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PeakTrader said...

Yes, however, is the following "fair?":

1st place: $1 billion
2nd place: A new car
3rd place: A toaster
4th place and below: Nothing

Of course, only destroying part of the rewards won't help everyone.

You don't want to kill the goose that lays the golden egg.

That's why Obama's "experiment" failed.

Updated chart of output gap (also, notice the destruction of potential output since 2009):

http://stateofworkingamerica.org/charts/output-gap-real-gdp-compared-to-potential-gdp-2000-11/

Scott Grannis also has an updated output gap chart (July 27, 2012):

http://scottgrannis.blogspot.com/2012/07/the-economy-continues-to-avoid-another.html

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PeakTrader said...

Obama: "The private sector is doing fine."

It should be clear to everyone, Obama wanted to distribute wealth. Instead, he destroyed wealth.

He has lowered the economy a notch, which represents trillions of dollars of lost income and wealth.

There are massive idle resources, e.g. labor and capital. The country is underproducing by $1 trillion a year.

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Yes, much of the additional $1 trillion a year in federal spending (compared to 2007 spending) is propping-up the private sector.

The additional $5 trillion in federal debt, over the past four years, was needed just to prevent living standards from declining.

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That's why it doesn't seem like a depression, because federal debt increased $5 trillion.

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Jon, did Austrian economists ever find answers to their questions?

In the U.S., the dominant form of economics is the scientific method of neoclassical economics.

Here's what I wrote on Feb 2, 2009 (although, a $5,000 tax cut per worker, or $750 billion for the 150 million workers at the time, would've been better):

How to prevent an economic contraction in 2009:

1. Obama should change his stimulus plan to a $2,000 tax cut per worker, along with increasing unemployment benefits by a similar amount. This will help households strengthen their balance sheets (i.e. catch-up on bills, pay-down debt, increase saving, spur consumption of assets and goods, etc.). This plan will have an immediate and powerful effect to stimulate the economy. When excess assets and goods clear the market, production will increase.

2. Shift "toxic" assets into a "bad bank." The government should pay premiums for toxic assets to recapitalize the banking industry and eliminate the systemic problem caused by global imbalances. The Fed has the power to create money out of thin air, to generate nominal growth, boost "animal spirits," and inflate toxic assets.

3. Government expenditures should play a small role in the economic recovery. For example, instead of loans for the auto industry, the government should buy autos and give them away to government employees (e.g. a fringe benefit). So, automakers can continue to produce, instead of shutting down their plants for a month. Auto producers should take advantage of lower costs for raw materials and energy, and generate a multiplier effect in related industries.

Also note, a large tax cut would've strengthened the banking system. Moreover, consumers would've paid-down or paid-off their highest interest rate debt first, to free up money for consumption.

Furthermore, Keynesian economics is not without value:

"Keynes intended government to play a much larger role in the economy. His vision was one of reformed capitalism, managed capitalism -- capitalism saved both from socialism and from itself...Fiscal policy would enable wise managers to stabilize the economy without resorting to actual controls. The bulk of decision making would remain with the decentralized market rather than with the central planner.

These tools could be used to manage aggregate demand and thus ensure full employment. As a corollary, the government would cut back its spending during times of recovery and expansion. This last precept, however, was all too often forgotten or overlooked."

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Real GDP revisions - July 27, 2012:

"The BEA revised GDP for 2009 to minus 3.1% instead of the previously reported minus 3.5%.

It revised 2010 growth to +3.0% instead of the previously reported +2.4%, and 2011 to +1.8% from the previously reported +1.7%.

Second quarter GDP slowed to 1.5%, and the first quarter was revised up from the previously reported 1.9% to 2.0%.

The 4th quarter was revised up significantly, from the previously reported 3.0% to 4.1% growth."

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VangelV says: "the Austrians are light years ahead."

I wouldn't say they're light years ahead, but I would say you're light years ahead in 19th century suboptimal growth.

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Ron says: "if you double the money supply you have decreased the value of each dollar by 50%. In other words every thing you buy costs twice as many dollars."

And your income can more than double, if the increased money supply spurs real growth through nominal growth.

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VangelV, it seems, squirrels have a better understanding of Keynesian economics than you.

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When Reagan ramped-up military spending to win the Cold War, the result was a "peace dividend" in the 1990s.

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VangelV says: "The US grew far faster in the 19th century than it is growing today. The post Bretton Woods era has been a total disaster that was even worse than the earlier part of Fed era."

Yes, and it's easier to double a dollar than a billion dollars.

After WWII, U.S. per capita GDP expanded faster than many smaller economies to become the world's only superpower.

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VangelV, in the post-WWII and pre-Obama U.S. economy, U.S. living standards improved, because economics improved.

Of course, improved economics was not always implemented, e.g. over the past few years.

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Chart of U.S. per capita real GDP 1871-2009:

http://visualizingeconomics.com/2011/03/08/long-term-real-growth-in-us-gdp-per-capita-1871-2009/

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THE MYTHICAL COLLAPSE IN AMERICAN LIVING STANDARDS
10/20/2011

"A good example of our extraordinary increase in standard of living over the last 100 years is to imagine all the things we can accomplish in an hours time.

Last night at 7PM I put my laundry in the wash, I put the dishes in the dishwasher, ordered dinner from a local restaurant and went upstairs into my office where I did an hour of work.

At 8 PM my dinner arrived, my laundry was done, I ate dinner on a fresh clean plate and I had done an hour of work in this period.

Imagine trying to do all that 100 years ago? How long would it take you? Days? Perhaps even weeks? That is a remarkable increase in living standards.

This is why, when someone says the dollar has fallen 95% since 1913, you should remind yourself never to listen to that person’s opinion ever again as they are just misconstruing the reality of our living standards, most likely in an effort to push some personal agenda.

This country has achieved an incredible amount in just 235 years. In this brief period we went from a small group of colonies to the world’s superpower. We have grown from poor immigrants to the wealthiest country on earth. We have grown into the greatest innovation machine that man has ever witnessed."

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This depression, since 2009, was unnecessary.

We could've achieved a shallow recession in 2009, a V-shaped recovery, or a stronger recovery.

Real per capita GDP could be much higher in 2012 than the 2007 peak (it remains below 2007) and the national debt could be much lower (by trillions of dollars).

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Obama has succeeded in reducing global warming by spending trillions of dollars to create a depression.

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