Saturday, January 24, 2009
I have never been a big fan of Steven Covey, or his Seven Habits, but I think when we're talking about the economic situation, all of the different bailouts, and where we are going to ultimately end up, I think Dr. Covey's habit of beginning with the end in mind (one of the Seven Habits) is applicable.
There is a wide divergence of opinion on the courses of action to take with regard to the economy.
There are some who don't think the stimulus plan on the table is bold enough (Paul Krugman)
There are others who believe that we should do nothing about the economy and let the market correct itself (Those from the Ron Paul/Lew Rockwell/Ludwig von Mises school of thought). Sure, there will be quite a bit of pain for a few years, but we'll be $1 trillion dollars less in debt, and the thinking is that the problem will correct itself cyclically like it always does.
Others (especially those on the far right like Rush Limbaugh, who has gone as far as saying that he hopes President Obama fails) feel like any massive government intervention smacks of Socialism and Liberal Social Engineering.
I'm not sure what the best course of action is. It seems like our only recourse now is to trust that the President and Congress are prepared to do the right things. This is something that does not inspire a lot of confidence. I feel some confidence in President Obama and the advisers he has surrounded himself with, but when was the last time Congress attacked anything this complex and did a decent job?
My biggest questions with regard to the stimulus is (whether it is $800 billion, or $1 trillion), what is the end goal of the stimulus? What are the measurements of whether the stimulus is "successful" (similar to questions I asked for a long time about Iraq/Afghanistan - how/when do we know if we've "won")?
Is the goal to get to a certain percentage of unemployment that is lower than the current level of unemployment? Is it a certain amount of growth of the economy?
What is the end game? Is the money going to be used in the most effective way? Or is it just going to be given out scatter shot?
Are we just throwing money at a problem and hoping that we just pull the right lever, or do the right combination of actions that will make the economy correct? How do you protect against unintended consequences - you take one action to correct one problem, which exacerbates a seemingly unrelated problem?
I know we don't remember much after a few months as a collective group, but I think it is so important to rewind and see where we've come from, and just how little our leaders understand what is really going on (read Tuesday Ramblings 9/24/08). The economic crisis is vast, complex and multi-pronged. Banks are failing. People are being laid off. People are losing their homes and businesses.
And if they don't really understand all of the prongs and how they inter-relate, how can we be expected to make informed choices?
Not that long ago (late September), we were told that if we didn't get $700 billion that week, the world economy was going to be in Depression within a short time (a matter of weeks they told us). The money was given. Basically a blank check from Congress, with little oversight, and little direction on what was to be done with the money by the participating institutions (and predictably with little oversight, instead of loaning the money and unfreezing credit, the banks used the money to acquire other banks, pay their shareholders and year end bonuses).
The economy has gotten worse since then, but nowhere near the levels of the Great Depression.
A little time went by, and they said that what we originally had planned to do with the $700 billion was no longer applicable - they didn't think the initial course of action was now the best use of the money. They have just recently again been wrangling on what to do with the second half of the $700 billion ($350 billion).
Now, they are getting ready to put through an additional large economic stimulus package with infrastructure projects (maybe up to $1 trillion by some accounts). The goal it is said, is to get people back to work and get the economy moving again.
But, what if it doesn't "work" and the US economy and the world economy continues to careen downhill? What then?
I've heard very few people seriously ask those questions - it almost seems like a lot of people feel like if we ask the questions, that might jinx the plan.
What about at the end (and the economy will recover at some point with or without a stimulus plan)? Will we just go back to the things that brought us here? Or will there finally be real change in how we view the economy and Capitalism?
Capitalism in the mode of Bear Stearns, Freddie and Fannie, Citi, Countrywide, etc, is NOT sound Capitalism.
It also seems like, and has seemed like for a long time, at least to me, that we are still operating in a panic mode, both at the macro level and the micro level.
Maybe the President and his economic advisers drawing up these plans are not operating in crisis and panic mode - if that is the case, they need to do a better job of telling us that and showing us that.
When you operate in the panic mode, very few true and lasting things can be accomplished. Imagine if US Air Captain Chesley "Sully" Sullenberger would have panicked in the face of the events of US Air flight 1549?
Saturday, January 10, 2009
After Christmas, I took my Barnes and Noble fun bucks and picked up a great little gem of a book called The Spiritual Emerson, Essential Works by Ralph Waldo Emerson.
I had been reading Emerson in a desultory fashion for years, and this is the first time that I really READ some of the essays.
A lot of people are putting a lot of faith and stock in the upcoming stimulus program. Some of the more interesting opinions have come from people like Paul Krugman (too little for the problem). Others want to know, what is the criteria to see if the stimulus "worked"?
This is from Emerson's Self Reliance:
"A political victory, a rise of rents, the recovery of your sick or the return of your absent friend, or some other favorable event raises your spirits, and you think good days are preparing for you. Do not believe it, Nothing can bring you peace but yourself. Nothing can bring you peace but the triumph of principles."
I think what he's saying is to not put too much faith in anyone else for your success in life. That would include this government intervention into the economy ("A political victory" "some other favorable event" (passage of the stimulus?)).
I said in my last blog, when talking about Peter Maurin, that it was time for us to take back the economy. WE decide whether we get to have hope. WE decide whether we get to spend money again. WE get to decide whether people are hired or not. Not exclusively the government, not the media.
As Emerson says again in Self Reliance:
"It is easy to see that a greater self-reliance must work a revolution in all the offices and relations of men; in their religion; in their education; in their pursuits; their modes of living; their association; in their property; in their speculative views."
"When private men shall act with original views, the lustre will be transferred from the actions of kings to those of gentlemen.
I don't mean to downplay all the pain that is going on. It is very real and will probably be for some time to come.
I want to be thinking of some alternative ways to view the economy.
I realize that it is not that simple just to snap the fingers and make it happen, and a lot of people will call me naive, but I believe Americans have been beaten down so long and convinced that someone else has to make all the decisions - big, nameless, faceless powerful institutions, that they've largely forgotten that the economy is not about Wall Street, or the big banks, the economy is (or should be) about one person making a good or service and another person purchasing that good or service.
I also do believe that the government has a place to HELP us get out of the economic trouble. I am very skeptical however that Congress is up to the complex task at hand.
It will be tough to change those views that most Americans have been fed their whole lives that someone on Wall Street has all the power, or someone in the government dictates how we feel about the economy.
As Emerson says in Compensation:
"Our strength grows out of weakness."
"A great man is always willing to be little. Whilst he sits on the cushion of advantages, he goes to sleep. When he is pushed, tormented, defeated, he has a chance to learn something; he has been put on his wits; on his manhood; he has gained facts; learns his ignorance; is cured of the insanity of conceit; has got moderation and real skill".
I think the most important questions are:
Will we learn anything from this? On the other side of the crisis will anything be different?
One more thought from Emerson on what our attitude should be. This is from Success:
"One more trait of true success. The good mind chooses what is positive, what is advancing, embraces the affirmative."