Monday, January 24, 2011

You can get Angry now!

One should not pretend to understand all of this, but One should integrate that the Austrians are right about Interest rates, and their ability to act as a Governor placed upon Consumer Prices. Keynes basically argued for replacement Government Spending to replace loss of Consumer Spending in deep recessions; it took the Monetarists to actually propound that you could get the same effect by monkeying with the Interest rates. I think Keynes and the Austrians were right, but only within limits. Keynes assumed one could increase Government Spending greater than the replaced Consumer Spending, which could not be done without long-term ingrained Inflation. The Austrians assume in error that Consumer Spending cannot fall below a level which will generate a sound economic signal system, which it can. Thus, we have three Views of the economy, all of which are in some ways wrong.

I promised myself I would not enter into Surge pressures on the economy, which will alter Consumer Spending totally outside the restraint practices of the Austrians. They assume every natural effect has a natural economic response, which is assuredly not the Case. Monetarists actually see nothing but the Surge effects of action upon the economy, ignoring the natural flow which cannot be sustainable suppressed over a long-term Period. Keynes recognized the Surge reductions in the economy, but would not admit that Government Spending could not exceed natural Consumer Spending without equal distress to the economy; all within a context where Consumer Spending was considered natural at the height of the last Boom, a completely farfetched illusion.

No Government action is better than misjudged Government policy, so the Austrians are correct on this Score. This is not to say that no Government policy is economically sound for it is not! My economic view differs from all three cited. Central to my View is the idea that one of the real reasons for the lasting impact of Recessions lies in the unequal impact they have on the fortunes of the economic participants. Government policy should be taken to ensure that all Participants share in the retardation aspects, as well as in the Booms aspects. This means higher Taxation for the Profits which do exist, and not necessarily by higher Tax rates. My Thought of the Day is that for every 2% increase in the Unemployment rate, that a Surtax of 10% should be placed against all viable Deductions, Exemptions, Credits, and other Tax remissions which are not Personal in origin–the later like Personal Exemption, Dependent Exemption, Household College credits, etc. This would be applicable to both Individuals and Businesses. This not only has the benefit of paying for Government Spending and reducing the Deficit, but also insists that all economic participants work harder to maintain their own personal standards of living. lgl

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