I would like to apologize to all eminent personnel, before I enter into this rave. I am not a Saltwater economist, or even a Freshwater economist; maybe I can be classified as a River Rat situated alongside a slow-moving brook. Some things I do know, one of which is that fiscal expansion must affect Resource and Commodity pricing adversely–this means maintaining a higher Price than would be otherwise natural; the Trick here being this will occur whether there is over-employment or under-employment of economic assets. Ricardo has little to do with that, except for allowance of foreign Suppliers to attain some level of economic Profits. Paul Krugman remains correct in his disbelief in the ‘intertemporal maximization’ which go on in these models; a sound rationale for this being that scaled Averages are a poor constraint for any graphical model. I disagree with Paul in his estimate that Public Spending will not crowd out Private Investment, but surely never for a reason suggested by the Freshwater economists. My Take on Public Spending is it presents an avenue of safe Investment for excess hoards of Cash at good rate of Return, which would never be invested at all if that rate of Investment rested upon Consumer Demand or the Supply of Product. I suggest that there would be less Private Investment at lower rates of Return, if Government through Treasuries didn't allow Investment of Profits at relatively high rate of Return. Remember that manipulation of Treasury Paper and its rate of Return is a political process controlled by Fed and Congress, and as consequence, Private Investment can insist on a higher rate of Return than that of the normal Risk based on market forces; Private Investment here cut off if the higher Profits are not realized, all because the safe harbor of Treasuries. This naturally curtails significant Private Investment because the added Risk Value cannot be paid by much of the proposed economic effort.
The first thing to be said is that the previous paragraph should have been much shorter. The second element must be a proper definition of discipline. The later must be flexible so that it bends under impacts, but does not break. I will interject this link here to indicate that I personally possess little discipline or logical pattern in my own efforts. I say this because the material in the Post with its own links should perhaps be read before my own advocacy of radical ideas. I start by suggesting all Concepts in any academic discipline should be reviewed almost continuously for relevance within the current Reality we face. Now I will turn to my main proposition.
I will start with the fact that We have a Social Security Trust Fund which is huge, but will run out after a period of years. The Trust Fund needs better assets than Treasuries with a Bernanke dictated rate of Return. Major Corporate Buyouts are all the rage amongst the Investment community, and huge commitments of Cash have not only been quoted, but raised. It is no secret that the Investment banks have run into the ground once, and show every indication that they will do so again. My idea is that the Fed has to save these banks anyway, and Congress has the power to dictate that these Banks under duress must be purchased with federal Treasuries held by the Social Security Trust Fund. The later gets a much higher rate of Return for their Investment, the Fed has to supervise these banks anyway, and Congress can also forbid Quantitative Easing so that the viability of these institutions must endure the stresses of the natural markets. As an intuitive aside, the proposed legislation should forbid any Publicly-held Property from granting any Salaries, Benefits, Bonuses, or Gains which would pay Employees better than the President of the United States–just a Thought! lgl