keynes stimulus+trade deficit=bankrupt

Keynsian economic policy states, and I am summarizing, 'Economies can be guided and/or controlled by governments and any government spending is good for the economy' On the surface this seems like a decent premise. Government controls tariffs, international trade agreements, interstate/province trade, monetary policy, banking and finance regulation and tax policy. The government is also not for profit, so when an economy is tanking the government can inject massive spending to help support private enterprise until the private economy recovers.

Any spending should work. Welfare injects capital into the retail and utility sectors. Food programs can augment agriculture. Housing projects can prop up real estate and building. Infrastructure can support heavy machinery, engineering, steel, mining and construction. You get the picture. But why does it not seem to work. Japan spent vast amounts in the 1990's and are still suffering. We spent large amounts in 2000-now and it does not seem to budge the economy in any great direction. The only time it seemed to work was under Reagan in the 1980's.

The reason this system does not work is globalization of markets and commodities. Something that was configured differently during Keynes hayday. I will explain after a quick example. Think about high payout slot machines and why the house always ends up with the majority of the money. A slot machine paying out 95% should return 95% of the bets to the gamblers over time. Which seems on the surface like a gambler loses only 5% of there monies. The problem is the gambler is losing every time money is put in the machine. Even over time the gambler loses. on average, 5% of the money bet. 100 dollars becomes 95 after 1 bet. 95 becomes 90.25 and so on, until nothing is left.

During Keyens time, raw resources were extracted from outside markets and brought into the domestic market for manufacture of finished goods. These goods were then returned to outside markets for sale or domestic sale. This scenario yielded a net gain in trade. As foreign markets demand grew and labor, health, tax, energy, etc. costs escalated in the industrialized economies, the means of production were shifted closer to the resource base. Finished products were now being shipped to inside the economy which begins a trade deficit. As globalization continues through consolidation and mergers, more components in a once encapsulated economy become outside the domestic economy. Now, money spent by the government does not necessarily stay inside the domestic economy with the same velocity.

This is the crux of why Keynesian economics has not worked in recent times. Government dollars that were once spent 5 to 10 times inside the domestic economy may be spent only once, before being exported to outside the economy. So, why did it work for Reagan? Reagan increased spending on defense. Most defense spending, especially R&D and advanced weapon systems, was spent entirely in the U.S. during the 1980's. Today, manufacture can happen overseas on certain systems, but most of the R&D and advanced weapons are still fully developed in the U.S. It is hidden protectionism that no other country would protest. The technical engineers and designers of the 1980's were mainly U.S. citizens or nationals. Today, there is export of pay as more foreign nationals work in defense.

Infrastructure spending does not build an economy, either. The engineering firm may be international, the steal is produced overseas and many components of the heavy machinery is from international markets. The high velocity dollars spent on infrastructure are contained in the workers salary and the ancillary services built on their pay. However, the money spent on food and household items by the workers soon leaves the domestic economy as well. Textiles and household items are mainly made overseas and depending on the season, many food items come from international agriculture.

It is like playing the slots. Every time the government injects stimulus into the economy, there is less left in the economy. As our government is running huge deficits, the money being injected is from other sources besides the treasury. We are in effect using a line of credit in a casino and putting all back into the slot machine. As we do this over and again, the line of credit seizes and the domestic economy becomes bankrupt.

With little manufacturing base or resource base to fuel a 'homegrown' economy, we can find ourselves slipping into the second or third world. The government already can not satisfy the social contract and commitments made to social security and medicare in the future. How can we possibly satisfy these commitments while we continue down the road of Keynes. We need to find a sustainable economy that is in equilibrium with our means of production.

As a nation, we are addicted to consumption. We purchase for the thrill or to fulfill an emotion more then to fulfill a true need. As a nation we need to reduce conspicuous consumption. 2/3 of our economy is from consumptive spending. Judging by sales of automobiles and durable goods, this consumption is on small insignificant low quality junk that will need to be thrown away and replaced by more cheap junk. To move the economy to sustainability, we need to consume and produce quality goods that can be fixed or kept for many years. The economy won't show record growth but it will be balanced without showing record declines either. We also need to ease away from credit spending and move to a cash society. Back to scrimping and saving to make big ticket purchases. The effects won't be felt domestically too much from moving back to cash. Manufacturing is done externally and the banks and credit markets are already at historic lows. Overtime, using these strategies toward household spending will bring our economy back and pride in buying quality goods made by skilled labor-not sweatshops.

The green elephant attacks again

What is a green economy????

I was thinking about what is a green job and green economy.

I found a definition of a green job in Time magazine: http://www.time.com/time/health/article/0,8599,1809506,00.html

Basically, any job that pays a 'livable' wage and contributes to helping the environment. This could be a solar energy engineer or an administrative assistant in a 'green' building. So, the definition can be anything the definer cares to define or undefinable. Sounds like a lot of double speak. I am a watershed hydrologist in a climate studies group. Is my job green? We waste a a lot of electricity on large individual offices, many computers, servers, printers, wall mounted display screens, etc. Are workspace is not green. My wage is not so great, borderline livable. My research is building a predictive model based on historical observations to run climate and land use change scenarios into the future. The goal is not to put forward any particular plan but to try and predict results. By the definition in Time my job is not green, but if I was a union light bulb changer, making a change from incandescent lights to cf lights- that might be green. Just more liberal double speak to separate more classes of people to feel disadvantage and victimized.

