Obama's Wealth Destruction
President Obama is under the impression that history owes him $1 trillion right now to spend on whatever he wants. His language is strident and full of irritation that anyone would question his right to live out his personal dream of being Franklin Roosevelt to George Bush's Hoover. This, he says, is what the election was all about. FULL ARTICLE
Comments (27)
Bruce Koerber
February 8, 2009
Equilibriating Forces Will Re-Orient America!
When there is an imbalance there are problems and roadblocks. The equilibrating forces that operate in the world eventually rectify this imbalance.
We see it very easily when we look at the economic equilibrium forces that are about to wash away the unConstitutional coup in America with the great market forces. But what is one of the reasons why this is so important?
In this time in history we perceive that there is one superpower among all the other nations. Apart from it being a mirage, due mainly to monetary hegemony since the dollar is the world reserve currency, it is an imbalance and an impediment to peace and prosperity for all the people around the globe.
Who is naïve enough to think that the sole superpower will sit down as an equal with the other nations to conclude a binding treaty that would make the world peaceful? Yet that is what is supposed to happen, that is the destiny. The whole world is one home and all of its people are part of one family. A contract guaranteeing the security of each nation against the aggression from other nations is urgently necessary in these days, days when suspicion and belligerence are prevalent.
The unConstitutional coup, which is trying to make America something other than the Constitutional Republic that was modeled along the lines of classical liberalism principles, is lustfully trying to secure and expand its superpower status by military means and by the means of economic terrorism.
But it cannot withstand the equilibrating force of the economy which will expose the counterfeiting of Keynesian quackery as a fraud by the market forces reducing the value of the dollar to zero! Then an impoverished nation thrown into chaos by the ego-driven interventionists will not be able to stand before the other nations of the world and declare itself a superpower without being scorned and ridiculed and called to account.
The hope of all classical liberals around the world is that America will return to its roots and as a Constitutional Republic become a society that exemplifies liberty and justice. To accomplish this the lies of the goodness of ’democracy’ needs, once and for all, to be exposed, since democracy is just a communistic type of plebiscite. What made America great were the principles of classical liberalism not the political abuses of democratic schemes.
Once all nations are on a level playing field then the calling of a conclave for all nations to enter into a binding agreement to bring about peace and security can proceed.
Published: February 9, 2009 8:45 AM
A.Viirlaid
There is no chance that the current regime will back off their misguided approach.
With Nobel Laureate Paul Krugman leading the charge against "underspending" and saying the economic system's capacity is underutilized, we will see MORE money thrown at the downturn, not less.
The various stimuli won’t work, but that won’t matter. In my opinion people like Krugman will try to convince the politicians to print (or borrow) even more money. And what happens if the spending doesn’t materially help? People who are promoting these ‘solutions’ can just say that not ENOUGH stimulus was used. Reminds me of Global Warming --- there is no way to falsify the hypothesis.
Argentina and Zimbabwe can be held up as past examples of the futility of solving downturns with more cash, but these cases will be dismissed by the socialist mindset as an ‘ideological’ right-wing academic argument, even though this is pure classical economic liberal thinking.
More cash may lead to more spending, as measured in nominal terms --- but not in real terms. There is no free lunch. People will hunker down, no matter what the FED and the Federal Government do.
Where has Economic Central Planning ever worked? Did Soviet-style 5-year plans and Mao’s Great Leaps Forward ever deliver wellbeing to the people? These attempts are futile, backward, ill-conceived, unproductive, disruptive, and wealth-destroying. The economy is drowning in debt and we are pouring more debt in on the heads of taxpayers and consumers. That will give us oxygen? That will keep us from choking?
America will rise eventually in spite of grievously harmful policies --- the only hope is that the Establishment’s Economic Academia will perhaps for once recognize the harm they will have done.
I thought I heard Paul Krugman say on CNN this weekend when debating with George Wills on CNN words to the effect that, what? --- are we still blaming FDR for the prolongation of the Great Depression?
What the Political Establishment’s logic appears to be, if I understand it, is that we will go only go into debt DEEPLY and QUICKLY and TEMPORARILY to jumpstart the economy. Then once the economy is rolling again, we will be in a better position to pay back those newly-incurred debts. Our tax revenues will magically rise on their own due to the induced higher level of economic turnover. Some kind of voodooist-thinking is taking control here. We are all being turned into zombies.
In other words, the bang will be worth the buck because we will stimulate ourselves back into prosperity and good times. The electroshock treatment will force sense back into us so as to get us to get back to that good old-time debt-based consumption.
Just listen to that argument --- if you could do that with your own life you would be called an entrepreneur; but can the government EVER fulfill the role of an entrepreneur? Does it even KNOW how to leverage debt into wealth?
Does the government get up at 3AM to see to business? Does the government put in 18-hour days? Does the government ever create anything? Does the government count its pennies? Does the government have to present a Business Case to its financiers? Does the government have to provide milestone reports as to its accomplishments? Or performance reports against its promised deliverables?
This current slowdown has to work itself out. The system is behaving in a way that indicates it is trying to repair itself. People should save. That is what this type of balance sheet recession is all about.
But if we work against that tendency, we prolong the agony as Mr. Rockwell correctly points out IMO.
The promise of President Obama was an administration free of ideology. One of hope. One of pragmatism. One of smart approaches and intelligent design.
What we are learning I guess is that one person’s pragmatism is another person’s ideology. We are getting a crash course in what rushing to tragedy is all about.
Published: February 9, 2009 10:07 AM
David Spellman
After reading Rahm Emanuel's book "The Plan," I have the impression that the current administration recognizes that FDR fell short of expectations, but that they believe it was because he did not get to fully implement his plan. Consequently, the goal is to do an even more thorough job this time around. In other words, the New Deal was not a big enough deal and this time we will get the full package.
So do not look for any change of heart or intelligent thinking from our government leaders. Deep in their hearts they sincerely believe you are wrong and that they can succeed with socialism. And even when it all comes crashing down, they will blame the common man for failing to support their plans and selfishly pursuing his own interests. All the excuses for socialist failure reduce to blaming ordinary people for not working to promote the good of society.
Totalitarians can never be dissuaded from believing that if everyone would just whole-heartedly support them, we would live happily ever after. In a way, they are right--if we willingly were subsumed into the Statist organism, authoritarian could work. The problem is that every person was born with a brain and exercises free will for their own benefit. Until mind control is perfected, we all have a mind of our own and those who would be king are doomed to disappointment.
Published: February 9, 2009 12:14 PM
billwald
>You cannot make a country rich by looting taxpayers and paying people to pound nails into siding at public schools!
Yes, we can. The Queen "is" GB, the captain of a war ship "is" the ship, and the rich people in the US "are" the US. Been that way at least since the end of Lincoln's War.
Rockwell confuses "money" and "wealth." Has the land disappeared? Are there fewer calories in a bushel of corn? Does the coal burn cooler? Have the trees stopped growing?
"Money" is only an accounting convenience. It no longer is an asset. And when it was an asset, half of all Americans lived in poverty.
Admit it. It was a great game. We, the working class, had a wonderful time, the best time and place since Adam got kicked out of the Garden. The game is over. The world is reverting to the pre-WW1 norm of 70% working poor, dirt poor, and poverty stricken poor.
