Illusion of Recovery – Part I: Print and pray has officially failed - Eric Janszen

[FRED]

Re: Illusion of Recovery – Part I: Print, spend, and wait has officially failed - Eric Janszen

I guess I am a bit confused when people say we need "construction" projects vs. SERIOUS "repair/maintenance" projects. I think we need the latter. Clearly the bridge situation is silly- hundreds (I believe) of bridges have sub-standard safety ratings. Let's fix them- all of them. That would have put people to work for sure, and for an "ROI".

Energy "efficiency"- I still think the boring stuff will turn out to have the best ROI: insulation, shade trees (in the south- kind of puts a damper on solar panels, doesn't it...)

Obama could have sealed re-election had he done the stimulus package right. Instead he transformed it into pork.

Road and bridge maintenance is a fixed cost. Road and bridge maintenance supports the existing level of infrastructure for commerce, for the movement of people and goods at a fixed cost and value to users in the economy. If the infrastructure is not maintained, the costs of maintenance decline but the costs to uses rises as the value declines.

New infrastructure, on the other hand, is a variable cost that lowers the cost of movement of people and goods in the economy.

Michael Hudson and others have suggested using the increase in property values of property that benefits from new infrastructure by capturing part of the increase in asset values in property taxes, and using the additional tax revenue to finance the building and maintenance of the new infrastructure.

[Slimprofits]

Re: Illusion of Recovery – Part I: Print, spend, and wait has officially failed - Eric Janszen

-1

Here we are in the midst of an evolving financial crisis caused by government interference in the free market, and we have people arguing that free markets and people who believe that free markets are the best (though not perfect) way are the problem.

Free markets are the best approach we have. Free markets made the West wealthy, and freeing up their markets to some degree has allowed China to bring more people out of poverty in the past couple decades than any time in history.

If there is any benefit to government interference in the free market - and I'm not sure there is, but perhaps there could be - then we are way past that degree of interference.

-2

As has been pointed out several times over the last few years:

What you're really saying (when we incorporate reality into your idealistic viewpoint) is that any attempt to end the capture of government by private banking entities that only want to be left alone will be met with cries of interference in free markets.

The guy down the street that aims to start a new business and has to deal with mountains of red tape is not the same as the Lord Blankfein's of the world capturing the levers of govt power and creating a Public Private Partnership (the National Homeownership Strategy) for the purpose of increasing by the millions the amount of people making mortgage payments.

[dcarrigg]

Re: Illusion of Recovery – Part I: Print, spend, and wait has officially failed - Eric Janszen

The Panama Canal was started privately, wasn't it? I believe it was technical issues and disease, not lack of govn't involvement, that initially doomed it. Once they solved those problems, they got it going. If it had been private property they'd still be collecting revenue from it and any debt taken on to build it would have been repaid. (if not nationalized).

I like the interstate system. But you have to admit that w/o it we might not be using nearly as much energy today. We truck things now that could be sent by rail. We neglected the rail system becasue of it. Local governments neglected public transportation and instead built their cities around interstates that were already there or planned. It caused the virtual end of new smaller cities where people live closer to things in favor of enlargement of existing cities into massive traffic jams and sprawl.

Hoover Dam. 1. Couldn't be built today because of govn't environmental regulations. 2. Some criticize it as an inefficient malinvestment of money/water/energy to otherwise marginally inhabitable areas. Obviously there was other land elsewhere in the US to grow crops, live, work, etc.

These things seem to always lead to various distortions and unforseen consequences. I have to think that creative ways to unleash those with money to start businesses here and create their own infrastructure would be more efficient.

At some point one has to wonder if wealth-envy is shooting us in our own foot and actually destroying the middle class we try to prop up by penalizing business.

We need to just agree that some pieces of public infrastructure were/are good for a country. Next someone will argue that we should privatize the air force or something. It's absurd.

One cannot speak in hypotheticals about what would be if governments never existed or did anything. It might be a paradise in the mind's eye, but the 'what-if' idealism of a libertarian (or anyone else for that matter) is not grounded in reality. Nobody can know what would happen would there have been no Panama Canal built by the .gov or no interstate system etc.

I'll not buy the argument that the private sector would somehow make a better Panama Canal. If left to "market forces" it would never get built. Businesses who saw the advantage in more expedient shipping were thrilled that the nation built it, I guarantee. There are also geopolitically strategic reasons for needing that canal.

