http://www.realclearmarkets.com/articles/2009/07/06/get_ready_for_14_percent_unemployment_97295.html

Like the Bush administration before it, the Obama team is pinning its hope for economic recovery on "stimulus". Despite the fact that Bush's $168 billion stimulus package in early 2008 had no impact at all, Obama rammed a $787 billion stimulus bill through Congress in January. Now the administration is waiting anxiously for the "stimulus" to take effect. It should not hold its (collective) breath.

"Stimulus" is based upon the superstition that government borrowing and spending creates "demand". In reality, it does no such thing. "Stimulus" is like trying to raise the level of the Hudson River by dipping out a bucket of water, walking five feet downstream, and pouring it back in. The only difference between the Bush and Obama plans is that Obama's bucket is bigger (and will create more debt). Ironically, the July 2 jobs report prompted calls from leftist economists for Obama to go back to the river with an even bigger bucket.

While doing nothing to boost demand, Obama's "stimulus" will depress PBI, and therefore employment. This is because the "stimulus" plan requires selling an additional $787 billion in government bonds. The money to buy these bonds will have to come from somewhere, and much of it will come from people who would otherwise invest in starting or expanding businesses. Indeed, the bonds will have to be priced so that this risk-free investment is more attractive to investors than their other alternatives.

In the fourth quarter of 2008, the Federal government ran a deficit of $303 billion (and therefore had to sell $303 billion of new bonds) and business investment fell by 21.7%. In the first quarter of 2009, the Federal deficit was $650 billion and business investment fell by 37.3%. The economy is being forced to invest in Barack's Bailout Bonds rather than in businesses that create jobs.

Of course, that ignores jobs created by the deficit spending, but the overall spirit of the article is correct. Especially in the long-term.

People like to talk in black and white false dichotomies, but it's not completely unfounded superstitious that deficit spending can invigorate certain job markets. What this guy, and most everyone else who gets trotted out to placate or enrage the public, seems to miss is that it matters hugely how much of a job sector was ALREADY funded by government spending and what your budget looked like before you started. These guys ignore that there is virtually always a greater appetite for municipal and government bonds worldwide than investors for them, regardless of how else the economy is doing.

Deficit spending can work. It can't work for forty years, which we're seeing the tail evidence for now. Going briefly into debt to smooth an economic transition period works just as well as it always has.

The overarching problem here is that we've had a debt-sustained economy for so long that the government and private interests have lost all knowledge for how to operate otherwise, and can only envision trying to extend the failed model further. We have, in essence, come to the point where we only have one tool in our toolbox, and that is a shovel to digger ourselves deeper with.

I think we have two separate problems.

We have the hole blown through the economy by the financial collapse and the long term problem caused by horrific spending practices.

Imagine if were a person with a huge pile of personal debt, credit cards, ect... You wake up one day and your roof has a hole in it. Yes, you need to solve your long term problems, but in the short term, you need to spend some money to fix the immediate crisis.

That may be what FDR did.

What Bush did near the end, accelerated by Obama now, is more akin to trading the house to pay for the roof. I'm sure the new owners will appreciate us doing the grunt work to fix that roof for them!

Meanwhile, we'll still get wet when it rains, being homeless and all.

FDR's idea was to reform and create new programs to stimulate growth though, correct? Isn't the new deal(s?) where we got Fannie Mae and Freddie Mac from, along with Social Security etc? I agree with L2 that we have long term problems to solve, but unless that money is actually being put to a directed use (rather than "hi failing companies, have some money. Stop failing please!"), I can't really see it being very effective.

That may be what FDR did.

What Bush did near the end, accelerated by Obama now, is more akin to trading the house to pay for the roof. I'm sure the new owners will appreciate us doing the grunt work to fix that roof for them!

Meanwhile, we'll still get wet when it rains, being homeless and all.


Heh, this reminded me of Larry the Cable Guy talking about crashing the pick-up to get the insurance money to make the monthly payment.

I think there had to be a momentum stopper. We were plummeting at a terrifying rate. The banks were collapsing. Loans had stopped. It looked like the whole damn thing was coming down around our ears.

Look.... Hank Paulson walked into a meeting with Senators from both parties last fall and they left the meeting visibly shaking. TARP was passed. Now if you want to believe this was fraud.. that it was a ruse by Paulson.. fine, but in my mind you are entering tin foil hattery land. I think he really did see something really really bad happening, and something had to be done to try to stop it.

Obama walks into office.. and what is happening... TARP is out.. the Big Three are collapsing.. massive unemployment is coming down the pike. The answer is do nothing? Its not reasonable and its not logical.

Nobody likes the idea of tax dollars to AIG or Banks, but shit had to stop. The momentum had to be slowed.

And Malse is 100% correct.. we need to get out of the economic model we have been in for way too long. But painful change of that nature and that scope is pretty much impossible in a democracy.
Imagine trying to pass a law that required everyone put down 20% for a house. No gimmicks, no second mortgages, no nothing.. 20%. It would be great for lowering our debt, it would have prevented the situation we now find ourselves... but it would never pass.
Or imagine passing a law that prevented Credit Card companies from extending credit to anyone with more than 40% debt to income ratio... Christ.. that would be fantastic but people would be in the streets with torches and pitchforks.

