Sunday, June 27, 2010

Statement on Economic Theory

I am going clear into the ozone here with the current Post, but so lays the state of the nation. I will discuss the possibility of closed containment of the economy. This is simply a Statement that natural Production will produce its own finance and resultant Consumption. Any artificial infusion of Production factors–cheaper materials, cheaper or greater finance, lower or higher Transport Costs, greater or lesser taxation, or excess advertising–will lead to artificial levels of Production and Pricing of Product. There are several generative factors which negate any potential deflation of Product Pricing, as all Supply Costs have risen to adjust for the previous maladjustment in Production and Pricing. This means that the only form for deflation to take is consistent over-Production, which can only come into being by a suppression of the labor Costs of Production; where the natural Consumption levels are threatened.

Many may not understand What I am talking about, but it basically states that Stimulus is actually counterproductive. It ruins the repayment system of Production, creating false centers of Profitability within a Production decline. The entire sentiment states that the false centers of Profitability are over-financed, leading to misplaced investment and Production. The higher Pricing for all Product generated leads to suppressed Production in other sectors because of the reduced Consumption due to Pricing. Stimulus, especially Tax Cuts for Business, carries exactly the wrong message and effect on the economy. Those Sectors most cautioned to restrict their Production by natural Pricing mechanism are granted false finance, while Those who have maintained their natural Production are penalized or bribed to undertake over-production activities. Inflation naturally arrives as soon as Consumption shows any sign of recovery.

Any Economist will tell you that the only true way to clear over-production remains a fall in Product prices. Business Tax Cuts of any type forestall such a drop in Prices; instead insisting on a maintenance of Pricing, which can only reduce Consumption and employed labor. Stimulus only pays for long-term minimization of both Production and labor Costs. One has to make the Call at times; it is actually very rare that benefit to Business is actually benefit to the economy, and where there is divergence, someone must speak. Business Profits maximization stands as a very poor indicator of good economic policy. lgl

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