The 6 Pack Economist

 A baby of the protectionist in the US is raising tariffs or restricting what can be imported.  I am not against restricting products from some crazy dictator or murdering nut job but usually it restricts stuff from a country like Canada. So is this Smoot-Hawley part 2? 

I know that most people’s understanding of history is on par with their understanding of particle physics in a singularity but something similar happened during a past round of economic turmoil.  This was brought by republicans in the 30’s.  It was called the Smoot-Harley Tariff Act and a bunch of protectionists thought it was great to just kill all imports. 

Let me preface this by relating a rule of life “Never screw people who can screw you too”.  This held true through the cold war.  The US and USSR never shot their Nuclear ICBM at each not because they were buddy-buddy but because they knew the other guy would shot back and everyone would lose.  Large tariffs against other-wise descent trading partners work the same way. 

The current economic “stimulus” package has some rule about only buying US steel which means it is not a tariff deal per-say.  But this spending package is the GDP of many other nations.  So by keeping other countries out of the deal it is working like a tariff.  In addition other countries are going to be doing their own stimulus packages and US goods will be restricted from theirs.  In the end it may just have a very similar effect of smoot-hawley tariff, although not nearly as devastating.

More Troops for Afganistan

There is a saying in the military and grand strategy; “Jr Officers study tactics, Generals study logistics”. Before the US commits more troops to an area of the world in which their only ally is about as stable the chick who stalked you in high school, I would ensure that they can get enough food to at least fight their way to the coast.

Forget the past two years
Perhaps the only way we are getting out of this mess is to just delete everything that happened in the past two years. I think a Tom Clancy novel did something like this.

Screw-it Just right the check
I find the price of this whole bail-out starting to get ridicuous. Who is going to pay for this? And just so you know I only half heartedly supported the first one and that was with the understanding that they were going to buy bad assets, not right blank checks to the banks.

A little scary
I am not big on too much from info wars web site. My rule of thumb on government conspiracies is that they are too incompetent to get it done. But doesn’t freak anyone else that Obama is being treated like a messiah? I hope people keep their heads on straight.

I have a few more posts I have to review for the weekend. Have fun. And don’t play in the street.

I am sorry to inform you that all four of you will have to patiently wait a few days for me to get my stuff together on a new web host.  Don’t worry everything will be back up soon.

P.J. O’Rourke said “When the legislature controls what is bought and sold the first thing that is bought and sold is legislators”.  Well as it turns he was wrong.  Who knew that is was the legislators who would be doing the buying of the businesses?

 I am going to explain how this could work out for the better before I tell you how it will actually work.  The government buys large amounts preferred stocks and can start guiding the bank on the right path. The banks will be required to hold the top executives responsible and start making good solid lending decisions.  The economy would start to pick up and they banks would be profitable.  The banks are able to return a dividend and the stock price goes up.  The economy now on its way to recovery the government can now sell its share of the company and use that money toward paying down the deficit (hopefully no new spending, but this is the positive part of the piece so let us assume that).   

 Unfortunately the preceding paragraph has as much to do with reality as my dreams of winning the lottery, moving to the Caribbean with a sail boat and being known as the drunken American sailor.  What will happen is this; the government will start off making good decisions for the bank.  Much like the preceding scenario where lending is restored and top executives can’t pillage the banks coffers; these actions will get the economy moving.  Once people have moved on to a new dog and pony show the rats will show up. 

 The return of the rats will mean business as usual.  These banks will be used as leverage between legislators to get pet projects financed in the legislators’ respective districts and to get deals for their own private homes.  Employment from the mailroom to the boardroom will become a patronage bonanza.  The legislators unwilling to give up control of this grand candy machine will not, I repeat will not sell their preferred shares. 

 The banks being essentially a department of the DMV will stop making smart business moves; instead they will devolve into a fat tub of immovable flesh. The banks will be so dependent on government money they will no longer be able to function on their own.  The patronage jobs and pet projects will have bloated the bank’s own accounting records so much that legitimate loans will be squeezed out.  They will know their master and their master is some legislator who will be voted into office again and again not because of his actions destroying a bank, which will be too hard to explain in a sound bite campaign, but because of his stance on some other issue that the legislators will not change anyway.

