Commentary: Bailouts will lead to rough economic ride

[Balog]

Longeyes: you really love the lengthy and elaborate metaphors don't you? Very colorful but something of and impediment to those you want to know what exactly the hell it is you're talking about........

[TwitchALot]

Re the gold standard:  A pure gold standard is limited in part by the fact that there just ain't that much gold in existence to allow for the amount of economic activity, worldwide, that's been going on.  The cited article is correct about the relative volatility, but "panics" during the gold-standard era were pretty much of short duration.  Yeah, governments were limited in what they could do to end panics, but the modern system means lengthier periods of "merely unhappy".  You gotta figure which is better:  Pull the BandAid off, all at once, or just one hair at a time.

Gold and Silver are, under the Constitution, authorized as legal tender. I have no issue with including platinum and other precious commodities (via amendment, obviously). The bank panics that happened during the gold standard era were the result of flaws in the banking system as far as I'm concerned- not the monetary system. You cannot have a bank panic (at least, as we know it) without having a fractional reserve banking system. Until that is fixed, there's no reason to presume that runs on banks will ever disappear for good. So far as I'm concerned, in the past, we had a good monetary system, but a bad banking system. Now we just have a bad monetary system and a bad banking system. A good monetary system gave us long term stability, and a good banking system would have given us short term stability. Now we have neither.

Furthermore, had the gold standard remained, we wouldn't be in all the messes we're in today. A gold standard (and the Constitution) limits government power by limiting government spending. It's no surprise that all the regulations we see today, firearms related and otherwise, came after the introduction of the Federal Reserve. When the government can make money out of thin air to cover its extravagant, and growing, expenses, what else should any reasonable person expect other than government expansion? People TALK about getting rid of the lobbyists, the corruption, the excessive spending, the earmarks, the intrusion into our lives, but what has anyone proposed to do about it?

You want to limit government intervention in your lives? Kick the lobbyists out of Washington? Reign in government spending? I have a novel idea. Take the money out of Washington. Obey the Constitution, and hold those who don't accountable for it. Voila.

The only reason lobbyists are in Washington is because that's where the money is. That's where the people who can make laws go in or against your favor are. And if the money weren't in Washington, and if the power to regulate was returned to the states, you can bet that Washington would be a much cleaner place. When you put the money and power to regulate in Washington, where the hell else did you think the lobbyists and corporations would go?

[The Annoyed Man]

Bah, no one cares about the Constitution.

[longeyes]

Balog, you're young, plenty of time to figure it out.

I was talking about an economy built on out-of-control leverage and a populace addicted to on-credit consumerism.

[Art Eatman]

TwitchALot, back during the gold standard, banks literally ran out of money in a panic.  No gold or silver coins left in the bank.  Those who hadn't gotten their money out lost it.   The owner(s) of the bank went broke.  The FRB wasn't dreamed up just for the hell of it, no matter what the tinfoil hat club says about it.  (I'm not at all saying it was the best way to try to avoid the results of panics.)

Anyhow:  The numbers of lobbyists have risen as there has become ever more government involvement in our daily lives.  Gun laws?  The NRA lobbies.  Environmental issues?  Both the Sierra Club and Exxon lobby.  And on and on.  Farmers and ranchers.  Small business as well as big business.  "Issues" groups such as NAACP and NOW...

The power of any lobbying group of whatever sort stems in part from numbers in the lobbying-groups constituencies (NRA and AARP, the two most effective groups) and in part from the $$$ invested in "helping" or "buying access" ("Big" industry/oil/etc.)

Lobbying helps.  Without the NRA's lobbying efforts, e.g., we would have seen the end of handgun ownership with the GCA '68, and registration would have become the law of the land.  The present Senator Dodd's father, also a senator, was a leader in the anti-gun movemnt.

