Gallup: Unemployment drops down to 8.1%, lowest level yet.

he thinks that creating trillions of dollars from nothing, making the GDP positive on paper, makes life better

 

and sequestering capital for inefficiency robs income generated from efficient, productive activity.
Congratulations, your childlike simplicity and belief in magical outcomes has created more problems than we started with.

 

That makes no sense. Checks are income.

Sure, they may produce, but they aren't producing wealth.

If that is the case, then you'll agree that all we need to do to create limitless wealth is print more money.

We are discussing your desire to see people paid to do what is no longer useful to the economy because, you believe, that a person being paid to do something unproductive creates production by spending the money you pay him, but doesn't create production by spending the money if he does nothing for it. There's apparently something magical about a "job" that automatically creates wealth even if it doesn't.

No? Weren't you the one saying that GM deserves to stay in business with the support of people who produce wealth and have it forcibly taken from them through taxation? That's a statement of morals, not economics.

Business people aren't cows, and they aren't running around in herds. The analogy sounds good when it comes from a politicians mouth, but it amounts to nothing more than sophistry.

You say that you aren't speaking of morality, but what you describe is a moral dilemma. Business people, seeing uncertainty, seek lower risk alternatives to what they had been doing before. You believe that they should be doing something more. When you involve government in the matter, it becomes a matter of pushing your moral view onto the market.

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For the government to stop creating business cycles when it intervenes in the monetary system. Ideally, that would mean a return to a free market in money.

Keynes's prescription is to spend money to cure the problems of spending too much money. It doesn't work, and it's never worked.

 

I agree that "Business owners react rationally to uncertainty by taking the steps necessary to eliminate undue risk". That is exactly what creates the recessionary death spiral. When there is less demand for their product and the economy is tanking, each business individually reacts rationally by cutting production and laying off workers.

While that is rational action for an individual business, it amounts to an irrational group action. Buy shutting down production and laying off more workers as a group, that creates more fear and panic. That in turn causes individuals to act rationally: The cut back on purchases and expenditures. But again, as a group, that creates the irrational act of reducing overall market demand. The reduction of overall market demand induces the individual rational act for businesses to cut back more production and lay off more workers.

Thus, while individual actions are rational, these individual actors as a group create the irrational act of perpetuating an economic death spiral, unless or until there is some psychological break in the pattern. This irrational group action can result in unnecessary destruction in the economy.

This is where Govt intervention plays a positive role, it can help break that psychological spiral, and thereby prevent unnecessary destruction of businesses -- and lives.

 

There's no such thing as a "death spiral." That's just a bit of sophist scare-mongering to get the boobus to go along with expensive government programs that benefit the cronies of politicos.

No. It doesn't. There is no group action and there's nothing irrational about it. You *believe* that businesses should do something different, so you *believe* that government should interfere to invest, using taxpayer money and debt, in riskier programs with than business people are willing to take on with their own money. That is a moral proposition, and you mask your moral proposition with scare tactics like a priest harangues his parishioners from the pulpit to lay off the booze and get with God.

Where is this "fear and panic"? It doesn't exist. People react to uncertainty in different ways, and those who own businesses make purposeful, and therefore rational, decisions that they believe will benefit them most in the event of conditions become more adverse. That is not "fear" or "panic".

"Market demand" is simply a term that describes individuals who want to buy particular products how they prioritize those purchases over other wants, including a want for safety from uncertainty against a want to continue business. Some people are more risk adverse than others. Your proposition is that government has a moral obligation to step in when some people want to take less risk than you think is good for them.

Exactly. A moral proposition. People don't act the way you want them to, so you demand that government interfere. And, as with all moral interferences by government, politicians and their cronies win out and the rest of us lose out.

 

​

Great post.

The bottom line seems to me to be that Keynesians want to control the economy.

They act like the father that 'helps' the son build a model - even though the father knows no more then the son does about building models...but he assumes he does just because he is the father.

He stands back when the son is doing a good job - but as soon as he starts doing it differently then the parent thinks he should (even though the parent does not know either), then he steps in and takes over.

And since he is ignorant - he ends up making mistakes. But he assumes that since he is the father, then he must know what he is doing...so the two of them stumble along.

Every time the son does what the instructions says, the father intervenes when he thinks 'that does not seem right' - even though he is semi-clueless...but his arrogance overrides all.

Eventually, the model takes many times longer to make then it would have if the father just left the son alone...plus it ends up looking substantially different (and noticeably worse) then it was supposed to look.

 

And, to complete the analogy, the son owns the model, never asked for help, and the father is a control freak who regularly beats his son for whatever reason comes to mind so that the son fears not letting the father take control whenever demanded.

