Look, unemployment sucks. But I don’t see any sense in using what is essentially stolen money to give people jobs doing things that, in a free market, they wouldn’t be employed doing. That being said, I do want to help people who need help, but I don’t know why that action must be done by government.
Fair enough. Truth be told though, I think current policymakers are leaning much more towards your type of policy than mine.
No. No. No. That is not what is going on. Do you know what percent of the U.S. population feeds the U.S. and 1/3 of the world? It is about 3%.
That is what is going on all around us due to information technology and business process knowledge progress. Our consumption and investment activities have not and are not keeping up with the warp speed increase in productivity.
We either must shoot and kill the unemployed now, or feed them and keep them warm, or keep them busy. If we don’t keep them busy they will end up in jail. There will be lots of employment for jailers.
Mansoor
Ok. I don’t care who help them. Churches, government, private individuals, manna from heaven. I just want to see them kept alive until we see the next data point clearly.
Mansoor
I just saw this today:
David Rosenberg of Gluskin Sheff. He notes that there are measures of economic health other than the stock market and GDP. To wit:
- More than five million homeowners are behind on their mortgages.
- There are over six million Americans who have been unemployed for at least six months, a record 40% of the ranks of the jobless.
- The private capital stock is growing at its slowest rate in nearly two decades.
- Roughly 30% of manufacturing capacity is sitting idle.
- Nearly 19 million residential housing units, or about 15% of the stock, is vacant.
- One in six Americans is either unemployed or underemployed.
- Commercial real estate values are down 30% over the past year.
- The average American worker has seen his / her level of wealth plunge $100,000 over the last two years, even with the recovery in equity markets this past year.
- Bank credit is contracting at an unprecedented 15% annual rate so far this year as lenders sit on a record $1.3 trillion of cash.
- Unit labor costs are down an unprecedented 4.7% over the past year, and what has replenished household coffers has been the federal government, as transfer payments from Uncle Sam now make up a record 18% of personal income (and the Senate just passed yet another jobless benefit extension bill!)."
from http://seekingalpha.com/article/193515-the-velocity-of-money-and-its-implications
But how did people make too many bread factories? I know you know this. What happens when interest rates go down? What do people that go to (generalizing here) banks get more of when interest rates lower in order to build these bread factories? What are mortgages? <— that should provide the answer very easily.
[and thank you for addressing the war comment. that was very brave of you. but it has been noted that ww2 wasn’t the economic turnaround. that didn’t happen until after the war ended for a certain period.]
You’re good at identifying problems, Mansoor, but I can sense that once you’ve identified a problem, you look at your playbook and say “hmm, what massive hammer do I want to hit this with today?”
There is another way to look at it. We wasted all this money and we still have deflation right now. This means we still have lots of savings (excess production) and our capacity to produce did not go down in spite of the bad bread factories. Don’t look at savings from USA point of view only look at it from a global point of view. The trade deficit represents foreigner’s savings!
What it tells you is that the bad bread factories essentially acted like a stimulus. When stimulus was withdrawn (the mad dash to cash by investors) deflation starts taking hold.
Mansoor
We already decided. Lets wait for more data points. I am a big believer in consensus building. I just want to put the thought out there so there will be a mental model to think with and navigate the universe that I clearly see in my mind’s eye.
Thanks for listening and critiquing.
Mansoor
Well, I appreciate your attempts to be forthcoming and as thorough in your understanding of this situation as possible (I try my best to be the same way) and I’m also glad to have had this very civil chat.
Also, when you clearly start seeing what I see. Don’t hold back. Tell others. Educate others. This is how we (humanity) will make progress through experience and light of knowledge.
Mansoor
That still doesn’t answer the question. And it is a global question. China and other countries bought into the derivatives that were backing mortgages. When mortgages weren’t – fill in the blank — then all those securities on Wall Street that China and other countries bought up (including u.s. investors) thereby gained trillions of dollars in defaults. All of these derivatives were invested on what? What are mortgages? Why were they not paid? Why did bankruptcies start on what mortgages are. Answer what mortgages are.
I don’t know what you mean. Mortgages are IOUs. Private contracts between investors and borrowers. Bad mortgages should simply be liquated/sold.
I don’t know what you are getting at?
Mansoor
facepalm
Do economics departments even teach supply and demand anymore? Seriously.
Can you please ask a specific detailed question?
Mansoor
sigh
Humans have unlimited wants. However, scarcity prevents us from fulfilling all of those wants, so we only fulfill the most important ones we can with what we have. Do you agree with this assessment?
His “specific detailed question” is “do you realize that, in the absence of unemployment insurance, labor regulations, and monopoly unions, wages and prices would fall to a level that would return the economy to full employment?”
Mansoor has yet to answer this:
Yes, which is why we need a free market. If we allow wages and prices to fall, then the economy will return to full employment and potential GDP. The Pigou effect would stimulate reflation.
And that isn’t mentioning my previous point that a free market currency would naturally provide fiscal and monetary stimulus in the case of monetary deflation.
So. you really believe we would be better off without umemployment insurance right now? It is very, very hard to get a job even as a security guard right now? Just ask those who are umemployed about the number of openings.
Even if we were to embark on a plan to remove “labor regulations, and monopoly unions” right now. Things will not change over-night. You will have to either shoot and kill the hungry and cold or incarcerate them (this would at least creater jailer jobs). Hunger will make people act very strangely.
Mansoor