Monday, November 17, 2008

How Obama Could Fix the Economy (or at least appear to)

Seed Corn. A mid-Winter banquet of seed-corn makes for a great meal, but insures future famine.

Obama can make a couple of moves that would appear to fix our troubles for a while. My fear is that he will try one or more of them and be hailed as some kind of miracle worker when what he is really doing is the equivalent of eating the seed corn.

1) He can make doctors, nurses, ER techs, and other highly paid medical professionals virtual slaves by imposing a single-payer health care system in which the government tells these people how much they will be paid to do their jobs, then sets wages at a fraction of their true market-value.

At first everyone will hail him as the one who made socialized medicine work. And for a while, it will. Then Doctors and other specialized medical personnel will retire or leave the profession, and a new generation of people will be highly reluctant to go through the agonizing and expensive work required to be competent in these fields for absurdly low wages. The supply of medical personnel will dry up and then we will have what every socialized medical system ever produced has had- rationing due to shortages in supply. This time, instead of your family and your insurer being the rationer, your unfriendly neighborhood government bureaucrat will be "the decider" on whether or not you get life-saving medical care.

2) He can tax "the wealthy" to confiscatory levels.

Of course the idea that the government should use its power (threat of force) to take things from one group of people and give it to another just because they have less is anti-biblical, but this looting-by law will work for a while.

Obama has been pumped up, made a sudden star, and protected by a global media that is owned by six gigantic global corporations. There is zero possibility, ZERO I say, that his policies will result in the looting of the super-rich who own these companies. Instead, the government pillagers will fall on the upper-middle class and the "barely-rich" who have a large pile of hard-earned assets to loot but not enough clout and organization to defend themselves from the theft.

The super rich will continue to have an official residence in the Cayman Islands, or have Congress grant them special loopholes, or hire an army of accountants and lawyers to dodge paying, just as they have done ever since the tax code got complicated enough to grant special favors. Even worse, government programs obstensibly meant to "help the poor" will in fact be cash-cows for some of these same global corporations and fat cats who will add to their fortunes servicing the government programs designed to "help the poor".

But on the rest, this will work for a while, until it becomes clear how to best protect ones self from government looting. Soon the barely rich and upper middle class will attempt to defend themselves the best they can. This will mean investing in things based NOT on what their potential market return is, but rather shift monies to investments that best avoid taxes. In other words, instead of expanding their business, they will use the money to buy tax-free government bonds or some other less-productive use of the money. Some of them will, like the doctors, say "sc$* these parasites" and retire early or work only four days a week instead of six - knowing that most of their extra effort would just go for taxes anyway.

Over time, as resources get shifted to less productive assets simply to avoid taxes and the most productive citizens reduce their work hours, the total amount of wealth to share becomes reduced. This has been the result of every government attempt to soak the rich in human history, and it will be the result this time as well. The once proud and independent population of this country will then be reduced to something akin to a pack of starving hyenas fighting each other over who gets the few remaining scraps of meat tossed to them by their rulers.

3) He can try a fancy semi-default on public and private debt.

He won't, but if I was interventionist I'd balance the budget (neglecting interest payments), then pass a law that said all bank deposits, salaries, and wages must be multiplied by ten. All debts to remain at current levels.

Would prices increase? Sure. They might not go up ten times though, because so many people would use their sudden increase in relative income to pay down debt rather than spend it all purchasing new goods. The amount of debt out there means there is some slack on inflation.

So prices would go up some, but if you handled it right domestic goods may not go up quite as much as wages. The main thing is that suddenly everyone in debt has only 1/10th the debt they had relative to their income. The banks lose value on their loans, but they have increased value on their deposits.

Who gets cheated? Holders of debt, especially government debt. Foreigners would not loan us anymore money so we could not deficit spend any more. I don't have a problem with that. Prices of imports would go up WAY more than home-made stuff. And I don't have a problem with that either.

Actually, I am starting to like this idea. He will never do it because it requires balancing the budget and standing up to the global interests who own him, the media which made him, and both major political parties in this country.

A note about "handling it right" is another reason he won't do it: I hasten to add the risk of ruinous hyper-inflation could only be stymied by curtailing the Fed and switching to real money backed by commodities like gold, silver, copper, etc....


Blogger Mark Moore (Moderator) said...

Looks like the Japanese are worried that Obama will pull some form of #3. They have proposed that the U.S. start issuing Treasury Bonds denominated in Yen and other foreign currencies instead of dollars. That way we can't cheat them by saying "Thanks for the loan when dollars are 1 to 100 Yen, we will pay them back in dollars that are worth 1/10th of a Yen".

4:52 AM, November 18, 2008  
Anonymous Tommy said...

In proposal #3, I'm wondering where would the money to increase bank deposits, salaries, etc. by 10 come from? I don't understand how balancing the budget, then increasing these things by such a large amount would fix the economy. Balancing the budget doesn't mean all these businesses have this type of money to spend. Please explain, thanks.

6:54 AM, December 07, 2008  
Anonymous Anonymous said...

You are an idiot

10:15 PM, December 19, 2008  
Anonymous Anonymous said...

Mark Moore,,,
I understand your feeling and meaning, But the USD=to 1/10th of a yen. Come on here.. That is impossible. Right now it is 1 USD= 10,000 yen so that is 1/10,000. That is very ruff. As you are saying.. I could agree that it could get as bad as 1 USD/ 1,000 yen. And even getting anywhere close to that number would be world WAR III.

10:22 PM, December 19, 2008  

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