A Convoluted Story - Part 2

Liberal Super Hero Paul Krugman of Nobel fame continues to lead the Keynesian chorus for more deficit spending by the Federal Government. (I would like to point out that Krugman's Nobel prize was awarded for the study of historical economic data - not forecasting/predicting the future, something he is likely no better at than a relatively intelligent investor with commons sense and having his own money at stake. Well...  perhaps not quite that good.) Deficit spending always feels good in the short term, but let's look at this another way. As truly thinking people should.

Right now, the Federal Budget is financed 2/3 by taxes and 1/3 by deficit spending. The Krugman/Keynesian argument seems to me to be that we should spend whatever is necessary to keep The People from feeling any discomfort economically. Never mind that that is not a measurable outcome. My question is this: If we can finance the Federal Budget with 1/3 deficit financing for an extended period of time,

(which might turn out to be the case! If the last couple of years has taught us anything it is that Credit Deflation had some really unforeseen outcomes. The Inflationistas can argue all they like about inflation... but the 2 big inputs - wage and housing - have experienced disinflation or outright deflation for years and without the Government's "help" would have gone into a deflationary nose dive (which I think might have been a good thing in the medium and long term - certainly it would have been a good thing for the "99%" not receiving social program benefits because it would have forced a reset on that silly system - but nobody asked me). Massive deficits and Fed interventions did not result in much inflation)

why can't we finance the Federal Budget with 3/3 deficit spending? Why do we even need a Department of the Treasury and a Federal Income Tax and and Internal Revenue Service? If 1/3 deficit spending has no deleterious effects on our currency, wouldn't 3/3 deficit spending be just 3X more deleterious? Doesn't 3 X 0 = 0?

Look, I am being only 1/3 tongue-in-cheek here. If the U.S. used my 3/3 deficit financing proposal, we would gain all of the productivity lost by collecting documents and filing taxes. We would free up all of those data reporting people at the banks, your company payroll department, those nice people at the IRS, some of our "best and brightest" wasting away at CPA services, and a bunch of other folks to do productive work with lepers/burn victims/lost puppies. Right?

Gotta be. If 1/3 (deficit spending) is good, why isn't 2/3 (deficit spending) better and 3/3 (deficit spending) perfect?

See. That's the problem with those close minded Keynesians. They just can't seem to take it to the next level.

If you know a Keynesian that can explain succinctly to me how 1/3 is good, and that we need to be able to spend whatever it takes (which presumably includes 3/3), but 0/3 is "bad" - and make that presentation consistent with C02/environmental socialized costs as well as our ferkakta wealth distribution - I would very much like to have a conversation with that individual.

- To Be Continued

A Convoluted Story

"In the long run, we are all dead." John Maynard Keynes

I have been out of commission for a while but certainly not out of contemplation.

A number of important issues have been raised in the following articles and something nags at me to pull it together.

Actuary Gail Tverberg had this to say at her excellent blog.
Physicist Stu Staniford had this to say at his excellent blog.


California provides this excellent data on gasoline consumption in a state with 1/8 of the U.S. population.

EIA data on total net electricity generation in the U.S. by year (2003 to 2012. I forgot to add year data on x axis. My bad.)

Here we have declining gasoline consumption and electricity generation in the U.S. the past 5 years but 2012 GDP has exceeded the previous high set in 2007? Yep. GDP measures transactions, and transactions are, like our money, abstractions.

"Reality is merely an illusion, albeit a persistent one." - "When you call me you can call me Al"bert Einstein.

Given the plunge in Nat Gas and Coal prices, the electricity data surprised me a bit, especially given the reports on GDP. Perhaps it should not have, given that the U.S. labor participation rate is at its lowest point in 34 years.

Got that? Labor participation, electricity production, gasoline consumption are all down... yet GDP is up. Hey, whataya know?

There is a great deal going on here. But thinking that anybody at the policy level is giving this any more thought other than getting through the next election is faulty at best, which leads me back to my original thesis expressed early and often: There does not appear to be a macro solution to these issues - only micro (personal) solutions. The world isn't coming to an end, but expanding your family, preparing and providing for the future they will be dealing with will not be done using the model the Boomer's used.

- To Be Continued....