Trickle Down?

For over 30 years the theory of trickle-down economics has held sway in some areas of US politics. It ends up with such statements as "We have to give the tax-breaks to the job creators so they create jobs." I keep thinking that there is more than a little BS in this idea.  A few of my reasons:

• One of the Great American Capitalists, Henry Ford would disagree. 
• Or at least his idea that he should pay his workers better so they could buy more products would say so.
• The gap between top and bottom income in the country might disagree.
• The gap has never been wider with a smaller "middle class" than has existed since the "middle class" became a reality. That means the ones at the top- the job creators- are not using their money to create jobs.
• The profit statements of many corporations could disagree.
• As profits keep going up for many big corporations, these profits are not being turned into new jobs. They are going other places, some of which are admittedly important. But the jobs are not being created.

The right-wing economists would come up with all kinds of reasoning why it hasn't happened yet.

• Regulations
• Uncertainty
• Democrats
• Obama

I would argue that if it hasn't happened yet, after 30 plus years, I see no reason why we should continue to believe that it will happen at some unforeseeable place in the uncertain future. 

And no, I am not joking. I fear that trickle-down economics is the joke.

Is It Over?

Black Friday (and whatever you want to call Thursday other than Thanksgiving) are now past for another year. Time for the war on Christmas to begin.

(Removing tongue from cheek.)

What a load of baloney!

I think Pope Francis is on to something important about our culture. We are materialistic; our financial health is based on buying more than we did last year so profits go higher this year than they did last year. And if the sales don't increase, well, just raise the price before you discount it so the new, cheaper price is the same as last year's old regular price.

Make sense?

Yes, I agree that growth is important- stagnation of anything, including economies, can be harmful. But when the push for more and more overcomes common sense and the importance of saving and planning, perhaps it has gone too far.

Unrestricted growth, unplanned and unmanaged growth, is what happens in our bodies when cancer occurs.

I have a hunch there is a parallel there.

No, I am not Scrooge. I have this addiction to the newer and better, too. I am in many ways an early adopter. I keep reading the Best Buy ads for what I want next in computer tech, smart TVs and camera accessories. But then I think of all those "newest and best" that I have bought over the years that are now long gone into trash and landfills.

Sure they were worth it and with some exceptions (leisure suits, for example) are not regretted. I am simply thinking about a little restraint, not the rush to madness we see every year on Black Friday. Governmental management is not the answer, but somehow to get to a point where we as a nation are able to make sensible judgements about our finances and futures without making or materialistic addiction so visible.

To Over Consume

An economy built on needing people to over-consume. That was what I heard an economic observer say in describing our US economy. It is not the first time I have heard it and the current economic situation is not the only time it has been raised. But the situation since the Great Recession a few years ago has brought it more clearly into focus.

Evidence seems to point to a few pieces of the puzzle why the retail (consumer) economy hasn't picked up as quickly as hoped. One is, the observer said, people are making budgets- and sticking to them. They are also attempting to save more and not using all their discretionary money on, well, discretionary items. As a result the up-tick in car sales earlier in the year has kept money from going into that discretionary spending.

Now, I am not a good example of a frugal, budget-conscious person. I know how to budget but have a very difficult time keeping to it. So I have been as guilty as the next person in lack of savings, etc. But there is much truth in the need for budgeting on individual levels as well as the governmental. It appears that people are working hard at doing that- and therefore the economy isn't growing like it could. Somehow or another that seems like a very unhealthy model on which to base any economy. It is a buy more, spend more mindset. The economy is not satisfied with last year's profit levels- the profits have to be more and more and more.

There has to be a balance here, I believe. I personally am working on that. As I look to retirement and Social Security income I know I will have to be more conscious of what and how I am spending. I wish now I had learned more about how to do that earlier in life. But it is also true that if I had, I might not have been doing my part as a "good" American consumer.

Surprise?

I caught this headline a little earlier today...

Stocks rally as job growth surprises Wall Street

Whether such a "rally" holds is still to be seen, but in reinforced something I've noticed and posted about before. The gnomes of the business world are no more aware of what is going on than anyone else. One day stocks will jump because of a bit of news. The next day they drop because another bit of news. Sometimes they are "surprised" by better than expected news or by worse than expected news or simply by news that they figured would happen. if it's good- up goes the Dow. If it's bad- sorry- you lose money.

Yet, from my simple position watching headlines from the economic sector (Fortune 500 profits, etc.) I am not surprised. The problem seems to me to be that the news media- and the Opposition Party- have an investment in keeping the news "bad" or "poor" in order to keep our attention. Every time I hear a positive economic report, the reporter/anchor will add- "Yes, but things are still bad."

Even in bad economies, someone will continue to make money.

It's just usually not the average person on the street.

