Deficient Economic Theory

Craig Depken provides an interesting Post on the effects of Price-setting by legislative action. He gives the Conservative traditional view of legislated prices, an alignment which in striated situations will apply (condensed market of limited volume with high variable Cost spread). It is clearly not the case in the presence of varied Cost markets where achievement of service possesses extensive routes with large Consumer volume (Case in Point: the Energy Cost of the trip between Grand Central Station and Wall Street with projected Consumer traffic v. the route from the Harbor to the Bronx). Most legislative action insists that the longer, less-traveled Routes be subsidized by the greater volume of the shorter, more traveled and cheaper Cost Routes. Conservatives would acclaim that this rerouting of Corporate Profits is a Government invasion of Property rights, but lacks validity when Companies themselves engage in such practice to engender higher Volume sales. Governments only claim for themselves an Accounting procedure to aid the Poor, which the Company utilizes for itself to attain more sequestered Profits.

Ben Bernanke proves that he has greater intelligence than most of his Critics. Keynes himself was a brilliant Economist of great worth, who failed only in his acceptance of the principle of continuous economic stimulus. Such Aid extended beyond two economic Quarters will automatically transform into Inflationary pressure past this Point, and will even start in the transformed condition, if Capital Goods have already returned to 60%(of the interum loss) of their pre-Recession value before interjection of the stimulus. Permanent Tax Cuts will not present any economic stimulus, even in the Short-term, beyond simple Investment of the saved Revenues; where they serve as little value because of their distributed array (insufficient for real Capital construction), but demand an immediate draft of Return from the Economy. The Costs of Capital concentration for Investment always erodes the Short-term benefit. The Short-term and Intermediate effect of Permanent Tax Cuts will insist on deficit Government spending, while the Long-term effect will always be the implementation of adverse taxation elsewhere.

This Post will fulfill the desires of the most masochistic of Readers. The Housing market is in the dumps, and the Outlook for rapid improvement does not exist. Unsold Homes will have to be cut in half before Realtors will again start to smile. That level of Sold Homes cannot be reached until the Mortgage markets can again establish a flow of Cash. A real drag on the entire Process is the vast numbers of Homeowners who cannot get their equity out of their homes, and the real dangers such presents to their personal Consumption patterns. I only wish Economists would recognize what got Us to this place: lax Mortgage lending practice; and stop preaching that what will be a curative would be an extension of such lax practice. lgl