• The Obama & Krugman Keynesian Conceit

Paul Krugman, the Keynesian drum-beating economist, was invited by CNN on Sunday to promote the Obama strategy of pumping additional billions into the economy. One of his very telling responses to Fareed Zakaria’s question on significantly more spending and borrowing was “what about now?”

This very self serving response from Krugman was an advocacy of profligate spending very much in keeping with a too popular expectation of immediate gratification. Pushing the debt onto future generations, and “get-me-what-I-want-now,” is the egocentric inclination that delivered the current state of financial devastation. “What about now?” came from the mind of an economist who exudes a distinct arrogance much too indistinguishable from that personified in Obama.

The defiant arrogance, evident in both of these currently influential individuals, is a disconcerting heap of hubris that America’s present and future conscience must reject out of hand. Another prognosticating ego on the talking-head circuit is Nouriel Roubini, the self-proclaimed forecaster of doom, who improves his personal bank account by knocking capitalism and calling for more government intervention. Current and future taxpayers cannot afford to accommodate such egocentric thinking, from egocentric minds. When overwhelming egos audaciously preach anything, we should become very suspicious of the direction they profess to lead.

I am making a statement less on economic theory, than I am making an observation on the message our intuitive natures are very likely receiving, many of us at least - the Obama and Krugman recipe for a utopian Now is false. It is false for the Now, and it is false for the Future. We should be apprehensive and skeptical of all egocentric thinking. We should very much distrust assertions, articulate or otherwise, that emanate from well-understood egotism.

Weary taxpayers should demand leadership that does not ignore the burdens of tax increases, massive stimulus spending, and out-of-control deficit spending. They should also demand of the Krugmans of the world, why they have no solutions to the impossible debt load that will be confronting America in 10 to 12 years. Taxpayers are standing on the sidelines of a progressive parade sweeping the country with an ideology that is expanding government to redistribute wealth rather than enacting measures to stimulate its creation.

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• Economy – The Outlook Is Your Outlook

You can listen to conflicting opinions of self proclaimed experts on government activity or lack thereof on “stimulating,” the economy, however, the reality is that the economy’s progress remains in your hands. The top of the financial food chain with the government’s help wants to prejudice your perception toward positive spending.

The American taxpayer is provided an abundance of opinions and fantasies surrounding economic progress packaged as truths, facts or principles. The certitude applied to the delivery of this inspiring radiation has maximum impact on the behavior of the audience.

The vast central swath through the middle of the American political spectrum representing a majority, seeks reasonableness from government. The majority expects its business to be conducted with some integrity, without the encumbrance of concrete boots of left or right extremism demanded by party affiliation. This expectation of common sense, and forthrightness has not been honestly accommodated by politicians. The cost of reaching elected office has so escalated that special interests have become the overwhelming force behind all thrones influencing legislative agendas. As a result, every utterance emanating from a political pulpit has become suspicious.

When Paulson and Geithner browbeat their economically illiterate, and incurious bosses, into bailing too big to fail financial firms, and to launch profligate spending programs, the taxpayers had no input, nor were they provided enough truthful information to know right from wrong. Furthering confusion came in the form of suddenly popular Keynesian economists affirming government stimulus spending. Their continual proclamation of mission accomplished, and the recession is over, has become a tired refrain.

With unemployment hovering at 16%, when you include marginally attached workers and part timers for economic reasons, the principal energy in the system is the government’s $1.25 trillion mortgage support program artificially inflating home prices, borrowed with future taxpayer sweat.

The two principal pulls at opposite ends of the government intervention string, are Financial Stimulus, and Lowering Taxes. The arguments move the cursor of political will along this confusing line with abundant force pulling effectively from both ends. Over the long term, practical evidence suggest that there is little positive impact on GDP from supposed spending multipliers, so the amount spent as financial stimulus will not find itself increased or even mirrored in the amount of the nation’s gross domestic product. From the other side of the great divide, the lowering of taxes has shown some positive affect, however long-term impact has been almost impossible to empirically quantify.

In the middle, rests the most reasonable path which mandates that government, and politics (humans guided by special interests), remain out of the equation altogether, with some leaning toward easing of corporate and personal taxes, and reducing government expenditures. As his will not occur, and as we have seen, the likely reality is for a continuation of tax increases facing the enormous deficit demanding to be satiated.

Your perceptions as consumers, and taxpayers, will impact economic activity. You will dictate the direction, which the economy takes, and through that process, minimize the influence from politicians and experts confusing your judgment with mutable notions of economic confidence. Instilling confidence is intended to move consumers to borrow and spend. Ignore the noise.

As the recession continues, and it will, we should all remain diligent with each dollar we earn, and even more so with each dollar we borrow, unlike the examples set by Washington.

The biggest financial decision we make pertains to our dwellings. We will be hearing newly energized implorations of mortgaging ourselves into evermore elaborate dwellings, or increasing the debt on those we already inhabit. The reality remains that a home’s increasing value should never become a source of newfound cash while we live in it. Perceive your home as an expense if you have purchased one. If you still rent, congratulations, you have bypassed the heavy stress that millions of mortgage borrowers have endured over the past couple of years.

