Why stimulus failed

I think this video is good —



— but somewhat misleading. It makes it sound like Obama's stimulus would not have failed if the money actually reached the intended (or, rather, advertised) targets and were not wasted or did not create unintended consequences. (I differentiate between 'intended' and 'advertised' because I believe, rather cynically, that the Federal government all along knew that the money would go to its buddies, in the usual crony-capitalist fashion.)

But the deeper point is that even if that were to happen, this money would still fail to 'stimulate' the economy. What was wrong with the economy is not that there was not enough money or spending or that it just needed a kick in the right piston to get the machine working again (see here for the rebuttal of this fallacy). The problem was not with lack of investment — but, rather, with malinvestment: during the boom phase of the business cycle, money was invested into the wrong industries (see here why this happened).

During the bust phase, the economy 'discovered' that there was after all no demand for the long-term, 'capital goods' businesses (such as construction) into which the investments had previously flowed (encouraged by the artificially low interest rates). This discovery led to contraction of the suddenly failing businesses (or, rather, businesses whose failure suddenly came in the open): their stocks dropped, they had to fire many of their employees, and even declare (or come close to declaring) bankruptcies.

This process of contraction is not only natural, following the malinvestment of the boom phase, but is in fact crucial for any 'recovery'. In order to get the economy back on the road, it was — and still is — necessary to allow the businesses that became too engorged with the malinvested capital to shed it and let the capital flow to the businesses that actually have the support of their customers (because they are successful at predicting what their customers need and want to spend money on right now). This could happen through the successful businesses buying up now-cheap equipment and land or office space of the failing businesses and hiring the suddenly unemployed workers.

By keeping the failing businesses alive or by taxing the successful businesses and redirecting the tax money towards roads or public schools, one does not reverse the problem of malinvestment. And by making interest rates even lower, thus encouraging further long-term investment unsupported by the public's spending time preference, the FED is making the problem worse!

More reading:

Activating Trash

It takes a while to build up...

In response to Edmund Conway's post–break up (with Apple) letter comparing Apple with Obama, one comment said:

Apple and Obama fan here. Agree about Apple/iOS 6, but zero sourness about Obama. What does economy problem have to do with him, again? He did a damn grand job helping to smooth the landing and overseeing the takeoff. Building takes a lot longer than destroying; people forget that. So yeah, no matter how hard I look, I can’t see anything sour in my Obama relationship, so you’re wrong that all fans would admit that.

My response:

You are right, orchestrating and building a new bubble takes longer than contracting from an old one. It takes days or weeks for people to realize that the papers they are holding are trash. It takes years to build up the con. 

Maybe the administration has been busy choosing malinvestments into which new commodity should be encouraged.  

Perhaps it should be the tulips again. The government should declare that if you invest in tulips, but your investment flops, the government will bail you out. Then, when the over-blown tulip investments burst and crash the markets, the government should provide a ‘soft landing’ by bailing out the tulip farmers and prolonging the resulting contraction from a month to another four years. 

Obama should learn from the Japanese. They have been in stagnation for three decades. Four years are like a butterfly’s dream to them.

More on topic:

Why Did Solyndra Fail? 

Obama the Honest

Well, at least he stopped pretending...

Statists (both Conservative and Leftist) fallaciously believe that the role of the US President is to "govern". To "get things done". They are wrong, because no president can do that. All that a president can do is "do no harm". He can use the power of veto to reduce the Congress's encroachments on Americans' liberties. The best presidents in the US history have done exactly that.

But Obama has even retreated from (pretending to occupy) those lines. Now he has admitted that he got the job description wrong. The purpose of the president is not to get "things done". It's to bullshit the American public into a sense of national unity:

"When I think about what we've done well and what we haven't done well," the president told CBS television in an interview, "the mistake of my first term — couple of years  — was thinking that this job was just about getting the policy right.

"And that's important. But the nature of this office is also to tell a story to the American people that gives them a sense of unity and purpose and optimism, especially during tough times ..."

So, keeping in mind that the government that governs least governs best (simply because everything that the government does will be harmful a priori), if all that Obama does in his second term is "tell a story to the American people that gives them a sense of unity and purpose and optimism" (I guess someone watched The King's Speech), he will join the ranks of the best American presidents.

Unfortunately, I don't think that's all that he will do...

(By the way, if you were wondering why I haven't been posting for a while, it's because, b"H, I had a baby girl born on Shabbos, Gimmel Tammuz. Now that the baby is toilet trained, walking, and talking, I have more free time on my hands and will try to start posting again...)

