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Economics Made Simple [Nov. 21st, 2008|10:14 pm]
[Current Mood |angry]
[Current Music |"Dies Irae"]

Rant warning: this is a rant.  That means, this is not open for argument in this venue.  Comments I don't like will be deleted without warning or apology. 

Treasury Secretary Paulson is, without doubt, the second stupidest man in this Administration, You Know Who being the first.   In fact, I have acquired even more disrespect for the people who supposedly know so much about the economy, as they flop around like beached flounders and demonstrate that they are utterly clueless and also can't connect a logical chain longer than one link.  Half a link.  (For the uninitiated, there *are* no logical chains that short.  But these people are that incompetent.)

The incompetents have blamed it on a) American consumers for buying on credit, b) immorality caused by northern secular liberals, c) Clinton,  d) welfare, e) the lack of oil drilling in ANWR...and on and on.

Folks, the mess did not start with sub-prime mortgages (that was a branch on the tree--not its taproot), self-indulgent citizens overspending on their credit cards, or any of the other popular theories.  It started with the plain and simple oldest way of all to go broke: spending more than you take in.  Not by individuals--by the government.   How'd that happen?  

Very simply.  Bush started two wars and lowered taxes.  Wars are expensive.   Very expensive, especially when you want your friends to make a lot of money out of providing services to your military because (you lying scumsuckers insisted) it was cheaper to privatize.  Sure it was.  That's why the national debt is off the chart.   Now you and me, if we decided to spend an incredible amount of money, just might have the good sense to go out and get a second job--bring in more money.  But not the Bushies.  No, they cut taxes (cut the income that pays for wars) at the same time they increased spending (on the wars) and...just like that...ballooning national debt. 

The tax cuts were supposed to (they said)  increase jobs and "stimulate the economy."    That didn't work.  It didn't work because they cut corporate taxes without demanding anything in return...with no safeguards whatever...and the corporations took those tax cuts and went right on shipping jobs overseas or in some cases just cashing in the profits and running.  And since 40% of this nation's economy is based on consumer activity (consumer spending), when you throw a lot of people out of work...they don't spend as much.   You would think even a kid could figure that out, and certainly any kid whose parents work at an ordinary job knows that already.  No job, no spending money.   Also--and this is important--no taxes from the person who formerly paid income tax.   Now you're not getting tax income from the corporations *or* the individuals.  Real smart, there, Sherlock.

Once you've run the country into massive governmental debt by this hare-brained scheme, and things are shaky, then anything else can tip the inverted pyramid...people who lose jobs can't make the house payment. Or the car payment.  And they can't get new jobs, either.  And as fuel prices rise (something predicted decades ago, but would they listen?  Noooo...that was a *liberal* notion)  and everything gets more expensive and those with jobs begin to realize how fragile their economic base is...they also spend less, or try to. 

If you really want to stimulate the economy, then you want to create jobs.   You don't give those jobs to CEOs.  You don't give tax cuts to the big corporations, because they'll take it and raise their CEOs' salaries and fly them around on private jets and send them to vacation spas.  And cut jobs.   You have two choices.  You can give tax cuts at the bottom first--but that doesn't help the person with no job.  You can create jobs with government money because you know--experience shows--that the corporations won't use any money you give them to create or retain jobs--they'll find some way to let their CEOs play with it, fritter it away, and not a red dime will end up in the pocket of an actual worker who would spend it on food, clothing, housing, and education.

Instead, you  create jobs that actually meet the needs of the country (not building all those cars.)   Lots of things need work in this country.  Bridges are an obvious example.  Other crumbling infrastructure, including substandard housing.  New infrastructure to support more efficient transportation (airplanes and SUVs are not efficient transportation).   Environmental infrastructure: cleaning up the disgusting mess this Administration has made of parts of Appalachia and is about to make of more of the West.   The research in science and technology and medicine--where we once led the world, and don't anymore--to improve these other areas.  People need uncontaminated food, uncontaminated water, clean air to breathe, a place to live, clothes to wear (and I'm not talking $600 shoes and $6000 suits),  medical care when they're sick or injured, and most of all jobs--occupations that let them feel good about themselves, have some dignity, some sense of worth.   They do NOT need the kind of "leadership" that rewards crappy judgment at the top of the tree with billions of bailout money while their jobs are vanishing and the bank's demanding the house they live in.  

