Monday, October 04, 2010

Try Ridiculous if All Else Fails

I may not intrinsically agree with all of this article, but Arnold like always makes an excellent statement. I am an old Hand at this stuff, and believe all economic Downturns come from mis-structure of the Profit distribution. When participants in the economy do not receive their proper allocation of Wage and Profit, then they do not maintain their normal Expenditure patterns; this leading to further shortage of normal Profits distribution, all leading eventually to Production failures. That Statement is easy to spout, but not as easy to prove. This stands as the base insecurity in the economy: everyone knows there is something wrong with the economy, but no one can precisely point out the trouble with effectiveness.

I like this Piece, because it made me reconsider my precepts. Robert Higgs says that Consumer Demand has been growing nicely, and cannot be the source of the Downturn. He has a Point which is hard to contradict. He relies on belief that the Downturn comes from the threat to private investment, which has declined. I will grant him this Point. The Question to be answered is what caused the reduction of private Investment. I think the source of the reduction came from two activities, on which most economists will not agree.

The first is the rise of Property taxes and Utilities Costs. These forced small firms to raise their Retail prices some 18-20% higher than the rise in Production and Distribution Costs increases. They lacked the volume and Cost-shifting capacity of the large Retail outlets, and competition forced small firms out of the markets. The image of Sole Proprietorship became tarnished and unprofitable–Investment left the small, independent Concerns; the greatest source of Employment. The second disaster was the Bush Tax Cuts. They insisted that there must be a continual growth of Government debt in magnitudes never before seen; this due to the great growth of Government Spending. Private Investors found a source of low-Profit, but absolutely Safe, investment. Where Have all the Flowers Gone?–to bankroll the Government everywhere. lgl

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