Thursday, September 30, 2010

Public Debt w/o interest (reposting)

The real weakness in the economy is consumer spending. The last expansion was fueled by ever increasing consumer debt, but that could not go on forever. How about cash for old water heaters and refrigerators? Let's turn them in for more energy efficient ones. How about any essential item made in the US that would put more people to work?
The only thing wrong with the stimulus program is the means of finance. There is no reason except superstition to finance it with government borrowing. It could be done with funds created by the Treasury or Federal Reserve. News programs are asking "Where will the money come from?" The implication of the question is that the money supply is fixed and if we are to have cash for clunkers it has to come from savings rewarded by payment of interest. But, in a recession when all resources are not being used, there is no reason to save. There is no opportunity cost.
New money can come from where it always has come from--new credits created by banks. Our banks are now mostly solvent, but few want to borrow money to make things when consumer demand is weak. When the banks don't want to create more money to put all of our resources to work, the government should do it. There is no reason other than myth and superstition that we allow people to be unemployed and citizens to cut back on their living level. Our plants did not rust or our engineers lose the formulas. We just need to understand the essentials of money creation. Money is made when a bank writes numbers after a borrowers name. Of course they charge interest for the loan. If government has given banks the right to create money, then government can certainly do the job itself and without paying itself or anyone else interest.

Incidentally, you may have read that some banks and Goldman Sachs made millions (or was it billions) last quarter and payed their executives absurd bonuses after being bailed out by the government previously. They did not make profits loaning money to business to make things, but rather they profited from financial trades in the equivalent of a giant casino--buying and selling paper. We saved their butts for this??

Wednesday, September 29, 2010

Persisting Unemployment

Firms don't want to hire because they are pessimistic about sales. Consumers don't want to buy because they are pessimistic about their incomes.
There is only one way to break this downward spiral, and that is for the government to directly hire the unemployed as they did in the Great Depression when we built many public works that we enjoy today such as parks, auditoriums, and Hoover Dam. At my own university (MSU) we enjoy WPA built buildings. We certainly have many national needs such as some high speed rail lines and improvements in our national electric grid.

I am aware that fear of government deficits blocks the necessary massive spending. This is stupid. It would not be the first time that slogans and propaganda kept us from acting in our self interest.

I have described in previous blogs how to increase government spending without increasing the debt.

Dumb and Stupid

In my lexicon dumb and stupid are distinguished.
Dumb is inability to accept evidence of a fact.
Stupid is not acting in your self interest.

Examples of dumb are denying evidence of the holocaust, evolution, & global warming.

Examples of stupid are voting for a party whose policies are not consistent with your needs, poor and middle-class support for extending tax cuts to the rich,

I hate stupid.

Does anyone have better terms for this distinction? What examples would you include in each? Where shall we put supporting the war in Afghanistan or the war on drugs?

Monday, September 27, 2010

Pledge to America

The "know-nothing" Pledge to America is a farce and made up of a thin veneer of sound bites, no doubt tested for an emotional surge, but no thought.
1. Slash taxes. This from the people that rail against deficits. The imagined spending cuts are not described.
2. Cut down on government regulation. Remember that every so-called regulation, while a cost for some, is a benefit for others. Do these people really want more oil well and pipeline leaks, untested eggs full of salmonella, unregulated pollution, credit card rip-offs, etc.?
3. Repeal Obama's health care law. This is simple mean-spiritedness by those who do not want to share with the less fortunate.
4. End stimulus program. The stimulus is the only thing that has kept the recession from growing larger. Government spending needs to be expanded, not ended. The net amount of the stimulus was very small considering cutbacks in state and local spending as property and income tax receipts continue to fall.

