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Original post by Lessbread
We're so programmed we hold contracts with bankers up as sacred, but contracts with union workers we treat like confetti. We're so programmed we would rather let our states go bankrupt than bail them out, even as we bailout the bankers with their offshore accounts. We're not at all programmed the way you say we are. Who's programming you with such false ideas?
There's a couple of issues here. We tend to treat consensual contracts as more valid than coerced contracts. The former is more often consensual than the later. Coerced contracts are simple robbery on a payment schedule. So when a contract's genesis is to satisfy a law passed to effect said contract of course it should be treated like confetti, it has no moral or ethical base, only a litigious one.
Or stated simply, the more reliant your contract is on government favor and monopoly grant the less dependable is the state of your contract.
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Original post by Myopic Rhino
I agree. We've become a nation of sheep. We put up with outrages on the part of our government that are several orders of magnitude larger than what the founding fathers fought a revolution over. People are starting to get mad, but it's often misdirected, such as blaming in on the other party, rather recognizing that it's both, or by getting mad about the $165 million in bonuses paid out to AIG execs, when that amounted to little more than a drop in the ocean of the total AIG bailout which we know now largely went as direct payouts to banks, including foreign ones.
The contortions required to maintain the illusion of a multi-party system are getting more and more extreme, and the various cheerleaders of party X and party Y are becoming less and less relevant.
The system is set up well to maintain itself, about the time this looks like it will unravel it'll be time for another national presidential election and the ruling powers will do their best to seperate us into 2 or more different groups, counting on our disdain for the other "team" to sustain us until the next cycle. They'll fire up their tried and true propaganda department, the white house press corp, and if all else fails expect some type of presidential scandal to break and find traction, that's usually a sure thing.
In business, during times of recession there's a saying, "They don't call it a correction for nothing." The context is when X business model that struck you as foolish hits the bubble market and does well, and then later collapses as the bubble pops.
During a bubble so much capital gets tied up into bubble ventures that core ventures suffer, you end up being stuck in a catch 22 where sound investments don't pay as well as bubble investments, so to be properly aggressive you end up putting money in bubble companies and trying to time the pop.
Governments work much the same. Their budget is based on a bubble economy, and much of their policies are designed to govern and perpetuate the bubble. Watching the contortions they are going through now to reinflate affirms their goal in maintaining the status quo.
When people finally determine that no amount of "stimulus" will ever reinflate something that is fully popped the government "market" will start correcting as well. Even monopolies are subject to economic rule, they just aren't responsive to price signals. The deeper the recession goes the more drastic will be the efforts of government to get a handle on the people, as people begin to look for alternatives. Alternatives in a monopoly situation mean black or gray market.
Prices are trying to adjust down, the government is doing everything they can to keep that from happening. Prices adjusting down is the first sign of a recovery, so by inference the government is doing everything they can to prevent a recovery. As prices fall bad investments are settled and the money hits the open market again, since all of it was malinvested it is reapportioned in a more effective manner, with some of it being put into good ventures and some being malinvested again. Once the ratio iterates a few times and capital is put to work we'll have sustainable growth again.
As a model, it's best to look to Harding instead of FDR. Ever heard of the Great Depression of the 1920's? No, instead you've probably heard of the "Roaring 20's", but the 20's started off with an economic depression as severe as "The Great Depression".
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Harding inherited the mess, in particular the post-World War I depression – almost as severe, from peak to trough, as the Great Contraction from 1929 to 1933, that FDR inherited and prolonged. Richard K. Vedder and Lowell E. Gallaway, in their book Out of Work (1993), noted that the magnitude of the 1920 depression "exceeded that for the Great Depression of the following decade for several quarters." The estimated gross national product plunged 24% from $91.5 billion in 1920 to $69.6 billion in 1921. The number of unemployed people jumped from 2.1 million in 1920 to 4.9 million in 1921.
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One of Harding’s campaign slogans was "less government in business," and it served him well. Harding embraced the advice of Treasury Secretary Andrew Mellon and called for tax cuts in his first message to Congress, April 12, 1921. The highest taxes, on corporate revenues and "excess" profits, were to be cut. Personal income taxes were to be left as is, with a top rate of 8% of incomes above $4,000. Harding recognized the crucial importance of encouraging investment essential for growth and jobs, something that FDR never did.