 

Hey...! I have an "uncle" just like that....my UNCLE SAM...!

 

don't you see ? The government must take our wealth and give it to their cronies so that we don't have to lose it on our own.

 

I agree except for the beating part.

I do not picture Keynesians as violent AT ALL.

I picture them as Paul Krugman/Ben Bernanke-wannabes.

They believe higher education is EVERYTHING, practical knowledge is near-nothing and that every emotion can be figured out using a calculator.

They are basically decent and well-intentioned but - and here is where it all falls down, imo - rather arrogant and very mooching (expecting others to give them money whenever they 'require' it).


BY the way - I am speaking about philosophical Keynesians, NOT politicians who use Keynesian-style spending habits.

Imo, 90% of politicians ADORE spending as much as they possibly can...Keynesianism just gives them the justification to do so.

 

You're right. The progressive liberal is more like the doting mother. She calls in Dad whenever the son violates one of the innumerable, often contradictory and confusing, household rules. She's never violent, but she's also not forgiving. Or forgetful.

But now this analogy is getting out of whack and becoming like the "death spiral" or "herd panic" analogies where the reality has to be tortuously twisted to match the rhetoric.

 

Sure there is. We were seeing in late 2008 to early 2009.

There is no action of a group? You're position is facially false.

It's not a question morals. It is how a group (the market) behaves and the economic consequences of the behavior, and the best way to address the behavior.

No you have to deny fear and panic exists for your position? Again, I submit that is facially false.

Fear and panic:

January 2009

Job loss: Worst in 34 years
Employers slashed 598,000 more jobs in January [2009] as unemployment rate climbed to 7.6%.

NEW YORK (CNNMoney.com) -- Employers slashed another 598,000 jobs off of U.S. payrolls in January, taking the unemployment rate up to 7.6%, according to the latest government reading on the nation's battered labor market.

The latest job loss is the worst since December 1974, and brings job losses to 1.8 million in just the last three months, or half of the 3.6 million jobs that have been lost since the beginning of 2008.

http://money.cnn.com/2009/02/06/news/economy/jobs_january/index.htm

Market players were also disappointed by reports that U.S. home prices fell 8.7% year-over-year in November, U.S. housing starts fell 15.5% in December, and weekly initial jobless claims rose 62,000 to 589,000.[/B]
http://www.businessweek.com/investor/content/jan2009/pi20090122_192905.htm

On Wednesday, the 30-stock Dow Jones industrial average finished with a loss of 248.42 points, or 2.94%, to 8,200[/B].

http://www.businessweek.com/investor/content/jan2009/pi20090114_103250.htm

598,000 Jobs Shed In Brutal January
Unemployment Hits 7.6% as Downturn Picks Up Steam

The need for progress on those fronts seemed more important than ever yesterday, as the Labor Department announced that conditions worsened more than expected last month. The nation's employers shed 598,000 jobs, the most since 1974, driving the unemployment rate to 7.6 percent from 7.2 percent. If the jobless rate keeps rising at the pace it has for the past two months, it will hit double digits in summer and reach its highest rate since the Great Depression by the fall.

http://www.washingtonpost.com/wp-dyn/content/article/2009/02/06/AR2009020601156.html

GROSS DOMESTIC PRODUCT: FOURTH QUARTER 2008 (PRELIMINARY)
Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- decreased at an annual rate of 6.2 [later revised to 9.2] percent in the fourth quarter of 2008[/B], (that is, from the third quarter to the fourth quarter), according to preliminary estimates released by the Bureau of Economic Analysis.

http://www.bea.gov/newsreleases/national/gdp/2009/pdf/gdp408p.pdf[/QUOTE]

Continued Unemployment Claims at Record High
In the week ending Jan. 24, the advance figure for seasonally adjusted initial claims was 588,000, an increase of 3,000 from the previous week's revised figure of 585,000.

http://www.calculatedriskblog.com/2009/01/continued-unemployment-claims-at-record.html

That is not my proposition at all.

Well, OK. If you want to call the unnecessary destruction of business and jobs as "bad" as a moral proposition.

 

Can you - using ONLY links to unbiased data - prove that Keyensians "act like the father that 'helps' the son build a model"?

Yes or no?

 

False.

Only in an erroneous sort of way.

 

Obama doesn't have any stats, but no Government states show that, unless you are not looking for a job. In which case you are not counted as unemployed.

I wish you better luck.

 

Feel free to show us you post isn't a failure by linking to a cite showing Gallup has ever reported a lower unemployment rate.