Sunday, September 19, 2010

Moral Values

The right wing has a point about the decline of moral values, but it is not about gays and abortion. It is about the rise of rampant greed and me-ism and the decline of responsibility. Those most responsible for our recent banking crisis refuse to acknowledge that they did anything wrong (and are doing it again.) Another example--Enbridge, a pipeline company that operates in Michigan has had over 90 violations in the last several years, but no government agency did anything about it. Their latest failure resulted in a spill and pollution of a river near Kalamazoo. In my hometown, real estate sellers use the curb-side public right away to advertise their homes, even if it is against city codes. When I called them on it, their answer was "Well, we have to sell real estate." They are saying that their needs are the only thing that counts, and others be damned. And, they justify it in terms of freedom, theirs!
Far too many people touting support for moral values are missing the point.

recycling plastic and energy policy

How have the Republicans turned policy addressed to climate change into a dirty word? We have no new energy and climate change legislation thanks to the notion that there is no evidence of global warming and no need to take it seriously. Is this the return of the "no-nothings" to political power?
Thomas Friedman writes in the NYT that an American company has developed technology to turn waste computers into usable plastic at low cost. But new factories using the technology are being built in China and Europe. Friedman explains:
"Americans recycle about 25 percent of their plastic bottles. Most of the rest ends up in landfills or gets shipped to China to be recycled here. Getting people to recycle regularly is a hassle. To overcome that, the European Union, Japan, Taiwan and South Korea — and next year, China — have enacted producer-responsibility laws requiring that anything with a cord or battery — from an electric toothbrush to a laptop to a washing machine — has to be collected and recycled at the manufacturers’ cost".
Why don't we follow suit? Answer--because the "no-nothings" regard it as a socialistic plot! Industry screams that such a policy would cost American jobs and slow the economy when exactly the opposite is true.

Saturday, September 11, 2010

Moratorium on Gulf oil drilling

British Petroleum has argued that extending the Gulf drilling moratorium is undesirable because it would hamper its ability to compensate those harmed by its drilling. The irony is deep.

We are number 11

I highly recommend this excerpt from the column by Thomas Friedman of the NYT, Sept 11,quoting Washington Post economics columnist Robert Samuelson. "Why, he asked, have we spent so much money on school reform in America and have so little to show for it in terms of scalable solutions that produce better student test scores? Maybe, he answered, it is not just because of bad teachers, weak principals or selfish unions."

“The larger cause of failure is almost unmentionable: shrunken student motivation,” wrote Samuelson. “Students, after all, have to do the work. If they aren’t motivated, even capable teachers may fail. Motivation comes from many sources: curiosity and ambition; parental expectations; the desire to get into a ‘good’ college; inspiring or intimidating teachers; peer pressure. The unstated assumption of much school ‘reform’ is that if students aren’t motivated, it’s mainly the fault of schools and teachers.” Wrong, he said. “Motivation is weak because more students (of all races and economic classes, let it be added) don’t like school, don’t work hard and don’t do well. In a 2008 survey of public high school teachers, 21 percent judged student absenteeism a serious problem; 29 percent cited ‘student apathy.’ ”
An economist by the name of David McClelland wrote a book years ago containing his case for explaining Differential economic development among nations. It was called "Achievement Motivation."

Friday, September 3, 2010

Buying Political office

Former Illinois Governor, Blagovich stood trial for selling a US Senate seat. Buying and selling of political office is commonplace. Senator McCain spent $20 million in the recent primary! That's around $75 per voter.
In Michigan, the Republican candidate for governor spent $7.6 million in the primary! This absurdity is buying office plain and simple. And it all masquerades as freedom of speech according to the Supreme Court!
Big campaign contributors get something for their money. The Securities and Exchange Commission sued Goldman Sachs for $! billion and then settled for 550 million in a case of claiming that Goldman mislead investors in a subprine mortgage product. I wonder why?
And now even some Democratic and most Republicans in Congress say we must continue the Bush tax cuts for the rich so as not to spook the recovery. Why do people keep electing representatives who do not legislate in the interest of most ordinary citizens? Answer: by bombarding the public with lies and diverting their attention with reference to gays and abortion.