Everytime I hear a politician or economist call for more stimulus to create jobs I just shake my head and wonder, do these people really not understand what is happening in the jobs market? Do they really not understand that government can't legislate prosperity? All governments can do is steal from...errr I mean tax it's citizens and then throw it away on nonproductive make work jobs.
Seriously how does it help the country to tax a productive citizen and then use that money to pay another citizen to dig a hole. And if you think that is ridiculous the government will then pay someone else to fill the hole in.
How in the world is this a rational use of capital?
Let me lay out the series of events that led to the mess we are now in.
From 1982 to 2000 we had two completely new industries created. The personal computer and Internet. These two technologies drove and incredible productive phase in history. They created millions and millions of jobs.
But as always happens when a new technology hits the market there is over expansion. By 2000 there were too many tech companies. Many of them had no earnings and never had any realistic chance of ever earning a dime. As always happens when expansion reaches over saturation the market will act to clean out the unhealthy companies. That cleansing process was the bear market from 2000 to 20002. Millions of jobs were lost as the tech sector contracted.
That was unacceptable to politicians and the Fed, so Greenspan slashed interest rates and printed billions in a vain attempt to side step the natural economic forces. The end result the Fed created the conditions that led to the real estate and credit bubbles.
Those twin bubbles temporarily created millions of jobs in the construction and finance industries to replace the jobs lost when the tech bubble collapsed. Unfortunately as we now know this was a phony economy built on a massive credit expansion and not a sustainable economic expansion.
As expected the bubble imploded. When it did we again lost all those jobs that were created in the bubble sectors. We also lost a lot of marginal businesses that were only surviving because of the false economic expansion.
So instead of halting the bear market in 2002 Greenspan just created a much bigger mess.
Now politicians are trying to create jobs by taxing and spending. That's not going to fix the problem. In order to fix the unemployment problem we need the next "new" industry to come online. The computer and Internet drove the economic expansion in the 80's & 90's. Electronics and plastics drove the expansion from 45 to 66. The automobile and mass production drove the bull from 1920 to 29.
We are never going to get out of this mess by taking money from productive members of society and giving it to unproductive members to dig holes. We need the next "new thing" to come online. My best guess is that it will come out of the biotech sector.
If politicians really want to create jobs they should direct funds into research and development in the biotech industry and speed up the process of finding and bringing online the next new industry.
Exactly. Funny how countries with low taxes seem not to be third world ones.
ReplyDeleteI think this is going to be one huge gigantic Greece. People here are in such denial. Or maybe it is just the result of lack of education of basic and true economic as well as monetary education. People don't ever stop to consider how most jobs in this country are parasitic type jobs that don't produce or add anything of value to the country. They actually think they're doing something of value, like the "relationship manager" girls at a bank for example. Boy when the true value of all of this nonsense is truly revealed, it's going to be a really humbling experience and I hope it spawns a whole new breed of people who suddenly realize that everything they thought they believed in was a lie! People really need to do their homework but they are lazy and they will be taught a vicious lesson. Mainly not to trust the damn government! To the government... Regulate yourselves or gold and silver will regulate you! How does the bull's breath smell snorting in your face?
ReplyDeleteYou mentioned those eras of time that drove our economy: 1920 to 1929, 1945 to 1966, the 80's and 90's. Guess what happened during the "gaps" between those periods of expansion?? Major wars and conflicts!!! We are now entering another "gap". This one is sizing up to be nasty! Before any "new thing" comes online, we are going to go through a major upheaval and MANY are not going to survive!!!
ReplyDeleteI feel like Mr. Connor is agreeing with Post-Keynesians when they say that government spending should be targeted. He is also, though not his fault, stresses the Ricardian Debt Equivalence Theorem. There is no empirical evidence to back this theory up and it completely ignores how a modern fiscal authority with a sovereign currency operates. When the fiscal authority spends it does so by pressing a button at the Federal Reserve, which creates money, and then debits a non-government bank account for the goods. Government money is free and it is never “financed”. There is no truth to the concept that a government, like the US, is taking money from someone else to pay for things in its own currency.