The "Wisdom" of the Market

I am not an economist or financier. Whenever I have tried my hand at investing, the stock has almost invariably lost money. My father-in-law had an incredibly uncanny ability to pick the right stocks and seemed to be able to make money on the market when no one else seemed to. He died three years ago next week and I often wonder how he would have done in the recent recessionary market. Somehow or other he managed to figure out the ups and downs - ins and outs - of the market. He always said it was a gamble and you had to be willing to lose money from time to time. He said more than three years ago that the market would fall again.

Well in the past year we have seen one incredible roller coaster. It still isn't over. Even though the market is well up from its way down level, it still tends to move up and down in ways that make no sense. Which is just the opposite of what was supposed to happen a number of years ago when they began taking some of the controls off.

You see, as I have heard it explained, the "free-market" left to its own would always make generally wise decisions. It was controls that caused the problem. The "Market," when left to pure "Market" forces would work out.

What they didn't plan on was that

• there is no such thing as a pure market force
• political situations have more of an impact than thought
• greed is a huge negative force and most importantly of all
• the market is made up of humans who react to situations with a panic.

In short, the "wisdom" of the "market" isn't. It is more reactionary than it is able to have leadership. It depends on others and forces beyond its control to move. But that problem with the market then leads to other forces working against the progress which then upsets the market...

So one day there is good economic news and the market goes up.

The next day the news is mixed so the market goes down.

Next week the news looks really good and the market soars

Then comes the end of the quarter and people want to take a profit and the market drops.

And on and on and on it goes.

As I said I am not an economist but I ask, is this any way to run an economy?

But since I have no answers I will have to let others work on that. But what if, somehow or another, the market decided today that they were going to believe for the next three months that the economy is basically sound and will recover? They would then make cautious investments, but with an eye to a sane and acceptable profit and growth margin.

I know it is too much to hope for, but then maybe I would believe that the "Market" may be able to take care of itself- and the economy.

PS: On Wednesday, after I had written the above, I came across an item on Live Science that reported:

WASHINGTON -- A recent analysis of the 2007 financial markets of 48 countries has revealed that the world's finances are in the hands of just a few mutual funds, banks, and corporations. This is the first clear picture of the global concentration of financial power, and point out the worldwide financial system's vulnerability as it stood on the brink of the current economic crisis.

Maybe the "Wisdom" of the Market is to be found in the decisions of a few who are simply out to make more money.

Saving is Bad?

What a change in overall perception.
A penny saved is a penny earned.
Save for a rainy day.
Always have six months of salary saved.

Then comes a headline on Friday that the household savings rate in May was really good. In fact it was the best in 15 years. That means money is out there. It means that the recession is coming to and end?

Not so fast. All that news that people are taking care of their finances was part of the cause of a weak response on Wall Street. The economic recovery is not on the near-term horizon- because people were saving and not spending. With consumer spending the economy does not respond. Even though debt caused the crisis in the first place.

I have posted on this before and it remains, I believe, one of the weaknesses in our economy and perhaps even our economic system. It is a material-based- buy-buy-buy economy. I am not an economist and certainly don't understand a great deal of deeper economic theory. Yet I feel that somehow there is something inherently self-destructive in a system that depends on increased spending from year to year and not on saving. Somehow I think that there will always be big losers in such a system. Most of the time it will be the average consumers who find themselves having to be in debt to keep up.

Then comes a debt-crash like we have just had and people lose their homes, cars, health insurance and probably a healthy sense of self. I find that scary. I hope someone finds a way to build a system of production and economics that can live and grow without having to constantly be expanding and greater and greater rates.

Yes, maybe I am an idealist, but often we can set up an ideal and then move toward it. Let it be so.

Depression and Depression

Bill Moyer's had Parker Palmer on his Journal this evening. Palmer is a brilliant spiritual leader who has written many times of the varied forms and ways of spirituality. It was a rich and challenging half hour with Palmer's usual depth and insight.

One part that struck me was when he reflected from his own experience of depression and the current economic situation. I was struck, believe it or not for the first time, by the connection of the two words- the economic and the "clinical/medical."

Here is Palmer's insight:

I don't think it's an accident that we talk about the Great Depression and maybe the impending depression that we're going into economically and about clinical depression.

There's a lot of darkness out there. And there's a lot of lossness. And there's a lot of people feeling that their lives are over. We need to learn to be present to one another in listening ways, in compassionate ways. Do we need to be doing outside work that has to do with repairing a broken economic system and a political system that's in disrepair? Absolutely we do.

But we need to be drawing for that on an inner wisdom that isn't there when it's only fake science that's driving our reconstruction efforts, when it's only an illusion of rationality or an illusion of affluence. We need to penetrate those illusion bubbles. Thoreau said reality is fabulous. And I agree with him. It's a lot more fabulous than illusion because it won't let you down. Reality won't let you down. It is what it is. And we have to learn to deal with it. Because when you're standing on the ground of your own reality, your society's reality, you can fall down, as we do and we will continue to do, and simply get up and dust yourself off. You aren't falling from 100 feet in the air where you're likely to kill yourself.
(Transcript)

I don't believe he meant that a "stimulus package" is necessarily a bad idea. He said we need to repair the system. But in fact, what he was talking about was the whole issue that underlies the problem and that neither Democrats nor Republicans are addressing- the foundational idea of an illusion of reality based on non-stop progress and affluence. Penetrating the bubbles of illusion mean offering a vision of reality that makes sense in these darkening times. The darkness is a spiritual one as much or even more than it is an economic one.