That's why the military got the job done. The army corps always has done these bigger jobs. Companies like Elliott Dredges certainly worked to complete the project, but on government contracts. This is okay. It is not the end of the world or a terrible distortion of a perfect market. University of Chicago microeconomics is not the answer to all of the woes of the world.

When has a private company ever taken on a large, somewhat risky project without government leading the way? Libertarian tendencies lead toward the explanation that the whole reason entrepreneurs should get oodles of cash is that they take risk. Yet one has to see how risk-adverse the private sector really is. This is also okay. Governments exist as the defenders, insurers and everything-else of last-resort. It can partner with the private sector to get things done. They can actually even work together towards a common goal (believe it or not). There is no dichotomy between private and public sector survival. One does not benefit as the other dies. I promise. Efficient government, sensible government, etc. are things one can argue for. Arguing that it should be done away with entirely is foolish and absurd.

Let me put it this way: when the $#!t hits the fan, will citizens want the U.S. Army or a Chicago School economist and a talking head from the Cato institute backing them up? Does anyone think that the average private weapons cache would even be enough to stop a single old surplus T-44? Thought games to prove how absurd it is to argue to privatize everything are easy to play.

As to your specific points, Sal&Richard:

#1: The panama canal was never a private project. The project, began by the French after the Suez Canal success, was taken over by TR's signing of the Hay–Bunau-Varilla Treaty. It may have been questionable whether Panamanians ever consented after they declared independence, but it was no private company that did this.

#2: Without the interstate system we would surely expend less energy today. We would also be a lot more urban and communiarian (as urban dwellers generally are on average). Moreover, trillions in GDP would be lost. But yes, things would probably be a whole lot more 'sustainable' as the progressives see it. Who knows what would happen in that world. Ask Russia, they never got a proper one built...it would probably look a lot like that, only with far more people.

#3: Sure, the dam probably wouldn't be built today unless it had major public political support over environmental concerns. This is likely an issue that will have to be dealt with as we move forward. I personally support the production of pebble bed reactors which suffer the same fate. At some point we need to go with what works and not what is politically expedient. But it was built when both the power and the work were needed. It could be done again today.

#4: Now you get into "wealth-envy." I'm sick of this argument. It literally sickens me. Whenever one stands up for not the poor (food stamps; welfare etc.) and not the rich (bailouts of banks/insurance cos./reductions on estate tax etc) one is made out to be "envious of wealth." What if one is not envious of wealth but rather valuing of work?

#5: What if I don't personally want billions? What if I want the middle class to be able to make twice what they do if they work hard, earn it, and don't inherit a trust fund? Am I a communist? I don't think so. Take the concept of wealth envy somewhere else. One may find sympathy for it in the house of lords. I'll not honor it on this side of the pond. What if it's my personal belief that a soldier is worth 10 tax-dodging bankers and should be paid accordingly? This I see as the grand battle facing us as middle class citizens in America.

There are many talking heads that believe it's okay to 1) get rich by managing a corporation to the brink of bankruptcy, 2) destroy 80% of all shareholder value, and 3) rob people with misleading and fraudulent products. They argue that the "talent" is worth the investment. Then they say that the public must bail them out (and they donate to make sure the politicians hand out the public money). Then they say the money they made shouldn't be taxed because they 'worked hard'. Then they argue that their children should be rich in perpetuity from generation to generation so we must lower the estate tax. Their children then never work a day in their lives and continue to fight for lower taxes on their trust funds. It's a sad joke.

Calling it wealth envy is akin to saying that an anti-cannibalist has flesh envy. It's a broken system and a bad idea. Many among the richest in the US have been saying the same thing. But the talking heads say, "what do billionaires know about what's good for them?" It's a sad, sad joke.

I will fight the nobility as our forefathers did. There will even be allies among the billionaire class that fight the nobility. They will not win.

Re: Illusion of Recovery – Part I: Print, spend, and wait has officially failed - Eric Janszen

I have to wonder how much additional energy useage was caused by trends in lifestyle and politics during the past 30 years or so.
- much bigger homes require more energy (thanks to govnt inspired credit bubble)
- road building as a method of economic "infrastructure" led to more driving rather than public transit and short commutes to numerous smaller citeis that pop up w/o high speed road access.
-cheap gas inhibited need for fuel efficiency.
-lack of emphasis on oil self-sufficiency for strategic reasons led to preference of buying cheap foreign oil rather than adjusting to limits of our own supply of energy sources.
-reliance on middle eastern oil and other aspects of globalism led to hidden costs (a large standing army) and involvment in foreign entanglements.
-mass immigration and lack of enforcement led to population increase and resulting higher demands on domestic energy sources.
-consumption culture led to more energy consumption.
-A complete ignorance of the fact that "cheap" foreign oil and goods and "cheap" domestic services are subsidized by the government through higher defense and transfer payments as domestic workers earn less, require more aid, and immigrants also take a bite. That $20 barrel of 80's oil came courtesy of a $2B carrier and $5B of escorts and such standing guard over the straights the tankers came through.