 The only thing left to do at this point is to get a large loan from a non-nationalized bank and then use that money to give to a legislator’s campaign.  Then the legislator can get you a big paying job at the bank.  While at the bank you can make a bid to buy the bank you got your original loan from and then lose the paperwork for your loan in the merger.

 Toast your next good beer to taking advantage of government corruption.

I get a little shaky when governments start going after bloggers, especially when it’s a supposedly free government like south korea.  This guy apparently made is name by posting bad news.  Let me start by saying I don’t know what this guy actually wrote or if he played some type of stock manipulation game but it is still scary.

More people are starting to recognize that an economy is 50% psychological.  If you feel good you spend money with allows someone else to spend money and the cycle goes on.  So what if governments in an attempt to control their own economy make it illegal to post bad stories about the economy?   

Why is the left (as in the political spectrum) so infatuated with “cults of personality”.  Even Castro at 82 years old is still shown to be vibrant in his jogging suit.   Although the only thing I can think of is a Saprano with bad hair.  I can sort of understand a little bit of the cult of personality for Obama.  I don’t agree with it, I can only understand it.

When was the last time a leader with cult of personality status said “With me in office, you will be free to fix it your damn self”. They haven’t for a very long time.  The cult of personality leader usually says something along the lines of “With me in office, I will fix it for you”.  How do you expect to get anywhere telling people that you will do less for them then the next guy?  It is a wonder that any real conservative gets elected but that’s another post entirely.

In the book Don’t Think of an Elephant! by George Lakoff (I will put it on my book list soon) he comes up with a theory on why people have liberal or conservative view points.  And I have to agree with him despite being on the other political isle.  Liberals tend to come from strong maternal role households or those that value nurturing.  Conservatives tend to come from strong paternal role households or those that value self reliance.  Think of it this way.  Your mom would tend to the scraped knee while your father would “tell you get up and stop crying”.  Using that understanding it becomes very easy to understand why the left values cults of personality so much.  These leaders are mommy promising to fix stuff for them. 

I don’t know about you but I left my house and parents so I could make my own decisions.  I did not exchange a personal relationship with my real mother for an impersonal relationship with a government acting like a mother.

At first I thought this article about savers had to be a joke.  But alas it is real.

Someone should really take this person’s keyboard away before they hurt someone.  I guess he/she works from home.  After all how do you get to work when you have cart in front of the horse.

For those of you that think this is a good idea, remember that banks lend out money that people save.  Basically the interest a person earns on the money they keep in the bank account is their share of the interest the bank made in loaning it out. If there are no savers, there is no money to lend out.  We have been playing this juggling act of using leveraged assets to buy more assets and then leverage the total again, for too long. 

There is nothing wrong with leverage itself.  It actually enables our economy to function.  It allows most of the successful economies to function. Leverage allows people to take a risk and be rewarded.  But what we have going on now is that the leverage was out of control and that everyone was so leveraged the whole system threatens to fail.

The situation we have is like an alcoholic who functions by taking a shot of whiskey in the morning, we are making our situation worse.  We have to go through the hang over from over consumption. 

The government is going to have to spend money to get things moving but these things have to be done in such a way that the money that is spent is spent on things to enable more private commerce.  I hope the government spends money on new roads, bridges, power distribution, and other infrastructure work.  But we all know what is going to happen.  Think Boston Big Dig but with more money. 

As for the people saving their money and not spending it, well that is just the way things happen.  People afraid that they will lose their jobs try to save money. The problem is not the saving people.  Provided they are not saving their money by putting it under their mattress, which is the only way money is truly lost to non-circulation.  The problem is that banks are not lending money at all.  Unfortunately they are not lending to worthwhile companies either.  Perhaps if enough people put enough money in the bank it will be able to de-leverage it self out of bad situation.

What we need is moderation.  Some spending, not like we have seen, but we also need savers.  Some people have to get burned and some have to be rewarded.  After-all it is those people who saved their money are the same ones who we depend on to get a loan when we need it.