 

We are seeing companies go under from malinvestment and others pulling away from it and seeking safter alternatives. That is not a "death spiral." A "death spiral" implies that without the divine intervention of beneficent politicians to stabilize
"the economy" with their powerful and omniscient knowledge of monetary central planning, the economy will come to a grinding halt and everyone will be unemployed. At least, that's what they want you to believe, and, apparently, you swallow it hook, line and sinker.

There is, however, no evidence of this scary and rhetorical "death spiral." Just people doing what they do when faced with uncertainty. They hedge their bets.

A "group" is made up of individuals. Individuals act. Groups do not. If you want to categorize actions by the nature of those actions, then fine, but don't try to make us believe that business people have a hive mind. Or think like cows in a stampede scenario. Business owners have different reason for the actions that they take, even if the actions are substantially similar to those actions of others. Each business owner or manager or CEO has his or her own adversity to risk and will act according to what he (or she) believes the future holds. You insist on labeling similar action as "group action", which it is not.

Unless you argue that government action is a virtual free lunch, there are people for whom it is not the "best" scenario because they have different time preferences than you, and it is a moral proposition when you decide that coercion is appropriate to benefit some at the expense of others. "Best" is entirely subjective. You might as well call it "good" or "evil".

Continued Unemployment Claims at Record High
In the week ending Jan. 24, the advance figure for seasonally adjusted initial claims was 588,000, an increase of 3,000 from the previous week's revised figure of 585,000.

http://www.calculatedriskblog.com/2009/01/continued-unemployment-claims-at-record.html
[/quote]

Where is the objective measure or evidence of fear or panic in the article? There is none. There are people responding to conditions in their own purposeful ways and according to their time preferences and risk adversity. You bundle all that action together, call it "group action", and then tell us, without any evidence or cite in the article, that it's "fear and panic." It's absurd.

When there's a period of malinvestment, there will be a period when companies seek to shed those malinvestments, and consumers seek to unload debt and prepare for difficult employment environments. That's not fear or panic, that's just good planning.

How do you know what is the necessary or unnecessary destruction of business and jobs? It certainly isn't possible for central planners to know.

 

so you admit that "unemployment" can shrink without a net gain in employed persons ?

 

yay, the central planners have saved us

 

They are working diligently on the problem of you not spending enough on doodads and geegaws and spending your money to do it. You're just ungrateful.

 

A. Saving jobs that do not cost-effectively contribute to consumer demand is a waste of scarce resources. When business owners make a poor investment in labor, that malinvestment necessitates a correction, i.e., a layoff. When the government prevents these types of corrections from occurring, economic recovery is inhibited and potential wealth creation is stifled.

B. That is an inaccurate generalization. Business owners do not simply stop investing during an economic contraction. They simply invest less, i.e., more prudently.

Recessions are corrections, like the withdrawal symptoms associated with heroin abuse. Your "solution" to the problem is to do more heroin. Sure, it temporarily eases the pain, but it only prolongs the suffering and postpones the recovery. The best course of action is to let the correction occur relatively unimpeded, as it is the quickest and most likely path to recovery and sustainable wealth creation.

 

with the two part time jobs I have, thanks to the incredible unemployment numbers, I will soon be buying my own doodads again. I view four dollar gas as a blessing. It is the price to pay for a doodad in every home.
Now if I could only afford food to cook in my new geegaw.............

 

When companies go down in a healthy economy it is for "malinvestment".

When good companies go down in a bad recession solely because of the recession it is because of the recession.

A death spiral implies just what it is -- a psychologically driven cycle in which psychology, fear and panic, causes the unnecessary death of jobs and businesses.

Your denial of group psychology and fear and panic is a false fantasy.

Groups act through individuals. Your denial that a group can act is facially false. Your denial of group psychology is likewise facially false. Of course there is. The Dow did not lose 60% of its value simply because every company in America suddenly had less than half the assets than they did a year earlier.

And if you had a stock portfolio, and looked at it in March 2009 worth less than half what it was a year earlier, and didn't fell some degree of fear or panic, then you have balls of steel. I submit very few people are so emotionless.

Your entire position is based upon faciall false concepts: That there is no such thing as fear or panic or group behavior. It is self evidence these things exist in markets.

All acts of society involve compromises. The question is whether it is better for society as a whole.

I disagree. The evidence is abundant.

It is not "malinvestment" when healthy companies go under or jobs are lost solely because of the overreaction of the markets from fear and panic.

Because the destruction and business and loss of jobs would not happen but for the overreaction of the markets from fear and panic.

 

Your solution is to let the junkie die from herion overdose without any medicines or treatment. I disagree that is the best course.

The best course is to break the psychological aspect of the death spiral with a temporary injection of Govt intervention to create demand.

 

You know democrats are desparate when they start bragging about 8.1% unemployment.