Saturday, August 20, 2011

Say Again? Again? Again?

How long do these guys have to be right before we pay attention? How long must they say the same thing again and again and again?

Robert Reich: Stock Tip: Be Worried. Workers are Consumers.

”Repeat after me: Workers are consumers. Consumers are workers.”

”Every CEO of every company that continues to squeeze payrolls (Verizon, are you listening? Ford?) needs to understand they’re shooting themselves in the feet. Where do they expect demand for their products and services to come from?

They’re doing the reverse of what Henry Ford did back in 1914 – paying his workers three times what the typical factory employee earned at the time. The Wall Street Journal called his action “an economic crime” but Ford knew it was a cunning business move. With higher wages, his workers became his customers, snapping up Model-Ts and generating huge profits.”

Ford Motor Company assembly line

Do you get it? Henry Ford (no friend of Labor) got it. Why can’t today’s knuckleheads? And speaking of The Wall Street Journal...

Paul Krugman: Fancy Theorists of the World Unite

”A number of people have pointed me to this remarkable editorial by Stephen Moore in the WSJ. What’s remarkable isn’t the views; it’s the all-out embrace of anti-intellectualism. It actually denounces “fancy theories” and rejects them because they “defy common sense”.”

A quick tangent. If you don’t recognize Stephen Moore’s name, you should read his Wikipedia entry.

”Stephen Moore is an American economic writer and policy analyst who founded and served as president of the Club for Growth from 1999 to 2004. He is currently a member of the Wall Street Journal editorial board and frequently opines on the pages of their op-ed section. Moore is known for advocating free-market policies and supply-side economics.”

A feared PAC, Heritage, Cato, Dick Armey, voodoo economics and the WSJ editorial board. This guy has more bad associations than any Republican could hope for. You’ll notice him a lot if you’ll remember his name.

Back to Krugman:

”Gosh, if that’s the way the right is going, the next thing you know they’ll reject the theory of evolution. Oh, wait.”

”I mean, common sense — or at least common sense as the WSJ sees it — would tell you that massive government borrowing would send interest rates soaring. And that’s certainly what the WSJ editorial page told its readers would happen. Only us fancy-schmancy Keynesians said otherwise; and here’s what actually happened:”

You’ll have to go to the entry to see the charts. But you might remember when I told you 3% interest on a 10 year T-bill was “cheap money” for us. It’s now down to 2%. 2.06% to be exact.

Still with Krugman: Awesome Wrongness

”OK, seriously: things are looking really terrible, And crucially, they’re looking terrible in the wrong way, at least if you wanted to believe that political and policy debate over the past year and a half made any sense at all. We’ve been utterly preoccupied with deficits, deficits, deficits...”

”And here we are, with markets now deeply worried not by deficits but by stalling growth, fearing not fiscal profligacy but fiscal austerity, and with interest rates at historic lows.

Instead of turning into Greece, we’ve turned into Japan, except much worse. And policy is replaying 1937.”

If you’re not familiar with it, 1937 is the year FDR was convinced to start worrying about the nation’s debt instead of worrying about the nation’s people -- worrying about the future instead of the present. We stopped spending and started paying down the debt. And went right back into a recession. See the “Recession in depression” tag below? That was 1937.

So, let’s check on my pet model -- history repeats itself. 1929 (Wall Street Crash) to 1937 (Recession in Depression) is 8 years. 2008 ( Wall Street Crash) to 2012 (Next year’s recession) is only 6 years. Hmmm. Could things be happening faster? Let’s hope not. After all, what we’re trying to avoid is that last entry on the chart above. There are worse things than a Depression.

By the way, do notice where the economy really took off. “U.S. rearmament begins in earnest”. Some of us call that “government spending by any other name...”. And the Great Depression wasn’t the only example of it working.

Don Brown
August 20, 2011

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