[TwitchALot]

TwitchALot, back during the gold standard, banks literally ran out of money in a panic.  No gold or silver coins left in the bank.  Those who hadn't gotten their money out lost it.   The owner(s) of the bank went broke.  The FRB wasn't dreamed up just for the hell of it, no matter what the tinfoil hat club says about it.  (I'm not at all saying it was the best way to try to avoid the results of panics.)

That's because of the fractional reserve system and how we seem to think banks ought to operate. So far as I'm concerned, banks should be places to securely store your wealth and valuables. And if they operated that way, bank runs wouldn't be a problem. With a fractional reserve system, the opposite is the case. Of course, with a fractional reserve system, bankers also make more money...

Anyhow:  The numbers of lobbyists have risen as there has become ever more government involvement in our daily lives.  Gun laws?  The NRA lobbies.  Environmental issues?  Both the Sierra Club and Exxon lobby.  And on and on.  Farmers and ranchers.  Small business as well as big business.  "Issues" groups such as NAACP and NOW...

The power of any lobbying group of whatever sort stems in part from numbers in the lobbying-groups constituencies (NRA and AARP, the two most effective groups) and in part from the $$$ invested in "helping" or "buying access" ("Big" industry/oil/etc.)

Lobbying helps.  Without the NRA's lobbying efforts, e.g., we would have seen the end of handgun ownership with the GCA '68, and registration would have become the law of the land.  The present Senator Dodd's father, also a senator, was a leader in the anti-gun movemnt.

Which is the result of our lack of obedience to the Constitution and the apathy or unwillingness of the people and the Courts to hold elected officials accountable to it. The list of things Congress is authorized to do is quite short, and if it were obeyed, Washington wouldn't be quite like it is today.

[MicroBalrog]

That's because of the fractional reserve system and how we seem to think banks ought to operate.

No fractional reserve banking - no economic growth.

[MicroBalrog]

I know I posted this elsewhere on this forum before, but I think it's useful for this thread as well.

I hope this addresses both what Art and Mr. TwitchALot has said:


The boom-bust cycle is not natural in that sense that Keynesian economists ascribe to it. Obviously, on an intermittent basis you'll have giant screw-ups, wars, and natural disasters that'll mess stuff up, but the idea that there's a natural 'market cycle' that needs to be corrected is the monopoly of the Keynesians.

The Great Depression, for one, is not necessarily a natural event  there are many economists who ascribe it solidly to a failure of the Fed to function in its role as a lender of last resort. Specifically, Friedman (whom I will quote here at great extent) believed that the main strength of the Depression could have been avoided as late as December 1930, during the failure of the Bank of the United States (the name is deceiving. That was actually a private bank. Naturally, the name was a marketing master stroke).

To this day, of course, the Fed is afraid of repeating the mistakes of 1929-1930, which is the reason for its current inflationary policy.

There are, I remind you, four major options as far as the banking system/money supply goes:

1.The central bank (in the case of the US, the Fed, but the system doesn't vary much) and the government manipulate the money supply for various ends  whether to control unemployment or stop a recession, or whatever. This is the system that is used throughout the world today. The benefit, obviously, that government has far more power to fix stuff. The drawback, as demonstrated in way too many countries, is that if you end up exercising this power too much, or too little, you can truly mess things up. Mike Irwin is older than me and probably remembers stagflation. Another drawback of this system is that it gives the government the ability to watch the banks very closely.

2.The gold standard. The benefit, obviously, is that inflation is very difficult with this  you can't just start mining more gold out of nowhere (unless you're Imperial Spain). This is however also a major drawback, because for your economy to be able to grow, it requires a constantly-growing supply of liquid money to be used in loans, investments, etc. No loans  no investment capitalism.

3.Monetarism, despite being touted by many economists, has never been implemented. This involved the government setting a limit (Milton Friedman suggests 3%), and forcing the central bank to expand the money supply at this rate every year, with exceptions being made only during wars. The drawback, of course (and that's why the US has made the Fed independent) is that you will make the wrangling around what the percentage should be political, with different pressure groups pulling this different ways).