ReplyDeleteIt is too simplistic to say the above periods of growth were the result of one industry. The growth was the result of a myriad of factors and institutions playing on each other. The housing bubble was not the result of low rates over a 5 year period but rather a 40yr old institutional belief that real estate should always increase in value. The exponential rise in OTC derivatives since 1990, which collapsed the market, can be linked to a lack of financial regulation and acting regulatory bodies. There is a direct and obvious correlation between the rapid rise in prices and the prevalence of fraud “all the way down the chain.”
I think we can both agree that government spending is not effective if it isn’t targeted or if it’s too small. The government should be spending massive amounts of money funding large scale research/infrastructure projects that will be of eventual benefit to the private sector. It doesn’t just need to be bio-tech but should be focused on projects the private sector can’t finance.
I work in the biotech industry, and I can tell you, it will not come from there.
ReplyDeleteEmployment will come from Peak oil, which equals: Too expensive to ship products from Asia to America.
In other words, when shipping is too expensive, companies will have to manufacture goods close at home.
When Americans start to work in factories again, then and only then will prosperity come back. There is NO OTHER way !
There is however one technological innovation I would like to mention that can change things, like the invention of the computer and the internet did.
You can find it at Potterdrilling.com
It's a completely new drilling technology allowing for much cheaper and much deeper drilling than possible with conventional techniques.
Why will that be so revolutionary? Currently there is only one known energy source that can replace 80% of oil usage ... it's called Geothermal energy. Believe it or not, there is such a thing as Peak Uranium, and we will hit it sooner than most people think.
Currently, Geothermal is only feasible in places where you have to drill 4 km or less to hit ground layers warm enough to produce steam.
Conventional drilling techniques don't go further than 5 km, at a very high cost.
To make Geothermal possible anywhere in the world, you would need 10 km deep holes, and they have to be cheap.
Guess what, with potter's technique in development, they can drill 10+km for a fraction of the price it would cost with conventional techniques.
Geothermal is Clean, it's quiet, and Geothermal will ALWAYS be around for millions of years to come. The big advantage, you can build power stations right in the middle of cities.
Solar and wind farms are very expensive to set up. They only work half of the time, and you need a long grid to bring the electricity to the consumer.
The longer the grid, the more energy you loose through transport friction of electrons.
It will not come from Biotech. Biotech will not create millions of jobs.
Prosperity will have to come from oil-replacement technologies. Within 40 years, oil will simply be too expensive for 95% of humanity.
Remember 40 years ago? It was 1970. To some it seems like yesterday.
Enjoy.
There are only three means of producing wealth: mining (including the extraction industries like oil), manufacturing, and agriculture (including forestry). That's it, folks. And that's the way it's been for 3,000 years. Banking, insurance, real estate, entertainment, sports, restaurants...that's all froth built on the base of mining/manufacturin/agriculture. So pull your heads out or prepare for the worst.
ReplyDeleteThere are only three means of producing wealth: mining (including the extraction industries like oil), manufacturing, and agriculture (including forestry). That's it, folks. And that's the way it's been for 3,000 years. Banking, insurance, real estate, entertainment, sports, restaurants...that's all froth built on the base of mining/manufacturin/agriculture. So pull your heads out or prepare for the worst.
ReplyDeleteThere are only three means of producing wealth: mining (including the extraction industries like oil), manufacturing, and agriculture (including forestry). That's it, folks. And that's the way it's been for 3,000 years. Banking, insurance, real estate, entertainment, sports, restaurants...that's all froth built on the base of mining/manufacturin/agriculture. So pull your heads out or prepare for the worst.
ReplyDeleteThere are only three means of producing wealth: mining (including the extraction industries like oil), manufacturing, and agriculture (including forestry). That's it, folks. And that's the way it's been for 3,000 years. Banking, insurance, real estate, entertainment, sports, restaurants...that's all froth built on the base of mining/manufacturin/agriculture. So pull your heads out or prepare for the worst.