As in the bad, bad, old, old days, the only opportunity to climb the food chain will be for the skilled laborers to again create powerful guilds. You paper pushers, key punchers, and shoe salesmen . . . dime a dozen.
Published: February 9, 2009 12:37 PM
Francisco Torres
Billwald,
Yes, we can. The Queen "is" GB, the captain of a war ship "is" the ship, and the rich people in the US "are" the US. Been that way at least since the end of Lincoln's War.
You're starting from a false premise - "we" are not the US and rich people are individuals, just like you or me. And even assuming for the sake of argument that the premise is true, looting one side to give to the other side is like taking money from my wallet and putting it in my back pocket and say that I created wealth.
Rockwell confuses "money" and "wealth." Has the land disappeared? Are there fewer calories in a bushel of corn? Does the coal burn cooler? Have the trees stopped growing?
No, he is not, billwald. Money is used to represent previous productive activities - I made a cake, and someone exchanged his money for my cake, but that someone had to make something else to get that money, and so on. Money represents wealth. What the government does is to take this representation of wealth and spend it on some other thing - no different than what a robber does after making you part with your wallet or purse, and I am willing to bet you will not be better off knowing the robber used the money to nail siding on a school.
"Money" is only an accounting convenience. It no longer is an asset. And when it was an asset, half of all Americans lived in poverty.
You're now confusing things. Money will always be a commodity or treated as a commodity, subject to the law of supply and demand - always. The difference is that fiat money can be printed ad infinitum, whereas Commodity money (gold, silver) has to be mined at expense. it is not true that people were poor because of commodity money - people were poor because there was not enough stuff for them to obtain, it had to be produced first. People were not lacking in cars because of commodity money, there were no cars yet, and people were not lacking in washing machines because of gold or silver - there were no washing machines available, they had to be produced first.
You first have to understand the structure of capital and the concept of Money to understand why you are confusing cause and effect.
As in the bad, bad, old, old days, the only opportunity to climb the food chain will be for the skilled laborers to again create powerful guilds.
Yeah, well, that would only usher a new era of DIY - guilds worked because of a lack of a good distribution system for information; after one made its appearance (which we call now "books") they did away with guilds, since then any yokel could learn a trade. Unless you are advocating for licensing laws, which already exist, and make the cost of cutting your hair higher than it should be, making you even poorer . . . Are you advocating for licensing laws?
Published: February 9, 2009 2:18 PM
RickC
You have to understand how this type thinks. They actually believe they are the chosen ones and their job is to lead us, the great unwashed, to utopia, whether we want to go or not. And they hold us in contempt for having the audacity to think we should be able to decide for ourselves how we live and work. It really is just that simple.
And that mindset hasn't changed in over a century. Rex Tugwell, socialist/utopian, agricultural specialist who headed the RA as part of FDR's "Brain Trust", when looking back at the failure of the New Deal to bring about heaven on earth, wrote that the cause of the failure was the Constitution. In other words, those nagging little freedoms, protected by law, got in the way of his and his comrades' grand plans.
This is why I have the same reaction every time I read some self-designated intellectual decrying the anti-intellectualism of Americans. I just point out that if earlier generations of Americans had followed the "great" intellectuals of the 20th Century we too would have had death camps, massive famines, gulags (we actually had our own slightly more humane one - Japanese internment camps) forced sterilizations, euthanasia for the elderly, mentally retarded and other "undesirables, and soul numbing poverty.
So here we are. Obama and his gang, despite all the rhetoric of change, are really just a re-hash of the same old, 20th Century statist philosophies.
Published: February 9, 2009 2:19 PM
DD
Good Job there, Francisco Torres, for the response to Billwald. I could barely even make sense out of that post, let alone respond to it.
Published: February 9, 2009 4:02 PM
Robert Brager
They're going ahead with it. Conventional means aren't going to stop them.
If information is to be our weapon - and in the end, it's the only effective one we'll have - Tom Wood's made a fine first effort but it's all uphill from here. You've made a great appeal, Lew. Unfortunately, it's addressed to people who shall never read it.
I think that the prospects are dismal, frankly. I mean, what do we next - to protect ourselves? The sensible things - secession, for example - are mad by the standards of the conventional wisdom and the "civics lessons" of the past seventy-five years that you've rightly excoriated. The times may be perfect for an Austrian School advent - and it may well happen. But the times are as perilous as they are full of promise.
Published: February 9, 2009 6:46 PM
A.Viirlaid
Mr. Llewellyn H. Rockwell, Jr. has some of his most significant words IMO when he writes the following paragraph in his essay.
"It just goes to show you that the presidency is something like a drug.
It makes people lose all connection to reality.
Part of the reality that Obama needs to recognize is that the New Deal was a calamity far worse than the initial market downturn that began it.
He needs to stop basing his policies on dumbed-down civics texts versions of events and consider the economic logic."
I think Mr. Rockwell is on to something here. It is something worth exploring in some depth, aside from just his (Rockwell’s) New Deal misgivings.
We may need professionals to help us see what the more significant psychological stresses are that President Barack Obama is currently operating under (in the first 100 days, if you like). By 'significant' I mean the ones that are the MOST crucial to understand so as to avoid making the wrong decisions within what might be referred to as the 'fog of the Presidency'.
If we, or more importantly, Obama's team can understand these considerations, then the new administration might yet forge a great Presidency. This they could do, by not trying the MEET current popular expectations, but as Mr. Rockwell (indirectly) indicates, by IGNORING those expectations.
First of all we know Obama is intelligent and he has stamina. He outlasted his opponents and he is young and adaptable.
As an aside we can credit him with breaking the most important color barrier that remained in America. All Americans but most especially visible minorities can be proud and hold him up as an example to their children of what every American can accomplish.
So Mr. Obama as President Obama has already given America a great gift by being elected.
But unless he can rise above the false expectations he is being driven to meet and the stresses those expectations create, he will fail in almost every other aspect of his Presidency, IMO. That, I believe, is Mr. Rockwell's most compelling underlying thesis here. And it is this gift from Mr. Rockwell that I hope he can somehow deliver into President Obama's hands and mind. As Mr. Rockwell says "the hardest work to do here is intellectual."
Presidential Management is not necessarily good when it gives people instant gratification, but when it delivers long-lasting benefits. Politicians are often in danger of confusing the two objectives. Ill-chosen tactics can make people seemingly satisfied in the short run only to deliver misery to them in the long run.
Mr. Rockwell's most germane issue is that politics often does indeed act like a drug. Like a person caught on camera in front of a microphone for the first time, we may say and do what we think is the norm. So can one in President’s Obama’s position be imprisoned by the behavior expected of him, by the expected response, by the expected strategy --- which can lead to disastrous results.
No matter how intelligent, such a person can, like a hostage, succumb to something similar to the Stockholm syndrome. Call it the Like-Me Syndrome. A person in such a situation can be steered into unthinking behavior that is primarily motivated by conformation to "what-I-should-be-seen-to-be-doing" not to "what-I-should-be-doing."
So while teams of advisors can help, a great president needs to occasionally rise above the team consensus and even to take contradictory positions to what would normally be the political imperative.
This may be asking too much. How can you turn down most of your advisors, most of the mainstream economists, and most of the people who elected you?
And yet that is what Mr. Rockwell is asking President Obama to do (along with some of his readers).
