Economics E.O Style

[BillChaffey]

Maybe our Democrat controlled Senate is taking Dave Ramsey's daily advise. Don't pay the credit card company that fronted the money you have already spent. Wait for a couple of years. Then offer half or less of what you owe. The mans a true Christian.

 

[EnglishLady]

Sue,
I think you saw the same thing I watched a bit of. But the explanation that is given is so far off that I can't stop laughing.

First thing is the economist on the panel subscribe to the Keynesian theory that government has to be involved with the economy to make it work - that is a very simplistic view of it (explained a bit more in the next paragraph). It worked to a small point during the depression when we had few choices and a lot of pressure for the government to be involved fixing what they messed up.

The fundamental idea is that the government will borrow the money to fund the projects to get the economy stable during the business cycle. When times are good, they pay the debt down with the revenue created by the taxes they imposed on the system but when times are bad, they borrow to stabilize the economy through programs that "stimulate" the economy - one program is construction projects, like roads D*ms and so on. The cycle continues in hopes that the more activity from the economy in the private sector will produce more tax revenue and hence pay down the debt.

WHAT it didn't take in account was the expansion of the social programs like Social Security which in itself would have been alright if left alone. Back in the early 60's Johnson needed something and with the tax rate being cut, he was convinced that ending poverty as we knew it was the right step, which gave us Medicare. He used the revenue projections for 1967 to justify the move to spend so much money they had at the time but by 1970, Social Security and the Great Society programs were bankrupt. Medicare killed the country, not Social Security but because Social Security has more programs where money is used, it has to be examined and changed drastically.

The second thing is that left or right, liberal or conservative, Barry or Bush, it doesn't frickn' matter because all political power that we have is seated in the big arena fight ring to fight to stay in power and the Keynesian economics that they hold so close to their hearts keeps them in power - it is a rather sick way of politics in our country. The funniest group in the political arena are the fiscal conservatives who wants to cut spending but than refuses to entertain the idea of eliminating social security and Medicare. They want to compromise while not forcing the issue of actual cuts. Everything proposed from them are band-aid approaches to the problem.

The third thing and very important is WE ARE NOT BROKE. What we have is a confidence problem tied with a spending problem. We should demand as citizens a cut across the board of 10% this year with no spending increases (which by the way is an automatic thing with our federal budget and has to be stopped) and again another 10% next year - no exceptions except military spending for soldiers. Everything, I MEAN everything should get a cut of 10%. The real investors in our country, the people, do not have confidence in the dollar and this is reflected by the inflated price of gold and the low interest rate on the fed's loans to the banks. Our treasuries, the vehicle that funds our budget, is giving 3% while the fed loans out money at .5% - it is backwards.

The fourth thing is many, including Williams, know what it takes and he among a few verbally express it. BUT on the other hand, within the community of economist, they won't go against the grain in their profession because of a fear of being an outcast. I spoken to a few and they say "off the record" a completely different thing than they publish. I trust their opinion because they have yet to be wrong.

Fifth, our government needs to cut spending first. Job growth can't be done with government involvement or "investments" into the economy but just the opposite, the less government, the more jobs. Case in point is the auto companies, the two domestic based companies got bailed out, but the jobs were reduced and no compromise was met with either the price of the products or the quality of the product which was two big problems. Instead a natural disaster affected their competition and they gained market share. It wasn't the government's involvement but outside forces that saved GM and Chrysler. Without government intervention, the job loses would have been the same regardless what the government and unions said because the assets and product lines had more value than the company as a whole.

Sixth, read this carefully;

BIG BUSINESS DOES NOT CREATE JOBS.

SMALL BUSINESS CREATES JOBS.

A fundamental mistake has been all the while that our country runs on GM and Chrysler, and their suppliers which is so far from the truth, it has to be repeated.

ON TOP of all of this, the corporations like say Pfizer, pay no FEDERAL taxes on their profits, even though they pay state taxes, the federal taxes are passed on to the consumer. So a small business would have an advantage if there is no federal taxes they need to worry about and this equates into jobs.

