I was thinking about all the things we are doing to try to get out of this economic crisis. Do any of the following steps make sense and why aren't economists speaking out against them?
I know economists can't control everything in the world, but can't they at least speak out publicly against some of this nonsense that violates common sense? It seems to me the economics profession has been captured by corporate and banking interests and political posturing that violates all sense of reason and logic.
- To control our deficits we keep proposing plans to cut taxes and increase stimulus spending instead of raising taxes and cutting spending.
- To lower government debt we keep adding to it.
- To control too big to fail banks we are making them bigger.
- To increase confidence in our government, our Fed is counterfeiting trillions of new dollars.
- To encourage jobs here in the states, we are giving tax breaks to companies that outsource overseas.
- To strengthen wages here we are emphasizing greater trade with $1-an-hour low wage countries.
- To strengthen democracy we are encouraging more corporate involvement in politics and political advertising.
- To encourage education we are raising its price, making it more difficult to finance and allowing big subsidies for phony for-profit colleges.
- To fight against systemic risk and the fact that all correlations go to one during crises we are increasing insurance programs and allowing huge interconnectedness through CDS default insurance market where everyone guarantees everyone else against default.
- To address the debt overhang we are avoiding debt restructurings, bankruptcies and paying all creditors 100 cents on the dollar when they get in trouble.
- To address lack of regulation in banking, politicians are campaigning on removing more regulation and freeing industry to create jobs.
- To address huge inequality we are proposing additional tax breaks for wealthy and corporations and the use of a regressive VAT and suggesting that these "job creators" wealth will eventually trickle down.
- To encourage people to work we are paying unemployment benefits, some of which I would guess is going to middle-aged people who simply will retire once the benefits run out.
- To solve our funding problems in SS we keep cutting the taxes needed to fund it.
- To cure runaway healthcare costs we keep adding benefits such as paying for drug purchases and insurance coverage for poor.
- To control industry's lust for profits at all costs to society, we allow corporations and banks to write their own regulations through lobbying and campaign influence.
- To encourage aggressive arrests of financial perpetrators we allow SEC and Justice Department lawyers to move to high-paying jobs at law firms serving banks.
- In a global recession, we encourage each country on earth to increase exports even though exports is a zero sum game.
- To control corrupt managements and financial middle men we encourage greater indexing and diversification with less shareholder involvement in the oversight of individual company managements.
- Given that the banks leverage dramatically increased systemic risk and threatens the stability of the global financial system, we allow banks to pay dividends and reduce capital and increase leverage.
- In a world of too little savings and too much debt, we cut interest rates to punish savers and encourage adding more debt.
- To solve the problem of a lack of transparency at the banks, we allow them to hold non-performing assets for life and not mark them to market.
- In a housing market awash in oversupply of unsold homes, we give huge tax breaks to homebuilders to keep them in business and keep them building more unwanted new homes.
- To save countries like Greece that have too much debt, we lend them more money instead of forgiving debt.
- After the biggest economic bubble in modern times with outsized consumption financed with money borrowed against our homes, we object if prices want to deflate to more normal levels to help consumers.
John R. Talbott is a best selling author and economic consultant to families. You can read more about John at www.stopthelying.com.
http://www.amazon.com/Invisible-Handcuffs-Capitalism-Tyranny-Stunting/dp/158367229X/ref=sr_1_1?s=books&ie=UTF8&qid=1315864452&sr=1-1
who cares if people lose everything.. just economic collateral damage.... and it's not me or anybody I know.
Due to this basic incorrect premise of infinite growth, we have all these contradicting solutions as to grow ourselve out of all our problems. When you are using the problem of growth to act as the solution, you of course you will violate many tenets of common sense along the way.
22. No argument.
23. The homes are WANTED, they just can't be financed with the current credit conditions. The issue is financing.
24. The money we lend to them is to pay off their immediate needs. Forgiving their debt will make them a poor risk for future investment, and they will go under even faster, as they will need to jack up interest rates on their bonds, making the borrowed money cost more.
25. Deflation will affect wages for the working class before they affect prices. With workers making less, it puts the economy into a deflationary spiral. Less pay => less demand => layoffs and fewer workers => less demand => more layoffs => less demand => etc.
"It seems to me the economics profession has been captured by corporate and banking interests and political posturing" - Self evident fact.
7-12. No argument
13. People who have no income will quickly lose their housing, car, possessions while lookign for new work. Without those things, they have a MUCH harder time getting another job. In addition, putting that kind of a threat on people basically guarantees that they spend less money, further damaging the economy. Having them WORK while on unemployment (on what, exactly?) would hamper their efforts to get another job.
14. Raise the ceiling.
15. Prevention is cheaper than cure. An anti-cholesterol drug prescription is MUCH cheaper than triple bypass surgery.
16-20.- no argument.
2. See 1930 and 1937. Cutting government spending in a recession is the surest way to make the recession worse. Don't kill an anemic economy by cutting governemnt spending. Because, at that point, the deficit will get a LOT worse due to no tax revenue and far more people needing government services.
3. I'm not going to argue with you on this one.
4. Trillions of dollars of wealth werte lost when the housing bubble burst. Either the Fed "counterfeits" more money (which is a patently absurd statement, as the Fed's main job is to control the money supply) and equalizes the money supply, or it watches a depression that kills all economic growth.
5. Not going to argue with you.
And the economy went from a bank panic in 1929 to a full-fledged Depression in 1933, with the economy in free fall.
Without MASSIVE governemtn intervention, we would have ended up like many other coutnries at the time.
In full revolution.
Did it prolong the depression? I don't see how letting the free market fix itself could possibly have worked. The only thing that FIXED the economy was World War II, the biggest Keynesian experiment the world has ever seen. And it worked, too.
If you want the central bank of the US to not be held by PRIVATE HANDS, then the government needs to take it over. As a PUBLIC, government owned bank, your major objection to it would be gone, right?
No, of course not. The Invisible Hand takes care of everything.
Because, without a central bank, then speculators will have the ability to mess around with the value of the US dollar. Those speculators would include foreign governments. Governments that don't necessarily like us.
I guess some are posted to underscore irony in some of the policies and proposals that are out there, but there's no grand unifying theme to the criticism, and as such, it is largely incoherent. You don't really elevate the discourse if you gloss over the competing interests behind some of these things. I may not agree with the conservative economists on many things, but at least i know they have some school of thought informing their opinions. I'm not sure what the school of thought is here other than to undermine the field of Economics as a whole.
Or maybe I should just lighten up.
I believe we cannot do the most obvious because there are people advocating against these positions such that we end up with a mish-mash of counterproductive policies. Debt restructuring and /or forgiveness seems obvious, but banks will not allow it they would rather own worthless, foreclosed homes, just for example.
Once you pick a side, ideology or religion, you can't see reality. Advocates never see facts.
My micro-bio is really pointing out: the divisions of party and ideology are vague, not consistent. For example, conservatives favor limited government, liberals favor more government for people's own good. So which should be against Fed law protecting innocent unborn while forcing women to give birth? Conservatives, right?
No person believes all the required beliefs of any ideology, party or religion. They go along with a bunch due to dogma and punishment of heretics. I get called troll here regularly for expressing my real views. As if Progressives know the correct view on everything, no different than an Inquisition.
TBTF has to be taken into RECEIVERSHIP/BANKRUPTCY RE-ORGANIZATION so the TRILLIONS in worthless impossible-to-pay "debt assets" are writtne off before a real recovery can take hold.
That means a new world post-Wall Street/City of London.