If Mr. Llewellyn H. Rockwell can somehow construct a gift box consisting of that kind of psychological advice (commensurate with being able to ignore the consensus) along with the economic advice he has already packaged, then he truly would have given the young president a priceless gift.
Published: February 9, 2009 7:11 PM
Bennet Cecil
President Obama is transferring prosperity from successful Americans to the government. Instead of letting failed banks and businesses go bankrupt he is forcing us to purchase them. The shareholders and employees of those failed businesses will not lose. Instead, Americans who were more careful where they worked and invested will be forced to take the loss. Goods and services will eventually cost more, because more phony dollars will be printed.
President Obama will likely secure a second term as did president Bush. Americans do not like to change presidents in the middle of a crisis. President Obama will not lose substantial wealth as he transfers the wealth of savers, investors and workers to government and the nonproductive units of our economy. He is already wealthy with his books. He can give expensive lectures like president Clinton after completing his presidency. He can accept private equity deals worth tens of millions.
The best way to thwart our government gone mad is by paying off personal debts, convert savings to hard assets and do all that is legally possible to reduce tax liabilities. Americans who work hard and expand businesses are merely growing the government.
Published: February 9, 2009 9:08 PM
seine
Bennet Cecil, well said.
Talk, write letter and support the rational voices, but stock your personal lifeboat.
Published: February 9, 2009 11:16 PM
Richard T.
“You cannot make a country rich by looting taxpayers and paying people to pound nails into siding at public schools! These activities amount to capital consumption. They are not sources of investment. You can say that they are stupid tasks or wonderful tasks, but it is not a matter of ideology as to whether such public projects will make us all wealthier. They will not. They drain the sources of wealth from society. They represent a cost, not a blessing.”
Hahahahah
So I suppose that the interstate highway system, which was the single most important public works project that jump-started our modern economic phenomena, was a drain and a cost?
So I suppose that Hover Dam, the single factor that enabled the rising of vast cities in the Southwest part of the country, was “not a source of investment”?
So I suppose that investing in education infrastructure, perhaps the most important factor in educating a new generation of skilled human capital, which is the single most important factor in economic advancement, is a drain on the sources of wealth?
Hahahaha
I suppose you folks think a private factory making, Oh, say, Donald Duck toys, would be a much better investment in “sources of wealth for society”
HeHe
You guys slay me.
Published: February 11, 2009 2:14 PM
A.Viirlaid
To Richard T. some comments...
The projects you list are all worthy and did indeed pay back more than their initial investments. Over time, that is.
However they did very little good during the 1930-s to help the desperate people back then. The highway system came later anyway.
The payoff for such grand schemes inevitably comes years later.
The same goes for any education investment.
There is nothing wrong with your list but it is the timing of the payback that is the problem.
If we have to wait the same length of time for the payoffs from the current federal stimulus plan, as we would have to wait for the payback from the items in your list, it would only be our children or their children who could hope to be the beneficiaries.
Not that there is anything wrong with that. But one question would be, if these are such good investments, why were we not undertaking them during the "good times"? Why not fix infrastructure when there is no shortage of money?
So again, nothing wrong with your list, but your list or such similar projects won't help get us out of the current mess --- I think that is the point of the essay. Unless you are willing to wait 25 years.
So, SIMILAR "stimulus" plans, if they are not pork, can indeed "pay back their initial investments" EVENTUALLY --- no one is arguing otherwise here.
But it is the nature of the current plan and the expectations it raises, that is the concern here. People are bound to be disappointed --- especially those who are waiting for such stimuli to make a difference to their own personal welfare today or at least relatively soon.
Even in the long run, to make an investment pay off, from something like the interstate highway initiative, you have to find a real investment that can "earn its own way" --- not a phony one.
If you build a "bridge to nowhere" or a "highway to nowhere" it ain't gonna help. It only helps the few people and companies that build it (like in Japan in the 1990-s), but it doesn't materially help society nor help any larger number of people. That, as the writer suggests, is what capital and wealth destruction consist of.
Another point is that we have already shot ourselves in the economic foot.
So this consideration for you to dwell upon --- if you are familiar with the essays at this site, you will know that the main point of the "Austrian mindset" is that we, as a Western society (and world), never had to economically shoot ourselves in the first place. There was a way to avoid the injuries we have done to our economic and social life. But we chose to go ahead and injure ourselves regardless of knowing that the gun was loaded.
IMO the writer is trying to say, perhaps even plead, LET'S NOT DO FURTHER UNNECESSARY INJURY TO OURSELVES AND TO THE WORLD!!!!!!!
The injury from the artificial stimulation in the 1920-s (which we repeated in the 2000-s) was made gangrenous in the 1930-s.
We are about to repeat that 1930-s mistake. How? By "stimulating" with printed money, by choking the recovery that will happen on its own, by interfering with the private sector's and economy's ability to heal itself, by not withdrawing the huge monetary injections made by the Federal Reserve, and in general just reacting to every new development in this crisis with some new ad-hoc 'solution'.
We may yet get war and other tragedies from this original debacle --- and those would be the hardships only from the injury we already have.
But we can make it a lot worse. Just wait for the world-improvers to get going with their 'solutions'.
Our authorities --- unlike the good doctor Jekyll who would have subscribed to the motto "first, healer, do no harm" --- are instead like a reflexive Mr. Hyde who does nothing but harm.
A Mr. Hyde who subscribes to what our writer says are "myths and lies".
A Mr. Hyde who believes in that old "civic lie that now suddenly appears after festering for decades".
Let’s face it --- this is no NEW New Deal --- it is an Old Deal, and will have the same old disastrous ramifications.
There were lessons learned from the Great Depression that were valuable. These include not letting honest savers lose their savings in bank failures. These include not raising taxes. These include not letting the money supply contract deeply and precipitously.
But those lessons most certainly did not suggest that the Federal Reserve INCREASE money supply by trillions. They did not include lessons that suggest that government-financed stimuli work.
After all if you confiscate wealth from working people and from still-productive sectors and put it "to work" pounding nails, do you really think you will generate more wealth?
The money comes from somewhere, and those productive sectors the government confiscates that money from, will suffer in proportion to what is taken. It doesn't matter if the money is taken as taxes, or debt (which is future taxes), or in printed money (which is future inflation, a hidden, unlegislated tax on everyone) --- the end result is the same:
CONFISCATION of wealth destroys wealth --- it does not INCREASE wealth.
Indeed if these last 'lessons' were the correct lessons to have been learned from the Great Depression, Zimbabwe today would be heaven on Earth.
Go CONFISCATION GO!!!!!!
Published: February 11, 2009 6:50 PM
Richard T.
Well, I am glad that you agree with me that there is actual payback for public infrastructure projects. But then you turn around and seem to say that because it will take a long time to pay them off, they should not be considered. Well duh, of course they take a long time to pay back, just as any private enterprise capital spending takes a long time to pay back. No difference.
Every time you or anyone in this country gets up, you make use of infrastructure paid for over long time periods. You use the water and sewer system when you get up. You drive to work on a vast system of public roads. You interact constantly with a whole apparatus the protects you, fights fires for you, researches public health for you, educates your children, I could go on and on.
Public spending is absolutely necessary, and we have a built-up backlog of public needs in power distribution , transportation, education and other areas that we just have to address.
