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Thank you jswinghammer. This statement right here summarizes the whole problem with the OP: "The only jobs that are sustainable are the jobs that produce somet
by Spyro7 15y ago
Thank you jswinghammer. This statement right here summarizes the whole problem with the OP:
"The only jobs that are sustainable are the jobs that produce something that other people actually want."
This is exactly it. You can not stimulate an economy simply by pushing up production on the supply side.
Mark Cuban's idea seems appealing on the surface, but he makes a serious assumption. He implicitly assumes a positive net benefit after you give these companies money and they create jobs with this money.
Look, if you transfer money from the government to the companies to the people then that is just a transfer payment. Moving money around like that does not create wealth within a country, and that is what we need right now. We need to spend money on things that generate positive net present value, and we need to curtail spending money on things that do not meet this criteria.
In order for Mark Cuban's idea to work, all of these companies must be employing the additional labor towards activities that are economically profitable. Here's a quick thought exercise. What is the likelihood of a company being engaged in economically profitable activities given that it is taking advantage of this program? (It is reasonable to assume that a company with a healthy balance sheet and a healthy income would not want to deal with government bureaucracy willingly.)
Also, as a side note, the following quote from the blog post is a bit inaccurate:
"(Stunningly, bailouts excluded)."
That the bank bailouts were repaid so handily owes very little to the bailouts themselves. Thanks to extraordinary measures taken by the Federal Reserve, the banks were able to borrow money at an interest rate of virtually nothing and then use this money to purchase U.S. bonds - effectively lending it back to the U.S. government. In addition to this, the Federal Reserve also took the unusual step of dramatically expanding its balance sheet (removing toxic liabilities from the banks themselves). That was the real bailout, and it was much larger than the pithy amounts that you saw reported by the administration.
To get a sense of the scale and size of the real bailout, please take a look at this graph:
http://economix.blogs.nytimes.com/2009/05/07/fed-balance-sheet-expansion-some-takeaways/ http://economix.blogs.nytimes.com/2009/05/07/fed-balance-she...
Edit: Also, I forgot to mention one more thing. The current negative rates on U.S. debt would almost certainly change if we began to issue substantially more of it. As Europe is rapidly learning, the debt market is far from a static environment.
- knowtheory 15y agoParticularly if this is not a static situation we should take advantage of it until until an equilibrium is met (no we should not over leverage, that's a terrible idea). The point is that we have an opportunity to do responsible investing. I am sympathetic to the argument that the US government is incapable of doing responsible investing. So who is, and how can we get them to act on the US government's behalf so that we all benefit?
- smokeyj 15y agoI think the point is central planning in general doesn't work. It doesn't work when socialists try it, or when fascists try it, or communists either. You just end up starving lots of people and blaming it on external factors.
- davedx 15y agoHere's an even crazier idea: Is growth economics the only answer? What about creating a sustainable economy that isn't dependent on infinite growth of wealth?
- gaius 15y agoIt is crazy, because you haven't thought through the consequences of zero-growth. Basically any medical research for example is off the table, because if the population expands or life expectency increases, the economy has grown. Technical research is off the table, in fact the same production methods in use today must be set in stone, since an increase in efficiency is economic growth. Etc, etc.