We need to change not just our laws, but our entire culture. I am open to any ideas.

There is easily two sides to this debate, but neither side can possibly win until we see what happens many years from now.

$800 billion in stimulus money was approved, but right now only 5% of that even entered the economy. Most of this plan is funding over the next few years which could generate new job sectors. We'll see.

I think there had to be a momentum stopper. We were plummeting at a terrifying rate. The banks were collapsing. Loans had stopped. It looked like the whole damn thing was coming down around our ears.

Look.... Hank Paulson walked into a meeting with Senators from both parties last fall and they left the meeting visibly shaking. TARP was passed. Now if you want to believe this was fraud.. that it was a ruse by Paulson.. fine, but in my mind you are entering tin foil hattery land. I think he really did see something really really bad happening, and something had to be done to try to stop it.

Obama walks into office.. and what is happening... TARP is out.. the Big Three are collapsing.. massive unemployment is coming down the pike. The answer is do nothing? Its not reasonable and its not logical.

Nobody likes the idea of tax dollars to AIG or Banks, but shit had to stop. The momentum had to be slowed.

When did I say do nothing?

It's sad that the breadth and depth of American ingenuity has largely been reduced to thinking in terms of either far Right or Left wing talking points. I reject that far more vehemently than I do this deficit spending.

The rest of that is predicated on the notion that massive government intervention can stop the market from going where it's going to go. There is plenty of compelling evidence that such action only slows the inevitable, simply compounding the damage over a longer period.

I mean, come on. Obama campaigned against McCain as "four more years of failed George Bush politics", specifically talking about the economy. Yet, when he continues the policies you would have decried a year ago, you find ways to support them now?

Meh.

Our economy is ultimately doomed to fail as is - bailouts or stimulus checks are simply slowing the decay. The solution is to completely change our way of existence. The housing market was only one symptom of the larger problem - we buy more than we need, use more than we have to, and waste the rest. We've comforted ourselves with the thought that CFLs and recycling will save us, but at the heart of it all we're still preoccupied with rampant consumerism.

For example: http://www.energybulletin.net/node/46276

We purchase to our limit, at both the individual level and the governmental level, and then borrow when we pass that limit. The recent collapse was a very simple result of some of those debts coming due. The markets invigorated by the debt are all debt related, and not long lasting.

The stimulus is a buffer to ward off complete collapse. Not a restoration of the previous status quo. So yes, it will lead to unemployment, but that unemployment was going to happen anyway. At least for now, its slower and more manageable. Falling down a gentle hill is easier then falling off a cliff. Either way, you get to the bottom. The reasoning?

We don't set the standards anymore. We are trying to preach free markets and democracy when the same systems of government we rail against are in essence are beating our pants off and we helped them get there. Communism. Socialism. Controlled market economies. Authoritarian states. Repression. Censorship. It all doesn't matter when places that have all these are achieving what are considered to be by American Democratic standards to be huge success.

The quality of most anything made overseas in the so called "sweatshop nations" is on par with anything made made in the EU, Commonwealth, or the US. They make it with labor that is practically free and with little expensive automation. Heck, in China there aren't even soda machines because they take away jobs. The rest of the world either has their governments bankrolling the innovation, such as the EU and projects like the Airbus 380 where governments will even put money down to aid an airline purchase the plane or they can do everything extremely cheaply with no regard for human safety and make split second decisions without the inefficiency of democracy. China excels at this. Beijing built a whole subway system and all the Olympic venues in less time wasted in Washington DC debating how to run the Metro to Dulles. All these countries do more, expect less and have a welfare system of government that takes care of them as long as they keep in line and accept huge losses of personal freedom in return or can stomach high taxes to limit their economic freedom. Like a big ant farm only they are working hard to no longer live in dirt. An ant farm with a lot more ants then the US. What they lack in innovation and ingenuity they make up for in shear numbers. A Chinese worker dies on the job due to an accident, they just cart his corpse out and get another worker. There is no investigation, litigation, legislation or any other -ations.