A stretch of bad luck

(Obama, looking at the falling American economy — source)

"Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded — here and there, now and then — are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all 'right-thinking people'. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty.

This is known as 'bad luck'."
— Robert Heinlein, science fiction writer


“We had reversed the recession, avoided a depression, gotten the economy moving again. But over the last six months we’ve had a run of bad luck.”
— Barack Obama, science fiction president

[via Istapundit through arbat]

Crook vs. racist?

Back in the day, there was an election in Louisiana between two candidates for a governor (or a senator, I am not sure and am too lazy to look up). Much of the intelligentsia supported one of the candidates. The slogan of the intelligentsia was: “Better a crook than a racist” (this just shows you the realities of politics in Louisiana; as well as the realities of any politics, for that matter).

I was just thinking while reading this (I don’t know anything about this blog; it’s just the first source of that speech I found while googling) that I suppose people voting for the current president did not think in the same terms (not that McCain was a crook; I mean whatever flaw people who voted for Obama found in McCain was obviously worse that the flaws of Obama). I actually know a 22-year-old who was quite proud of the fact that her first act of political activism (nothing to be proud of ever, but never mind that) was to vote for Obama. I think it’s quite sad, to be honest.

 Like Obama, I am a graduate of Harvard Law School. I too have Muslims in my family. I am black, and I was once a leftist Democrat. Since our backgrounds are somewhat similar, I perceive something in Obama's policy toward Israel which people without that background may not see. All my life I have witnessed a strain of anti-Semitism in the black community. It has been fueled by the rise of the Nation of Islam and Louis Farrakhan, but it predates that organization.

We heard it in Jesse Jackson's "HYMIE town" remark years ago during his presidential campaign. We heard it most recently in Jeremiah Wright's remark about "them Jews" not allowing Obama to speak with him. I hear it from my own Muslim family members who see the problem in the Middle East as a "Jew" problem.

Growing up in a small, predominantly black urban community in Pennsylvania, I heard the comments about Jewish shop owners. They were "greedy cheaters" who could not be trusted, according to my family and others in the neighborhood. I was too young to understand what it means to be Jewish, or know that I was hearing anti-Semitism. These people seemed nice enough to me, but others said they were "evil". Sadly, this bigotry has yet to be eradicated from the black community.

In Chicago, the anti-Jewish sentiment among black people is even more pronounced because of the direct influence of Farrakhan and the Nation of Islam. Most African Americans are not followers of "The Nation", but many have a quiet respect for its leader because, they say, "he speaks the truth" and "stands up for the black man". What they mean of course is that he viciously attacks the perceived "enemies" of the black community – white people and Jews. Even some self-described Christians buy into his demagoguery.

The question is whether Obama, given his Muslim roots and experience in Farrakhan's Chicago, shares this antipathy for Israel and Jewish people. Is there any evidence that he does. First, the President was taught for twenty years by a virulent anti-Semite, the Reverend Jeremiah Wright. In the black community it is called "sitting under". You don't merely attend a church, you "sit under" a Pastor to be taught and mentored by him. Obama "sat under" Wright for a very long time. He was comfortable enough with Farrakhan – Wright's friend – to attend and help organize his "Million Man March". I was on C-Span the morning of the march arguing that we must never legitimize a racist and anti-Semite, no matter what "good" he claims to be doing. Yet a future President was in the crowd giving Farrakhan his enthusiastic support. [read on] 

But — hooray for the free dental insurance. (Well, I personally don’t have it, but I am happy for those that do.)

Also, this caught my attention: “Growing up in a small, predominantly black urban community in Pennsylvania, I heard the comments about Jewish shop owners. They were ‘greedy cheaters’ who could not be trusted, according to my family and others in the neighborhood.”

But, which shop owners (or worse yet, factory owners, CEOs, etc.) are not “greedy cheaters who cannot be trusted”? You hear from many very intelligent, educated people with good character traits that they “don’t like capitalism”. Of course, they like being able to buy bananas while living in a northern state more than once a year. And pizza (which may be made locally, but most of the things to make it, including the ingredients and the tools, were brought from other states by those huge trucks or even from overseas). And they like to be able to afford to make use of air (or bus, or taxi) travel. And of the 99% of their life that would be impossible without capitalism. And yet, the people who provide them with the goods and services are not to be trusted and the system of free exchange of goods and services is bad.

