Can they save the economy? No.

NOTE: Found this today. Sounds about right:

A $3 Trillion Bankruptcy Will Now Start To Emerge

An experienced European banker told EIR this morning that "the problems of 2008 are of a completely different order of magnitude than those we saw in 2007."... the real write-off concerns some $3 trillion, the source said. That is what is starting to emerge now.

Back to my blogging:

Let's set aside the obvious point I would make about Peak Oil and the energy problem and what it is/will do to GDP. But that doesn't solve our problems. The economic issues we face in and of themselves are going to be a disaster. What we have is a series of positive feedbacks, i.e. a set/series of reinforcing disasters.

An interesting non-issue, as far as the media and the economists are concerned, is the effect of the wars in Iraq and Afghanistan on the economy. It used to be thought war stimulates the economy. And this is true. In the short term. In the long term, it eats up valuable investment in capital and infrastructure. War spending is non-investment. The materials created get used. They get depleted. And they add nothing to future growth. The only long term advantage to war is conquering and/or controlling resources and gaining additional land for expansion.

Studies show that around the sixth year of a war the false propping up of the economy in the form of a rush of money supply expansion begins to be shown for what it is: reckless spending. It's not hard to see why. Imagine you have a neighborhood feud. You and your neighbor go at one another all the time. One day you find your roses cut up. You retaliate. Eventually you put in a fence. Looks great. Doesn't solve the problem. Your dog gets poisoned. (Don't worry, you've got a good vet. But he's expensive. More money goes out.) You put in a security system and slash his tires. He keys your car. You get motion detectors and salt his entire yard. He... anyway. So, you've got a new fence, etc., and have spent thousands of dollars you couldn't spare. Where are you now?

War spending undermining U.S. economy

One of the world’s most exclusive business clubs warned the United States recently that its open-ended national security and war expenditures, along with tax cuts that led to large budget deficits, could erode the country’s status as a powerful economic force.

The Geneva-based World Economic Forum issued its 2006-07 Global Competitiveness Index (GCI) rankings and listed the United States in sixth place, down from the top spot...

“With a low savings rate, record-high current account deficits and a worsening of the U.S.’s net debtor position, there is a non-negligible risk to both the country’s overall competitiveness and, given the relative size of the U.S. economy, the future of the global economy,” said Augusto Lopez-Claros, chief economist of the World Economic Forum’s Global Competitiveness Network.

The myth of the war economy

“'In previous periods when the U.S. has been involved in war, what you
typically end up with is an artificially propped up economy followed
by a decline in economic activity when the war is over,’ said
economist Patty Silverstein of Littleton-based Development Research
Partners.”

“'War is a wonderfully inflationary pressure on the economy,’ added
Tom Clark, director of the Jefferson Economic Council in Jefferson
County. ‘It's a wonderfully nonproductive use of assets, usually
followed by a period of hyper-inflation.’”

Stimulus packages, the other side of this plug nickel, are also a big mistake. What got us here, after all? Unlimited spending, unlimited lending/borrowing, unlimited money supply (Check the Shadow Government Stats link), huge tax breaks almost all for the wealthy (Trickle down? Kiss my ass...), Greenspan telling banks to get creative with their lending while interest rates hovered near zero, crazy new debt instruments... No, what is needed is fiscal responsibility at all levels. Long term, the fractional banking system (usury) needs to die a quick, painful death.

Stop Bush, Democrats Before They Save Our Economy: Amity Shlaes

Jan. 16 (Bloomberg) -- ...economic experts have already endorsed the concept of such short-term measures.

Former Treasury Secretary Larry Summers... Nobel Prize winner Joseph Stiglitz... President George W. Bush, briefed by experts, may take up the stimulus concept as early as this week...

This is perverse. The real question about tinkering should not be ``how?'' but ``why?'' The persistence of the stimulus habit, and the endorsements by experts, makes it worthwhile to review such previous interventions and their consequences.

Back in the early 1990s, great economies confronted trouble. ...U.S... Japan, banks were foundering, and the real estate bubble had popped...

...economists... talked about a $10 billion or $15 billion outlay... For Japan... Christopher called the Japanese leader's $115 billion stimulus plan merely ``a useful first step.'

Fortunately, Republicans and conservative Democrats tamped Clinton's domestic project down into nothing... with spectacular results.

Japan, by contrast, heeded the U.S. and the experts and dutifully ``stimulated'' the economy for years.

...A number of stimulus packages and Bridges to Nowhere later, the Japanese economy slept on.

...in the early 1970s...

Nixon's greatest tinkering came after his Camp David retreat in 1971. He emerged from the hills to order an end to the gold-exchange standard and a 90-day freeze on wages and prices. His eight-point plan also slapped a 10 percent surcharge on imports.

...the plan was not great. Its consequences were terrible ruction for the gold market and the stagflationary 1970s...

The worst problem with the tinkering impulse is what it precludes: necessary permanent reform...