But any suggestion that money be spent on providing things citizens actually need (the food, the water, the housing, the medical care, the jobs with which they could buy these things, transportation options to and from the work, education,  energy sources that don't destroy the land, water, and air...) gets dumped on as being "liberal" or "socialist"....while the boys in the silk suits (and gals ditto) are assured of golden parachutes the size of the Sahara, continue to fly around in private jets and be whisked here and there in limousines, never having to deal with the reality most of us live in. 

That's the problem--not some family in debt because both parents lost their jobs.   Not the person who, as one snotty person on TV said "Really wasn't qualified to buy a house."  No, the problem started at the top, with men and women who just don't give a damn about the country or about the people in it--who want to play out their hero  fantasies with our blood and our money and our homes and our land and water and air.  Does the CEO of GM care a cat-dropping about real people?  Prove it.  I think the evidence leans heavily the other way.  Same with the AIG execs who took their handout from the government and happily went off to celebrate as expensively as possible.  And they dare sneer at welfare mothers!   

I've been angry about this for weeks, but the book came first, so now...snarl. 


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[User Picture]From: ysabetwordsmith
2008-11-22 05:30 am (UTC)


I have a sinking suspicion that this is what was meant by that college entrance exam that placed my math skills at about the 66% level nationally. Allow me to eludicate: I SUCK AT MATH. Apparently 2/3 of college-bound people sucked even worse.

Now, even with my pathetic math skills, I can tell that spending more than you make is bad; that what goes up must come down; that capitalism REQUIRES some people and individuals to fail whether they deserve it or not; and that whenever people start treating anything as a collectible, it's going to boom-and-bust. Those things seem obvious to me. They weren't obvious to Mr. Greenspan.

Okay, at least I had the sense to look at my math skills and say, "Eh, I'm a writer, not a mathematician." When I have better economic sense than the people who are running the economy ... that is not a restful thought.

Of course, they could know exactly what's going on and simply be lying while they grab as much money as they can and then flee like the crooks they are.
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[User Picture]From: e_moon60
2008-11-22 03:51 pm (UTC)

Re: Hmm...

"Simply be lying..." Well, that works for me. They've done it all along. They've used fear tactics with the skill of a Mafia mobster for the entire time to terrorize people into giving up personal privacy and rights, and you can't produce that much fear without lies as well as plain old threats.
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[User Picture]From: entp2007
2008-11-22 05:34 am (UTC)
Well said. Not to throw fuel on the fire and I think I'm about to. Here's my biggest concern about the incoming administration, or rather about the one still destroying the country. I was elated that Obama had won and that the Democrats had picked up more seats in Congress, but I knew that the current administration still had over 70 days to continue mucking things up. I think they want to so bankrupt the gov't that the next Congress will not be able to afford to fund the programs so desperately needed for lower and middle income families.
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[User Picture]From: e_moon60
2008-11-22 03:48 pm (UTC)
Oh, I agree. The current Administration started going into overdrive in the summer, when I think they began to realize the Elephant might lose, to do as much damage as possible in their remaining time. But I think the actual motive is greed more than a determination to scotch social programs (it might be...it might also be to ensure that any incoming Democrat will look bad.) By granting as many concessions to the mining and oil industries as possible, I believe the Administration is boosting its own profits.
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[User Picture]From: gunhilda
2008-11-22 05:48 am (UTC)
Well said.
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[User Picture]From: e_moon60
2008-11-22 03:45 pm (UTC)
Oil is a large part of the picture, but I think slightly differently than you do, because I grew up in Texas in the '50s--and my mother works for a small oil company that connected to larger ones. So I had an inside view of the oil bidness (as it's said down here) for some very formative years. The oil business itself drove bad policy decisions, both domestic and foreign, in a number of administrations prior to the current one--this one just made the worst possible decisions over and over, in pursuit of traditional oil policy positions. That's a whole 'nuther rant, which I may never write because--since my mother died almost 20 years ago--I have had no access to her memories. I do have my own (the quiet, docile girl reading a book in the corner while the men talk business may not be concentrating on the book.) I spent considerable time sitting in corners and reception rooms of various oil-business headquarters--Dallas, Midland, San Antonio, Houston because my mother had to travel on business. Amazing what you can learn when people are quietly chatting outside the conference room...amazing what you can learn when someone sticks you in their law library for a few hours.