Also, recently I heard from a family member that “there shouldn’t be business-type relations within a family”. I asked her: “Do you mean that if I own a business — or, let’s make it less evil, a lab — and your husband is a specialist, and I need exactly that kind of specialist, it is bad for me to hire him and allow him to provide for his family, while I get in return his service?” She said: “Well, no, of course not. I mean relations of a simpler lomd”. So, I said: “You mean, if I need a babysitter for my kids, and my niece is looking for a summer job, it’s better for me to hire a complete stranger, and my niece to go working for complete strangers than for us to help each other out with what each one is looking for?” She didn’t think that was too evil either. Whatever example I was providing was not evil. In the end, it seemed, some kind of business-like relations in a family are fine. As long as children don’t “borrow” two dollars from their parents and then demand those back. Well, yeah, that’s just a bit stupid.

A note

(“If you use your free insurance, your teeth will look as shiny as mine”)

A note found in President Obama’s desk from his predecessor.

To: President Obama
From: President Bush
Subject: When [...] hits the fan

Dear Borya,

When things get tough, do the following:

1. Blame everything on me.
2. Do everything exactly like me.

Best of luck,
Garik

It seems our mighty leader has gotten to step two. (If you remember, President Bush started a war in Iraq. The war was going badly. Liberals and the press were screaming. Then the President found a proper general, who won the war. The same story, by the way, happened with President Lincoln.)

[via arbat]

Time magazine men of the year: a collage

(Joseph Stalin, y"sh  — twice)


(Adolph Hitler, y"sh)


(Wow, that's an unflattering painting. Anyway: John F. Kennedy)


(Vladimir Putin — with some barrel distortion)


(Barack Obama)

And now... drum roll...


(Ben Bernanke, Mr. “We screwed up your economy, but it could’ve been much worse”)

By the way: that picture of Obama above? I always wondered what it reminded me of.



I rather prefer William Wallace’s haircut, though.

Who’s laughing now?

[via Adam from New Orleans]

Great news from the front

Such fun:

President Obama may have to raise taxes to pay for public health care and the growing deficit [rrreealllly?.. who could have guessed?..], an eventuality that administration officials touched lightly on Sunday as they promoted an economy emerging from recession.

With an expected deficit next year of $1.8 trillion, and spending still being planned for a $1 trillion, 10-year health care reform, officials say something will have to be done to prevent further erosion of the economy.

"We will not get this economy back on track, recovery will be not strong and sustained, unless we ... can convince the American people that we're going to have the will to bring these deficits down once recovery is firmly established," Treasury Secretary Tim Geithner said on ABC's "This Week."

Asked point blank whether it was right to suggest it is a matter of when, not if, taxes will be raised, Geithner responded, "It is absolutely right."

But the president's team circling the Sunday morning news shows was quick to note that there are signs the recession is easing despite a persistent decline in job losses in the past six months [no worries then; all signs of improving economy here].

Administration officials say they hope to see positive economic growth before the end of the year, and credit the $787 billion Recovery and Reinvestment Act passed in February with preventing recession from going into depression.

The legislation — opposed by all but three Republicans in the House and Senate — was intended to help save or create 3 million to 4 million jobs. But since that time, the jobless rate has grown to 9.5 percent, higher than the administration predicted even without a stimulus package. [But that’s not because the administration’s model of the market, its prediction abilities, presence of common sense and in general the view of the Universe the administration is living in are all shit. It’s because… err… well, it would be even worse without the stimulus package, wouldn’t it? Wouldn’t it?]

Of course, raising new taxes and increasing minimum wage will make it more likely for new jobs to appear… Rrrrright?.. I mean, if you are a business owner, and your profit becomes even lower because you need to pay new taxes and pay more to each worker than the market (i.e., competition between businesses for workers) allows, you are not going to cut jobs; you are going to hire even more people. Yep, yep…

Also, friends, in case you were wondering, this is an image of an asshole:

July 28, 2009: Treasury Secretary Timothy Geithner offers a toast during a dinner after the first meeting of the U.S.-China Strategic and Economic Dialogue in Washington, D.C. (Reuters)

What brings us together

Three participants of the beer summit, left to right, each thinking:

“A white man’s drink…”
“F—ing assholes. I wish I was drinking whiskey with my buddies, watching Sox…”
“Left side is my best photo angle…”

Fox News reports:

“I have always believed that what brings us together is stronger than what pulls us apart —” Obama said, adding: “…booze.”

Obama’s plan is working!

It is, it is, it is! Haven’t you heard: “The economy is gaining momentum and the Democrat-passed stimulus package is only just beginning to pay dividends to the American workforce, President Obama's advisers said Sunday, defending the administration against GOP accusations that the stimulus is falling flat. […] White House economic adviser Austan Goolsbee […] says the economy is showing encouraging signs.”