I realize you school of thought is concerned about inflation. But what you do not seem to realize is that all this money creation is just a small portion of the money destruction that has happened. Many many more trillion dollars have disappeared in the last year that is ever being contemplated to be created. This bugaboo of inflation fears is just not realistic.
Published: February 12, 2009 3:12 PM
crosson
Everytime someone touts public infrastructure I always like to compare the project to my dinner, or well being.
Is that shiny white stone brick in my State Capital worth more then my dinner? Is it publicly beneficial to starve them for justification of a new building for the sake of dwindling un-employment? What happens when there are no farmers left because they all have been employed by the state.
How can a government have the foresight to know where to allocate it's massive resources in these government infrastructure projects?
How large will these projects become and how much labor/capitol will be stripped from the private enterprises use? How many fewer farmers will their be, how many fewer cars will be produced, how much smaller will our power as consumers be if the government controls the direction of the majority of the labor in our country? Wasn't the great depression and the drastic results of the new deal enough proof for the commies to give up on it?
Public infrastructure projects are not beneficial. You starve the economy to pay for these programs. You can't enjoy looking at your state capital if your dead from starvation. What good does building more schools do when people can't eat? What good does paying them money do if no one produces anything?
The point may be extreme but it's a valid point. Arbitrarily building random things does not produce more food, goods, materials, resources. It just makes for great historical landmark points down the road.
How can I feel ethical if someones taxes halfway across the country pay for a park down the street for my house. Likewise then what are my taxes paying for? Why even bother with property taxes and fuel taxes?
Published: February 12, 2009 5:09 PM
A.Viirlaid
Thank you to both Richard T. and crosson.
For crosson, I have to include some links here to view if he has not already seen these particular monuments. For what were they built? To satisfy man's ego? To make-work?
I would hazard that most people would see these as 'monumental waste'. I think these examples complement crosson's post above.
I would think that crosson and we all are glad not to live in countries that host such 'monumental' buildings. Especially since they came at the cost of inducing famine in the population.
A lot of people died, and were not just inconvenienced by going without dinner, to see these edifices get built. I see crosson's point. For us, it might not mean famine, but it would surely hurt living standards.
And some of these 'grand' edifices are not yet finished to this day.
For Nicolae Ceauşescu's palace (for the glory of Romanian socialism?) please see
http://www.metacafe.com/watch/864064//
http://www.webphoto.ro/english/places/ceausescu-palace.php
For the Ryugyong Hotel in central Pyongyang (for the glory of the People’s Republic of North Korea?) please see
http://www.forbes.com/global/2008/1027/059.html
For Enver Hoxha’s pillboxes (for his paranoia?) please see
http://en.wikipedia.org/wiki/Enver_Hoxha
http://www.nationmaster.com/encyclopedia/Enver-Hoxha
I quote from Wikipedia:
"Hoxha's legacy also included a complex of 750,000 one-man concrete bunkers across a country of 3 million inhabitants, to act as look-outs and gun emplacements along with chemical weapons."
Sure our governments have done stupid things with our money as well. We’ve done stupid things with our own money.
But when private money builds a concert hall, I don't really care. I do care if someone uses my money to build something, in a similar vein to crosson. Unless of course I make a voluntary contribution.
We cannot justify waste if it does no good. We should not continue doing stupid things because we have done them in the past.
Published: February 12, 2009 6:35 PM
A.Viirlaid
To Richard T. Just 2 rebuttal points.
First point is that the Hoover Dam turned out to be great, but if we were to make that type of initiative part of our infrastructure efforts in today’s stimulus package, who would it help? Not you and not me, unless we were among the relatively few who would work on such a project. It might help people living in 2030.
As I said, there is no positive effect from such initiatives to counter the economic dilemma we’re facing in THIS decade. How long can we wait? Because you will have to wait a heck of a lot LONGER with such public efforts, as compared to letting people’s own economic choices act upon the 'malaise' we are in.
I believe crosson has a valid point --- there had better be some payback in any such project. And I am assuming that the river behind such a dam does not run dry before payback is realized. If these things are not certain (and they never are) then I would have to agree with crosson --- let private entrepreneurs take the investment risk.
So why make such 'investments' now? Especially when we could pay off everyone's mortgage with the gargantuan sums we are now talking about? (That last point was someone else's but it is germane as a counterexample.)
My main point is that if our goal is to 'fix' the economy within the next 7 years or so, the outlined efforts are going to fall woefully short. In fact they will harm, not help. They will lengthen the time to recovery, not shorten it.
The second point concerns your strange comment about money disappearing.
Money doesn't get destroyed unless you burn it. Or nowadays perhaps delete it electronically from someone's account.
Because a bunch of financial assets valued at say 50 trillion dollars 6 months ago are today valued at 24 trillion dollars does not mean 26 trillion dollars of money has disappeared.
Yes, wealth has disappeared, but not money.
If your house was valued at 400 thousand dollars half a year ago and is now valued at 200 thousand it does not follow there are 200 thousand fewer dollars in existence as a result of the drop in your home's valuation.
Of course it does mean that if you exchange your house today FOR dollars, you will get 200 thousand less today than you would have 6 months ago.
Imagine if tomorrow you wake up and there are somehow twice the dollars in everyone’s pocket (or bank account) that there are today when you go to sleep.
Let's just say Ben Bernanke's magical mystery helicopter dropped loads of money on us overnight like some beneficent tooth fairy.
What has changed? The extant dollars are now twice as numerous as before.
The supply of goods and services has not changed. Bernanke's helicopter cannot auto-magically change those things overnight. They take REAL work and planning and real invested resources. They take TIME.
So guess what? Everything now costs twice what it did before you went to sleep.
That's all.
There is no free lunch. And I have to disagree with you --- there is one heck of a bugaboo waiting around the corner.
So, get ready for inflation, because while it won't happen as quickly as in our little fairytale scenario, you had better not bet on your quiescent bugaboo sleeping forever.
Published: February 12, 2009 7:15 PM
Kitty Antonik Wakfer
Note to Moderator: This is 2nd send; first ~10pm 2/12/09. Notice of receipt seen upon submitting. ?Not showing
A Viirlaid, I think you have made some excellent points in your first comment (which unfortunately were not picked up by others). I have long thought that the vast majority of people supporting the concept of government have the sincere conviction that rule by others is truly necessary, for without it they are convinced that there would be chaos - a loss of society as a whole. And similarly the majority of USers appear, by many recent polls, to be in agreement with President Obama's plans to "stimulate the economy" by "adding jobs", not realizing that this is for the most part simply make-work, funded by money taken from everyone, including themselves (directly or via inflation). I think that they, as well as Obama, are acting out of a sincere belief that what each of them is saying is what is truly needed to be done to keep the US from falling into what they expect would be complete ruin, if the proposed bailouts and spending measures were not taken and NOW.
The problem then is how to motivate people with strongly held beliefs (and I use the word "beliefs" purposely to signify ideas held as valid, but for which much historical evidence and sound economic theory exists that they are incorrect).