Earlier in the conversation, Palmer had talked about depression and what is needed at those times. He said:

BILL MOYERS: What do you do when you hit bottom?

PARKER PALMER: Well, nothing for quite a while. And people sometimes say depression is like being lost in the dark. My experience is it's more like becoming the dark. You don't have a sense of self any longer with which you can stand back and say, "Oh, I have this disease and it, too, will pass."

The voice of depression takes over. And all you can hear is the darkness which is you. And I think what you learn at that point is a couple things. One is there's huge virtue in simply getting out of bed in the morning, by which I mean learning to value the fact that you can take one step at a time.

The second thing you learn is that you need other people. You don't need their advice. You don't need their fixes and saves. But you need their presence. I sometimes liken standing by someone who is in depression as being like the experience of sitting at the bedside of a dying person because depression is a kind of death, as is addiction and other serious forms of mental illness.

That is part of the thought behind the stimulus package from either side. Democrats see it one way, Republicans another. In the end the spiritual side of all of this is what will be the most successful at keeping us moving. One is the "value of simply getting out of bed" and keeping moving. But doing that alone is not enough. We need each other. We need to be there for those most impacted by the depression. Walking with them in their pain and sharing in whatever ways we can.

It is not an easy plan. Nothing is that really works. Quick fixes and a desire for instant gratification achieves little of value. I fear that by not challenging the illusions of economic dreams of wealth where the rich continue to get richer and poor might as well accept their poverty, we will not discover our depth and hope as people in community with each other.

The Economy ?

I continue to be bothered by the whole economy thing. It seemed like a guilt-inducing bit of news that gee, whiz, we mean nasty consumers aren't doing our part to help the economy. We should just have bought more and more at Christmas. And the way of giving us a tax stimulus rebate now is to just decrease our withholding. That way we are more likely to spend it instead of putting the One Big Check into a savings account.

Then the Burnside Writer's Blog posted this highly apt quote from Wendell Berry. It says it well, as would be expected from Berry:

The idea of the current crop of "conservatives" - that government can cater to greed and leave charity to volunteers - is vicious and it can't work. The "liberal" idea - that the failures of a greedy and wasteful economy can be effectively patched by government services and regulations - is also hopeless. There is no way to get a good result from an economy that institutionalizes greed as an honorable motive and excuses waste and destruction as "acceptable costs."

- Wendell Berry in a 2005 interview with Preservation Magazine

The More Times Change...

The following is from a Will Rogers speech to bankers in 1923. Let's see, in over 85 years it still has a powerful edge to it that we recognize.

I see where your convention was opened by a prayer, you had to send outside your ranks to get somebody that knew how to pray. You should have had one creditor there; he’d have shown you how to pray. I noticed in the prayer the clergyman announced to the Almighty that the bankers were here. Well, it wasn’t exactly an announcement. It was more in the nature of a warning. He didn’t tell the devil, as he figured he knew where you all were all the time anyhow.

--A HT to Russell at Street Prophets

Hmmm.

--fr/ David Hayward.

Awesome and challenging.

Appropriate for Times Like This

John Kenneth Galbraith

"The only function of economic forecasting is to make astrology look respectable."

When Experts are Wrong

Actually, in many fields "experts" are often wrong more than they are right. Economics comes to mind. As does political punditry.

Then there's the price of gas.

I remember not so long ago when gas was hovering in the $4.00 range and the price per barrel was around $150, the experts were saying that the price of gas was unstoppable. It was inevitable. Others said that while the price/barrel might go down (since it was oil futures that was going the problem) it would never be cheap again.

Well, I guess it all depends on your point of view.

This week the price/gallon here in southern Minnesota was hovering around the $3.20 mark. Yes that is high compared to what we paid in the good old days, but it is a price we were told never to expect again.

And what caused it? The financial meltdown which sent the price/barrel to well under $100.

Which reminded me of the book The Black Swan by Nassim Nicholas Taleb which argues that the BIG world changing events (like stock market collapses, etc) are never predictable. They will always be a surprise since, in my words, if they were predictable we could be prepared for them. Predictions anre forecasts are often based on what is happening now and projecting now into the future. When things go wrong, they go wrong quickly because we aren't prepared for them.

That's why I hope never to be an expert on anything that changes.

Explanation, Please

Will someone please explain to me:
1) Why does adding BILLIONS to the national debt, borrowed from China and future generations, help the economy?

2) Why the strength of our country has to be based on you and me spending, spending, and then spending some more? and

3) Why using the "economic stimulus package" rebates to pay bills and buy gas, or even save it, is bad for the economy and is a fear of some economists?

Why does this sound like addictive thinking?