Nu, nu. And the fact that unemployment is way worse than predicted and expected had the stimulus not been implemented is no big deal. Part of the game. Keep looking at this figure — all the evidence of Obama’s wisdom is staring at you:


(Blue and light-blue are models. Maroon is what actually happened. Oopsus… Click on the figure to see a larger version.)

At the same time, stupid-stupid Europeans refuse to see the light and (fed up with socialism) told liberals to go take a hike.

When socialism was implemented in Russia and Eastern Europe, the power was placed in the hands of low-lifes and bastards. When socialism was implemented in Western Europe, the power was placed in the hands of people who thought that just because a rose smells better than a cabbage, it will taste better in a soup¹. As socialism is being implemented in the US, the power is placed in the hands of overgrown children and clowns whom the children like for the bright-red noses.

__________________________
¹ The simile is borrowed from a quote by H.L. Mencken.

The circus is back in town

An interesting article on Voz Iz Neias: “What Obama taught me”.

Holocaust, schmolocaust.

Aren't those pesky Jews ever going to go away? Yes, denying the Holocaust is "hateful." But let's get a grip. Palestinians "endure . . . daily humiliations." Their lot's "intolerable." Israel "devastates Palestinian families." No wonder our president shunned wicked Israel during his trip - sending a clear, if unspoken, message that Jews are now fair game.

"America's strong bonds with Israel are . . . unbreakable." Yup. And they're issued by Chrysler.

Hamas is a legitimate, recognized voice of the Palestinians. Rocket attacks against civilians, suicide bombings and kidnappings really work.

Iran can have nukes.

Our president's acceptance of "peaceful nuclear power" for Tehran was coded language for "no pre-emptive military action."

Jordan doesn't matter.

So much for one Arab country's attempts at human decency. If you want attention from our president, you've got to be a desert gangbanger.

My wife wondered why Obama didn't make his speech in Indonesia, the world's most-populous Muslim state, where he would've been welcomed proudly as a home-boy. Obama just reinforced the stereotype that Muslim equals Arab.

Democracy isn't for everybody.

We're done peddling that particular drug.

What are my personal thoughts about our president’s speech? They are fully expressed in this video:

Obama is trying to recreate Japan’s “Lost decade”

It’s not foolish to trip and fall. It’s foolish to trip and fall on the same place twice.

From here:

The scenario was eerily familiar. A long real estate bubble that had expanded extra rapidly for the previous five years suddenly burst, and asset prices came crashing back down to earth. Banks and financial institutions were left holding piles of worthless paper, and the economy soon headed south. The national government responded to the crisis by encouraging more lending and spending previously unfathomable amounts of money on public works projects in an effort to stimulate consumer spending and restart growth.

But that stimulus did not save the Japanese economy in the 1990s; far from it. The ensuing period came to be known as the Lost Decade, characterized by multiple recessions, an annual average growth rate of less than 1 percent, and a two-decade decline in stock prices and corporate profits.

The Japanese government’s easing of credit rates, instead of spurring real demand, created artificial demand. Federal loans and stimulus spending were not economically productive, and they vastly increased the nation’s debt and prolonged the economic malaise. Worse, businesses spent critical time on the sidelines, waiting for government bailouts and other centralized actions, instead of speedily consolidating their losses, clearing their balance sheets of bad investments, and reorganizing.

The United States in 2008–09, unfortunately, has started down the same path. Federal intervention and the expectation of additional government action are removing firms’ incentive to clean up their balance sheets by selling “toxic” assets. Why accept pennies on the dollar if a deep-pocketed new bidder (i.e., the state) looms large on the scene? The Japanese experience shows that when the government is an active participant in the market, many firms would rather accept state support than initiate the inevitable financial reckoning. Such a status quo does not provide a sustainable foundation for the economy. Instead, it restricts economic growth and creates a cycle of stagnation.

Read on, for a detailed analysis of the ongoing situation and general description of how bubbles form and burst, etc.

Government backs your waranty

So. Many. Jokes.

It is just too hard for me to determine which of the thousand or so jokes in my mind deserves to be voiced out. And besides, whatever I write, it is still going to be not as funny as seeing this clown speak himself:



The only question that comes to mind is: does he believe himself in what he is saying? Or is this the biggest mass-scale scam in the history of the Western society since Reform Judaism?

You gotta do what you gotta do

And the homework is… to write a compare-and-contrast essay comparing and contrasting these two videos:

Before:


After:


“Before and after what?” you may ask. Well, it’s obvious, ain’t it? Before and after political parties changed power. Oh, and also before and after Bush kicked terrorists’ ass, so we can all feel much safer and talk about how evil torturing terrorists is and stop being “reasolonable”.