Continuing to write only for the already convinced does not appear to me to be the way. And when writing where the majority of other writers and readers hold views supportive of continued, and often even more government involvement in people's lives (at least in some areas), I try to always remember that these people are (for the most part) very sincerely wanting a better society for themselves, their families, friends and every other peaceful member of society. This last is the point I was making when I commented at the QuickLink another writer at OpEdNews.com (OEN) had made as the description for the link to this article by Lew Rockwell; the description appeared on the newsletter for that site, sent to all members, as well as on the site index itself. (OEN is labeled as a "progressive" website, but its owner has the commendable practice of printing anything that is well written; for the most part I think the team of editors there do a very reasonable job.) I was in the process of submitting a QuickLink of my own for Lew's article, when the OEN system informed me that the URL already existed for a link. My introduction was to be much different - something very similar to what I put as my first comment at that Quick Link. Unfortunately, because the description that was published is fairly negative of Obama, many of those who support him probably read no further and dismissed the link entirely. The referenced QuickLink at OEN for Lew's article: http://www.opednews.com/populum/link.php?id=82376
I would like to see more evidence in their writings by serious liberty-promoters, that they truly understand that the vast majority who do not agree with the viability of a society without rule by others, or even with only little of it, are not evil-minded or moronic. If little movement in that direction occurs, there will continue to be large numbers of individuals, singly and in groups, who are merely shouting (and the Internet equivalent) at each other with no real communication of ideas for the purpose of solving serious problems. Shouting with fingers pointed will go nowhere towards correcting the economic and social mess in the world.
Published: February 13, 2009 10:42 PM
A. Viirlaid
Thank you very much to Kitty Antonik Wakfer.
As a Canadian, I do not have as much of my personality, emotional being, and sense of identity at stake when it comes to what I notice to be strident arguing and name-calling in the blogs south of our common border. (Not to suggest those blogs don't exist everywhere and not to suggest I cannot be a little strident too.)
I have little personal emotional stake in Democrat versus Republican etc. But we Canadians have a HUGE stake in America's well-being because our own is so intimately tied to hers.
I agree with your observations. And it does pain me to see good people in the U.S. arguing 'past each other'.
We lose the chance to all learn something. I try to learn all the time. I try to be civil.
So when we make our "winning of the argument" seemingly a matter of our own life and death, a matter of our own sense of psychological well-being, we do jeopardize, as you say, this wonderful chance to gain and to give understanding of the universe we all share.
Such written exchanges could all potentially be exchanges of gifts --- we should always strive for that.
Even historians well after some historical event will argue from left or right, from religious or moral conviction, from the post of elderly and worldly observer or from the fieriness of youth. Maybe that is the way it should be because a firmly-held belief and one that is mightily defended is usually one that is close to the heart.
And maybe, over time, we can gain the most understanding from those strongly-held positions that are most at odds, that most test us, and that are usually most important to many of us --- because these can also be the ones, that once resolved, lead to a betterment for all of us. That at least, is the hope.
My worry and yours too, is that all of this heated discussion is not currently getting us anywhere.
When it becomes "my President against yours", and my (view of) country against your (view of) country, then it resolves little or nothing.
Not every discussion point of disagreement need be interpreted as a slight against my President, or my party.
President Obama hopefully will, as he wants to, achieve some bipartisanship before he leaves office. My guess is that he will have to. My guess is that things will get very serious and will require him to be a kind of 'wartime leader'.
My worry is that we currently rush to legislation before we know the issues and before we have been able to bring all the best ideas forward. That can lead to harmful waste and dead-end problem solving. It will require us to revisit the whole problem all over again in less than a year. It becomes one ad-hoc 'solution' after another.
But it is worse that just not yet knowing what the best course of action should be.
As you say, when we argue from the point of view that my Democratic party came up with these proposals and we won the election and your guys (Republicans) didn't contribute and did not want to be involved, then the whole process becomes so divisive it is self-defeating.
Isn't it the idea that we are ALL trying to help ALL of America? That we are trying to help all the unemployed --- not just Democrat unemployed, or Republican unemployed, but all unemployed, and all who are struggling?
Sure the Democrats can argue that the Republicans spent money like drunken sailors during the last 8 years and the Republicans can say that you did not even ask us for our ideas, and so on. The blame game never seems to end. Maybe, to highlight the issue to the politicians, we should invent a board game called The Blame Game and then send it to all of our elected officials (including to ours in Canada).
When the chalice is so poisoned, that you work against each other with such vehemence, you all risk hurting yourselves, you risk hurting your home, your America.
Published: February 14, 2009 5:30 PM
Richard T.
Mr. Viilaid,
Technically you are right, money does continue to exist once created. But there are really two kinds of money, capital and consumption money.
Say you have saved up 100k to invest. You buy a bond from a company. Now you have a bond, and the company has two entries on its balance sheet, the 100k as an asset, and an offsetting liability to pay you back you money at the end of the term.
Next, the company spends the money in the normal course of business. However, the business does not make a profit, and so goes bankrupt. The result being that the asset you carry on your balance sheet is worthless, and the liability the company caries is extinguished.
So what is left? True, the 100k that the company spent is still out there swirling through the economy, going from one person the to next being spent. But what has disappeared is money of the first type, capital. It is money that has stopped flowing through the economy in the form of spending, and has been reserved by someone in order to invest that has disappeared in such great quantities. This is why the first bail-out went to re-capitalize the banks, because their capital had disappeared. Granted, the money is still out there, but apparently its velocity has been much reduced because as of yet, prices appear to be headed lower, not higher.
It remains to be seen if the new stimulus will appreciably raises prices. It depends on whether people spend it or save it, and if they spend it, with what velocity. I know you folks have your own definition of inflation and deflation, but to the economy as a whole, what is visible is the general level of prices, and that depends on more than just the total quantity of money, it depends on spending vs. saving, and the velocity of money through the economy.
It also remains to be seen if these future stimulus amounts will over-stimulate and cause a large increases in prices. I would tend to think that if some of it goes into home mortgage write-down, that could be seen as an increase in capital. That leaves all the rest of the tax decreases and infrastructure spending. My feeling is that there has been such a shock to the financial psychic of the nation that money pumped into the economy will be saved at a much greater rate than in the past. I know for sure that will be true for me.
Published: February 16, 2009 10:42 AM
A.Viirlaid
Hi Richard T.
You raise some interesting issues.
Using an accounting approach to either a company, an individual, or to an entire national economy (versus say another national economy) can lead to some interesting insights.
Let's assume (as you outlined) we originally had 100,000 DR of cash assets with an offsetting credit balance in our Equity of 100,000. We bought the 100K bond, reduced our cash by the 100,000 and recorded the asset as an invested bond at 100,000 DR. Our assets equal our Equity.
As you say, when one of our personal investments goes to zero, we write off that asset, or investment. So say this was initially a bond for 100,000 from your example, as I indicated above.
So we credit that asset on our Balance Sheet --- that is, write it off to zero.
The offsetting debit is an 'Expense' on our Income Statement for the period during which this loss happened.
Assuming we had no other income or expenses, our Income Statement would show a net negative income of 100,000. This is considered a debit, since it is a real expense.
To close the Income Statement to the Balance Sheet we would 'credit' our Income Sheet entry with 100,000 and enter the offsetting debit to our Equity or Retained Earnings, reducing that to zero.
I assumed for simplicity that the original Equity on our Balance Sheet was carried as 100,000 as a credit balance as outlined earlier.
If this was our only investment (and our only wealth) our assets are now down to zero as is our Equity. We have nothing.
Of course our spending would now be inhibited. That much is clear. And you have said as much.
We need to replenish our cash by working, earning, and saving. That is what this Balance Sheet Recession is all about, and I could not agree with you more. I have used black and white figures in my example. Most people's situations are more blended than this one.
