Spengler on the economy
Spengler charts the dangerous waters in which we are now sailing. His advice is to turn around.
"Fiscal stimulus combined with near-zero interest rates have proven to be a toxic cocktail for the United States, the macroeconomic equivalent of barbiturates and alcohol."
The problem with government action - spending, policy, regulation - is that it has a way of crowding out private activity. We love policy prescriptions like tax incentives and "cash for clunkers" but then the programs end and the recipients look up and say: "More, please." How about another "clunkers" idea? How about another stimulus? How about another program? The government is usually more than willing to comply. Then, we see some odd result:
Throughout history, we keep making these mistakes. We are smack dab in the middle of one right now. Take a few moments and read Spengler's thoughtful essay.
Related post here.
Update: They are "vexed".
"Fiscal stimulus combined with near-zero interest rates have proven to be a toxic cocktail for the United States, the macroeconomic equivalent of barbiturates and alcohol."
The problem with government action - spending, policy, regulation - is that it has a way of crowding out private activity. We love policy prescriptions like tax incentives and "cash for clunkers" but then the programs end and the recipients look up and say: "More, please." How about another "clunkers" idea? How about another stimulus? How about another program? The government is usually more than willing to comply. Then, we see some odd result:
Throughout history, we keep making these mistakes. We are smack dab in the middle of one right now. Take a few moments and read Spengler's thoughtful essay.
Related post here.
Update: They are "vexed".
There’s a typo somewhere in Spengler’s excellent essay. Spengler says: “To the 15.1 million on the official unemployment count, add 9.2 million ‘involuntary part-time workers’ and 2.2 million who were dropped from the tally because they had not sought work in the past month, and the unemployment rate would rise to 17.1 million.” That doesn’t add up, of course. The total would be 26.5 million, not 17.1 million.
Spengler must have meant to say “the unemployment rate would rise to 17.1%.” His use of the word “rate” suggests that he intended a percentage, rather than the total number, and 17.1% works out mathematically. According to The Wall Street Journal, since the start of the recession in December 2007, the number of unemployed persons has increased by 7.6 million to 15.1 million, and the unemployment rate has doubled to 9.8% percent. 15.1 million is 9.8% of 154 million, in round numbers, and 26.5 million is 17.2% of 154 million. That’s further evidence that Spengler meant to say 17.1 %, or maybe 17.2%.
As Spengler says, “That doesn't include another three million long-term discouraged workers - those who want to work but who have long since stopped looking. That would take the number up to 20%.”
During the Great Depression, the unemployment rate was 25%. Does anyone know how that figure was arrived at? Should it be compared with the current official 9.8% or one of the broader rates of 17% or 20%?
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See also the latest from Richard Rahn, entitled "Stimulus Scam." http://www.cato.org/pub_display.php?pub_id=10615
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Thanks, David.
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