ReplyDeleteThere are only three means of producing wealth: mining (including the extraction industries like oil), manufacturing, and agriculture (including forestry). That's it, folks. And that's the way it's been for 3,000 years. Banking, insurance, real estate, entertainment, sports, restaurants...that's all froth built on the base of mining/manufacturin/agriculture. So pull your heads out or prepare for the worst.
ReplyDeletemining manufacturing and farming yeah, and military
ReplyDeleteI suspect we can see many more jobs worldwide in the military and security(private mil) industries
You mentioned those eras of time that drove our economy: 1920 to 1929, 1945 to 1966, the 80's and 90's. Guess what happened during the "gaps" between those periods of expansion?? Major wars and conflicts!!! We are now entering another "gap". This one is sizing up to be nasty! Before any "new thing" comes online, we are going to go through a major upheaval and MANY are not going to survive!!!
ReplyDeleteYes we do tend to have global conflict during secualr bear markets. We've already had two so far during this bear.
ReplyDeleteIn the eighties, the gov't got more out of the way of the entrepreneur so new ideas had fertile ground. The real growth was not in the PC and internet, it was in existing businesses that adopted and adapted to the new technology.
ReplyDeleteI doubt that BioTech will be the next because the 800# gorilla just crushed Health Care, the biggest place for biotech. The Green economy (GM seeds are BAD, etc) makes it hard for innovation.
Our Pols have punished the employers with lots of new and yet to be rules, taxes, costs, obligations, interference, and obstruction. If the employer does succeed half needs to go to the Taxman. Easier to just be a distributor for foreign goods.
I wonder if we're in a period of time similar to pre-nazi germany.... Maybe our dollar is likethe Reichmark or something. We might be right on gold but it might be a moot point because of what could be coming. Do you think that there's enough people out there that are wise to the puppetmasters' tricks that we will be able to be free? I think that they'd like to shut everything down and declare their new world order if they could. They've never been so visible to me. But I think that the speed of information travel as well as free market forces such as metals investment forcing the banks to eat their short positions are actually creating a regulating force. I just can't believe the extent to which they are trying to intervene and control everything. To what end? These guys certainly aren't "independent". What a joke. The only way to protect yourselves is through the metals and I sure as heck ain't giving them up!
ReplyDeleteToby, I don't think you understand what's happening either. Your last paragraph proposes a solution of having the government fund R&D in the biotech industry and moving industries online.
ReplyDeleteThat's where you don't get it. Government needs to get out of the way and let the free market process fund ventures and get the rewards when right, and the losses when wrong.
Governments need to be restricted to rule of law, enforce property rights, and maintain a standing army for protection against foreign threats. That is it.
Hope you get these comments. Thanks.
And when have I ever disagreed with any of that? :)
ReplyDeleteI'm just saying that instead of throwing money away on stimulus it would be better spent by funding the biotech sector in an attempt to speed up the process of bringing the next "new thing" online (by online I mean getting the new idustry up and running commercially, not online as in on the internet).
Someone posted a comment, "Government money is free and it is never “financed”." This is not true. Thomas Jefferson warned us NOT to privatize the printing of our money, but unfortunately, we outsourced this to the Federal Reserve (a private bank). The US Government (taxpayers) pays finance charges every time we "borrow" money. And unfortunately, the payment plan is not achievable.
ReplyDeleteGenial dispatch and this fill someone in on helped me alot in my college assignement. Thank you seeking your information.
ReplyDeleteCome on...let's grow up and admit to ourselves that politicians can't possibly be so stupid that they don't see what is happening!
ReplyDeleteFacing that fact, let's then explore WHY the politicians are destroying America.
One word sums it us...MONEY.
They have been bought and paid for.
Ever hear of the New World Odor..uhh Order. Well, there are (suprise, suprise, suprise!) people who are pulling the politicians'strings behind the scenes. Those people (and I use the term very, very loosely!) have beaucoup bucks and with those mountains of money (thing David Rockefeller, thing Rothschild here) they have BOUGHT up the media, they have bought up the politicans.
Yeah, any school child can see that America is being destroyed...so why would anyone believe the politicians CAN'T SEE IT TOO?