Posted on 03/10/2009 1:56:38 PM PDT by BGHater
Everywhere you turn there is news that the Fed, the Treasury, or Congress is attempting to "get credit flowing again".
Kevin Depew was discussing this situation in Five Things: Credit is the Lifeblood of the Economy?
These are heady times we are living in. Collectively, our national intoxication runs deep and fierce. From moment to moment no one really knows whether to laugh, cry, or do both at the same time, and so the air on the street is juiced with a mildly psychotic hum.Like Kevin, I had to laugh the first I heard “Credit is the Lifeblood of the Economy”. After it was repeated 20 times then espoused by Congress, the Treasury, and the Fed, and indeed even President Obama, it became more scary than funny.
Consider the assertion - made almost daily by politicians and monetary policy figures - that all we need to do to end this economic crisis is “kick start” lending and that credit is the “lifeblood of the economy.” These baseless assertions infect news article after news article and are repeated by the vast majority of economists and market pundits over and over again as “self-evident” truths.
The reality, however, as noted on Minyanville recently in the article, “Deflation Redux,” is that these assertions are non-sequiturs.
Debt is the lifeblood of the economy. Been true for several hundred years.
Will be for another several hundred years (clue: Stocks are a form of debt....oooooooooooh).
Creation is the life blood of the economy. And investment and profit are the pumps that drive it.
Someone else who reads MISH.
Follow the link at his site and read the comments. Lots of back and forth, some libs, but most of the time not too bad. The economic info and speculating has helped me understand alot of what is going on in our economy.
Consumption is the lifeblood of the economy.
The flip side is supply.
Once you consume more than you have the ability to pay at the time you consume, THEN you have debt.
Debt is not the lifeblood of economy, debt is the leech of economy.
I little won't hurt you but get too many (too much) and it can kill you.
These guys disagree but they are soooo passe!
"Necessity is the plea for every infringement of human freedom. It is argument of tyrants. It is the creed of slaves." William Pitt in the House of Commons November 18, 1783
"All the perplexities, confusion and distress in America arise not from defects in their Constitution or Confederation, nor from want of honor or virtue, so much as downright ignorance of the nature of coin, credit and circulation." John Adams
"I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a moneyed aristocracy that has set the government at defiance. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." Thomas Jefferson
"If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered." Thomas Jefferson
"We must not let our rulers load us with perpetual debt. We must make our selection between economy and liberty or profusion and servitude. If we run into such debts as that we must be taxed in our meat in our drink, in our necessities and comforts, in our labors and in our amusements, for our callings and our creeds...our people.. must come to labor sixteen hours in the twenty-four, give earnings of fifteen of these to the government for their debts and daily expenses; and the sixteenth being insufficient to afford us bread, we must live.. We have not time to think, no means of calling the mis-managers to account, but be glad to obtain subsistence by hiring ourselves to rivet their chains on the necks of our fellow suffers. Our landholders, too...retaining indeed the title and stewardship of estates called theirs, but held really in trust for the treasury, must...be contented with penury, obscurity and exile.. private fortunes are destroyed by public as well as by private extravagance.
This is the tendency of all human governments. A departure from principle becomes a precedent for a second; that second for a third; and so on, till the bulk of society is reduced to mere automatons of misery, to have no sensibilities left but for sinning and suffering... And the fore horse of this frightful team is public debt. Taxation follows that, and in it's train wretchedness and oppression." Thomas Jefferson
No, they're not. Stocks are equity. Debt and equity can serve similar functions, but they're not the same thing.
I would argue that supply is the lifeblood of the economy. Some of what is supplied is consumed, while some of it is saved (invested). Debt (at least according to the classical view) doesn't really fit into the picture; it's an issue largely limited to finance rather than economics.
Keynes had very different views--and there is some truth to his arguments in the short term, but I think the classical view is largely true in the long term.
"Undoubtedly there are, in connection with each of these things, cases of fraud, swindling, and other financial crimes; that is to say, the greed and selfishness of men are perpetual. They put on new phases, they adjust themselves to new forms of business, and constantly devise new methods of fraud and robbery, just as burglars devise new artifices to circumvent every new precaution of the lock-makers. The criminal law needs to be improved to meet new forms of crime, but to denounce financial devices which are useful and legitimate because use is made of them for fraud, is ridiculous and unworthy of the age in which we live. Fifty years ago good old English Tories used to denounce all joint-stock companies in the same way, and for similar reasons."-19th century, 1883, "William Graham Sumner", one of the founders of the "new science" of sociology.
I enjoy reading and referencing the writings of William Graham Sumners--so long ago, but yet so current.
I hope that we don’t restrict the capital markets too much as a result of this last year of blowouts. Jail the frauds and let us get on with business.
Yes, was reseaching the book and found Sumner is the real source of the present edition (Amity Schlaes) of the forgotten man.
But how do we jail Barney Frank? The same power brokers in government that misled investors in public statements when questioned on Fannie Mae etc..they just always stick around and knew most Americans would never remember. Plus their "backsides are always covered" by another like gray- haired Democrat.
We might have more faith in Government if it accepted responsibilty and justly policed and punishing itself with dismissal--In China, they arrest and sentence you to death! (Re: Food contamination, etc)
If there is no consumption there is no need for a supply.
Debt is dependent upon good faith and trust....little of which characterizes the business world in a post-christian America...
There’ll always be demand if there’s supply. This is one of the fundamental differences between classical and Keynesian economics, but I think it’s important to recognize we’re better off encouraging supply than demand.
Excuse me?
What type of bunk is that?
Just because there is a supply of something (whatever it is) doesn't mean there is a demand for it.
If it's something useful for some people then there may be a demand for it from some people that find it useful.
That doesn't mean that JUST because there is a supply there will be a demand.
It’s classical economic theory—the sort espoused by Milton Friedman.
First of all, unless the good is completely useless, there will always be demand for it at some price. Second, producers aren’t in the business of making goods for which there is no demand, so we don’t have to worry that the supply will be useless.
If we encourage production, we’ll experience economic growth. If we encourage consumption, we might be able to push a little more supply in the short term, but in the long term we’ll probably just experience less investment and more debt.
This I agree with but that wasn't stated in your first reply.
Second, producers aren’t in the business of making goods for which there is no demand, so we don’t have to worry that the supply will be useless.
I will also agree that this is typically the case.
If we encourage production, we’ll experience economic growth.
I will also agree that this is the case if we stipulate that it is physical goods.
However, you can produce as much as you want but if there is no demand (consumption) all you are doing is oversupplying and it won't sell.
People also have to be able to afford what you are supplying.
Production, by itself, will not make an economy recover.
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