Quote from Ed Breen:
Trefoil, I am flattered that you think my analysis is perfect. It took me many years to figure it out and now be able to write it down clearly in a couple of paragraphs. I benefited from meeting and listening to Robert Mundell and reading his work, but I am not him. I don't think he would entirely agree with my analysis. On the other hand I notice that you offer no analysis; just pure political bias.
Private credit contraction cannot be countered by Government leveraging. They are two completely different things. In fact it is the Keynesian policy mistake of thinking that you can substitute government leverage and spending to counter private deleveraging that is causing the soveriegn insolvency crises that is now manifest in the smaller EU nations and is threatening the larger ones and the U.S., and Japan for that matter.
Government can only spend the saved or present surplus of the private sector or it can borrow against the future surplus of the private sector. All debt, whether it is public debt or private debt must be justified and paid out of the surplus earnings of the assets that such debt has been used to create or maintain. If you borrow money and you do not invest the borrowed money in some asset that can earn a future income stream large enough to at least pay the debt back then you will go broke; public or private.
The big lie that you clearly have bought into, is that spending and aggregate consumption is the prime economic driver. You probably think it makes sense when someone repeats the silly observation that 'consumption is 70% of the economy.' Do you even stop and say, 'What does that mean? How can that be? Can you really just create money out of thin air, just by spending it? It is ponderous to observe that two generations of our elites have been taught this crap like it is gospel, and they go along with it unquestioningly like it is some white noise humming behind the tanquilized obviousness thier carreer development.
Come on!...consumption spending creates and maintains wealth and jobs?! Stop taking drugs...the proposition is stupid on its face. If that was true, Bush would have made everyone rich and we would be at full employment...hell, since then Obama would have tripled the world GDP and California would have no debt!
In the famous equation C + I + G = GDP the only thing that matters is 'I'....both 'C' and 'G' are the surplus of 'I' and the export/import codicile is irrelevant (that is why I left it out of the equation). The whole confused idea of the GDP metric was created by an FDR socialist. It conflates C, I & G and has contributed to the over educated brainwashed thinking that 'C' is the economic driver ... as if spending on unemployment can actually create jobs, or that reducing the amount of payroll tax paid will make your payroll benefits more secure as you use the extra folding money to buy beer and cheetos while 'G' compensates by promising to borrow more money in the future to take care of you. Whose assets are going to pay for that debt? I am OK with trying to help people who need help but its a lie to justify charity as an economic engine...its a surplus that somebody has to pay for.
There is no such thing as a money multiplier. Its a tooth fairy lie for political convenience. Ask Romer, she is famous for never finding one, though you would never know that unless you looked under her pillow and read her study.
The only way to grow, increase and maintain wealth, is to invest capital in the creation and maintenance of assets. It is the cash flow from the assets created and maintained by 'I', that creates sustainable jobs and pays for 'C' and 'G'. If you stop putting money into 'I' and instead divert it just to 'C' and 'G' you will destroy your wealth and lower your standard of living...no matter what your political ideology is. Have you ever heard of 'seed corn?' Now, instead, we could create a fiscal context to attract more 'I' to domestic endeavors or we can just eat our seed corn and watch the 'I' go offshore and the whole country turn into Detroit.
When I talk about the real economy and the need to foster a context for entrepreneurism and innovation, I am not talking about public companies like the ones you knee jerk to. I am talking about private companies that employ between 100 and 1000 people. I am talking about the companies that actually create jobs..not the public companies whose mature role and nature is naturally to reduce jobs. I am not talking about the companies run by rent seeking sector consolidating subsidized monopoloy protected whores that POTUS has appointed to his strong arm fund raising ruse parading as jobs commission. How many net jobs do you think Warren Buffet has created. Think about that as you listen to Lowell George sing, "There's a fat man in the bathtub with the blues. I hear you moan, I hear you moan, I hear you moan."
I am talking about the job creating private companies that pay the top tax rates even though they are the job engines...I am talking about the Sub-S companies that have to pay tax on retained earnings even if they want to reinvest in their business. I am not talking about the rent seeking whore public companies who consolidate sectors, seek to restrain trade, and avoid the top tax rates. In the examples you gave above you confuse Wall Street for the real economy and you use a few high tech success stories to make a false point that doesn't sound in the real economy.