4.Free banking. This means that the minting of currency is privatized, and instead of having a single lender of last resort, there are multiple superbanks that serve the same function. This went out of the window with general growth of government power at the turn of the 19th century, world-wide. In America it went out of the window with the Civil War. Naturally, there's disagreement between economists with what this did, how common wildcat banks were (though these were mostly known in the US application of this system), or how well it did for the economy.


Now, what I am going at is this:

This 'crisis' has been caused (as many have pointed out) by there being many loans, too cheap and too plentiful, available for people to make really bad investments. The bubble

It is not a result of America having an economy that is too free, because America does not have such an economy.

It is true, of course, that America is a freer economy than most of the other ones. But America  as every single Western nation is a mixed economy, where the government plays a massive role.

The current crisis will repeat itself as long as this system is maintained.

What needs to be done  and it is not something that will happen any time soon  is that the very role of the government in economic and society needs to be rethought.

I do not imply that 'We must adopt anarchism or we are all doomed', but I do believe that to fix this, we must  adopt some of the options in the classical liberal toolbox.


P. S. Milton Friedman (whose book I consulted to write this post) suggested a series of Constitutional Amendments to prohibit deficit spending, limit the Fed's power to manipulate money supply (that's Option 2, above). Mises and later Rothbard were free banking fanboys (specially Rothbard), and I do think that Hayek was into gold.

P. P. S. I am not an economist, nor do I play one on TV.[

[Waitone]

At least the discussion here'bouts is turning to the banking system.  Pity the public discussion is shotgunned everywhere else.  The debate will eventually center around currency.  Do we want a debt based currency as we have now or do we move to an asset based currency.  I doubt we will every debate the answer until western civilization sits on a pile of ashes and smoldering ruins.  There exists simply too much power in debt based currency.  An asset based currency is a pair of handcuffs on government.  No change is forthcoming any time soon.

[Manedwolf]

We can't have an asset-based currency if we don't control the asset.

We can control how many dollars are in circulation to a great extent. We cannot tell hostile nations to not dump or withhold precious metals onto the world market.

Do people not remember the noble metals panic of 2001, when palladium spiked up to $1000 an ounce because of a Russian supply bottleneck, and then fell back down to under $200 an ounce?

You want your money to do that, the next time South Africa has a mine power problem for gold mines? I don't.

[longeyes]

A lot of good stuff here.

The boom & bust cycle isn't economic, it's psychological.  Valuations are about perception, not underlying economic realities.  Is our overall stock market in trouble or really only worth half its market value?  I think the latter.

Anyone want to remark on why the .gov stopped publishing M3 numbers some years back?  There was a point where I believe the money supply was growing at an annual rate of 18 per cent a year.  Cripes.

[Waitone]

Go to http://www.shadowstats.com/ and be treated to how the govt diddles the statistics for generations.  When the FED quite publishing M3 last year or this year (don't remember which) I figured something was up.  The gatekeepers knew what reality was.  The only reason for ceasing publication was to keep Joe and Martha Sixpack in the dark. 

One further observation.  If fed.gov feels free to diddle its statistics for its own purposes, why do we assume wall.st is not doing the same thing for its own purposes?

Nice summary page of the problem http://www.shadowstats.com/alternate_data

[Zed]

And yet, on some other issues he's dead nuts crazy wrong. 

I'm almost afraid to ask, but how do you figure that?

[The Annoyed Man]

We can't have an asset-based currency if we don't control the asset.

We can control how many dollars are in circulation to a great extent. We cannot tell hostile nations to not dump or withhold precious metals onto the world market.

Do people not remember the noble metals panic of 2001, when palladium spiked up to $1000 an ounce because of a Russian supply bottleneck, and then fell back down to under $200 an ounce?

You want your money to do that, the next time South Africa has a mine power problem for gold mines? I don't.