I hope that clears it up for you.

All I can tell you Greg is it was terrestrial TV and I came in part way.

If it was the same program, then you would have heard that they were talking smaller firms but with Corporates taking the lead.

IMO - Any Business big or small that expands creates jobs.

I didn't hear any mention (from when I started watching) that any G'ment bail outs were required, needed or talked about.

 

[greg334]

They all agreed that unemployment had to be first and foremost resolved ……

Employment can't solve the problem. There needs to be changes in the structure of the government with regulations and taxes first.

Obvious next agreement Business’ have to expand and thus take on employee’s.

The problem with that goes back to the issue of employment. The key cause of not hiring is the uncertainty and lack of confidence with the government to stay out of the way of business.

Suggestions from panelists were,
raising inflation,

Deflation we have had is going away but ther present incomes won't support a higher inflation and as the fed has already proven, they can't control the economy enough to stop inflation from rising beyond what they consider needed. This can lead to hyperinflation which will trash the dollar very fast and again forcing a loss of confidence world wide.

Corporates getting involved in infrastructure,

This already happens with a lot of public sector projects but if we want to say ... make high speed passenger rail to happen, the incentive is not there for private involvement.

Make exports more attractive

Attractive to whom?

The fallacy that we prop up our exports and in turn will produce jobs is just that - a fallacy. The truth is our export market is dead right now and we have a surplus of labor who is willing to work cheaply. If you understand the import/export global cycle, you would understand that exports won't do it. AND on top of all of that, if we make private investments into manufacturing for exports, the efficiency within the factory doesn't allow the employment that many would expect - we have great output but not with the man/hours needed to produce.

All Panelists agreed, now is not the time to try and reduce the deficit (in the short term).

See this is where the Kensyian tought process fails their argument. It isn't the deficiet but the debt, it is the problem of overspending and a lack of confidence that causes all these problems. The sad fact is we don't have too many people alive from the depression (who actually LIVED in the depression as adults) so we have no connection to the history and hence no idea what a lack of confidence means.

Without money going into the economy how can the economy grow thus reducing unemployment?

It isn't the money that is needed, it is the government getting out of the way.

Reducing unemployment benefits the economy – Housing markets starts moving, white goods start moving, people start spending again.

Housing is dying because we became dependent on it as an indicator of how well the economy is doing when we shouldn't have.

How do you stimulate the Economy and reduce the deficit?

How?

Here is how.

1 - increase the interest rates that the banks pay.

2 - restructure the tax system to reduce the size of the regulations, making it into a near flat tax or better yet going to the Fair Tax which alone will remove the "taxed at the source of labor". ALSO attempt to fix the tax rates to for 10 years.

3 - cut spending by 10% across the board, removing the annual increases by freezing them based on the previous year's budget line.

4 - cut next years budget by 10% across the board.

5 - repeal the laws for the fed not being overseen by congress. Repeal the charter for Freddie and Fannie, bring mortgages into the private sector again, revise the banking accounting laws to a more realistic level and start breaking up some of the companies "too large to fail"

6 - defund the following departments - EPA, DoE, Education and consolidate the DoA and other departments where redundancy is obvious.

Everything there has a message that we are serious about our country to the rest of the world. It isn't that we need to worry about what they think but we want to have their money come here to invest in our country and our labor - not the government.

 

[EnglishLady]

Attractive to whom?

The fallacy that we prop up our exports and in turn will produce jobs is just that - a fallacy. The truth is our export market is dead right now and we have a surplus of labor who is willing to work cheaply. If you understand the import/export global cycle, you would understand that exports won't do it. AND on top of all of that, if we make private investments into manufacturing for exports, the efficiency within the factory doesn't allow the employment that many would expect - we have great output but not with the man/hours needed to produce.

I thought that I had read a thread or post on EO not so long back that exports were doing well so I decided to do a little research .........

This from Trading Economics ....