I will pull in my spending horns. I will cocoon as far as more spending goes. I have been injured. This is the 'wealth-effect' in reverse. This is the 'poverty-effect'. And it will cycle through the economy. In fact, for people whose houses have depreciated in value (some to a tune of more than 100,000 dollars) this 'poverty-effect' is very real, as economists like to point out.
And the more people like me save, the less we keep other people employed. We, in effect, cause more unemployment. But we had little say in the matter that created our 'losses'. We were played.
But where we probably disagree is what will happen next. No stimulus is likely to help me. If the government gives every person like me the amount I have lost (the 100,000) I will initially feel like I am back to square one. But that magic money will soon lose its magic, as everyone starts to spend their money.
Now there is my new money and the old money I lost in my investment, BOTH out there chasing goods and services. Maybe it won't chase the goods and services right away (some as you say will be more likely to be squirreled away than before --- the 'propensity to spend' will go down and the 'proclivity to save' will go up).
But that money will sooner or later start to reflect in a reassessment of what goods and services are worth. That is all I meant about stimulus packages created with newly-printed money. That new money is eventually competing with the old money.
I agree with you in that the effects are likely to show up more slowly than they would in an economy that was booming, one, where, as you say, the money velocity is relative high. Sure money will circulate more slowly in a fatally-damaged economy.
So I think we agree overall, it is just a matter of where we draw our conclusions.
My take on this is that what we have now is the 'new normal'. It is not today's situation that is abnormal. What were abnormal were the housing bubble and other associated bubbles (financial, auto, export-import: just look at the Baltic Dry Index's behavior).
These were all artificially created by the overall Credit Bubble created by Central Banks, our faulty money system, and many other factors. Let's just say we had the petal to the metal for an awfully long time.
When the money system finally rebels or fails for lack of a better word, it does suddenly and in a sense, permanently. There is no easy boat back to the other shore. Our bridges are down; our boat has sprung many leaks. It's a time of dénouement, a fin de siècle, a final purging of the previous excesses.
This is what the Austrian School has always suggested. You make your own bed and sleep in it. There is no 'solution' other than time. Society can help to mitigate the personal pain of many, but it cannot quickly revive the economy it has so grievously damaged.
The Equity on your Balance Sheet can be interpreted as the difference between your assets and liabilities. Hopefully it is a positive amount. That is, that your assets exceed your liabilities.
If so, you have a certain amount of 'order' in your financial life. You can afford to buy food, settle your accounts, and live.
This is what physicists call being entropically in control of your environment. You can employ resources and bring some of the rest of the world’s resources to bear on solving your personal problems. You can, as most life does most of the time, 'fight the tendency to increasing entropy'.
Someone who has negative equity (Equity is also known as Retained Earnings) cannot easily bring those same resources to bear on solving their own life's problems. They don't control the energy and food and shelter and other things that make one's life biologically and psychologically ordered and good. They are not in your enviable position. They are not masters of their own house, even if they have a house. They are not masters of their future.
The same is true of countries and companies. When our national Equity is negative or being compromised by being reduced very quickly, we lose the ability to control our societal life, our future, our environment. We cannot easily bring order to our national life. We are threatened by disorder, communal strife, unemployment, matrimonial and societal breakdown, war, disease, pestilence, and so on.
Of course, we don't live in the middle ages and our Western societies are still relatively wealthy and healthy. But they have been hurt. They need repair and compense.
They need composure and a realignment of where our efforts go next. No government can centrally plan where the road should take us.
Don't send Hillary Clinton to China to beg the Chinese to buy more of our debt. That doesn't make sense. The sooner we get on our own feet, the sooner we can walk.
So it is not likely that a plague will attack us without our being able to respond effectively. But we should not be in denial; we have injured ourselves. Our ability to respond is damaged.
We need to reassess and reacquire assets and equity. Without those we will remain hurt. No government plan can more effectively help us heal than the paths that we would choose for ourselves. But please don't assume that those reacquired assets and equity need be the same as what we strove for in days past. This may be a new age.
I imagine that a lot of the successes over the next decade will come from home-grown enterprises in small towns. There may be some great opportunities in downsizing.
Where one giant chocolate factory closed down there will arise a half-dozen more nimble endeavors.
The economy has been damaged like a Nile Delta that is no longer replenished because of the 1965 High Aswan dam which sequesters the annual flow of 100 million tons of silt and mud, which in other times would have rebuilt the parts washed away by the Mediterranean, and then some.
We have to find other ways to replenish our economy, through small enterprises, through local ingenuity. It may be that we have 'economies' not an 'economy'.
The dam that seems to be holding us back may indeed instead uncover for us such opportunities that we did not have before. This may be a new ecosystem. We may be going back to the future.
Think of new small technologies, local power sources, of new ways of making that chocolate. Don't assume it will come from China or France. It is not that globalization is dead. But it may be that it cannot solve all our needs. Can we rely on toothpaste made in India? Wine from France? That day may be gone.
We may have to make our clothes locally.
I saw a show about the end of suburbia. Yeah so what?
Peak Oil? Again I say, so what?
They will happen and guess what? We will adapt.
I see a day when Yankee ingenuity will overcome the lack of cheap oil and mass approaches to solving all of our problems. The grass will grow wherever there is sun and water.
It may be that this is an opportunity handed to us to use new thinking, new technologies, new craftsmanship, new ways to come together.
Necessity is the mother of invention.
Let the East have the mass manufacturing. We can do better with virtual companies, and speciality manufacturing. If we are really post-industrial, let's do our second, new Industrial Revolution in a way that renews us and grows hope for the future.
Let’s build real equity in our happiness and our health.
Published: February 24, 2009 7:21 PM
ehmoran
Well they'll get it when the Govt takes control of American's 401ks. Just heard that discussion on TV.
I believe the Gov't has borrowed enough of my money to promote their special interests. Taking control of 401ks will be another pot of money Washington can exploit, like our other retirement program: Social Security.
They promise 3% to 4% interest on 401k returns. That isn't even Real Inflation.
Published: February 24, 2009 7:37 PM
A.Viirlaid
I have to thank you Richard T. Your post made me look at the issues from a different angle.
I also read another post today by George Reisman at the Mises site. It has the title of:
Economic Recovery Requires Capital Accumulation, Not Government 'Stimulus Packages'
After rereading your contribution and Mr. Reisman's, I wrote an entry at his blog.
Please allow me to partially reproduce my entry to Mr. Reisman's blog here in response to you, since your post helped my thinking to evolve.
One of the sentences that you, Richard T., wrote above, especially caught my eye.
"This is why the first bail-out went to re-capitalize the banks, because their capital had disappeared."
I started to think of how that capital had disappeared and what the FED might do about that loss.
My reevaluation has to do with how the Federal Reserve seems to look at the world through an Accounting Model that says Equity equals Assets minus Liabilities. I believe the FED is trying to boost Assets and reduce Liabilities, at least in some nominal way with Assets and some real way with Liabilities.
Much like the capital reserves of banks have been impaired; the equity of entire nations has been diminished, not to speak of individual companies and people over the last few years, as Richard T. wrote.
Two sets of questions should be asked and answered before we can judge the probable efficacy of Government (taxpayer-funded) bailouts and FED (Federal Reserve / Central Bank money-printing) monetary injections.
