Ed,
Everything that is being done is patchwork - trying to deal with the effects of the basic problem. I fear that modern economists are simply unable to handle the realities of economics! The are behaving essentially as the Japanese did when their land-value crash occurred - running around in circles wondering what happened. This led to a dozen years of stagnation, a situation still continuing. Modern economists are fond of telling us what happened after the event, sometimes long after. This is Bernanke: "Asked if he expected the "R-word," Mr. Bernanke said after a speech today: "Let me tell you a story. Before I got this job, before I was even on the [Federal Reserve] board, I was a member of the NBER business cycle dating committee which is actually the official body that determines the dates of the R-word as you referred to it. And one of the things that was striking about that operation is we didn't even sit down and think about it until six months after the event. And the reason we didn't do that was because economic data being as volatile as they notoriously are and as subject to revisions as they notoriously are, you really can't make a determination about that kind of thing until well after the event. And so that's what we did in that particular episode. What was ironic about it was even though we waited quite a while to make a determination, subsequent to our determination there was yet further revisions of the data, further information, that you know cast doubt eventually on our dating. It just goes to show you how difficult these things are to interpret and evaluate." This is the "science" to which we entrust our wellbeing! I'm sorry, Ed, but I'm not impressed. Harry ******************************* Harry Pollard Henry George School of Los Angeles Box 655 Tujunga CA 91042 (818) 352-4141 ******************************* From: [email protected] [mailto:[email protected]] On Behalf Of Ed Weick Sent: Thursday, December 18, 2008 7:52 AM To: [email protected]; futurework Subject: [Ottawadissenters] Downward but onward! We of the rich world are in a quandary and have no real idea of how we are going to get out of it. What we seem to want to do is revive our economy as it has existed for the past several decades – restore credit as it has been, revive the auto industry and all of the industries that are dependent on it, revivify lumber, mining and metals, etc., restore employment to a high level, and make the economy grow again. But perhaps we’ve reached a point at which, for practical or other reasons, people do not want to buy new cars and appliances as often as they did in the past. They simply have enough cars and appliances. Or perhaps many people can’t get the credit to buy big items anymore. And there is now a widespread fear about whether jobs will continue and people will be able to feed their families and pay for the goods they have purchased on credit. Because the future has become so uncertain, one had better not venture into it too boldly even if it is Christmas and the season to be jolly. Sellers of cars and appliances appear to be in real trouble. There was an add in the local paper a day or so ago that offered huge discounts on new Chrysler made cars if people paid cash. You had to wonder why, if the dealer needed cash that badly, he couldn’t just go to the bank and withdraw or borrow some. Well, he couldn’t. Because of poor sales, he probably didn’t have much cash in the bank and the bank probably wouldn’t lend him any. Yet he had to pay his staff and meet other expenses. There are also major problems in housing. People don’t seem to want to invest in houses because house prices are not going up anymore, they’re going down. The appropriate strategy would be to wait and avoid getting stuck with a mortgage that is worth considerably more than your house. What’s happened in the US could well happen in Canada. People could simply walk away from a house that simply isn’t worth paying for anymore. An item in today’s paper said that young people, students in particular, have rather amazingly high credit card debts, often higher than their student loan debts. Not to worry I guess, when they graduate they’ll get a job and pay it all off. Or will they? Will the jobs be there? According to Keynes (long ago) and Paul Krugman (recently) there is a way out of all of this; spending on infrastructure. Fix up all the roads, bridges and other bits of public capital that have been falling apart over the past many years. Create jobs by deficit spending. But how much money might there continue to be after we have bailed out the banks, the auto industry, forestry, mining and metallurgy and all of the other corporate sectors that have become increasingly unstable and threaten to fall apart? And indeed, the central banks can print tons of money and flood the economy with it but what is that going to do to incomes, prices and the general stability we rely on in our day to day lives? Perhaps the economy can be fixed up enough to limp along in the short run, but underlying the short run is the long run with its finite capacity to provide us with the hydrocarbon energy, lumber and metals we take for granted. It is possible that many of the gifts of nature that we think of as there forever will have substantially run out by the time our grandchildren are elderly. What then? A friend has pointed out that humankind has gone through three transitional periods since its beginning in Africa some two hundred thousand years ago. For the longest time we were hunters and gatherers; then we became agriculturalists; and finally we became industrialists, which is what we still are. Given the downward slide we may well be into during the next fifty years or so, we may well reverse the transitional periods and take up farming again and then, when that has declined, start chasing animals for food again. Maybe some of the big ones we used to hunt will come back. It might be fun to hunt a woolly mammoth. 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