" United States ExportsUnited States exports were worth 172.7 Billions USD in March of 2011. United States is the most significant nation in the world when it comes to international trade. For decades, it has led the world in imports while simultaneously remaining as one of the top three exporters of the world. Main exports are: machinery and equipment, industrial supplies, non-auto consumer goods, motor vehicles and parts, aircraft and parts, food, feed and beverages. Main export partners are: Canada, European Union, Mexico, China and Japan. "

United States Exports

 

[copdsux]

I still don't understand how the folks, on this forum, including me, can come on here day after day and purport to tell the folks in Washington how to run the country. They(members of Congress) were all elected fair and square, so they make policy for the country.

Right now, the R's control the House, and D's control the Senate. I believe that scenario leads to how most of us run our lives: Compromise.

Thanks for listening.

 

[AMonger]

Now WHY the the unemployment thingee take money? big business creates jobs NOT government...

And corporate pay for infrasture? well that is just plain stupid......the US corporate tax rate is one of the highest in the world....and throw in HC taxes to come.....we won't know where they relocated till the dust settles from the stampede to get out of here.....

Not only that, but one of the biggest factors holding back greater employment is the presence of a crazy man in the White House. CEOs don't know what this crazy leftist is apt to do next. Nothing is off the table when you're as far left as Obama. No telling what he could do, so nobody's willing to take the risk of expansion until somebody a little more stable and less opposed to private enterprise comes along.

 

[AMonger]

Hmmm not sure I'm following you there Dennis


The discussion last night was about kick starting the economy

Those economists were on the show because they can be relied upon to spout acceptable propaganda. If they didn't spout the party line, they wouldn't have been invited.

 

[AMonger]

I still don't understand how the folks, on this forum, including me, can come on here day after day and purport to tell the folks in Washington how to run the country. They(members of Congress) were all elected fair and square, so they make policy for the country.

Right now, the R's control the House, and D's control the Senate. I believe that scenario leads to how most of us run our lives: Compromise.

Thanks for listening.

1) it's OUR country and they are our employees;

2) the economy isn't something to be managed. The economy is the collective decisions of people who spend their money on what seems best to them. ANY tinkering with it inescapably leads to disaster;

3) most importantly, bring elected doesn't give anyone special wisdom. There's no injection you get, no special helmet of knowledge that you put on once elected that gives you any special wisdom. As a group, congress is LESS qualified to run so much as a lemonade stand than the average person, let alone a country. A successful expediter is far more qualified.

Hundreds of elected officials bear most of the responsibility for our current situation, but the lion's share goes to just a few. Are these guys so brilliant that we should just shut up and watch them steer the ship into the rocks?

 

[Poorboy]

Seems to me that Obumma should have addressed the economy and Unemployment "before" spending all that time and money on his bull crap health care!

 

[greg334]

This from Trading Economics ....

" United States ExportsUnited States exports were worth 172.7 Billions USD in March of 2011. United States is the most significant nation in the world when it comes to international trade. For decades, it has led the world in imports while simultaneously remaining as one of the top three exporters of the world. Main exports are: machinery and equipment, industrial supplies, non-auto consumer goods, motor vehicles and parts, aircraft and parts, food, feed and beverages. Main export partners are: Canada, European Union, Mexico, China and Japan. "

That is all true but as I said the fallacy that we prop up our exports and in turn will produce jobs is just that - a fallacy.

What I mean is explained later on, the jobs don't come because we have been catching up to production and when we do, we don't use old technology nor do we use old tools. Our efficiency has increased a lot in the past ten years and this is shown by the output numbers in the manufacturing sector when compared to the unemployment numbers from that sector.

Give you one example.

