NOW WHAT
Recently, I
received a piece written by an economist (I believe) in which he lists the many
steps we’ve taken, both here and in Europe, to fix our economies. Our Federal
Reserve, and European central banks, have bought assets, dropped interest rates
(some below zero). All without the desired effect of stimulating economic
growth. His suggestion, give citizens money, which they will surely spend,
making lots of work for all.
You can make
what you like of this suggestion. But, to my mind it doesn’t seem to really fix
anything.
It’s always
easier to see fundamental problems in other countries—we’re not concerned with
ideology or political loyalties. So let’s look at European nations. They’ve been trying
every manipulation of their financial systems possible and still have massive
unemployment and no growth. By now, you’d think they would have examined their
antiquated labor laws, welfare systems, protectionism, excessive regulations,
low productivity, and other sources of non-competitiveness. But no—they still
have to try negative interest rates. As one European official put it: ‘It’s not
that we don’t know what to do; it’s just that we don’t know how to do it and
get reelected.’
And what
about here? Do you see any similarities?
When I look
at our low growth problem, I see a number of roadblocks that our leaders are
unwilling to address.
We have huge,
and growing, debts at the federal, state, and local levels. Leaving aside how
we’ll pay for them, there is the little matter of interest payments, and a
damper on thoughts of spending more on even the most growth-worthy investments.
I notice that we’re going to raise taxes for a pork-loaded infrastructure
program. Will it improve our productivity? Who cares?
The actions
of the Federal Reserve have been anything but stimulating. The Fed has fostered
an enormous misallocation of resources. Billions have been borrowed by
corporations, at near zero interest, to buy back stock, pay dividends, and make
acquisitions, making CEOs rich. Why compete in the marketplace for customers
when it’s so easy to get rich by moving other people’s money around?
Our
government and our economy are caught up in a massive system of rent seeking
(aka crony capitalism). Very few people understand the corrosive effect of this
system on our government and personal lives. Please read the following; you’ll
be glad you did.
Joe Bakewell
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