The founders probably knew that the supply of gold circulating through world markets could not be controlled by folks like you and me. They also probably knew that our government couldn't control it. There has to be some reasoning for that line of thought. There has to be some reason why they chose to have gold and silver used as legal tender (as volitile as it is  ) rather than have such a soundly controllable fiat currency monetary system similar to what we have today. I don't know what it is, honestly. I think [what the founders thought of paper currency] would make an excellent research project.

And where does this "we" come from? I wasn't aware that "we the people" can control much of anything our government does, anymore.

[Manedwolf]

We can't have an asset-based currency if we don't control the asset.

We can control how many dollars are in circulation to a great extent. We cannot tell hostile nations to not dump or withhold precious metals onto the world market.

Do people not remember the noble metals panic of 2001, when palladium spiked up to $1000 an ounce because of a Russian supply bottleneck, and then fell back down to under $200 an ounce?

You want your money to do that, the next time South Africa has a mine power problem for gold mines? I don't.

The founders probably knew that the supply of gold circulating through world markets could not be controlled by folks like you and me. They also probably knew that our government couldn't control it. There has to be some reasoning for that line of thought. There has to be some reason why they chose to have gold and silver used as legal tender (as volitile as it is  ) rather than have such a soundly controllable fiat currency monetary system similar to what we have today. I don't know what it is, honestly. I think [what the founders thought of paper currency] would make an excellent research project.

And where does this "we" come from? I wasn't aware that "we the people" can control much of anything our government does, anymore.

Gee, maybe in the 18th century, world business transactions were a matter of moneychangers and weeks and months, whereas today they're in the billions of electronic cross-currency transactions per second, all over the globe? Sure, gold was useful then. Someone could go to a country whose currency they didn't even know, and gold could be measured out with a scale as a portable measure of currency that couldn't be faked, fake gold is discovered in seconds with acid tests or displacement. But it's not useful in that manner anymore. We've outgrown it.

You can always tell when someone hasn't spent any time at a major multinational corporation with access to the financial spreadsheets, seeing how many transactions are going on per second...! One touch of a key and millions of dollars move back and forth across the internet and satellites, becoming part of the flow of parts from Chinese factories, oil from the Middle East, produce from South America. THAT is what money is now. It's become so fast and complex that it's akin to a global version of the human nervous system. It's why "pain" in some remote location triggers a response everywhere at once. It's not ledgers and a pen anymore, you know? 

Money is now a series of constantly-varying global rates that people assign to what they are willing to pay for goods and services, it does not represent a shiny metal, nor would it be feasable, useful or possible for it to anymore.

You can keep some gold in your safe if that makes you happy. But that, and you, have nothing to do with the vast raging river of global transations going on around you every second of every day.

It should be enough clue for you that the major yearly driver of gold prices is the Indian economy and the Indian wedding season when people want it for the vast amount of jewelry traditionally called for. The major use now is simply ornamentation. It is not what it was. It is not the One True Money. It is just...a volatile and rather poor investment that can drop to lows and stay there for decades.

Deal with that. 

[TwitchALot]

No fractional reserve banking - no economic growth.

Real economic growth would be the result of increases in real productivity, not artificial increases that are the result of increases in money supply. And real economic growth can happen without fractional reserve banking because things like savings would actually mean something. Thats how you would, and should, generate capital in a properly designed financial system.

Will economic growth be slower? Most likely, yes. Would the standard of living of Americans go down? Probably. But thats because theyd be living within their means, not beyond them. When you live beyond your means, you had better be ready to pay for it. The problem is that everyone wants everything, but no one wants to pay for it, or they want someone else to do it. Hah.

Have you ever wondered how its possible that consumer spending makes up so much (a majority, mind you) of our economy? I mean, if I spent more money than I made all the time, Id be serious trouble, dont you think? Have you ever wondered where this current system is going to take us as a country?