As the ravages of unemployment persist, we can each contribute to a return of long-term national economic stability by viewing each dollar we earn as if it were your last one for a while. The behavior might just be contagious, and will hopefully spread long enough for political representatives to assimilate the message since elections don’t appear to change much in Washington’s behavior.

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• Obama - The Second Tell

As follow-up to a November 21, ’08 article on this post regarding signs that may reveal the direction that an Obama Presidency might take, the following presents another “tell.” This one is less innocuous, but may prove to be more expensive to America.

Perceptions inside the current White House, when Bush and Cheney took office, were that incurring debt was its right and was its political capital to spend with Cheney supposedly claiming “deficits don’t matter.” Hindsight was temporarily kind to them with support from William Niskanen, a member of Reagan’s Council of Economic Advisors also claiming, “The lesson we should have learned is that deficits have little or no short-term economic impacts.”

Through the early years of this decade, everyone accepted the premise that debt was a normal, perhaps integral conveyance of a modern society, possibly even an applauded one. From economists to taxpayers on assembly lines, everyone dwelled in the comfort that deficits and borrowing could bring unfathomable respect from acquisition of material possessions. Second mortgages were objects of desire and their procurements were cause for boasting. And didn’t second cars and gigantic cinema sized TV screens provide jobs for people in foreign lands anyway? Who could possibly argue with success?

Debt administered through spinal shunts delivered energy into the U.S. economy. The amphetamine rush sent economic experts into undiluted delusions of grandeur, and the exploiters into creative overdrive on derivative concoctions too complex for their corruption and decomposition to be diagnosed. Somewhere along the delivery track, the drug magically transformed into analgesic and the rest of society, including government, slid into either acceptance or compliance. Some sectors of government abdicated responsibility, when their persuasion to appear oblivious was finessed with financial seduction.

Debt is seductive. Its power is evidently overpowering. America is anxious to move on beyond the current administration and is anticipating a new President with promises of change. We listen for signs of that impending change, and so here is the Second Tell. During this past weekend President Elect Obama, while making promises of unprecedented public works projects, stated, “We've got to provide a blood infusion. And that means we can't worry short-term about the deficit." At least Obama’s delivery of attitude toward economic probity was less arrogant than Bush and Cheney’s, but identical in its bearing. He seems more genuine, even if misguided. The legal debt ceiling has already been increased to $11.3 trillion and more increases will be requested.

Evidently not so much has changed or will change, and deficits be damned, full steam ahead with borrowing and government intervention. An additionally disconcerting sense is felt when accepting the reality of the notion that even bigger government may not be just an enigmatic abstraction over the coming four years.

A preceding article on this post discussed the need of the 44th President to urgently obtain an intensive and thorough education on inflation. With the coming boom in currency creation, not doing so would be tantamount to an abdication of responsibility.

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• ECONOMISTS, OUR NEW PHILOSOPHER KINGS?

Our mainstream media has been in panic mode for a couple of months, and in its continuing consternation, has clamored for the President Elect to rush, first and foremost, into naming his economic team. “Hurry up, and you better be picking some guys who understand numbers and the economy. We want experts. The best money can buy.” So you turn off the news, and head off to bed confident that although a gloomy, almost mystic storm is brewing outside your window, all will be well. An Economist will figure it out. Some hours later your wake up call is the dawn sending rolling thunder that jolts your home to its foundation. You jump, wide awake, and in a cold sweat. “What the hell is an economist?” The sun is actually attempting to cast light around your drapes.

Once upon a time, "economist" was a term applied to an individual who enjoyed a certain conservative frugality to all human endeavors. Vestiges of that connotation remain with today’s definition, although these cannot be assigned to the modern economist in whose hands we appear to entrust our economic lives, those of our children and those of our grandchildren. Not that some of our more illustrious ancestors might not be addressed today as economists. Certainly Xenophon, Aristotle or Adam Smith wore the mantle well, in addition to being philosophers. Doubtless, each would probably be perplexed by the current definition, and even embarrassed by its most modern incarnation.

Our best known are too often staggering egos, rooted in analytical methods far from the disturbing notion of public discourse and sensibilities, but readily capable of pontification on the state of everything economic. Aided by the most powerful computational powers the world has even known, they interminably scrutinize the minutiae of fractions, macroeconomically dissecting our lives, creating hypotheses felicitous of one theory, or another that each might have subscribed to. The new breed of economist hopes that the consequence of his or her efforts might eventually dissolve into public policy. All struggle to be heard in one way or another, and a few get lucky.

Alan Greenspan for example, was much more than lucky. He was feared. He was clearly not as competent as he believed himself to be, but he was feared, as well as venerated. So discombobulated were four American Presidents on the state of their economies that Reagan, Bush Sr., Clinton and Bush Jr. each capitulated, leaving him insulated, permanently ensconced in office as 13th Chairman of the Federal Reserve. For 19 years Greenspan was arguably the most powerful man in the world, if you place money at the top of the human existence food chain.