In other news, I already wrote somewhere that I am not too worried about Obama — based on his track record (before the election) he will have trouble convincing the Congress to do anything too stupid. Well, some stupid things have definitely been passed, but still, reading the latest news about closing of Guantanamo reminded me of my prediction.

Whoops.

Put your actions where your words are

One of arbat’s commentors writes:

Calling current deficit spending “unsustainable,” he warned of skyrocketing interest rates for consumers if the U.S. continues to finance government by borrowing from other countries.

“We can’t keep on just borrowing from China,” he said. “We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.”

Holders of U.S. debt will eventually “get tired” of buying it, causing interest rates on everything from auto loans to home mortgages to increase, he said. “It will have a dampening effect on our economy.”

And why didn’t Americans elect the person who said the above their President? Oh wait, they did — it’s a speech by Obama himself.

I just had an idea — there are two of them out there: Barack Obama and Borat Obama. One of them, of course, is a [time traveller]. Borat sits in Washington and works on economic policy, while Barack travels around New Mexico and makes speeches.

In case you have no idea what it is he is going on about, compare the quote in italic from above with these charts:



In gray is evil conservatives’ spending. In red — you-know-who’s:



And finally, I love this figure:



Greg Mankiw comments:

To put those numbers in perspective, imagine that the head of a household with annual spending of $100,000 called everyone in the family together to deal with a $34,000 budget shortfall. How much would he or she announce that spending had to be cut? By $3 over the course of the year — approximately the cost of one latte at Starbucks. The other $33,997? We can put that on the family credit card and worry about it next year.

Nu, nu. I hope I don’t have to tell you that it’s your money, folks.

Keep remembering this: whenever the government “finances” or “stimulates” something, it does it with your money. Not just money out of your paycheck. The extra money you pay for products which did not become cheaper, because their manufacturers were taxed and did not invest extra money in product development. In those products that you cannot afford. In extra you pay for house, for your amenities. In all that civilization advances on which you missed out — about which, of course, you don’t know since they are not there.

So, I guess, in one sense it’s not so bad. It’s like living in 19th century without toilet paper. It sucks, but you don’t know it does, since you don’t know what you’re missing.

I hope you enjoy those stones.

Gotta love our President

Such a charming fellow, this guy is.



I can definitely see this guy outshining Woodrow Wilson, JFK, and Jimmy Carter in his idiocy.



Oh, wait, he didn’t know. Right...

Speaking of FAA, did you guys know that every time a plane goes down in the US, this wonderful organization receives more funding? You did? OK, just checking. Imagine that your telephone company raised its bill every time you got a dropped call. After all, the fact that you get dropped calls means that you’re not paying enough money to ensure the quality of the service. Why, it all makes sense...

He promised, and he is starting to deliver

Change is pretty much here. As is hope.

What else was on the list?

Back to the trail

Is it just me, or is our President already bored with his new job, wishing he was back on the campaign trail, where people didn’t make demands of him or had high expectations, but just brought sacrifices to his altar? Otherwise, how do you explain him going back to the campaign mode?

Is this what he’s going to do — every time it gets a bit tough, sneak out of the capital and campaign a little?

Update: Nope, I am not the only one who sees this (interesting stuff on Elkhart, IN).

This is the first president we’ve had in a long time (ever?) who sounded more presidential when he was a candidate. Maybe it’s just all wearing a bit thin.

Foxes vs. hedgehogs

What do liberal presidents have in common with Chassidim? They are always late.

Obama has been routinely late to events and news conferences, including the ones at which he reversed Bush's orders. This has led to an already familiar refrain from the Obama camp: "He's running late."

The president was nearly 30 minutes late Wednesday for the ceremony at which he signed a bill to expand children's health care. He was 10 minutes late Thursday to a memo signing at the Energy Department.

Even before the inauguration, Obama wasn't a punctual sort; he arrived late to a Jan. 8 news conference on the economy that was aired live by broadcast and cable networks.

When it comes to following the clock, Obama closely resembles Bill Clinton, who was famously late to events when he was president. By contrast, Bush despised being late and punctual to a fault. He set the tone early in his presidency -- he arrived at the Capitol five minutes early for his inauguration.

"To me, being tardy, it's got to be one of two things," said presidential historian Doug Wead, who advised both Bush and his father, George H.W. Bush. "Bad organization that can be corrected, or it's arrogance. It sounds to me like this is arrogance."