The Great Depression, for one, is not necessarily a natural event  there are many economists who ascribe it solidly to a failure of the Fed to function in its role as a lender of last resort.

Mixed systems generally dont work. No argument with that.

This is however also a major drawback, because for your economy to be able to grow, it requires a constantly-growing supply of liquid money to be used in loans, investments, etc. No loans  no investment capitalism.

Ah, theres the kink. Savings, not loans, should the basis of accumulating capital. The savings rates today are abysmal at best, but whos surprised at this? Its no WONDER why savings rates are so low, because savings dont mean anything. Your dollar declines in value all the time, and your savings rate probably isnt high enough to keep up. Essentially, by stashing away 2000 dollars, you are losing wealth. This wouldnt happen if the purchasing power of your dollar stayed the same, and it would make saving far more attractive.

By the way, while were on the subject of loans, you do realize that growing debt is the inevitable consequence, right? There is not enough money for everyone to pay their debts right now, and thats one of the drawbacks of the current system. The people are bound to be in debt and at the mercy of bankers. And this country, and its citizens, will pay when those debts come due.

Anyway, as far as the options presented go, Im not a fan of either. Im of the belief that banks should be secure places to store your wealth, and the system should be based around that and a commodity backed currency (details if requested).

What needs to be done  and it is not something that will happen any time soon  is that the very role of the government in economic and society needs to be rethought.

And banks. See, we had a decent monetary system before. We had panics yes, and people attribute it to a bad monetary system. I dont- I attribute it to a bad banking system, and that thats what should have been reformed. We had something good going- an imperfect system, but a good one. We took the good parts way (because they were ostensibly the broken parts), and here we are today. An alphabet soup of agencies, expanding government power, spending, and intervention in the lives of its citizens, the violation and infringement of our Constitution, and a whole lot of trouble.

None of this could have been done, at least, so easily, without the benefit of a fiat currency system. You cant run an ATF without money, and you cant just print it with a gold standard. It was a fine check on government power until its, shall we say, modification.

We can't have an asset-based currency if we don't control the asset.

We can control how many dollars are in circulation to a great extent. We cannot tell hostile nations to not dump or withhold precious metals onto the world market.

Do people not remember the noble metals panic of 2001, when palladium spiked up to $1000 an ounce because of a Russian supply bottleneck, and then fell back down to under $200 an ounce?

You want your money to do that, the next time South Africa has a mine power problem for gold mines? I don't.

If we cant control it, we shouldnt have it? Huh. That sounds strange.

Money is now a series of constantly-varying global rates that people assign to what they are willing to pay for goods and services, it does not represent a shiny metal, nor would it be feasable, useful or possible for it to anymore.

You can keep some gold in your safe if that makes you happy. But that, and you, have nothing to do with the vast raging river of global transations going on around you every second of every day.

It should be enough clue for you that the major yearly driver of gold prices is the Indian economy and the Indian wedding season when people want it for the vast amount of jewelry traditionally called for. The major use now is simply ornamentation. It is not what it was. It is not the One True Money. It is just...a volatile and rather poor investment that can drop to lows and stay there for decades.

Deal with that.

You arent under the impression that a gold standard would eliminate paper money, are you? Or that the price of gold in dollars would fluctuate under a gold standard?

[The Annoyed Man]

Maybe the founders couldn't tell a computer from a microwave, but they might know a thing or two about rampant inflation. That's been a plague on economies from day one.

Anyone who buys gold as an investment may be in for sore disappointment. Precious metals work best as inflation-stops. Heck, maybe that's why the big-government types hate the gold standardbecause it couldn't print more money than it had gold to back it. As it stands now, if you invest in a savings account at your local bank earning %0.34 APR, you won't be able to keep up with the annual rate of inflation. Buy gold or silver, and there's no guarantee that you won't still be unable to keep up with the rate of inflation, but at least when you cash it back in after a year, you'll be much closer to actually saving any amount of earnings than you would be with any fiat currency.