We exported oil during WWII and fought a far-flung war on a massive scale with our own oil. With massive increases in efficiency since then (a 300hp car can get 30mpg highway) there should have been the ability to remain self-sufficient. Money for energy would stay here in our economy.

Re: Illusion of Recovery – Part I: Print, spend, and wait has officially failed - Eric Janszen

The Panama Canal is terrible. It benefits nobody. The Hoover Dam sucks too. So does the interstate system.

Small business!!!! Innovation!!!! Bureaucracy!!!!

Further catch phrases containing no "solutions"!!!!

Let me guess, your other tab's open to reason.com. Even they wouldn't hate on the Panama Canal. Ideology is getting thick these days. I think libertarianism will be the new version of marxism. Blind faith in its power grows by the day.

The Panama Canal was started privately, wasn't it? I believe it was technical issues and disease, not lack of govn't involvement, that initially doomed it. Once they solved those problems, they got it going. If it had been private property they'd still be collecting revenue from it and any debt taken on to build it would have been repaid. (if not nationalized).

I like the interstate system. But you have to admit that w/o it we might not be using nearly as much energy today. We truck things now that could be sent by rail. We neglected the rail system becasue of it. Local governments neglected public transportation and instead built their cities around interstates that were already there or planned. It caused the virtual end of new smaller cities where people live closer to things in favor of enlargement of existing cities into massive traffic jams and sprawl.

Hoover Dam. 1. Couldn't be built today because of govn't environmental regulations. 2. Some criticize it as an inefficient malinvestment of money/water/energy to otherwise marginally inhabitable areas. Obviously there was other land elsewhere in the US to grow crops, live, work, etc.

These things seem to always lead to various distortions and unforseen consequences. I have to think that creative ways to unleash those with money to start businesses here and create their own infrastructure would be more efficient.

At some point one has to wonder if wealth-envy is shooting us in our own foot and actually destroying the middle class we try to prop up by penalizing business.

Re: Fed gov debt >> 6%

I have been searching for this figure for a while now. If Fed Govn't debt is indeed just 6% of total debt, even with it so high now, I can see why some are forecasting deflation even with massive deficits. At least for a while. If you borrow $1.5T but an equal amount of debt is removed from the private sector, it would seem to keep a lid on inflation.

Re: Illusion of Recovery – Part I: Print and pray has officially failed - Eric Janszen

Any proof increased govn't spending on infrastructure and energy wouldn't just be more boondoggles like that in California where $535M was "invested" in a green company that recently closed its doors? Or merely given to political cronies and unions and other supporters, as long as it sounds beneficial?

Why is this method deemed superior to the other side of the coin? ("spending" via tax cuts for businesses, incentives to expand, lowered regulation, etc?)

Make no mistake, business is corrupt and imperfect. But government seems worse.

Wouldn't energy tax increases provide the incentive to make alternative energy financially viable while also raising revenue? I doubt any "serious" person thinks govn't can centrally plan that better than private enterprise.

What about local incentives for businesses to locate outside of major metro areas where traffic jams consume massive amounts of energy in wasted time spent idling in traffic? In the internet age there's minimal reason to commute an hour from the suburbs to a centrally located office.

Under the theory that cutting deficit spending would be a bad thing, (no doubt it would be painful), where does it end? If it's possible to borrow and spend one's self into prosperity, why aren't we better off with a $14T debt vs the $4T or whatever it was when Ross Perot had his own charts/graphs out 20 years ago?

What exactly did we get for our $10T "investment"?

How did the US see such growth 1870-1920 without massive federal deficit spending?

I still can't see how globalism benefited any American who didn't a) have money to invest, b) have an immigrant-proof job, and c) had a job in the FIRE economy , and Yes, you can "consume" more items for less. But when your real income is fallling doesn' that offset the benefits and then some? Isn't the over emphasis on consumption in our economy a result of this? Cheap consumer items plus easy credit, or deficit spending on massive programs plus the ability to borrow cheap by the government. Sounds like the same things. Huge distortions that we have to now pay the piper for.

