mathematically impossible
As we careen wildly toward January 20 and a virtual guarantee to waste another trillion dollars, I can’t help but be disappointed (though hardly surprised) by how inevitable it feels.
Japan already tried this, of course, and as a result they’re wrapping up their second lost decade of productivity, with a debt to GDP ratio of almost 200%. If you’re too bored by the topic to understand why “stimulus” packages have not and can not possibly work — why it is mathematically impossible in the long run — feast your eyes:
That’s twenty years of Japanese decline, plowing new 25+ year lows with each passing month. Despite borrowing an amount equivalent to 100% of GDP trying to spend their way out of it. Money into a black hole.
For those who want to understand, I highly recommend Mish. Every day. He’s not high-volume, and he writes extremely well.
Naturally, he has made his own comparisons regarding Japan’s epic failure and our looming emulation thereof.
Last week he referenced a piece in Newsweek — I won’t even link to it, for fear of the liability to which I might expose myself if you were to read it and suffer a precipitous drop in IQ — but one bit cannot be resisted (emphasis mine):
As bad as it looks, the current financial crisis will end. I don’t know when or how, but the combination of government interventions will eventually work. Why do I say this? Because governments are more powerful than markets.
Quite apart from being one of the dumbest things that I imagine Newsweek has ever regretted printing, it is an apt opening for one of my favourite founding-father quotes:
Government is not reason, it is not eloquence, it is force; like fire, a troublesome servant and a fearful master. Never for a moment should it be left to irresponsible action.
Who else? The G-man.
Update: the words were barely out of my mouth! Now it’s a trillion per year?
George said,
January 8, 2009 @ 13:42
Phil, you might find Eliot Spitzer’s recent piece in Slate to provide at least some counterpoint to your post:
http://www.slate.com/id/2207920/
The core point is that a single large investment (e.g. the trillion dollars that apparently so frightens you) can so completely transform certain conditions that it has a much greater effect than the same wealth invested piecemeal (by, for example, private capital with all its flaws of imagination).
Not that I think Obama will actually DO this, unfortunately. High-speed rail would be a nice candidate: with a trillion bucks you could put high-speed rail all across America.
As for whether governments are more powerful than markets, I think this depends — what was WWII? But it’s a vacuous point for Newsweek to make, agreed.
As for comparing the US economy to Japan’s, I think there are some key differences. Zero percent interest rates in Japan, for instance. And maybe some other things. But I haven’t taken the time to read the link you offered (sorry, my back hurts and I need to sleep).
But why worry? None of this economy shit matters much unless you were planning on getting rich quick, delaying all your *actual* dreams until that moment when you could stop worrying about making money… That said, I do hope things are good down there. Oil prices will go back up, someday, because markets and governments both love the stuff.
phik » re: mathematically impossible said,
January 11, 2009 @ 21:45
[...] Thanks, George! [...]