Of course, you can always try to earn it and spend it faster than they can inflate it. Good luck with that, though.

Gold and silver don't have much practical use. I get that. I'm not likely to carry around a brick of gold and expect 7-11 cashiers to be able to make change at the register. The gold standard simply allowed Americans to keep their metals at places like Fort Knox and use currency similar to silver certificates to exhange their portion of the PM supply for goods. Could this be done electronically? Certainly!but mouse-clicks would have to be backed by gold and silver as well.

Folks, be careful about what you argue is outdated. There are a lot of folks who have arguments as to why the 2nd Amendment is no longer needed. What works for you, can also work against you. 

[Manedwolf]

Buy gold or silver, and there's no guarantee that you won't still be unable to keep up with the rate of inflation, but at least when you cash it back in after a year, you'll be much closer to actually saving any amount of earnings than you would be with any fiat currency.

So if you bought it when it was near $1000 an ounce, you could cash it back in...and get a little over $800.

Yeah, that makes, um...sense.

Goldbugs are a religion, I've noticed.

IT'S JUST AN ORNAMENTAL METAL. IT WAS ONLY USED AS CROSS-NATION CURRENCY BECAUSE IT'S HARD TO FAKE AND EASY TO DETERMINE WHEN IT'S FAKE.

Yes, cover your ears and go "LA LA LA GOLD GOLD FIAT GOLD GOLD".... 

[MicroBalrog]

IT'S JUST AN ORNAMENTAL METAL. IT WAS ONLY USED AS CROSS-NATION CURRENCY BECAUSE IT'S HARD TO FAKE AND EASY TO DETERMINE WHEN IT'S FAKE.

What's your point?

Gold is an ornamental metal... so?

It does not matter, from an economic standpoint, WHY people are willing to pay a high price for something.

[Racehorse]

The comments about a fractional reserve banking system being the problem mystify me. How can you have a bank if you don't have a fractional reserve system? Banks make profit by lending out deposits at a higher rate than they pay to depositors. If you don't have a fractional reserve system, banks can't lend anything and therefore, cannot make any money. We would have no banks. We'd just have a lot of safety-deposit boxes. But we wouldn't have a banking system at all.

Is that what you mean? That we shouldn't have a banking system? Just a bunch of secure places to store money?

If that's what you're talking about, then I have to vehemently disagree.

[TwitchALot]

The comments about a fractional reserve banking system being the problem mystify me. How can you have a bank if you don't have a fractional reserve system? Banks make profit by lending out deposits at a higher rate than they pay to depositors. If you don't have a fractional reserve system, banks can't lend anything and therefore, cannot make any money. We would have no banks. We'd just have a lot of safety-deposit boxes. But we wouldn't have a banking system at all.

Is that what you mean? That we shouldn't have a banking system? Just a bunch of secure places to store money?

If that's what you're talking about, then I have to vehemently disagree.

Banks would make profit by charging for financial transactions and storing wealth (what, someone protects your wealth and has it insured for free?). Things like debit cards and checks would still exist, as would fees and such.

But let's suppose for a second banking didn't exist. I'm curious as to why you "vehemently" disagree. You wouldn't have something to lose, by any chance, would you?

[richyoung]

<div class="quoteheader">Quote from: Manedwolf on September 24, 2008, 02:56:30 AM</div><div class="quote"><div class="quoteheader">Quote from: MicroBalrog on September 23, 2008, 10:00:43 PM</div><div class="quote"><div class="quoteheader">Quote from: Headless Thompson Gunner on September 23, 2008, 09:34:46 AM</div><div class="quote">Ron Paul is an amazing man.  He's absolutely 100% right on some issues.  This is one of them.  And yet, on some other issues he's dead nuts crazy wrong. 
</div>
Yes. THe problem is that some people are just so wound up around these two or three issues they'd rather vote for someone who's wrong on the other 90% of the stuff.
</div>
No, the problem is that HE is so wound up around two or three of those issues that it derails anything sensible he might say. He starts with the rising voice and crazy eyes about GOLD STANDARD, and everyone goes "Woah, the guy is nuts."
</div>
I don't understand why the gold standard is "nuts." Inflation was relatively steady when our currency was backed by precious metals. And, I don't know about you guys, but, I kind of like the idea of feeling like what I have worked for has value. Oh, to have lived back in those dayswhen money wasn't "just" papercloth and everything was made in America.

