Sunday, December 13, 2009

But, but, but. . .

I have always felt the need to interject myself into the serious discussions of other men on important subjects, and Brad Delong presents these ten paragraphs; granting me the ability to act like an ass, especially as Brad gave himself two of the paragraphs. The distinguished authors are basically discussing the Credit freeze and the Unemployment issue; most definitely giving Us a creditable account about the bind in finance and the lackluster potentialities for Employment. Like any good Groupie, I feel the need to express myself; so here is my contribution:

Paragraph 11:
The real roots of the current Recession trace to the extension of Stimulus when None was needed; i.e., the Bush Tax Cuts. The American economy was struggling in 2001, but consisted of a natural struggle where the Capital was brand new, and already purchased; this meaning that the elements providing the previous Boom–a vast expansion of Capital Goods and Consumption–were in for a period of reduced Sales. We could have sat out that reduction, and kept the effective Tax structure then in place. Instead, We opted for Stimulus; the resultant pressure on Resource pricing and Cost of Consumption brought Us further constriction and higher Unemployment. The second set of Bush Tax Cuts did it again; fostering a second round of Inflationary pressures exactly as the economy was working out of the Government-inspired difficulties. The current Recession is now caused by the Government pressure in earlier years to commit everyone to exorbitant Home ownership, as if there was something wrong with the large Renter class; one of the effective Means of Capital aggregation existent. The Government pressure was so great and wrongly placed that there was more Housing construction priced greater than $500k, than there was Housing priced less than $200k; while most Economists could have assured that most Household could afford the Debt Service of only about a $230k mortgage. We are now talking of a great inflationary Stimulus at exactly the time when that Debt Service capacity has declined dramatically. Any Stimulus effort will likely destabilize more Households, than it will provide relief. The correct Solution seems to be higher Business taxes, as Business will not utilize greater aggregation of capital for expansion in an era of declining Consumption.

I like that paragraph, as it even makes me sound like a real economist, though most of that profession would call for a Witch-Burning. I would admonish All, as did my mother, and tell them to play nice, and not set their playmates on fire! Remember that the Truth will set you free, or something like unto that. lgl

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