Namely, is the situation abnormal TODAY or was the situation abnormal PRIOR to the bursting of the bubble? Or can they both be considered abnormal?
Are bailouts and fiat money injections likely to help or hinder? What are the objectives of such supposedly reformative actions? What are we trying to socially-engineer our way (back) to or out of? If we know, can we identify how to get the money injections to the right places to make the 'right' things happen? Is it always a simple matter of making things 'happen' with fiat money? Is there such a thing as A Simple Plan that will work here?
The equity of a nation (or company) can be hurt if the value of assets falls without a corresponding drop in its liabilities. As I mentioned in my last entry, this can lead to a lot of misery. Our Central Banks think that the have A Simple Plan to fix things. More on that later.
When Argentina has debts denominated in, to it, foreign currencies, it has to raise money in those foreign currencies (usually U.S. dollars) to pay back to its lenders. It cannot just print U.S. dollars.
America can.
But America usually wisely chooses not to resort to piratical money-printing.
This may not be one of those wise times.
America is still seen as the country with a world-class so-called reserve currency.
So America can also (still, last time I checked) borrow in U.S. dollars by issuing bonds denominated in U.S. currency. Argentina has a hard time convincing lenders to buy its bonds when it issues them denominated in Argentinean pesos. It is forced to issue Sovereign Bonds or Foreign Bonds.
That is why Argentina more easily defaults. It has fewer ways to recompense when it gets into trouble. It is also not as wealthy as America.
Why bother with a discussion about Argentina?
If the U.S. abuses her position she can lose her currency's reserve status. That would be a mighty blow. America can then herself become more like an Argentina in regard to its currency. It would no longer be able to issue debt (bonds) in its own currency. It might have to borrow in Euros or even some day in Argentinean pesos. And accept the currency risk of trying to repay in those foreign currencies.
But is this likely to happen?
It might, depending on what the FED does. If the FED so debases American currency by printing too much of it, in a futile effort to engineer a way to 'recovery', it conceivably runs this risk.
But why would the FED even consider doing this?
Well, one thing is to raise the required financing for of all the buying of 'assets' from 3rd parties (banks, financial institutions, maybe auto companies even) that it is currently doing. It is one big pawn shop. The FED may even have to resort to money-printing to buy the Brobdingnagian issuances of government bonds coming from the Treasury.
Especially if Hillary Clinton fails in her attempt to convince the Chinese to buy more of Uncle Sam's bonds. Or if, more likely, the Chinese themselves can simply no longer buy American bonds because China begins to fail to earn the huge trade surpluses of the recent past. Same goes for the other big buyers, OPEC and Japan and the other Asian 'savin' nations.
What would be the other motivation for the Bernanke FED to print money, essentially counterfeiting it?
Reconsider our earlier exchange about the loss of capital. Your motivation to rebuild it is sound.
It is the technique that is likely to be resorted to by our authorities that is my big worry.
Like I wrote, if we all rebuild capital by saving and EARNING it, then that is great. Well, maybe not great, but at least, FINE. It will take a long time, entail sacrifice, and no small amount of unemployment. That is what a Great Recession is all about --- that is, REPAIR the impaired Balance Sheets of all of U.S.
But the FED knows how the nation's Balance Sheet works as much, or likely much more, than you or I do.
The FED looks at the Assets and Liabilities and the Equity, and sees that in a land of falling asset values, and standing-still or increasing debts, the remainder, our overall Equity is falling. That is because Equity equals Assets minus Liabilities.
Bad news? You bet. Just like we agreed earlier, this can lead to all kinds of grievous social effects.
So what does the FED do?
It cannot change the nominal amount of the debt owed to China or Japan or to others unless America actually defaults. But the FED can debase the currency that the debt is denominated in. (Good thing, as we mentioned, that this is in U.S. currency.) That debasement would cause the real value of the debt to contract. That is FED argument ONE in favor of printing money.
The FED can (as you mentioned) try to increase the nominal value of assets. How? By again inflating the money supply, by printing more of it. The houses, empty lots, factories, and so on, will all surely go up at least in nominal value if you debase the money sufficiently. And the FED will use that money to buy up a lot of financial 'assets' directly from the marketplace. That is FED argument TWO in favor of printing money.
There is a another 'benefit' in the FED’s eyes that its money-printing brings about. This is the prevention of price deflation, which in its perspective, is a hell to be avoided at ALL costs. (Of course, that is idiocy IMO, but hey, who am I?) That is FED argument THREE in favor of printing money.
The FED also thinks it can goose the economy with monetary injections. It is the great doctor-mechanic who applies the electrodes at just the right spots to jumpstart the economy. It knows it will not electrocute or kill with the wrong type or size of electrical (monetary) charge. It 'knows' that its stun-gun won't discharge in the victim at the wrong moment in the heartbeat cycle. This is FED argument FOUR in favor of money-printing.
There are some smart people out there. There is Llewellyn H. Rockwell, Jr. There is George Reisman. There is Bill Gross. There is James Grant. There is Doug Noland. There is Peter Schiff. There is Professor “Dr. Doom” Nouriel Roubini. There are the Chinese authorities. There are the American people. There are the Bond Vigilantes. There are people willing to buy gold to protect themselves.
So it's the FED's opinion against all these other people. Will the FED succeed in its chosen way?
Will the Chinese continue to buy bonds when the value they get back may not even cover their invested principal? Will foreign banks and governments continue to keep American currency in their 'reserves'?
IMO 'money' is not something that should be manipulated in so blasé a manner. It has been in recent times, and look what it has brought upon us. This was not the way that Central Banks used to treat money.
And IMO simply manipulating the nation's or world's Balance Sheet via these methods will not address the problem. Certainly not by A Simple Plan that jacks up the nominal value of assets and contracts the value of liabilities in real terms. The FED has to rethink its approach.
This approach gives us a pseudo-intellectual appraisal that Hey, We Can Increase our Equity, our Net Worth, auto-magically, by MoneyPulation. We'll be better off. We can be entropically in control of our environment. We can have a free lunch. Eureka, there is a thing called Perpetual Motion! We are saved.
The bottom line for me is that you, Richard T., are correct --- we need to do some repairs. But these repairs need to be done by all of us, personally. They cannot be delivered by some Wizard of Oz from behind a curtain.
An asset is only worth what it earns for you in real terms in the future. An earnings stream, discounted to the Present, can give you an idea of that asset's real value.
If the assets you have are, in such real terms, valued at less than the present real value of the currently outstanding liabilities with which you financed those assets, then you are broke --- unless you have some wealth to draw upon from elsewhere, that you can use to do a real value-based reconfiguration of your economy.
So, unless you can find a way to use those assets in a higher-return manner than they are currently employed, you will stay broke, or get more broke.
If we let the Wizard have his way, we will end up with worthless money. We will end up with a more impaired economy, not one that is less impaired.
The Wizard cannot reconfigure an economy with the magic of money injections. He will cause more malinvestments in the wrong places, in the wrong amounts, at the wrong times. No one can centrally plan our way out of this mess.
It's a rat hole, like Doug Noland said in his latest weekly column with the heading SURREAL.