Anyway. The damage the oil business did to US policy started long ago but has only escalated with the coming end of the oil age, which was well-known and predicted at least as early as I came in contact with the business. My mother did exhibits for the legal staffs--helped with presentations that ended up in Congress--and whenever she worked late on something, which was a lot, I was at the office with her, doing homework (and looking over her shoulder to see how she did what she did.) Back then, as a kid, I believed everything I was told--until it began to make the wrong kind of sense, as I read more and more history, especially military history but also economic history.

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[User Picture]From: peristaltor
2008-11-22 08:10 am (UTC)
While I must confess I did not miss the thrust of your argument, I must disagree just a bit. While Bush et. al. are indeed more than a bit culpable, I don't think they did the whole shebang. Why? Philosophy.

Bushy is a private guy. Meaning private = good, public = bad. That means regulation that restricts the actions of private must be stopped, and anything that funnels moneys to private must be encouraged. Based on that, restrictions on monetary silliness is lifted just as "privatisation" is forced down the public throat. Blackwater draws all the big bucks just because Eric Prince funds a private army, while the boys and girls in uniform get screwed with triple deployments.

On one hand, Wall St. goombas create Collateralized Debt Obligations and debt swap agreements, unsustainable for exactly the reasons you mention above; without the ability to pay the loans, they will fail. On the other, an uncaring administration digs us deeper into Middle Eastern trenches with private armies.

The result? Bailouts for those that precipitated this crisis and a mess for the next administration to clean up. I separate the two only in that Bush would have planned more thoroughly had this been part of a master strategy.
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[User Picture]From: teriegarrison
2008-11-22 12:38 pm (UTC)
What makes me apoplectic are the people who *STILL* say that tax cuts create jobs. Well, yeah, they do....offshore. The company I work for is shifting EVERY SINGLE job opening that doesn't require a physical presence in-country to India. They don't care that they pay the people 25% of a US salary and get 10% of the work, because the remaining US workers are forced to pick up the slack and now most of us are doing twice the work we used to for no additional pay. So they still make their profit out of our (the employees') flesh. Isn't that all that matters? (Rolls eyes.)

Plus, as you so eloquently pointed out, since the jobs were moved to India, the tax revenue from them no longer goes to the US government, and workers in the US can't get jobs.

As someone else said, when math-dummies like me can figure this out, it's nothing short of terrifying that top government officials can't. Of course, I also believe, as a different someone else said, that it's not a matter of 'not figuring it out' so much as it is intentionally breaking the government. They'll all fly to Paraguay on 21 Jan, and our only hope is that the plane has difficulties en route and they have to land somewhere where they'll get arrested and sent to the Hague to answer to war-crimes charges. (No, I'm not holding my breath on that one.)
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[User Picture]From: e_moon60
2008-11-22 03:54 pm (UTC)
They've allowed theory to overcome common sense. The theory is a very comfortable one for those in power, so of course they don't want to give it up--and people who don't want to face facts can not see them even as they trip over them.

