridge? That’s usually the domain of counties and larger institutions. To add to that if they did lose the bridge in a flood there are more than one program already in place to fund replacement with tax dollars. Maybe the management of your “poor little town” is poor?

          1. As per your richer neighborhood that apparently didn’t plan well enough to maintain its infrastructure. You collectively fucked up by not sufficiently planning to maintain your infrastructure, feel free to collectively solve your fuck up amongst yourselves.

    3. You are correct. The problem is over-capacity and lack of demand. The solution is for the government to print money and use it to hire people to do anything useful, rather than borrowing money in order to pay them slightly less to sit on their asses.

      No, the solution is to let the chips fall where they may.

    4. pay them slightly less to sit on their asses. I *heart* unintended consequences. You know what a Gulf Coast Carpenter went for post Katrina? Yeah, me neither, they all sat at home, collecting FEMA checks to rebuild their own homes. That was if they could get the materials, because, well, the No-Bid Contractors, employing ‘un-documented’workers were competing with the Carpenters for the scarce materials. I’ve seen Home Depot parking lots look like fucking U2 shows over some shitty drywall that some lawyer would end up suing over.

    5. You are correct. The problem is over-capacity and lack of demand.

      With analysis like that Timmeh might be out of a job.

    6. Not a bad idea in theory, Chad, but the labor unions would have a shit-fit.

    7. If governments are so much better at spending money than individuals, why did the communists lose the Cold War?

    8. There is an enormous amount of real work to do. I can absolutely assure you that if you helicopter dropped, say, $2000 per resident into every mayor in the countrys’ hands

      You would produce more real work more efficiently if you simply gave that $2000 to each resident.

  12. Sorry for the threadjack. But Donald Berwick is truly scum. From reading this I think the man might be insane.

    http://pajamasmedia.com/blog/d…..ot-for-me/

    1. I can absolutely assure you that if you helicopter dropped, say, $2 trillion into every Donald Berwick in the countrys’ hands, with instructions to use it to build or fix something as soon as practical, there wouldn’t be a single one that doesn’t have a backlog of things to do that would easily swallow that much money.

    2. Mental illness no longer has the stigma it once had. Anyway, mine is covered by my healthcare plan.

  13. and the real estate market is plunging so fast it’s now clear the whole country is built on an Indian burial ground.

    Except according to the King County tax assessor’s office where housing prices have been going up…uP…UP for three years!

    1. So high, in fact I changed my name so as to hide from their next UP assessment.

  14. Too bad Larson and Cavanaugh are entirely innocent of basic economics.

    We live in a world of scarcity. Overproduction is not a problem. An sufficient increase in the quantity of money can raise spending.

    Cavanaugh and Larson both seem to be unable to distinguish money from credit and a need to reallocate resources from a need to reduce production. Malinvestment means there are shortages of the things people want to buy, not overcapacity of everything.

    Too little money relative to the demand to hold money results in too little spending on goods and services. Interest rates may be disrupted like everything else, but it isn’t about there being too little money for people to borrow or interest rates being too high relative to what someone or other considers normal.

    1. ‘Malinvestment means there are shortages of the things people want to buy, not overcapacity of everything.’

      Agreed, Bill! A shortage of what people want to buy and an excess of what they don’t.

      1. Yes, and right now what people want to buy is air. Bottled air. Bagged air. Bulk, free floating air, any kind of air at all is in hot demand.

        There’s a HUGE shortage of air.

        If only there was something people really wanted to buy right now besides air. If there was, then somebody could start producing it and hiring people and creating jobs and pay lots of taxes.

    2. “We live in a world of scarcity.”

      I didn’t notice that at the grocery store this morning. Examples?

      “Overproduction is not a problem.”

      It certainly is a problem for producers and it is certainly not one for buyers.

      “A(sp) sufficient increase in the quantity of money can raise spending.”

      Well, duh. Pumping more money into the economy, detached from any increase in wealth, will make money less valuable, so you will need more of it to buy a loaf of bread at the grocery store.

      “Too bad Larson and Cavanaugh are entirely innocent of basic economics.”

      An understanding of basic economics would require the capacity to run a lemonade stand without going broke.

      1. My dogs overproduce crap. The market value is virtually zero.

        Clearly we need massive government intervention to raise the price of dog crap in order to fix the economy.

        For the children of course.

        1. If your dogs had a Nobel Prize in economics they’d eat their own crap.

    3. Malinvestment means there are shortages of the things people want to buy, not overcapacity of everything.

      Yes. And “recession” means “nobody’s in the mood to buy a fucking thing”. How does that smoke when you put it in your pipe?

      Too bad Larson and Cavanaugh are entirely innocent of basic economics.

      But not more than their would-be critics.

  15. The problem is that we aren’t spending enough. We need at least $3 trillion of deficit spending a year. Combined with the multiplier effect, our GDP would quadruple in 5 years.

    1. However, $3 trillion in tax cuts WILL pay for themselves. With magic.

      1. It would have worked better then the deficit spending.

  16. As lovers of freedom, our only real hope right now is the tea party movement. How strange that’s it’s being torn apart by the REAL racists at the NAACP. THIS is what Reason should be covering:
    http://www.nydailynews.com/new…..etter.html

    It’s really all about race. Only Jim Goad knows what’s up.

