Monday, March 23, 2009

Mike Norman blog readers continue to expose out-of-paradigm thinking/policy

A reader of this blog sent me the following email:

Mike,

You know how you were saying that a big reason it’s so hard to convince people is because of the “pay to the order of” line on the check or the payroll deduction?

I found what seems to be a layman’s guide to the U.S. Budget (2002) at http://www.gpoaccess.gov/usbudget/fy02/pdf/guide.pdf.

I half expected part of it to be ‘in paradigm’, at least somewhat.


From page 22 Why a Budget Surplus is Important

Should we worry about the possibility of a return to budget deficits? Deficits increase the Federal debt and, with it, the Government's obligation to pay interest. The more it must pay in interest, the less it has available to spend on education, defense, law enforcement, and other important services,…


Wouldn’t it be impossible to have a productive discussion with the naysayer that would refer to this “.gov” pdf? It’s a effin DOT G-O-V publication for cryin out loud, oh my gosh!

This was my response:

The gov't pays interest the same way it makes payments for everything else: by crediting bank accounts and there is no limit to its ability to do that.

Not having "enough money" to pay for other things like defense, law enforcement, etc is a self-imposed political constraint.

Also, interest paid on debt becomes part of private sector income and private sector savings by definition. So to the extent that higher interest payments increase personal income, then people have more money to pay for education, health care, local law enforcement etc. and that means the Federal Gov't is needed less.

Whoever writes these things should be required to memorize the preamble to the Constitution, particularly the part that states, "...and promote the general welfare.."

You have women out of work getting into porn and becoming strippers to pay bills because the gov't failed in its basic responsibility of promoting the general welfare by sustaining output and employment. The result is crime and human degradation and a generally unhealthy corrosion of society.

I just listened to former Congressman Dick Armey talk about Shumpeter's principal of "creative destruction." I guess society needed more strippers and porn actresses because this is occurring naturally via the "market," and according to Armey the market is always the most efficient allocator of capital (in this case, human capital).

Most of this is happening because of an excessive and irrational focus on, "the money" as opposed to using the money to achieve our potential. There is an overzealous concern about an inflation that might happen sometime in the future, but zero concern for really bad things that are happening right now.

It's irrational.

-Mike

3 comments:

googleheim said...

Is it not ironic :

a. If the government does not create new money by crediting banks to replace the money that vaporized, then the only federal system left to retrieve money, to distribute and to regenerate the system would be taxation. This is entirely too slow and completely impossible to make any type of fix.
Plus, it is what creative destructionists want to abolish.

b. Creative destruction will only focus the wealth and assets of the country away from small business and common people who make start ups. Creative destruction is an exclusive purchasing club made mostly of vultures.

c = a + b :
If creative destructionists have their way, they will control money flow and interest rates, rather than the government which seeks somewhat to make a level playing ground. That would mean zero taxation for the creative destructionists, but mandatory conformity to all others who are not in the supply side to purchase in a constrained field of choice.

A strong dollar to be created by sustainable evolution is required
no matter what because we have had a weak dollar for too long.

Imagine all the money that has disappeared as a big hole in the front yard. Now imagine all the assets and commodities that have deflated as a big hole in the back yard. Now imagine that the house is shrinking because no one is buying anything, no business is expanding and things are going small.

Then add to the fact that the energy or electricity to power any tools that will fill in the holes and resize the house is getting more expensive because OPEC is creating the equivalent of a downsized industry - namely cutting production which makes the gas prices inflate - even though not many oil companies have gone out of business.

Everything is cheap now because of deflation and a strong dollar. If the dollar is weakened while the old high prices of everything comes back, then things will look inflated ...

and possibly shock therapy will be needed in the form of high interest rates if we do NOT stimulate the economy with bank credits to fill the holes and resize the house and return normalcy without massive disruption

caveat : perhaps

Mike Norman said...

Gov't must supply sufficient quantities of its own money so that people can pay taxes and hold whatever amount of the government's money they want to hold. That applies to the rest of the world's (ROW) desire to net save in dollars as well.

googleheim said...

are you saying that destructive creationists prefer a broken economy without any liquidity and without any spending/stimulus/crediting-2-banks because that means the taxation leg of the body-at-large doesn't work and we know that they don't like any taxes ?

also, is it such that even FDIC is not fed by taxes ( and tax payers on the hook ) but by the Fed/Tsy monitary system of credits or whatever ?