If we were running $1.5T surpluses due to small government does anyone really think we'd be facing potential disaster? How is more debt the solution to too much debt? Isn't the a big culprit massive transfer payments to unproductive individuals, (and wars) with the resulting distortions that causes in the economy?

[aaron]

Re: Illusion of Recovery – Part I: Print, spend, and wait has officially failed - Eric Janszen

"They" did not put squat into the real economy. They spent 10-20 trillion dollars on the financial economy while they spent what, a few hundred billion on jobs?

Unfortunately, it will require a massive public works project to make a dent. How much would it cost your household to upgrade the wiring, insulation, repair your house, switch to cheaper energy, etc.? It would take me about 1 year's salary to really make long term changes to an old house. I would guess it takes the same amount from the government to upgrade our country.

That would be 14 trillion.

Take 14 trillion and use it to upgrade the country's energy and transportation infrastructure. With a solid plan, the bond holders of the world would tolerate it. And, if they do not... they would have revolted anyway based on our current trajectory.

We are going to have a crash
We are going to have misery and inflation

But, it would also be nice to have some infrastructure out of the deal.

[Mn_Mark]

Re: Illusion of Recovery – Part I: Print, spend, and wait has officially failed - Eric Janszen

+1

In the new Cold War, I'm less worried about China's "communism with Chinese characteristics" than I am of America resurrecting McCarthyism, and the other attendant problems we had at home. I'm still looking for exactly what form that's going to take, but knee-jerk free-marketers seem to be the dominant candidates in that role at the moment. In any conflict, the real key is not just competing in the struggle, but doing so in a way that doesn't diminish your own nation. To do THAT requires an ability to look objectively at the strengths and weaknesses of one's own arguments, and that is not something I frequently see in the "free markets are always best" crowd.

-1

Here we are in the midst of an evolving financial crisis caused by government interference in the free market, and we have people arguing that free markets and people who believe that free markets are the best (though not perfect) way are the problem.

Free markets are the best approach we have. Free markets made the West wealthy, and freeing up their markets to some degree has allowed China to bring more people out of poverty in the past couple decades than any time in history.

If there is any benefit to government interference in the free market - and I'm not sure there is, but perhaps there could be - then we are way past that degree of interference.

[yernamehear]

Re: Illusion of Recovery – Part I: Print, spend, and wait has officially failed - Eric Janszen

Had ROI-based construction programs been started by the end of 2010, without question the following chart of construction spending would look different than it does today.
Public construction spending is below re-recession levels, peaking at the end of the recession in Q1 2009. Non-residential construction spending after recovering to 2006 levels in 2009 remains there today. Residential construction spending regressed to 1996 levels during the recession and has not recovered.

Hard to imagine a similar picture today if wide-ranging transportation, energy, and communications infrastructure project were underway.

I guess I am a bit confused when people say we need "construction" projects vs. SERIOUS "repair/maintenance" projects. I think we need the latter. Clearly the bridge situation is silly- hundreds (I believe) of bridges have sub-standard safety ratings. Let's fix them- all of them. That would have put people to work for sure, and for an "ROI".

Energy "efficiency"- I still think the boring stuff will turn out to have the best ROI: insulation, shade trees (in the south- kind of puts a damper on solar panels, doesn't it...)

Obama could have sealed re-election had he done the stimulus package right. Instead he transformed it into pork.

[Thailandnotes]

Re: Illusion of Recovery – Part I: Print, spend, and wait has officially failed - Eric Janszen

Thanks for your efforts in consistently replying to the libertarian talking points. A lot of the time I see them and get annoyed, but just don't have the energy or don't want to bother. Keep fighting the good fight.

I'll second that.

The fierce opposition to building the first sewer system in NYC is a fascinating subject. Only socialists would suggest the public foot the bill for such a boondoggle. Meanwhile back in Milwaukee where they had one of the first, the infant mortality rate was cut in half. Amazing the term "sewer socialist" stuck.

[Scot]

Re: Illusion of Recovery – Part I: Print, spend, and wait has officially failed - Eric Janszen

The Panama Canal is terrible. It benefits nobody. The Hoover Dam sucks too. So does the interstate system.

Small business!!!! Innovation!!!! Bureaucracy!!!!

Further catch phrases containing no "solutions"!!!!

