The central tenets of Obamanomics appear to be that access to credit will enable people to borrow money to buy stuff, the spending will spur production and employment, and thus the economy will grow. It’s a neat and simple picture, but it has nothing whatsoever to do with how an economy works. The President does not understand that consumption is made possible by production and that credit is made possible by savings. The size and complexity of modern economies has obscured these simple concepts, but reducing the picture to a small scale can help clear away the fog. FULL ARTICLE
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10 comments ↓
Obama and his team are doing exactly the opposite of what this country needs to deal with the economic crisis.
It was caused by too much consumerism – too much spending, too much debt, and too little savings….at the same time that the government and the banks were doing too much inflation.
Solving the problems won’t be done my more of the same – that’s either a complete misunderstanding of the cause, or complete insanity.
It’s very sad just how few people understand the difference between money, credit, and wealth. I would guess that far less than 1% of the people in our government understand that money isn’t liquidity; liquidity is other people who are not only able, but also willing to trade.
As I think Mr. Schiff has pointed out in other essays, merely adding more currency doesn’t create liquidity. There’s a hell of a lot of currency in Zimbabwe, but liquidity is notably lacking there.
-jcr
econ is a social science, dealing almost infinte variables which makes modeling it an endless guess/correct cycle. the Experts failed to reconize that this is as a choatic system, which could be best modeled with a streamlined/simple/general solution. The Experts really couldn’t see the forest for the trees and it is evident that they had no real Science/Math courses, or they would have seen it coming
Great point about adding additional currency, John. Makes me think of an article we had here from Larken Rose a while back – where he asked some basic questions…like…..if printing up more money would make us more wealthy, why don’t we simply give everyone a million dollars tomorrow?
Not too many good answers in support of that…You can read his article here:
The Mother of All Bailouts
The Rose article was a good one and raised many good questions while illustrating the absurdity of some of the common myths & reasons for the credit crunch. You can explain it in five letters
G-r-e-e-d. And the corruption that goes with it.
I have an account ( Credit Card ) with Capitol One. They just sent me a notice that my interest will be raised to 15.3% if I don’t call and opt out of the raise. If I opt out I can’t use the card anymore. I would be closing my account. That’s OK with me except why send me the notice? When I took the card out I was promised 6.99% until May 17th, 2009 at which time the interest would fall to 5.99% for the duration of the account payout. Nothing said about changing the interest. I have never been late on a payment, always paid significantly over the minimum, and have an excellent credit rating. You would think that Companies with outstanding bad loans would be scouring the countryside for accounts like mine.
I’m sure that every cardholder in America received the same notice. My point is this should be a reason for suit against them. Think I might get a Law Firm on Contingency. Yes I have filed a complaint with the Federal Bank Regulatory Agency. I know nothing will come of the complaint, and i will pay off the account before the change date.
But this type of behavior illustrates the real problem with our financial institutions Greed.
This country need a National Usury Law.
Well Cliff, I sure hope you close that account. I would prefer to not have ANY more laws in this country. Then, maybe people would rely less on these magical regulators to take care of their financial concerns and only do business with reputable companies. And sans bailouts, those shady-dealing businesses would go under.
Peter, you forget that the baker in your example did not lend his bread to the candle maker. He sold it (for the steak that the candle maker borrowed from the butcher). Now the baker is selling more bread than he would have otherwise, earning extra money, let’s say to buy some fish from the fishmonger. The fishmonger in turn, earned enough to buy some corn for his chicken coop (he sells chicken in the off-season). Putting an arbitrary value of $1.00 for a steak, loaf of bread, candle, fish and a sack of chicken feed, we see that $1.00 of credit had a “multiplier” effect on this whole economy, increasing their GDP by $5.00. The multiplier here operates in an obviously simple economy. The expected multiplier of our government stimulus is expected to be in the 1.3 range. And no, don’t try that nonsense that government spending crowds out private spending, and likewise with government borrowing, both perfectly reasonable arguments in a robust economy. But we are in a very different scenario, where REAL JOBS, FAMILIES AND LIVES are being destroyed. You have no business fooling your ingenuous readers into thinking you know what the H__L you’re talking about. They are in most cases exactly the people who will be most hurt by the approach that you espouse. I suggest you try to get your ideas published in a peer reviewed economics journal, before expecting any thinking person to take you seriously.
So, #7 Mazilli – are you saying that the best way to deal with a problem caused by too much reckless spending and consumerism and debt is..
to take on more debt?????
That’s absurd.
but, I’m sure when this all fails to give positive results, you and the politicians who spew this nonsense, this outright theft of our wealth to give to their corporate buddies, you’ll just make the claim that you didn’t steal enough of our money, right?
Cliff…also contact your state Attorney General’s Consumer Affairs office…make copies of the original agreement…they could force captial one to honor the agreement and then fine the crap out of them too..A great article too…heard Peter on Lou Dobbs the other day…made sence…too bad no one in the Obama administration wants to seek him out…
Thanks Steve
I wanted to get a class action going because I’m sure I’m not the only one. Problem is I can’t find a Law Firm who is willing to take on a Class Action (I have contacted some other people who have had the same experience – actually there is a website where people can go strictly for problems with Capitol One). The Law Firms said it would be too expensive and the chance of winning would be small. And I do have copies of the contract. They promise not to raise the rates during the life of the contract, but they send this message around to millions of card holders, and you have a choice to keep you account open at the higher rate or close it and pay out at the lower rate. Sounds fair enough , but the only way to opt out is to call. Explicitly they say you cannot opt out by writing, calls only. The problem is that if you call you can prove you did that, what you cannot prove is that you asked to opt out. I have the money to pay it off and I will. It’s just the crookedness of the company. I would like to put a hurt on them. What I suggest to those law firms was to bring an action of $10 per card holder. They have 48 million.
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