Tuesday, August 09, 2011

Inflation, jobs, and a failure of governance

Over at JzB's place, we have a long discussion of inflation and why capitalism doesn't work without it. I've touched upon that a few times on this blog, but that's a worthwhile discussion over there to refresh your memory. The conclusion: WASF.

Actually, what it all boils down to, in the end, is two things: debt and jobs. So let's look at debt first. There's two ways to deal with debt -- via direct monetary payments (debt forgiveness or debt amnesties), or via inflation. Of those two, we need inflation anyhow to make capitalism work, so why *not* crank inflation up to 5% or so? That would reduce the real value of debts by 5% per year, and our economy worked reasonably well at 5% for quite some time. Oh, the banksters will scream bloody murder because they recall what happened to the S&L industry, which was stuck with a buncha 30 year 5% mortgage loans at a time of 12% inflation when they had to pay 8% for deposits and a -3% spread means you're out of business sooner rather than later, but crap, the banksters are already down 50% on their mortgage portfolio because of the collapse in housing prices, so it's not as if they're not *already* bankrupt. But that will take years to get housing prices back up to the value of the loans against them, so that brings to mind another thing. If you're underwater: Debt forgiveness of the part of mortgage loans that is underwater, accomplished by the Federal Reserve with freshly printed money. Make it tax deductible or you're defeating the purpose.

But of course none of that works out if people don't have money to spend because they don't have jobs. So let's look at jobs. Actually, it's easy enough to create jobs, if you think out of the box. Infrastructure is just one way, and limited by the number of available construction workers (people are not fungible, an unemployed accountant is useless for riveting steel for a new bridge). For example, if we said "Fuggit, those jobs are gone and they're never coming back, so everybody between the age of 55 and 65, you can now retire with full Social Security payments" (and funded it with freshly-printed dollars buying Treasury bills), that would free up a huge number of job openings as the Boomers between age 55 and 65 suddenly leave the workforce, while increasing aggregate demand as Boomers saving in case they lose their job between age 55 and age 65 (since loss of a job between said ages means you're likely never to have a job again) suddenly have a huge load taken off their back.

And that's just one idea off the top of my head, I can come up with literally dozens of ideas that would create jobs for every unemployed American today, which in turn would result in increased aggregate spending and thus economic productivity. Remember, FDR created 4 million jobs with the stroke of a pen in November 1933, though I understand right-wingers think they weren't really jobs because working for the government is, apparently, slave labor as far as they're concerned. But what's not working is our political system, which has turned into a he-said she-said high school debate club squabble of juvenile whiners trying to score points in some obscene game rather than a serious attempt to tackle the problems of our nation, facilitated by a media which would somberly report "opinions of the shape of the world differ" if the Republicans came out tomorrow and demanded an end to the teaching of that heretical round-earth theory (it's anti-Bible, y'know?).

And that, in the end, is why WASF -- not because government could not theoretically solve the current jobs and debt problems, but because *our* government cannot due to imperial incompetence, stupidity, and hubris.

-- Badtux the Waddling Penguin


  1. How cool would it be to see thousands of people walking into a building to sign up for jobs, while baggers protested outside, decrying the 'slavery'? Then, a few years later, the 'slaves' would be hiring the surviving baggers to mow their lawns.

  2. Morning to you. Thanks for sharing your views.

    One of the problems with what you've said seems to me to be the fact the goverment is just a lot of people similar to you and me. They don't know one hell of a lot about anything much, and they're full of opinions deriving from not knowing much and the desire to act on them.

    You and I can have lousy opinions without it doing any damage, whereas theirs end up letting US industry haul all the factories off somewhere with cheap labor to make things and sell back to us.

    My lousy opinion at the moment is that if the government wants to help create jobs it needs to erect protective trade barriers on imports high enough so a US worker can build a toaster and sell it at a price comparable to a Chinese toaster.

    Enjoyed your blog.

  3. sofar, I think you're being entirely too generous in your assessment of the people in government. The decision-makers, that is. The .gov employees behind the service counters and in the cubicles are probably just like us.

    But the people who get up on stage to make speeches and beg rich folks for money so they can buy TV commercials are a different lot. It takes an ego-driven narcissist to do that. Whatever morals a lot of them had to begin with are corrupted by deal-making, flattery and participation in the hundreds of little ethical lapses/crimes that present themselves as they go up the success ladder. By the time a politician reaches a pinnacle of power, the sociopaths, greedheads and easily manipulable chumps have been selected; the decent ones have been weeded out.

    I think nations would be better governed by selecting random names from the phone book to be legislators. H.L. Mencken had a famous essay about this.

  4. Indeed, Sofar. We've never had government by geniuses in this country (probably a good thing, since most geniuses are socially maladjusted jerks in my opinion), but in prior generations we at least had leaders who were willing to listen to real experts and who had the best interests of the nation at heart. Today... not so much. Our leaders in government listen only to experts who tell them what they want to hear, and are more about scoring points in some obscene game of partisanship (while incidentally enriching their patrons in the Top 400 who earn more money in a year than the 150,000,000 Americans at the bottom of the totem pole) than about the health and welfare of the nation. And those leaders who *do* have brains enough to listen to the experts don't appear to have the balls that God gave a hamster, they spend all their time whining about why they *can't* do things recommended to them, rather than *doing* things and letting the chips fall where they may.

    We didn't have paragons of virtue or geniuses in office in 1933 when FDR created 4,000,000 jobs with the stroke of a pen, and there was decidedly partisan rancor, but the deal is that a) FDR had balls, and b) FDR was willing to listen to experts whose opinions were not the same as his. Remember, FDR even called Keynes to the White House and respectfully listened to Keynes talk about what needed to be done. Complained to his cabinet afterwards that what Keynes said sounded like so much mathematical gobbledygook, Keynes was altogether too radical for FDR (who remember was the scion of a wealthy New York family, not some rabble-rousing socialist, he was liberal because that's what the times required, not because he was by nature liberal), but did at least use a couple of Keynes's ideas for putting people back to work.

    So when is the Obama administration inviting Krugman to speak with the President? Yeah right. In some alternate universe, maybe.

    - Badtux the Snarky Penguin

  5. Guys -

    You are suffering from a collective failure of cynicism. While there is certainly no shortage of fools and tools in government, its important to focus on the real goals of the Rethug party: the utter destruction of the American middle class, and the morphing of society into the new trans-natonal mega-corporatist feudalism.


  6. JzB, I'll see your cynicism and raise you two dachshunds.

    The Republican Party is trying to repeal the Enlightenment, and especially the French Revolution. Their position on the estate tax gives them away: they want hereditary wealth to dominate the economy. They're opposed to Reason as the guide of policy. They want the Church to have a hand on the levers of power. They don't give a damn about nature. They don't think education of the general population is a good thing. Hell, I bet they don't even like Beethoven.

  7. Beethoven? Who was that? One Merle Haggard's backing musicians?

    - Badtux the Snarky Penguin
    (Channeling a typical member of the Party of the Confederacy).


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