    1. “Only Jim Goad knows what’s up.”

      Your link is to an article about Mark Williams. But “Jim Gonads” would be an excellent name for a warrior.

      1. Poetry denied….and all for lack a a single “n”!

    2. 88, as in HH, as in Heil Hitler.
      RACIST!

  17. “It’s just one thin mint.”

    1. It’s wafer thin?

  18. What I think is interesting is that small business owners haven’t been hiring, even though most of the ones I’ve spoken with still don’t know about that 1099s for everything requirement under Obamacare yet.

    I mean, they’re holding back ‘cuz they expect to be screwed. They don’t yet know how bad it’s gonna be.

    1. The IRS doesn’t have the infrastructure to process the millions of new 1099’s. They will exempt credit card transactions for starters.

      What’s baffling to me is the Obamacare theory that reporting business to business transactions would raise a nickel in new revenue.

      Business to business transactions are already tax exempt. Businesses already have every incentive to report these transactions and no incentive to hide them.

      1. It’s all a precursor to VAT. Bastards.

        1. I doubt it. The two most liberal states, CA and NY, also have the highest state sales taxes. A VAT would raise the retail sales price or products in those states even more. Pols want to get re-elected, a VAT would be a kick-me-out tax.

          1. Of course its a precursor to a VAT

            And since when have politicians not engaged in self defeating stupidity.

      2. A 1099 is not meant to generate tax revenue. It is meant to catch cheaters.

        1. How does 1099 catch cheaters for business to business transactions?

          1. If I (as a business) hire a plumber to fix my leaky faucet, I must “notify” the IRS that I paid Joe the Plumber $600 for services rendered. The IRS now knows that JTP received $600 from me. If JTP’s declared income is less than all of his 1099s, he’s busted.

            If I am JTP, and I do work for a company and they do not issue me a 1099, I do not have to report it. Well, I do, but the IRS will not know about it.

            1. Yes, but a 1099 for materials doesn’t achieve the same purpose. It would be used to track the purchaser not the supplier. The IRS will be looking for business owners running purchases through their businesses for personal use.

              1. It would be used for both. It’s going to create a tendency for businesses to buy from fewer suppliers. The less suppliers they buy from, the less 1099s they have to file.

                The IRS will be looking for business owners running purchases through their businesses for personal use.

                Not necessarily. I can still issue a 1099. If I by a boat, I can tell the dealer it’s for my business and issue a 1099 and still deduct it as a business expense, even if it is not. What does the dealer care? 1099s are not itemized, 1040s are.

              2. A 1099 is just a name, address and an EIN. There’s nothing on there that specifies what the service or purchase was/is.

            2. …and an amount, duh.

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  20. I am not hiring, because there is no increase in demand for my service. When demand increases, and orders pile up, then I’ll hire more workers. It’s very simple. I don’t care how much someone entices me with a low interest government loan.

    As far as the 1099 thing, I don’t see how it can possibly stand. It’s not just too much for small businesses to keep up with, it’s too much for the IRS to handle. They would have to hire a shitload of workers. But then again, that never stopped the government before. Including corporations is one thing, but to require all purchases, is insane. I’ll have to collect addresses and EIN/TIN numbers from half of the internet. How do I get a EIN/TIN from somebody on ebay?

  21. Including corporations is one thing…

    Huh? If you’re not a C, S, or LLC already your pants are around your ankles.

    1. Currently, if hire a contractor that is a corporation, I don not have to file a 1099 for that service, only for individuals and partnerships. The new rules would include all corporations.

      1. SBO,

        I am one too and my point is that there is no new revenue to be found with the extra paperwork.

        1. I think they were trying to make it more difficult for businesses who sell goods online, etc., to hide income. It’s also intended to cut down on fraudulent deductions ? if you report that your business spent money on window cleaning services to Clear, Inc. ? and you have to issue Clear, Inc. a form 1099 for that amount ? you’re more likely to report it accurately. Cause you’re not going to tell Clear, Inc. that you spent $1,000 when you actually spent $500. So the result is more accurate reporting. That’s good, right? It’s all about closing the tax gap and trying to recover some of that $300 billion in unreported income each year.

          http://www.taxgirl.com/new-rul…..ng-a-stir/

          An accountant can explain it better than I can.

          1. I get that. Goosing expenses wasn’t honest or legal before, it wouldn’t have passed an audit, but with 1099’s flying out of every business’s ass, there is more information in the IRS’s SQL database to use in the targeting of audits. $300 billion? I doubt that the IRS could even recoup the expense of the audits.

            1. Ya’ll are depressing the hell out of me. Sounds like the paper work problems with ObamaCare are even worse than I’d thought.

              And that’s before you add up the rest of the costs, and the fact that quality is almost certainly going to take a nose dive.

              So tell me again, how long do you figure it will take us to sink to third world level?

  22. Is blighting slightly more lubricated than eminent domain?

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