Do I think they'll all run away with all the money they can stuff in the private planes? You betcha. The kind of wealth and security we're talking about does not produce real courage--it produces a frantic desire to keep every single scrap of privilege because not having it is so scary.

The Paraguayans may not be as friendly as they hope.
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[User Picture]From: green_knight
2008-11-22 01:30 pm (UTC)
I don't get the whole privatisation thing anyway.

If you're the government, you need to cover your costs and make enough money to be able to reinvest in future projects.

If you're a private investor, you need to do the above, *plus* make money for sharesholders/investors.

So whoever says that the private sector can deliver the same service cheaper than the state, err, err,

No. I still don't get it.
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[User Picture]From: e_moon60
2008-11-22 03:58 pm (UTC)
There's no evidence that private companies provide services cheaper, you're right.

But privatization has benefits for governments that wish to shed responsibility, and makes it harder for consumers to insist on quality service/goods. Of course it IS ironic that an Administration which regularly insists that others be held accountable is the very same one happily shedding responsibility as fast as possible.
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[User Picture]From: bevhale
2008-11-22 02:16 pm (UTC)
Amen. I've been saying some of the same things for years, and no one believed me (well, almost no one). Without personal responsibility on the part of all of us (especially the CEOs and groups that think you can dump crap in the water somewhere else and it won't affect us, or blow up someone somewhere and the fallout won't drift over, that you can destroy the land and it will have no consequences, etc.) I think we're not going to solve the problems.

I hope we learn to work together. I hope we learn that we're all in this together. I hope we be responsible to ourselves and to each other.
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[User Picture]From: e_moon60
2008-11-22 04:05 pm (UTC)
People don't learn to be responsible by being privileged. Entitlement teaches irresponsibility except in the accumulation and protection of personal privilege.

Personally, I'd take all the top executives (not their minions, who work darned hard and get sneered at), put them on minimum wage with no access to any other source of funding and no contact with one another--them and their families. No political activity allowed. No clandestine source of funds or influence.

Until their level of arrogance and irresponsibility is shown to be unprofitable, they'll try to hang onto it. We need to make it unprofitable, even painful, for people in those positions to act they way they've acted. Not going to be easy. All our rewards (position, celebrity, money, influence, etc.) are aimed at people who are irresponsible, greedy, and "more hat than cattle" in the competency department.

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[User Picture]From: jowake
2008-11-22 02:45 pm (UTC)
I basically agree with everything you all said, but, sorry, who voted in Bush and his team for a second term. I thought your voters were nuts at the time. They say the country gets the government it deserves.
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[User Picture]From: e_moon60
2008-11-22 03:30 pm (UTC)
Oh, come on. I didn't vote for Bush in ANY of his campaigns. If you think everyone voted for him, you're ignorant; if you know better but snarked anyway so you could feel superior, you're being rude. And that fake "sorry" doesn't fool me a bit. You're not sorry: you're gloating.

The next time your government does something stupid (and every government does) do you want me to come waltzing in and accuse you of getting what you deserve?

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[User Picture]From: neshel
2008-11-22 03:23 pm (UTC)
I agree 100%.
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From: themaskmaker
2008-11-22 03:34 pm (UTC)
Snarl away!
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[User Picture]From: rhia_hilldancer
2008-11-22 06:54 pm (UTC)

i'm glad i started reading your blog way back when it started. i don't comment much, but, you are a remarkable individual who hits the nail on the head pretty damn often!

and, i'm angry too. it's outrageous!
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From: morgan_dhu
2008-11-22 08:27 pm (UTC)

One reason for a government to run balances or even surpluses rather than deficits when times are good is so that some judicious deficit spending can be sustained when times are bad in order to fund the kinds of infrastructure programs you mention that do create jobs and get important things done.

If a government is already too deep in debt when a crunch comes along, it may not be able to do what is necessary, thus making things worse.

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From: mmegaera
2008-11-22 09:39 pm (UTC)
Just another member of the choir here...
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