A guy sets up a little shop in his garage. He has a mill and a lathe. He also has a nice 10'X10' CNC machine. He has a computer with free design and manufacturing software. He learns how to use all of them and in turn produces parts for a small manufacturer in town and produces some thing he can sell direct to consumers. He replaced 15 people that would normally do the engineering, prototype, drafting, running of the machines, sales and the accounting. His sales which may be small by shop standards for his product line is still making him a lot of money from the parts he makes for the manufacturer in his town and his little widget he sells on line is sold to people in China and Korea. So he is considered an exporter at this point, and contributing to the billions we export. He employs himself and that's it. So imagine that this is not just one isolated thing but allover the place with the capital to invest in better equipment and software while reducing the labor cost. By the way, what I described is true, the guys sales is about $900k a year and he may hire ... two people to expand.

 

[chefdennis]

greg wrote:

By the way, what I described is true, the guys sales is about $900k a year and he may hire ... two people to expand.

"To Expand"...thats when and why you create jobs..corp or businesses do not hire people that are not productive...the day of production on "speculation" is over (well except in the auto industry, and that should change too) no business hires people to do nothing or just to get a tax credit from the government when they do not have the need for the product that a new hire would need to produce to justify the wage that he would need to be paid...

Businesses are not in business to create jobs, they are in business to fill a need based on demand, if the demand exceeds what the current staff can fill, then they hire (a job has been created by the demand for the product) but without the demand, there is no need or reason to hire....

 

[greg334]

But you noticed I didn't say that small business are not the job creator, I countered Sue's point that big business is creating jobs which it isn't.

In his case, he may expand but likely not. It is because of the unconformable feeling within the state and the need to hedge against the possibilities that the big businesses in the state will be helped and not the small ones.

Here is another fallacy about exports.

We all know that they are talking about a second bridge for Canada, with the BS that the governor and county leaders are spreading - not one part if true or approaching the truth. They say that it will help the area because it will bring jobs from the stuff coming into Canada. They also add that the exports going through this port will bring jobs to the area. NOT one of these people got the idea that the hold up on the bridge is not with the ability of the bridge to handle the traffic but because of customs - which we all know. The other thing is we don't have the manufacturing in the area but a lot of stuff comes from out of state (or Canada) where it is cheaper to produce, so the jobs that are expected won't happen.

 

[chefdennis]

I understand what you are saying greg (and i appreciate HOW you are saying it in this thread, not the condesending sarcastic know it all attitude, just a good informative conversation) my whole point is that no business creates jobs unless there is a demand for their service or products and the demand exceeds what their current level of production by the current level of employees can handle...

If there is no dmeand for the product or service, a tax credit from the government is not going to make it worth adding or creating a job that is not productive...employers do not create jobs, the market does....

 

[EnglishLady]

I understand what you are saying greg (and i appreciate HOW you are saying it in this thread, not the condesending sarcastic know it all attitude, just a good informative conversation) my whole point is that no business creates jobs unless there is a demand for their service or products and the demand exceeds what their current level of production by the current level of employees can handle...

If there is no dmeand for the product or service, a tax credit from the government is not going to make it worth adding or creating a job that is not productive...employers do not create jobs, the market does....

and so the vicious circle continues .......

If the masses aren't buying there is no use for the "product" hence a business shrinks and does not expand and does not take on new employee's ......

This is why, I think, the Panel were saying that unemployment has to be solved first.



As always IMO

 

[Camper]

Both arguments, both the Keynesian(demand-side) approach and the supply-side approach have been debated an untold number of times. Both approaches while good in theory have failed in practice in their own ways.

Contrary to conventional wisdom, recessions aren't a bad thing. They're simply corrections brought about by periods of irrational exuberance. Sure, they're painful to those affected by it but they are unfortunately a necessary part/stage of the business cycle. By trying to step in and end them, the government only forestalls the inevitable by allowing the excesses in the system to continue unchecked, necessitating the need for a bigger correction down the road.

Case in point: the Recession of the early 90's came about after a decade-long boom in the economy which resulted in overly inflated housing and stock markets. Rather than let the business cycle run it's course, Alan Greenspan and the Fed primed the pump with easy money and propped up the economy, given us the 90's boom. The early 2000's recession came about after the 90s boom and the residual excesses from the 80s bullmarket..What did Greenspan do again: You guessed it, easy money(artificially low interest rates and debasement of the currency) which created another leg up on the housing bubble. In essence, the recessions of the early 90's and early 2000's were much shorter and milder than they should have been due to meddling into the cycle. hence, the creation of an even bigger economic bubble which lead to a bigger correction(the current recession) than would otherwise have been necessary.