What is a green economy? 3 books or ideas really started the green movement. Rachel Carson's Silent Spring, Paul R. Ehrlich's Population Bomb and Donella H. Meadows, Dennis L. Meadows, Jørgen Randers, and William W. Behrens paper The Limits to Growth.

The Limits to Growth an effort to model simple world systems through time to run different scenarios to predict outcomes. The main drivers were economic growth, population growth, natural resource depletion, pollution mitigation, etc. The outcomes pointed to social and economic collapse after population growth, resource depletion and runaway pollution. The conclusions were made in 1972. Many critics of the findings have pointed to the fact that the scenarios have not held true to the time lines predicted. Many factors are involved in the failed accuracy. Themain factors are the growth rate in fully industrialized countries has either become stable or negative. Population is 1 of the main drivers in this model and in real world outcomes. The other main misconception was the true scarcity or abundance of natural resources. As prices have inflated over time and technology has become less expensive per unit, the extraction of mineral resources has produced profits in low percentage ores that at the time of the first writing of Limits were not viable resources.

The one conclusion that has not been contested over time is that economies that grow ad infinitum are not sustainable and yield a resource scarcity and runaway pollution followed by population collapse and a lowered standard of living. So, a green economy could be said to be a 0 growth or slightly contracting economy. Then we have it- we were promised the hope a green economy and now we have a green economy. So why do we need a 'stimu-aint' bill, if we have green economy.

I am confused. Please, somebody help explain.

The green elephant wuz here

Crying About T.A.R.P.

I had to detour from the environment for this one.

All the whining needs to stop. To begin with, this was a terrible idea thought up by Paulson and Bernake. Bernake is known for his theory on asymmetric information in lending to small business during financial disturbance, which lends him to believe that the banks are being taken advantage of by borrowers and the banks are the cornerstone of financial recovery.

We have a policy that was rushed through the 'Hill' based on a theory that is owned by one of the priciple creators of the bailout.

What would have happened without a bailout. The argument was the worst financial disaster ever. Markets are governed by psychology and temeperment of investors and actors in the market. When the ex-prez, the tresaury and all the chicken littles on wallstreet started crying the sky is fallen-the sky fell. Whenever a hint of good news or positive outlook is put forward the markets rebound.

Back to T.A.R.P.-> if the institutions in trouble were allowed to fail what would happen. The other institutions with inflated balance sheets and sketchy accounting would tumble also. The result would be, regional banks that were in strong financial positions would acquire the assets and other companies would buy the debt at a discount to cover losses of bad loans. The regionals flush with new deposits would increase lending in their regions. These banks tend to be the banks that finance small business and home purchases.

T.A.R.P. did exactly the opposite. All banks were forced or coerced to take the money whether the institution was solvent or not to, hide the institutions actually in trouble from runs on deposits and stock/bond devaluation. This is the 'Indy Mac' rule. Indy Mac was financially solvent until, I believe it was Schumer from New York, sent a letter to leaders about the trouble in a regional bank with large business in California. Indy Mac went out of business based on a lie and speculation.

So, when Wells, which is 1 of the few financially strong institutions, wants to operate as normal with vacations and bonuses the press and new_prez get their panties in a bunch because they took T.A.R.P. money. Well, let the banks that did not need or want the T.A.R.P. money give it back and let the weak banks fail or shut-up about T.A.R.P.

Maybe next time, before passing a massive increase in socialism, read the bill before voting!!!!!!! If you don't read the bill and vote for it anyway, then shut your mouths and stop whining or admit your absolute lack of competence and judgement in fulfilling your duties to your constituents.

I have not read the full report on the executive pay cap, but I am sure it will be a whole lot of talk with no teeth and unenforced. This is the presidency of talk the talk but walk a different direction. Luckily most people live on sound bites and forget the actual actions taken like no lobbyist in the white house and paying taxes(I thought Biden said 'be patriotic pay your taxes', so I guess Geithner, Daschle, etc. are unpatriotic????).

The Green Elephant wuz here

back to blue crabs

I have to revisit this subject and add a point. I have been thinking about how I and many others identified the problems with the Chesapeake Blue crab harvest 20 years ago and this past year the bloviating governors of Maryland, O'Mally, and Virginia, Kaine, act like they did some great bit of oversight in acting to change harvest regulations. At least they did act, which is more then can be said about the last 20 years of democrats and republican governors.

This lapse of oversight and management is exactly why big government does not work. Nobody has authority to act. Fifty commissions and hearings have to be held before an action committee is convened to discuss possible policy solutions that will not be acted on if it's an election year and the particular lobbies are well endowed.

All these bureaucracies and bureaucrats get in the way of effective government. Streamline the upper management and middle management and empower people to make decisions and introduce policy changes that get real support based on the authors years of service and dedication-not the biggest pocket book.