Anyway, I could keep on beating this dead horse but the bottom line is that our standard of living is going to be drastically cut but to do so abruptly would be a disaster. Its inevitable because our level of consumption and demands for entitlement are just not competitive or sustainable compared to what is considered acceptable to the rest of the world. To take it a step further, our standard of living was artificial. An illusion. Pay no mind to the man behind the curtain. We robbed Peter to pay Paul all this time in attempts to ward it off but there really is no stopping it. If the Cold War happened with today's dollars, we could not afford it but here we are thinking we still can. The faster China, India and Brazil rise, the quicker we sink. The more they want to consume, the more things cost, such as raw materials and energy, while at the same time less and less of the money made from generating products flows onto US shores and into American pockets. Its the bad mix that creates stagflation or worse. The catch is that the US can't sink too fast or the whole process crashes before these up and comers, who have ALOT more consumers, can become the engine driving the global economy. Thankfully all these people getting a modest bump should more than offset a shrinking US level of consumerism. They will be carrying us as we used to carry them in the future. Heck, probably alot more. If the US crashed 10 years from now, there is a good chance the rest of the world would pull out of it and leave us to our ruinous fate, probably while feeling somewhat vindicated. In the end we will all be forced to live within our soon to be very humble means, the playing field will be level and Humanity as a whole will be forced to take out of the Earth only what the planet can support as a global economy. Which isn't much. The one silver lining of a non diverse economy is that no one nation can ever hold all the cards without slitting their own throats. Perhaps that was the plan all along. Makes for fewer wars and more efforts of the mutual benefit because even if you "win", you still lose. Welcome to the world of economic Mutually Assured Destruction. Its not just for nuclear war anymore!

Another thing about the stimulus...

They told us from the beginning that it was going to be a long term thing, and it was going to get worse before it got better.

One problem is that the 24/7 media news cycle thing literally cannot wait or see things with a long term perspective.

My biggest complaint is that our economy is still not yet at the bottom, only a fraction of the first massive stimulus has made its way into the economy (5% of $800 billion), and instead of pushing the money out faster they are pushing for a second stimulus package.

April 2011 I go home. I will technically be "homeless and unemployed" as I will no longer be in the service and getting ready to tap the GI Bill. Can't help but wonder if I am coming home to a totally different country by then.

At least the revamped GI Bill is pretty badass, it actually pays for college now, not just the tuition.

April 2011 I go home. I will technically be "homeless and unemployed" as I will no longer be in the service and getting ready to tap the GI Bill. Can't help but wonder if I am coming home to a totally different country by then.


How much time in Lum?

Little over 8 years when I get out. I joined originally to get the college help so I could finish up my bachelors and maybe do some post grad stuff. The fact that now the GI Bill will support your living expenses in addition to tuition is more than I could have hoped for. Its going to be nice not having to work full time AND be a full time student.

http://d.yimg.com/a/p/rids/20090709/i/r3356552547.jpg?x=400&y=340&q=85&sig=_dbUibuGcHSmlg8QoaQV7A--

Talk about stimulus... BAM!

Yeah I'm hoping to either get into one of the Army's grad school programs so I can save my GI Bill for my kids, or use it for Grad school. Either way it's damn nice.

For those unfamiliar with it, it used to be $50,000 to be used over the space of 36 months of schooling (4 years of 9 month school years)

Now, it's 36 Months of tuition rates at the highest rate for an in-state school in your state. and a living allowance equal to an E-5 pay grade's housing allowance (usually in the 1200-1600/month range) and then a yearly $1000 for books (I think I'm fuzzy on that one)

So basically you get a free ride scholarship to college now.

Oh and now if you stay in a certain amount of time you have the option of transfering it to your spouse or kids too

That is an excellent upgrade from my days, which was the Nam era Bill.


And Osg, the video that picture has been taken from was played and replayed and replayed some more on the local talk shows, and there is too much gray area in whether he was looking at the ass or looking at the step as he was reaching to give a hand to the lady behind him.

But hey, he would be the first politician to look at some ass, I guess.

Hey at least he didn't pull a Clinton and bang a fatty

Stimulus = awesome for the people who bribed their way into it:

http://www.reuters.com/article/wtUSInvestingNews/idINN1426244020090714

(tl:dr;? Goldman Sachs to US public -> Thanks, suckers)

And meanwhile back on the home front the tea parties showed what evil lurked in mortgage write downs for struggling homeowners.

The only thing I see the stimulus affecting me is the amount of people purchasing energy improvements which has made my business BOOM with the tax credits and regional refunds. The pre Bush era 07' credits have nothing on the credits that are pulling people to upgrade there home energy bills today.

There are so many easy ways to make money, but Obama just made the energy conservation industry like the tech boom. people can keep trying to do the same old thing or evolve with the times and prosper,is all Im saying the stimulus is working to move wealth.

I saw the talk of military people looking to return to school, so I'm using it as a flimsy pretext to point to a scholarship program that I recently got an award from: http://www.asee.org/fellowships/smart/

Tuition payment, book stipend, monthly payments, etc. Have to be a sciences/engineering/mathematics major to apply for it I believe, but its a great program for all levels of education and (assuming you win an award) they'll set you up with a job at the end of it.

I saw the talk of military people looking to return to school, so I'm using it as a flimsy pretext to point to a scholarship program that I recently got an award from: http://www.asee.org/fellowships/smart/

Tuition payment, book stipend, monthly payments, etc. Have to be a sciences/engineering/mathematics major to apply for it I believe, but its a great program for all levels of education and (assuming you win an award) they'll set you up with a job at the end of it.


Good to hear about this. We really, really, REALLY need to get a larger number of American students interested in these fields.

Stimulas package did jack and nothing for me, well unless it allowed the company that places folks in Microsoft to hire me.

Guess I shouldn't speak against something I'm not sure of now that I think of it. lol