Tom Burger

Why Won't Obama Just Create the Jobs?

"Jobs" are easy to create, but wealth and well being are not. We need to produce things that people need at a cost they can afford -- not create make-work jobs. Only a relatively free, division of labor economy can do that.

It's ridiculous to say that "it isn't clear" whether or not the government can create "sustainable jobs." The government cannot do that -- it is absolutely perfectly clear that it cannot. Besides, it is the wrong question.

Cash-for-Clunkers Is a Poor Choice of Stimulus

Jeff,

I don't want to get too argumentative about this, but in fact there is a reason why governments should not intervene in the markets -- they never achieve the desired goal for multiple reasons. Consider reading Mises' book "Interventionism, An Economic Analysis." mises.org/store/Interv... There are also some essay collections on this topic, all quite readable and compelling, IMO.

If government expenditures are made from tax receipts or borrowed money, the government is just pushing the economy around to favor something that people wouldn't have done on their own. If the government spends newly "printed" money, it is distorting relative prices and directly causing capital consumption.

Cash-for-Clunkers Is a Poor Choice of Stimulus

Your anti-cash for clunker comments are certainly correct -- but there is no "good choice" of stimulus. Government deficit spending is creating a few winners, but the rest of us come out on the short end of the stick. Your conclusion that it's better for the government to promote housing is, in my opinion, flat wrong.

Houses "appreciate" only because of ongoing dollar debasement. A piece of land can grow in value if its location makes it more highly desirable over time, but a house is just a durable good. More durable than a car, but it nevertheless is worn out over time and eventually becomes worthless.

Government cannot beneficially stimulate the economy except by shrinking itself. If politicians actually want a stronger economy they should eliminate market interventions, cut government spending, cut taxes, eliminate costly regulations, eliminate tariffs, and give us an honest system of money.

I know. It's never going to happen -- but I don't have to pretend that government spending can be economically beneficial.

Rising Prices = A Bear Market?

Hi David,

<"I have no idea why the bears miss the obvious, but they do.">

Is any market position really obvious except in retrospect? If anybody can reliably identify "correct" trendlines with "flawless" pattern recognition -- well, I would expect that person to pretty much own the whole world.

I have no strong opinion about where this market is going, but a continuing bull market sure doesn't seem to be obvious. Hussman Funds (www.hussmanfunds.com/r...) has a couple of research articles that suggest this substantial rally does not "look" like previous bull market starts when volatility and volume considerations are examined.

Also, as a minor point of interest, this rally has just now equaled the first big rally after the 1929 panic. Is it really so obvious that the present rally won't fail and then show us even better stock valuations than we saw last year? If you use averaged earnings over a number of years, or use peak earnings as Hussman does, you find that valuations at the recent bottom did not get as low as they have been at the major historical bottoms.

It looks to me like the only fundamental that currently favors a roaring stock market is the flood of money into the economy -- and that is only a temporary positive. I am not a stock market bear, but I am concerned that the stock market may begin to reflect once again the abysmal fundamentals -- and the damaging actions still emanating from Washington.

Given that feeling, I bought quite a bit of stock "near" the lows, but have taken gains on much of that. Sure wish I could see future prices with the clarity you suggest is possible. For now I am doing what you are suggesting -- buying a very few individual stocks that seem to be priced for good return.

U.S. Government Converts Inflation into GDP

I agree with your analysis, but want to make one point on the whole "inflation" discussion. Frankly, I think we give too much credit to the whole creaking mainstream economic nonsense when we play their game of "real" GDP adjustments.

As the Austrian School economists argue, there is no such thing as a price index. Creating new money always immediately impacts relative prices, but may not raise the CPI for years -- and the long term impact on prices never becomes uniform.

Pumping money into an economy always increases nominal GDP but rarely if ever impacts the CPI. The simple fact is that with massive monetary inflation we have a distorted measurement of GDP, and there is no logically consistent way of measuring to what degree the GDP is distorted.

Europe's Historical Model for Income Growth

Here is the key to your dilemma: "In a Malthusian world."

There is no Malthusian world. There haven't been many big ideas unleashed on the world as wrong headed as this one.

Identifying the Next Bubble

Your question simply demonstrates the folly of focusing on prices. To stop the boom/bust cycle, we have to somehow prevent central banks from manipulating the interest rate -- better to eliminate the central banks. Below market interest rates can be maintained only by flooding the country with new money, and it's the new money that creates "bubbles," leveraged investments, and speculative behavior in general.

There is no method of predicting the nature of the next bubble, although once a mania begins it's easy enough to see. There were many, many people who could see the technology bubble in real time and the same for the housing bubble. Doug Noland (The Credit Bubble Bulletin) is calling this new realm the Government Finance Bubble. When the deficits and money printing slow -- that's when the activities dependent on that credit will be revealed.