Let me guess, your other tab's open to reason.com. Even they wouldn't hate on the Panama Canal. Ideology is getting thick these days. I think libertarianism will be the new version of marxism. Blind faith in its power grows by the day.

Better than the blind faith people put in the state. And it's less dangerous, too.

A libertarian will admit he doesn't know what the "solutions" are. A statist doesn't know either, but that won't stop him from arrogantly shoving them down everyone's throats.

[Chris Coles]

Re: Illusion of Recovery – Part I: Print, spend, and wait has officially failed - Eric Janszen

+1

In the new Cold War, I'm less worried about China's "communism with Chinese characteristics" than I am of America resurrecting McCarthyism, and the other attendant problems we had at home. I'm still looking for exactly what form that's going to take, but knee-jerk free-marketers seem to be the dominant candidates in that role at the moment. In any conflict, the real key is not just competing in the struggle, but doing so in a way that doesn't diminish your own nation. To do THAT requires an ability to look objectively at the strengths and weaknesses of one's own arguments, and that is not something I frequently see in the "free markets are always best" crowd.

We are not operating within what are described as free markets; we are trying to live as though free when in point of fact, we are all living in a medieval style feudal mercantile economy. For those interested, try chapters 4, 5 and 6 of The Road Ahead from a Grass Roots Perspective.

Turning to the point raised by ASH earlier:

From what I understand, labor had a lot more pricing power in the 70's and 80's, so it was able to secure nominal wage increases to help offset inflation.

Here in the UK, when the drive to withdraw local grass roots prosperity into the FIRE economy started to become very visible and the price of fixed and paper assets became the driving force for the new FIRE prosperity; the true value of wages started to decline. But another tipping point was also reached with the vast government inspired industrial ventures, British Coal, British Steel, British Rail, British Leyland,....... all started to show the insidious effects of a bureaucratic stifling of free enterprise by bringing together many individual companies to form vast conglomerates and a social war broke out between, the employees who were watching their standard of living decline and the "Establishment" employers who had to keep a lid on wages to enable the continuous illusion of prosperity for their defunct, grossly unprofitable enterprises. The 1972 - 1974 Miners Strike here in the UK was a very good example: http://www.agor.org.uk/cwm/themes/ev...74_strikes.asp Followed a decade later with the definitive Miners Strike in the 1980's.

Feudalism demands that wages are kept as low as possible to prevent natural competition between what would otherwise be free enterprise employers each freely competing for both the customer and the employee. You need both for a successful company within a freely competitive economy. More success brings benefits for both the company and the employee; the former in more profit and the latter in the form of higher wages and thus greater prosperity.

Greater prosperity brings a natural increase in wages that in turn again naturally inflate the economy.

In an uncompetitive economy, where feudalism reigns, the opposite occurs, when the owners of the now very large and potentially unstable conglomerates try every way possible to prevent wage increases; as they will destabilise their business model. In turn again, taking their control of government institutions towards government inspired moves, raising interest rates is a very good example; to "Prevent" inflation taking off.

In a true free market, changes in worker income have a stabilising effect. You may pay more, but have to remain competitive. In which case, it is the competition between individual suppliers to the natural economy that dictate the rate of sustainable inflation.

I remind you all that we have not been living within a naturally free, competitive economy, for many decades now.

[aaron]

Re: Illusion of Recovery – Part I: Print, spend, and wait has officially failed - Eric Janszen

China is getting wage price inflation. In that sense, perhaps their "bubble" is not so insane at all. They are inflating mortgages away like America did in the 1970's. The U.S. came out of that OK (could even say good). It is something to think on.

[astonas]

Re: Illusion of Recovery – Part I: Print, spend, and wait has officially failed - Eric Janszen

Thanks for your efforts in consistently replying to the libertarian talking points. A lot of the time I see them and get annoyed, but just don't have the energy or don't want to bother. Keep fighting the good fight.

+1

In the new Cold War, I'm less worried about China's "communism with Chinese characteristics" than I am of America resurrecting McCarthyism, and the other attendant problems we had at home. I'm still looking for exactly what form that's going to take, but knee-jerk free-marketers seem to be the dominant candidates in that role at the moment. In any conflict, the real key is not just competing in the struggle, but doing so in a way that doesn't diminish your own nation. To do THAT requires an ability to look objectively at the strengths and weaknesses of one's own arguments, and that is not something I frequently see in the "free markets are always best" crowd.