Published: February 26, 2009 9:42 AM
George Tirebiter
The ongoing economic dissection of events is all well and good as far as it goes but what if the power elite just want to keep the game going, knowing that they will always be favorably disposed to cream off the lion's share of the accumulated capital from the masses who produce that capital? What if their continuing to play the game necessitates inoculating the masses (thru public education) with the belief that they can also get their piece of the action if they work hard enough and smart enough? What if their continuing to play the game also necessitates inoculating the masses with the belief that if they don't win big it's God's will (thru religious education) or their own fault (also transmitted thru public education) and not the result of a rigged system? What if the game only remains interesting to the power elite if they have the ability to continually expand their power and wealth? What if they reach the point where the only thing that gets their juices flowing is adding greater amounts of risk to the game? What if this same power elite requires well rewarded (thru money, power and/or fame) minions to play out the game? What if the Obameister is, at best, a patsy and, at worst, a willing tool in the game?
Published: April 20, 2009 7:03 PM
KEN-DO-CAN-YOU
WILL SOMBODY PLEASE POINT ME TO WHERE I CAN FIND A DEFINITION OF WEALTH?
Published: June 2, 2009 3:52 PM
A. Viirlaid
What is Wealth?
Money? Total Control? Knowledge of Your Destiny? Awareness? Consciousness? Health? Love? Freedom from Want? Total Relaxation? Happiness? Peace for Humankind?
Your question is very general but also very deep, very meaningful. Life can be equated to Wealth if you think about it in one way.
Your question goes to the root of biological life. Perhaps even to the meaning of Life. Life can, in one sense, be considered to be its own meaning.
That is, if you subscribe to the Theory of Evolution, then Life might have arisen more or less with no initial inherent meaning, other than to survive. Asking what the Purpose of Life is before you ask "What is Life" is detrimental to gaining awareness IMO.
Life has always been in a struggle with Entropy which is the Physics Concept that describes the tendency within all natural systems (even the entire Universe) to Disorder.
Life at the very least has the tendency to Order. That is, it tries to oppose Entropy by creating conditions in which, it, Life, can survive and prosper. It strives to manipulate, control, or at least to draw sustenance from its environment.
Then in some sense Wealth is what allows Life to prosper or to make Order from what might appear to be Disorder.
So long as there is Energy in a system, and so long as Life is there to take advantage of this energy that would otherwise dissipate with no 'useful' work being done, Life can draw on this 'Wealth' in order to prosper, propagate, and survive. In this view Wealth equals useable Energy.
Personal long-term survival, or Life, is less certain, since Evolution requires personal lives to be of limited duration, in order to allow the species to differentiate during at least some period of Evolution, so as to vary generation to generation, and individual to individual, and thus so as to allow the species to survive changing environmental conditions.
The price of Life for the Species is death for the individual in other words. Or at least it has been so far, until the species itself develops (rises from the mud) sufficiently so as to give it the Knowledge to cheat its own built-in mortality. Think genetic manipulation and other such schools of Science --- Playing at being God in other words.
Can your Wealth give you longer life? "It slips away, and all your money won't another minute buy" (Kansas --- DUST IN THE WIND). Well maybe some day your Wealth will give you this other minute. Maybe the Wealth of Life can someday be purchased through your Financial Wealth.
Most people think of money when they try to answer the question you have posed. They also think of personal Wealth as opposed to Societal Wealth.
That is one place to start.
So I will start that way also.
You can probably find as many definitions of wealth as there are people.
"… makes a man healthy, wealthy, and wise." (Benjamin Franklin)
You could argue that Health and Wisdom are the most important personal components of Wealth.
After all, without those, what is your wealth to you, personally worth?
Accounting-wise, financially-speaking, your Wealth can be considered to be your Net Worth.
Net Worth is Assets less Liabilities --- in other words your Total Wealth is your Equity or Retained Earnings.
In financial terms, an asset is the net present value of a future stream of expected earnings.
Say as an example, your Income Stream consists a bond that EARNS you interest and your Outlay Stream consists of a debt or loan for which you PAY interest, the difference between the two, expressed in Present Value Terms, discounted by an appropriate interest rate, would be your total wealth.
Of course you would have living expenses that you would also have to calculate into your Outlays. These would reduce your expression of Wealth.
Most often people have other assets, cars, real estate, and so on. These would also figure in your calculation. These are of different natures. Some are consumption goods, meant only for pleasure or day-to-day survival, or relatively immediate 'consumption'. Others are investment goods, that themselves can earn you an income stream.
So an automobile used for pleasure driving is different in nature from a taxi-cab that you might operate with a view to making a return on your investment.
That is why it is wise to borrow only for such 'earning' investments never to borrow for consumption. For one thing, consumption tends to destroy the item consumed, and it does not lead to earning a future income stream --- most especially the type of consumption that usually comes from Discretionary Spending.
Your Education is not that type of consumption --- it presumably can 'pay back' for your entire Life. Of course you can consume too much Education if someone lends you the resources to obtain such an Education. Perhaps you study Medicine from the age of 20 until you die without once working as a doctor, researcher, or teacher --- seems like you consumed your Education and never had a resulting Income Stream to pay back your initial student loan. Not very practical for the lender --- even though you might love it!
It is unlikely that the money you borrow for consumption can be paid back as quickly as the item you have bought and have consumed. You are left with a financial hangover of the sort our entire society has recently been convinced into acquiring by our prevailing socio-financial philosophy as exemplified by our Western central banks --- spend and shop until you drop in other words. This is MOST DEFINITELY NOT a Great Approach to Life and your Wealth and your overall wellbeing.
In other words it is advisable to 'match' the streams of income and outlay --- don't borrow unless you can pay back your loan earlier or at the same time that you earn a stream of income from your investment --- a stream that at the very least can 'cover' your debts and the 'servicing' of those debts.
Why is it 'advisable'? Because then you put your overall Financial Wealth into a less risky position of total loss.
It's a little like the cheetah who pursues her next meal and then does not take into a tree to keep it from the lions. That cheetah won't likely Live very long.
Getting back to tying your Wealth into Life --- what Life generally attempts to do, at least what humans seem to want to do, is to control their immediate environment --- in other words to have sustenance, clothing, shelter, companionship, and most importantly IMO Love.
Your Wealth, as you ask the question, then is what can give you the things you 'need'. Maybe Maslow’s hierarchy is one place for to consider in starting to think about Wealth.
http://en.wikipedia.org/wiki/Maslows_hierarchy_of_needs
I wish you luck in deciphering the mysteries of our Existence. You are on an exciting journey.
Published: June 17, 2009 12:12 PM
fundamentalist
KEN-DO-CAN-YOU: "WILL SOMBODY PLEASE POINT ME TO WHERE I CAN FIND A DEFINITION OF WEALTH?"
Here you go:
"For riches, don’t you see, are not a little
more or a little less money. They are bread for the hungry, clothes for the
naked, fuel to warm you, oil to lengthen the day, a career open to your son, a
certain portion for your daughter, a day of rest after fatigue, a cordial for the
faint, a little assistance slipped into the hand of a poor man, a shelter from the
storm, a diversion for a brain worn by thought, the incomparable pleasure of
making those happy who are dear to us. Riches are instruction, independence,
dignity, confidence, charity; they are progress and civilization. Riches are the
admirable civilizing result of two admirable agents, more civilizing even than
riches themselves—labor and exchange."
From Bastiat's "What is Money?" available at http://mises.org/journals/qjae/pdf/qjae5_3_7.pdf
Published: June 17, 2009 1:14 PM