Who preceded Greenspan? Paul Volcker, who will now be Obama’s eminence grise.

Aristotles, they are not, but let's cast a slightly more discerning inspection their way, and toward the state of their art. Economists are human with any of the frailties the rest of us might also endure. They are products of their educational systems, and environments limited by the very nature of economics. It is a vast endless field of study. Some concern themselves with wide global movements of goods, people and money. Others might specialize in capital ratios, dealing with banking regulations and interpretations on depository requirements, or the standards of capital and asset risk measurements, with specializations within each area. Others are preoccupied with inflation, and just to complicate matters all countries have individual methods of calculating capital within their boundaries, though they are confined to internationally accepted guidelines. Unfortunately, they either specialize, or they really don’t know anything, and become really, really dangerous.

It was anomalous that a few economists, during the bubble’s inflation, indulged quietly on the more dire economic possibilities, but their squeaks were obscured in the noise of the herd.

We assume that society’s Greenspans can not only be visionaries with insights into mathematical models, but can hover above the fray issuing profound prognostications on the state of our malaise. We assume a dream team of economists crowded around a new Commander In Chief of Change will blend their discordant mix of views into a powerful amalgam. One capable of charting a methodical path out of a labyrinth no one really understands, and no one is taking credit for.

Repeating platitudes on the perils of assumptions would be pointless. Through the kaleidoscope of our bank accounts we are witnessing the evolution of our own wreckage in slow motion.

The first clue as to why our modern day Aristotles of economics are not the oracles we sanction them to be, is that they deal with yesterday. They present the past beautifully, and with more clarity than the Hubble’s brilliant and awe inspiring images of distant galaxies as they existed billions of light years ago. As to what will occur tomorrow, or even later today, our seers are particularly inept. Specialization and compartmentalization are dangerous competences, particularly when compromised by insecure egos.

The second clue resides in the box that hides these enigmatic specialists of the statistical tables. They have perceptibly limited understanding of the nature that is human. The culminating pinnacle of their output is theory. Not practical, but obscure and probably intangible methodologies for hopefully enhancing efficiencies, or exploiting short, mid or long term trends, and biases. Nowhere in the mix that is the economist’s alchemy, can we find a scintilla of any universal principals that might inject percepts of morality into their mental and computational gyrations. Their inclinations fall short on the E.Q. meter, and human nature is not in their catalogue of, “Things I’m An Expert In.”

Now for the third clue. It is not in the nature of the economist to be an entrepreneur. Time spent in research, and analysis also do not allow for long term commercial endeavors. Unfortunately, this limit understanding of where the proverbial rubber meets the road.

The most effective presence at the round table carving a new path out of the maze America is trapped in, would be that of an entrepreneur. One who has had extensive success in the commercialization of goods or services to the broad market over a sustained period of time. One who has demonstrated vision and creativity, as well as capacities to motivate individuals other than himself to reach unexpected productivity. One who in practice and not through vicarious imaginings, has been drenched in all elements that fuel the economic engine driving an economy.

Drawing the curtains to let the sun’s warmth fill the room, you remain hopeful, but know that as the morning news will announce yet another bailout package, you will look elsewhere for telltales of contemporary Voltaires in our midst.

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• OBAMA GIVES BERNANKE VOTE OF CONFIDENCE

In the reality of continuing negative economic news, American taxpayers are looking for signs of relief. With mortgages sliding under water, automobiles getting yanked out of garages and taken back to lenders, food costs becoming a sobering family burden, and with commuting to work becoming a deep breathing exercise as fuel gage movement becomes a source of anxiety, America is anxiously seeking leadership out of its mess. Obama’s thumbs-up on Bernanke is a depressing sign.

Bernanke has shown no capacity to forge a path different from the one Greenspan followed for a whole generation under four presidents. The restored economic health of the country is the principal concern of all voters. The Fed has implemented decisions, and has been supportive of economic policies that brought America its housing bubble, as well as unfathomable National and personal debt levels. Fed policy led a majority to view their homes as repositories of wealth. Homes became piggy banks, and to make things worse, the lack of regulations or restrictions on lenders turned trillions of dollars worth of real estate into a Wild West Show.

America not only yearns for, but badly needs new, knowledgeable and judicious leadership. The next President doesn’t have to be prescient, but should at least demonstrate some grasp of economics enough to pick the best of the brains around him or her. Obama directing a vote of confidence toward Bernanke disturbingly demonstrates a complete lack of familiarity with the complexities of the beast that America needs taming. His economic advisors should all be replaced, and he should close himself off in a room somewhere, and spend some serious time getting educated. It doesn’t matter that McCain isn’t any more economically literate since America isn’t looking to him for change or innovation. If Obama wants to inhabit the White House, he needs to brush up on the source of America’s most critical concern.

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