Economic Post Mortem
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My background is business and I get a bit ticked when I read something like this:
And that's what business types have a hard time understanding because in the business world money equals income. If those failed green projects that Obama tried had not been attempted and if we had simply decided to not increase the deficit, that would not have been a savings for the macro economy. Those saved dollars would have leaked from the income flow.
Way back in college I noticed that business majors did fine in micro, but they seemed to have a hell of a time getting macro. Business types just don't have the intuition for macro because they tend to think in terms of stock variables...that might be why so many of them also had problems with calculus. Anyway, I see this same confusion with Romney. I'm sure he's a smart and sharp businessman. And he might have excellent CEO skils (and that's important in a President); but the guy is clearly at sea when it comes to macroeconomics. Clueless beyond belief.Back awhile, I wrote this:
THURSDAY, OCTOBER 13, 2005Excessive Spending - The Next RecessionI'm going out on a limb now, but I think the 4th Quarter of 2005 will be viewed, retrospectively, as the beginning of a new recession in the U.S.
For those of you who did not read my post of September 16, check it out.
Here are some economic stories from Reuters:
The Fed is getting ready to pounce on the economy. Why? Well, apparently it sees that the economy is running out of energy (pun intended), so it is time to put on the economic brakes by raising interests rates further. For those of you with short-term memory loss, go back to 2000 when the Fed raised the prime to 8.5% for our own good. Alan G. did admit to a slight error in judgment on that action. Unfortunately, the Fed seems to have a short-term memory loss, but the logic is still consistent: when the economy is hit with natural disasters, energy market aberrations, job losses and currency manipulation by competitors, then it is time to cripple the economy by tightening the money supply and raising interest rates.
The official recognition of the "recession" was about 3 years later... well after the malaise hit the economy. The "macro" numbers showed things were pretty good. The "macro" numbers failed to recognize what millions of businesses and individuals were seeing... the U.S. was in big trouble. I'll admit that I used the term "recession" in a way that would make a macro-economist cringe... but in a way that most individuals and businessmen would understand.
Macroeconomics is the belief that looking at large amounts of aggregated data can tell you what you need to know about the economy... like this:
February 27, 2008
Federal Reserve Chairman Ben Bernanke went to Capitol Hill today to provide Congress with an update on the struggling US economy. The Fed forecast he summarized called for very slow growth in 2008, but no recession; and that was the good news.
The Feds forecast says that growth could be as low a 1.3 percent for all of 2008, down sharply from its July forecast. And with the economy expected to pick up only in the second half of the year, that could mean almost no growth at all in the first six months.
Chairman Bernanke acknowledged the problem in the second paragraph of his testimony. "The economic situation has become distinctly less favorable since our July report," said the chairman.Now the song, 4 years later, is that all we have to do is spend money on green projects to make sure "income" doesn't fall. My thoughts:
So, you say that it doesn't matter that the government dumped money into "investments" that had no real business cases. What was the opportunity cost? Come on, don't tell me there was no opportunity cost because the government can spend as much as it wants. Chickens come home to roost.
At the same time that the "don't need no business case" geniuses [like Frank and Dodds who liked the idea of everyone owning a home even if they couldn't afford it because all that spending was good stuff] were dumping money down a series of black holes, the government was waging its own Don Quixote wars on carbon vapor. The goal? Why to protect us from plant food, of course. Better to kill the most efficient sources of energy and thousands of jobs along with it than to risk having to run the air conditioners a few more days.
So, our macro data experts have urged spending and our macro data bureaucrats have responded with policies and investments that have guaranteed a far less cost effective source of energy. Gee, if you pay more per KW, that means the economy will be booming. Think of all of that spending.
If Ben [big economics] Bernanke couldn't see the writing on the wall and all of that recent government spending has simply increased government debt with very little to show for it, why it's just those stupid business types who don't understand how good things are? ...
Tell me, what besides the imaginary 4.2 million jobs saved has all of that spending achieved? Housing is still a mess, unemployment is still over 8% and millions have stopped being counted because they are discouraged, and government debt will soon be beyond servicing when interest rates do increase... the time implication of current spending.
Government spending that simply expands dependency on government [Nancy Pelosi's more people on unemployment is good for the economy] while the government attacks those who create jobs and incomes is a recipe for... well, the Obama administration and Keynesian economics. In your words: "clueless beyond belief."
UPDATE:
With regard to the impact of government spending, three professions from the Harvard Business School [uh, oh... not economists] came to the following conclusion [click on image for larger view]: