Old Books

I can't help but think that old books, like “The Chief Cause Of This And Other Depressions" (1935) and "Great Red Dragon" (1889)

http://GreatRedDragon.com ::

were warnings that have been kept from economic classrooms for the last 70 years, so that the foreign financial powers could once again make mischief, and people once again have to go through the nonsense.  Even Ron Paul wrote "Freedom-Under-Siege" twenty years ago. Did economic professors listen then?  No, they were paid to lie [by omission.]  So, here we go again.

Great article, Mike.  Thanks for bring this up. 

by Edward Ulysses Cate (0 articles, 0 quicklinks, 0 diaries, 217 comments) on Friday, December 21, 2007 at 1:31:39 PM
 

So true Edward

Certainly those books were hidden from the other Presidential candidates. However,  I'm not sure that they could make heads or tails out of Mr. Ayres writing with their elementary understanding of macro-economics to begin with.

The economic prowness (lack there of) of our leaders is terrifying on both sides of the aisle. Must be something in the D.C. water.

Thanks for the post. Mike

by Mike Folkerth (120 articles, 0 quicklinks, 2 diaries, 566 comments) on Friday, December 21, 2007 at 2:05:16 PM
 

Ron Paul, too late?

Uh, there is another way of looking at this. Perhaps, given that we're headed into big time recession / depression, Ron Paul is the right person at the wrong time. The policies advocated by Ron Paul and the author of the pamphlet you cite were not those that brought this nation out of the Great Depression. I would strongly argue that once unrestrained, unregulated, global corporatism has thoroughly trashed the system we depend on for civilization to prosper, it's a bit late for advocating these sorts of policies.

 We have little manufacturing base left to speak of in the US, excepting military.  We have been saddled with huge debts that will weigh us all down for at least a generation, if not longer. That's money already squandered on war, mayhem and cronyism in a deliberate attempt to cripple our future choices.

 We've already observed what virtually unrestrained corporate rule has to offer, vast wealth for a few as corporations continue to merge into giant transnationals answerable to nobody. Without checking the unrestrained concentration of wealth / power, there is no realistic future for Democracy.

 The "invisible hand" hand had done absolutely nothing to address the approach of peak oil, even though we've had at least half a century of warning. Things are fundamentally different now that we are bumping up against restraints imposed by nature. Sure we can leave it to the market to sort things out, even though it bears little resemblance to the capitalism envisioned by Adam Smith. We now have corporations directly making policy for us. Based on their failure to address fundamental issues such as peak oil, I suspect they are a poor choice as policy makers.

We simply cannot continue to allow our future to be guided by the short term interests of a few executives at large corporations. There is no risk for them, millions in sign-on bonus, millions per year in salary, millions per year in bonuses, millions in retention bonuses, millions in severance, millions in retirement benefits. It's not a matter of envy, it's a simple basic observation that all that money is power and it is concentrating more by the day. Sure the market will always settle things in the end, then again so will nature. The question is whether there is sufficient wisdom to address issues before they become the latest bursting bubble, where calamity will rule the day.

Perhaps we will find some solution to peak oil, but shouldn't we, as a people, hedge our bets and demand an end to the squandering of petroleum in a hopelessly antiquated system of transportation, with individuals driving vehicles that should be getting at least 50% better mileage than they are? Sure, we can let the "market" deal with it, sending our military resources overseas so that we can procure "our share" so that our lifestyle, which is not subject to negotiation, may continue unabated for some short period longer. What is not negotiable are the natural limits to our physical world, rude shock though this may be to economists "educated" to believe in exponential growth forever. It ain't going to happen, it's not a zero sum game, it's a one earth reality.

 I suspect we might need another FDR to prevent collapse of our civilization, I would suggest Dennis Kucinich is a far better choice for the times we face now than Ron Paul. 

by all owners (1 articles, 56 quicklinks, 4 diaries, 140 comments) on Friday, December 21, 2007 at 11:13:33 PM
 

allowners

Great post. We are singing out of the same hymn book until you reached the last paragraph. I am the author of "The Biggest Lie Ever Believed" which chronicles our history and paints a vivid picture of how we arrived at our current juncture.

In this limited space, the bottom line is that exponential consumption in a finite world is impossible. A principal to which you seem to prescribe.

Mine is the study of macro-economics and it is my opinion that regardless of who leads this nation, only a vast departure from our current system will keep us from sliding to 3rd world status. You can view an article that I wrote on that subject and read a chapter from my book at kingofsimple.com.

In the true sense of continuing this discussion I hope to agree to disagree that Dennis Kuchinich holds no viable economic answers that could survive long term.

America simply has to change our habits and living standards, the earth  mathematically can't support our consumption and our government. Marion King Hubbert, the Shell Oil renowned geophysicist, predicted peak oil in the U.S. by 1970 and global peak by 1999. We did in fact hit the U.S. peak in 1970 and it is now believed that we reached world peak in 2006. Mr. Hubbert made the prediction in 1956.

Thank you for your excellent post. Mike Folkerth

by Mike Folkerth (120 articles, 0 quicklinks, 2 diaries, 566 comments) on Saturday, December 22, 2007 at 9:35:06 AM
 

Allowners

In the coming depression, another FDR would have a tough time of it, especially if his aim was to eliminate the automobile and control oil consumption by force, based on a theory.

What tools would he have available to him? The taxing authority is tapped out; the assets have all been moved out of his jurisdiction or have been squandered trying to stay afloat. The regulatory authority has already had its maximum effect; many manufacturers have fled the country or died.

The tools available to an FDR, force and fiat currency, have been used until they are useless any more. Adding force to the equation will simply squash any new economic activity, except from rent-seekers who will briefly profit directly from being given tax dollars while those last. Pumping fiat currency into favored business activities in an attempt to choose winners and guide consumer choice will be increasingly useless as the value of the dollar nosedives. The last of the dollar's value is being used up in trying to save the banks from collapse; the inevitable coming of sharp interest rate increases will stop money creation and pretty well rule out any new investment in wealth-creating capacity in this country.

Anyone who wants to sieze the reins of power at this late date and use the same tools that brought us to the brink of currency failure will find those reins going limp in his hands. Tinkering with a little of this or a little of that will not change the direction of the economy.

As for destruction of the remnants of the automotive industry, they have seen this coming for years. Around 15 years ago the decision was made to divest themselves completely of all parts making capacity in North America, at whatever cost (and it was costly). Investment in new plants was restricted to token moves, for assembly plants only (people think an assembly plant is where cars are made, actually all of the money is in the parts). The burst of the housing bubble was begun in part due to the collapse of many thousands of small manufacturing businesses supporting the automotive industry. The automotive companies have managed to offload their staggering health care load for pensioners off onto the greedy union, who lust after the management fees. When they walked away from their North American supplier base, they knew full well that they were losing the strongest customer base and the best engineering support in the world. They knew full well that sales from the dead manufacturing sector would fall severely. The end result is that now, whether it be CAFE laws that target their last profitable market segment, environmental laws that simply try to shut them down, or outright confiscation of their plants, they are prepared to abandon the North American market completely on the day it becomes clear that they cannot make a profit in the foreseeable future. They will sell cars here as long as they can, but they will make the parts for them elsewhere, and simply sell them elsewhere when the laws prevent selling them here or when the depression hits and their customers cannot afford their products.

It will not matter what the non-engineers in Washington dictate to the auto makers and their customers. The customers won't be able to afford what the policy makers dictate shall be available for them to buy. The policy makers have tinkered until there is no surplus remaining for them to squander.

Back to the point at hand, any plan that does not allow business owners (particularly small business owners) to keep the wealth they generate, and that does not eliminate corporatism (special favors by government for corporations, or fascism), and does not eliminate barriers to entry into markets, will ensure that manufacturing does not happen in this country on any meaningful scale.

As it is right now, it is practically illegal to make anything in this country, what with the plethora of regulations, taxes, laws, permits, fees, delays, paperwork requirements, inspections, and what have you. There is more freedom to make things in communist countries than there is in the USA (and so that is where they are being made). As a consequence of this perversion, those in the wealth producing sector of our economy have become vastly outnumbered by those in the 'service' sectors (assuming anyone considers government and regulators a 'service').

When the ability to borrow or print money and spend it into the economy devalues the currency beyond a certain point, no improvement will be possible until spending by the non-productive sector falls below the value produced by the wealth-producing sector. The value of the currency will continue to fall, because we are consuming more than we create, and we have destroyed the ability to create more. What's next is a terrible decrease in the standard of living of those who don't get their paychecks by force. Followed by the same thing happening to those who do get their paychecks by force. The creative ability of our population has limits, and so does the ability of a semi-free economy to recover from attacks at its core. We have reached those limits, and now the numbers are starting to roll in, reflecting it.

In the coming depression, if we don't shake off fiat currency, government siezure of wealth, and central economic planning, things will be very much worse than they were in the great depression of the 1930's. I don't envy the next FDR who tries to fix the problem with Stalinist controls and fascist-type government/business partnerships. The loot has all been plundered, and yet more government force injected into the economy might cause the starving population to resort to force in order to throw them off.

I contend that it is too late for an FDR to save our economy. When the last of the wealth is consumed by government, the only statist solution is always bread lines, collective farms and work camps. Or war, which doesn't save eonomies either.  I'd rather not. Socialism brought down the Soviet Union, and it will bring down the United States of America, too.

I see the policies advocated by Dr. Paul as our last, best hope.

by John Danforth (1 articles, 0 quicklinks, 4 diaries, 93 comments) on Wednesday, December 26, 2007 at 7:05:56 AM
 

Tax Slave

Few people go the trouble of investigating our underlying economy; you are a definite exception. In a response to one of my posts regarding logic and economics, the self stated "educated" responder said, "I don't care about economics and logic, I am unbending on my principles."

The principles included free health care for all, free schools including college, quadrupling the money put into medical research and other similar programs.

As I stated previously, I wrote a book on the subjects of your comments. I continue to try and find ways to educate those who find no connection between our unsustainable economy and all the social programs that they hope to install.

Please visit me at kingofsimple.com and join the discussion.

by Mike Folkerth (120 articles, 0 quicklinks, 2 diaries, 566 comments) on Wednesday, December 26, 2007 at 9:00:55 AM