Changes on the Wind

I am sure that Greg Mankiw regrets his impulse to challenge Paul Krugman in the Betting Pallor. Greg really does not want to focus a large sum of his own wealth on an indeterminate issue which will always be contested. Economic models say exactly what the Authors want them to say within an estimated range of 8% of variance, a Condition non-conducive to settling Bets. Tyler Cowen’s doubt of the efficacy of a declaration of investments and assets resounds through the economic community, especially as Economists could be compared against the success of other Investors, and thereby change the matrix in which Investment is made. I actually doubt that Few vary from Tyler’s conservative investment program, as Economists do not make their Income from Margin Calls.

Some people think We are in the Best of Times, some the Worst of Times. Something can be said for either View. The trouble is that Main Street tends to ignore all distinctions, especially with the advent of modern Consumer Credit. It is becoming almost unfashionable to discuss the difference between real Wealth, and over-ample use of Credit Cards; indicative of increasing Life by Credit. Business borrowing increased by about as much as Consumers cut their Credit expenditure in the last Quarter. This means that Business is still tied to a format of convincing Consumers to overextend, a down the road hazard. It also suggests that expansion in the American economy may be limited, as the American Consumers average Income is limited.

The real trouble today comes in how to return Productivity to its previous levels. One, though, first has to ask if it makes sense to return Productivity to levels which consume excess amounts of Resources, all based upon Credit-finance–both in Production and Consumption. A downside production schedule will led to more Unemployment, but Baby-Boomer retirements will make a vast difference in 5 years. It might be best to establish effective Training and Education programs to reach high efficiency in production methods before that later time. A massive push to rev up the current economy will bring major Resource disruptions and Inflation, when lack of trained labor will bring on eventual natural decrease–the entire Turnaround functionally occurring within a decade. Neither Obama or Wall Street seem to recognize the speed in which the American Way of Life will alter, simply because of shortage of labor expertise. lgl