Powerful senators, however, favored giving bonuses to veterans, as 38 states had done. But such spending increases would have put upward pressure on taxes. On July 12, Harding went to the Senate and urged tax and spending cuts. He noted that a half-billion dollars in compensation and insurance claims were already being paid to 813,442 veterans, and 107,824 veterans were enrolled in government-sponsored vocational training programs, the total cost of which was estimated to involve another half-billion dollars.
The senators were determined to push through this spending bill, and Senator Pat Harrison of Mississippi accused Harding of having "attacked the soldiers of America who fought and won the recent war." Meanwhile, a tax cut bill emerged from the Senate Finance Committee and was passed, while debate on the veterans’ bonus bill continued.
Harding’s Budget and Accounting Act of 1921 provided a unified federal budget for the first time in American history. The act established (1) the Bureau of the Budget with a budget director responsible to the president, and (2) the General Accounting Office to help cut wasteful spending.
In the fall of 1921, Harding’s Secretary of Commerce Herbert Hoover prompted him to call a Conference on Unemployment. Hoover wanted government intervention in the economy, which as president he was to pursue when he faced the Great Depression a decade later, but Harding would have none of it. Good thing, since Hoover’s policies were to prolong the Great Depression. Harding said, "There will be depression after inflation, just as surely as the tides ebb and flow." Harding insisted that relief measures were a local responsibility.
In 1922, the House passed a veterans’ bonus bill 333–70, without saying how the bonuses would be funded. Harding let senators know that if they passed the bill, he would veto it. The senate passed it 35–17. Despite intense lobbying from the American Legion, Harding vetoed the bill on September 19 – just six weeks before congressional elections, when presidents generally throw goodies at voters. Harding said it was unfair to add to the burdens of 110 million taxpayers.
Federal spending was cut from $6.3 billion in 1920 to $5 billion in 1921 and $3.2 billion in 1922. Federal taxes were cut from $6.6 billion in 1920 to $5.5 billion in 1921 and $4 billion in 1922. Harding’s policies started a trend. The low point for federal taxes was reached in 1924. For federal spending, in 1925. The federal government paid off debt, which had been $24.2 billion in 1920, and it continued to decline until 1930.
Conspicuously absent was business-bashing that became a hallmark of FDR’s speeches. Absent, too, were New Deal–type big government programs to make it more expensive for employers to hire people, to force prices above market levels, to promote cartels and monopolies. Frederick Lewis Allen wrote, "Business itself was regarded with a new veneration. Once it had been considered less dignified and distinguished than the learned professions, but now people thought they praised a clergyman highly when they called him a good business man."
With Harding’s tax cuts, spending cuts and relatively non-interventionist economic policy, the gross national product rebounded to $74.1 billion in 1922. The number of unemployed fell to 2.8 million – a reported 6.7% of the labor force – in 1922. So, just a year and a half after Harding became president, the Roaring 20s were underway! The unemployment rate continued to decline, reaching a low of 1.8% in 1926 – an extraordinary feat. Since then, the unemployment rate has been lower only once in wartime (1944), and never in peacetime.
"The seven years from the autumn of 1922 to the autumn of 1929," wrote Vedder and Gallaway, "were arguably the brightest period in the economic history of the United States. Virtually all the measures of economic well-being suggested that the economy had reached new heights in terms of prosperity and the achievement of improvements in human welfare. Real gross national product increased every year, consumer prices were stable (as measured by the consumer price index), real wages rose as a consequence of productivity advance, stock prices tripled. Automobile production in 1929 was almost precisely double the level of 1922. It was in the twenties that Americans bought their first car, their first radio, made their first long-distance telephone call, took their first out-of-state vacation. This was the decade when America entered ‘the age of mass consumption.’"
So while it may still be averted it's looking like a chance of a showdown between the government and the governed. A possible breakdown of the two party monopoly. Maybe a chance at government reform as the monetary base breaks down Zimbabwe-style. Pretty exciting times really. If they somehow manage to reinflate the bubble it will be short-lived, and the next pop will make this one look like child's play.