The moral of the story: the two major parties in Washington have presented nothing more than two ways of screwing up the business cycle.

 

[BillChaffey]

Where is the initiative for a person to come off unemployment, when the President and Democratic Senate. Keep raising the amount of months a person can sit at home and collect.

 

[chefdennis]

Camper wrote:

The moral of the story: the two major parties in Washington have presented nothing more than two ways of screwing up the business cycle.

a few things, washington politicians have no business "presenting anything"..and all they need to do is get out of the way of businesses and they will expand the economy...and if washington would realize that they have regulated and taxed jobs out of the country and back off (a major reason why businesses are sitting on money and not hiring), we just might see manufacuturing jobs come back here..even though the US is still the world leader in manufacturing jobs, we are quickly lossing that edge to, with thanks to obama and gov regulations and corp taxes....which some even think barry is doing deliberately...(over regulating and taxing)

 

[Camper]

Chefdennis wrote:



a few things, washington politicians have no business "presenting anything"..and all they need to do is get out of the way of businesses and they will expand the economy

My point, exacly...



Posted with my Droid EO Forum App

 

[greg334]

This is why, I think, the Panel were saying that unemployment has to be solved first.

But Sue, the employment end of it matter less when the strength of the dollar and an issue of how we lessen our debt matters more. IF we didn't have the debt, we wouldn't have the issues we have today, which is inflation in energy and food. Coupled with the fact that as Dennis pointed out somewhat (slight correction ahead), we lead the world in manufacturing output (not employment) and in order to return to the employment in the manufacturing sector, we must also return to a lesser degree of efficiency.

What is missed here is as we focus on manufacturing as a way out, the product or goods that are exported is part of the equation for revenue production - we failed again to understand how to leverage our R&D side of things while also failing to figure out how to attract investors into this country via any and all incentives that are not giveaways.

The biggest obstacle is ambiguity in the country, the second is how we are being taxed and how complex the system is - it is not all about the rates. If we had a tax system, like the fair tax where we didn't tax labor and where the rate was fixed for 10 to 20 years, can you imagine how well the economy would be doing?

AND as Camper pointed out about the supply side and demand side economic theory, they don't actually work all that well. Some seem to think that we need to return to a gold standard but this brings us back to the problem as Camper mentioned recessions being an adjustment for irrational exuberance which in part is caused by being on the gold standard.

In addition to this, Obama's policies are actually an extension of previous administration's policies. Many come to beleive that it is a leftist position that we have higher taxes but as Reagan proved, lowering the tax rates while closing off write offs produced more revenue than we previously had. Kennedy proposed the same thing but his plan was partially implemented.

 

[chefdennis]

Greg wrote:

we lead the world in manufacturing output (not employment) and in order to return to the employment in the manufacturing sector, we must also return to a lesser degree of efficiency.

Exactly!! Yes we still lead in manufacturing, but we are doing it with less people..machines do do what people use to do...and they do it MORE EFFICICENT!.. So to "create more jobs and employ more people, manufactures are suppose to GO BACKWARDS!?!? Please....businesses are in business to make money for themselves and their investors...no other reason...they are not in business to create jobs, if they could do what they do without employees they would and to a certain degree they do and that is how they stay in business...businesses are not charities, has long as they can maintain a certain profitablity, they do what they do, when they can't they make cuts to maintain their profits and that is done in alot of ways and part of it can be by replacing people with machines to do the same job and do it more cost effectively....employees are a necessity as long as they can maintain their productivity and profitability..when they can, they are gone...it really is that simple.

Sue, think of it like this, John doesn't put more trucks on unless there is more freight on a ongoing basis to to make adding more truck a good decision...he doesn't put trucks on to have them sitting...