THE DEVIL’S IN THE DETAILS

A  recent comment decrying my rant on our inexorable march toward inflation with QE3 as just another opinion, from a person I know to be of above average intelligence, disturbed me for that very reason. He was willing to grant me a modicum of expertise on the health care system, but that’s where it ended.

We’ve been relying on the opinions of “experts” on the economy for far too long. In 2008 there was a resounding silence before the collapse. A few smart people knew what was happening (and made millions shorting the system) but they were either silent or their cries were tantamount to spitting into the wind. The time has come for us, the American people, to use common sense and look at fundamentals, or we will be doomed to a perpetual state of confusion. The economy has been so complexified (yes, that is a real word) by arcane constructs such as derivatives and chimeric mortgage instruments that the average citizen’s mind is numbed. We’ve become like zombies walking in a smoky room.

It’s time to turn on the fan of clarity. The simple, solid economic principles you learned in high school and college still apply, and you don’t have to be a bespectacled professor of higher economics to understand them:

  1. You can’t continually spend more money than you have without paying it back.
  2. You can’t keep borrowing money from your friends and enemies when you’re broke and maintain your credit rating.
  3. You can’t keep printing money beyond the level of growth of the economy as your credit crashes without making your dollars worth less. This is called inflation.
  4. You can’t keep living at a higher standard of living than you’ve earned and expect your children and unborn grandchildren to pay for it—oh … maybe you can. But you can’t expect them to be happy about it when they finally figure it out.
  5. You can’t have more people on the upper end pushing money around and grabbing gobs of it in the process without producing anything of value, and people on the lower end taking more and more money from the fewer and fewer actual producers without the system collapsing.

All the complex economic instruments, regulations and machinations designed to obfuscate and circumvent the basic laws cannot change the fundamentals. The only question is whether they can distract the American people long enough for the GDP to implode.

Even the smart ones.

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10 Responses to “THE DEVIL’S IN THE DETAILS”

  1. Ira Says:

    Ah, I’m honored that you think of me as a child of Lake Wobegon.

    As to your economic arguments:
    1. In fact, while in theory you may have to pay it back, when you are the US government you are not subject to such bothersome facts of life as retirement or morbidity (yes, I chose that word specifically). The debt as a % of GDP was much higher at the end of World War II and we managed our way out of that (re: my reference to reasonable, intelligent men). Also, in fact, just 12 years ago the US operated at a surplus. As an aside, to quote Karl Rove during the Bush administration: “increasing the national debt doesn’t matter”.
    2. The credit rating, established by a private firm (the same people who gave credit default swaps a AAA rating,) is a ridiculous measure of anything to do with the US debt. Much more dangerous is the US Congress establishing and politicizing the “debt ceiling”.
    3. See 1. above
    4. Agree
    5. Requires a political, not an economic solution.

    And I granted you at least 3 or 4 modicums.

    • Davecor Says:

      Time will tell. If the plurality of the country believes as you do, we’ll stay with the present leadership and I predict our anemic growth will peter out and degenerate into a recession. It may take a while, as Greece trundled along until the debt to GDP ratio was 170%, and we’re only at 100% and rising. What you’re not taking into account is the changed culture since the end of the World War. Back then most people felt welfare was an anathema; now it’s become a way of life for a large segment of the population, with the inefficient government a much larger part of the economy and our manufacturing exported overseas.

  2. Ira Says:

    We can agree. I am not predicting a rosy economic future with the present leadership. (Though after last night’s poor performance the present leadership may not be leading much longer). I am actually fearful of a republican win because of their social agenda, anti-intellectualism and thinly veiled rascism. I believe that a President has much less control over the economy than popularly thought and that will continue to be the case.

  3. Ira Says:

    Wow. If a reasonable discussion can lead to no common ground between us, it is a tragedy, both personally and for our children. I believe you are terribly misguided, but rhetoric and powers of persuasion utterly fail me. Be well, my friend.

  4. heartheaded Says:

    Hence the ideological gridlock in our society. When differences in opinion are deemed as “anti-intellectual” and “thinly veiled racism” there can be little common ground for rational discussion. Viewed from the other side of the fence those pronouncements might be characterized as “elitist” and “misguided,” although I would hesitate to thus define them as it further stifle productive discourse.

  5. Ira Says:

    So, you object to my perjoratives? Why didn’t you say so instead of throwing them right back? It is not the opinions that are anti-intellectual, what I find abhorrent is that anti-intellectualism is one of the core values of the right-wing movement, and I think their leaders would say that is a correct characterization. And while rascism is not a factor in your analysis, and perhaps not among left-coasters, I’ve lived in the South for 28 years and I can tell you that for many Southerners the Civil War, or the “War of Northern Agression”, is still being fought.

    We can discuss the US economy all day and, for me, it will be like trying to walk thru jello. I think on some days (and fear) that your conclusions my be more astute than mine, and honestly, if the economy were the only issue, I would probably be voting with you. But I am not at all confused by the fact that I cannot abide the social agenda of the tea baggers.

    • Davecor Says:

      On sober reflection, I guess you’re right. I’m going to go with the far left social agenda that is full of compassion. I realize that minorities can’t be expected to achieve on their own. We need to lower the standards for them, give them a helping hand. What do you mean it may cast a pall on those that have truly performed? That’s racist. And no cutting the budget for the public school system. They depend on it–can’t afford those pricey charter schools the rich Republicans flock to. Vouchers? Choice? Bah! What about all those tenured teachers? You need to be compassionate. Yes, I’m beginning to see the light that blinds those troglodyte right-wingers. I’m on the phone to China tonight to borrow a few million more for that creaky old school system. And maybe they’ll send over some chow fun–I’m starving.

    • Davecor Says:

      P.S. It may be time to move north or west if the Civil War is at the top of the “right-wing” agenda in your neck of the woods.

  6. Ira Says:

    I will magnaminously ignore your sarcasm. Everything you mention except education is clearly ECONOMIC, not SOCIAL. I am talking about women’s rights, gay bashing, separation of church and state, intelligent design nonsense and anti-science agenda, immigration reform, drug policy… need I go on?

    I agree with you on education.

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