My guess is that the people who expect us to think that the gold standard is nuts are the same people who can authorize the presses to churn out another 500,000 twenty-dollar bills whenever their palms itchThe men behind the curtain started another "nut" rumor, and now they're pissin' down our legs and telling us it is raining.

+1.

Quick example:  Gold was $32 to the ounce before the traitor FDR outlawed its possesion by mere subjects,  So lets take two boxes, and bury them in the back yard, in 1932... one holds 30 ounces of gold coinage, and the other holds the same amount of paper currency - 960 dollars.

  At that time, (1932), 960 dolars would buy you a nice car - not a Cadillac or a Dusenburg, but a nice Chevy or Ford.

NOw, we skip forward to 2008, and dig up ONE of the boxes.  If its the one with the coins, you've got 30 ounces at a current price of 865 an ounce, for $25,950 of buying power - enough to get a pretty nice Ford or Chevy car, brand new.

If you dug up the one with the bills - you have $960 of purchase power - enough to get a nice suit.....

But the "gold bugs" are the "nuts".... :rolleyes:

[MicroBalrog]

I wonder why people think the gold standard is our only alternative.

[makattak]

freedom lover, the learning process about money and politics is a lengthy process.  Even with help from knowlegable folks, we're talking years.

As far as government monetary policy, there are two main schools of thought:  Keynesian and Austrian.  You can Google for all this, and for books on the issues.  Keynesian is what our government has done since FDR bought into the program.  The Austrian crowd has been more accurate in predicting the idiocies which ensued from Keynesianism.  (This is obviously over-simplified to hell and back. )

Re the gold standard:  A pure gold standard is limited in part by the fact that there just ain't that much gold in existence to allow for the amount of economic activity, worldwide, that's been going on.  The cited article is correct about the relative volatility, but "panics" during the gold-standard era were pretty much of short duration.  Yeah, governments were limited in what they could do to end panics, but the modern system means lengthier periods of "merely unhappy".  You gotta figure which is better:  Pull the BandAid off, all at once, or just one hair at a time.

Back to the "Ride":  Even if magic happened and this "Cash for Trash" bailout did anything good, the fundamentals remain in place for a decline of the dollar's purchasing power, which means more of the present consumer price inflation.  They're not gonna find any new oil at a rate greater than worldwide consumption or increase in consumption.  Personal debt means that with the wipeout of the housing market, consumer spending will decrease.  Since some 2/3 of our economy's employment depends on consumeritis, we're gonna continue to see rising unemployment--which reduces tax income to all levels of government.

That's a few items of a list of fifty or more.

Not to be negative or anything...

Art

Art,

As much as I love the Austrian school, it's hard to call them a "main stream of thought."

While I agree they (we, as I am something of an Austrian) have been right on the consequences of bad monetary policy, they (we) are hardly mainstream.

The Monetarists (led by Milton Friedman) are the main counterpoint to Keynes in economic thought.

In fact, in economics, Keynes is basically dead. Unfortunately, most politicians don't know this.

Now, Freedomlover, I'd suggest you also read "Economics in One Lesson" by Henry Hazlitt. It's simple and brilliant. Many examples of how to apply economic thinking.

[MicroBalrog]

In fact, in economics, Keynes is basically dead. Unfortunately, most politicians don't know this.

Yes, but his thought still directs central bank efforts world-wide.

The K-Percent rule has not been adopted anywhere.