Thursday, May 24, 2012

Jobs? You think jobs is the problem??


Okay. But it's our problem. A problem for people. It's not a problem for the economy. If you want jobs from the economy, you have to give the economy what *it* wants.

Of course everybody thinks they know what the economy wants: to cut the growth of government spending.

That's not it.

And now, to ruin a perfectly good brief statement, let me explicitly point out that I am *not* saying we must expand the growth of government spending. I am not saying we should cut it, and I am not saying we should expand it. What I'm saying is, the size of government is not the problem. The spending of government is not the problem. The debt of government is not the problem. The government is not the problem.

I'm saying we should stop talking about the government, and focus on the problem.

Excessive private debt is the problem.

We need to wipe out that debt, private debt, before life as we know it ends like a game of Monopoly.

8 comments:

Woj said...

This post hits the nail on the head. Unfortunately that solution remains politically unfeasible.

Greg said...

How is a problem for people not a problem for the economy? Is the economy something other than people? Arent people making exchanges, for money, what we ultimately call "the economy"? Even if the exchanges were strict barter we would still label that as the economy.

There is nothing "the economy" wants that isnt wanted by people.

I think the rest of your post is dead on but you started off in a place where I cant agree with you at all, which is very odd. I normally am mostly in agreement with you. Talking about the economy without referencing people and their place in it, the "job" they do, is................ meaningless.

Is there an economy without people?

Greg said...

So YES, I do think jobs is the problem!

The Arthurian said...

Greg,

To me "the economy" is measured as the dollar totals resulting from the activities of people. When the dollar numbers show imbalances (like too much debt or too much money) those imbalances cause things to happen: things like inflation, for too much money; and stagnation, for too much debt.

You would probably say stagnation is a problem, inflation is not. But we cannot fix the economy by making you happy, nor me. We have to make THE ECONOMY happy, by correcting the imbalances.

The economy is a system that can get out of balance and will tend to correct itself when it does. For example, people do not try to create unemployment, and yet unemployment happens. This is because for the economy, unemployment is a way to fix an imbalance.

What we need to do is fix the imbalances that cause the economy to generate responses we don't like. We have to fix them in ways that ultimately satisfy us, by doing things that satisfy the economy. For example, reduce private debt in order to reduce costs, so that the economy perks up, so that jobs are created.

Greg said...

'To me "the economy" is measured as the dollar totals resulting from the activities of people. "

I think that is just GDP which is one metric of the economy, but again this is measurable in the first place because people are exchanging money for stuff. We find it helpful to know how much stuff is being circulated and for how much.

"When the dollar numbers show imbalances (like too much debt or too much money) those imbalances cause things to happen: things like inflation, for too much money; and stagnation, for too much debt."

Agreed


"You would probably say stagnation is a problem, inflation is not. "

What makes you say that? First I would ask to define inflation. As the Austrians or Friedman defines it I would say its not a problem but I do think its a real problem when the price of things exceeds the ability of most people to pay for them with a reasonable portion of their income.

Stagnation is not necessarily a problem unless one is wed to perpetual growth.


"But we cannot fix the economy by making you happy, nor me. We have to make THE ECONOMY happy, by correcting the imbalances."


Your talking about fixing balance sheets, which can be done with the stroke of a pen if so desired. THAT is easy!

"The economy is a system that can get out of balance and will tend to correct itself when it does. "

Now you sound like a neo classical economist. There is no tendency for "an economy" to correct. Correct to what? Full employment? The sale of all produced goods at the price the seller wants? Any corrections are the result of people making new choices not some innate capacity of "The economy"


"For example, people do not try to create unemployment, and yet unemployment happens"


Really? So laying off teachers, nurses and firemen intentionally, under the false notion that we dont have any more money, isnt "people creating unemployment"


"This is because for the economy, unemployment is a way to fix an imbalance"


The major imbalance is in the minds of economists and politicians that puts the value of a man made object like a "currency" above the welfare of actual humans.
Any other imbalance it corrects is a balance sheet fiction.


"What we need to do is fix the imbalances that cause the economy to generate responses we don't like. We have to fix them in ways that ultimately satisfy us
by doing things that satisfy the economy. For example, reduce private debt in order to reduce costs, so that the economy perks up, so that jobs are created."


Boy I wish after 4 years "the economy" would tell us what makes it happy. I know what would make some econoMISTS happy but they cant all agree either and they are the economy whisperers for us. The only ones who can talk to this economy guy

Greg said...

Sorry Art

I know a lot of my last comment was snarky and smart ass, but I just feel like "just treating numbers" is absolutely what our "owners" are trying to get us to do and Im not going to do it. I dont treat numbers when Im managing a patient, I treat the patient. The economy is only partially and inaccurately reflected by the numbers we choose to look at and someone needs to remember that lives are within the numbers somewhere.

The Arthurian said...

Greg,

Separating my first sentence from the second allows you to disagree with the first and agree with the second; but in doing so you misinterpret the first.

It is true that when people speak of "the economy" they usually mean "GDP" -- even I do. But the latter sentence is there to make clear that I am talking about something else. (As you know, most of the graphs I put up are not of GDP, but of money or debt in relation to each other or in relation to GDP or other things.)

Me: "The economy is a system that can get out of balance and will tend to correct itself when it does."

You: Now you sound like a neo classical economist. There is no tendency for "an economy" to correct. Correct to what? Full employment?

No, you mis-take my meaning. When the economy corrects ITSELF it does things that satisfy the demands of the monetary imbalance we have created by policy. Full employment is a goal of people, not of the economy. When the economy corrects itself, the results are often NOT beneficial to people in general.

Let's say the dollar numbers show an imbalance in the debt-per-dollar ratio. (It is an "imbalance" because it is at or near an extreme, relative to its historical values, let us say.)

The imbalance affects the economy by affecting the way people behave in response: people use more credit than normal, because money is in short supply. And financial costs are higher than normal, because the level of debt is very high.

When people's behavior changes because of such imbalances, the economy changes. I describe this by saying the economy changes in response to the imbalances. The way the economy responds to the imbalance is an attempt to "correct" the imbalance.

People en masse suddenly adopting deleverage is an extreme example of this. And the "fallacy of composition" thing -- that if all individuals deleverage at once, the economy at a whole cannot -- is another example of how the economy's response is different than the responses of individuals.

Greg said...

"Let's say the dollar numbers show an imbalance in the debt-per-dollar ratio. (It is an "imbalance" because it is at or near an extreme, relative to its historical values, let us say.)

The imbalance affects the economy by affecting the way people behave in response: people use more credit than normal, because money is in short supply. And financial costs are higher than normal, because the level of debt is very high."

Yep. No argument here

"When people's behavior changes because of such imbalances, the economy changes. I describe this by saying the economy changes in response to the imbalances. The way the economy responds to the imbalance is an attempt to "correct" the imbalance."

Yes, its the peoples behavior that IS the economy. The economy is not some outside entity. Yes, policy regarding the price of credit is quite influential. Also whether or not there is even an alternative to bank credit (fiscal policy) is a policy choice. Currently we are run my monetarists who want everything run through the private credit system. They want the full emasculation of fiscal policy. They want no free money so to speak, everything must come with an interest price.......... and this affects how people behave. How likely are you to make an optional purchase when you dont have the money in your account and you need to borrow it? Its the optional purchases which are the lifeblood of our economy. We arent the most vigorous economy in the world because we sell a lot of food and water.

Maybe Im agreeing with you more than I realize but I feel like the focus needs to be on the people and the rest will take care of itself.

What Im not saying is that we need to take a micro perspective. Its about people not an individual............... (queue up the echo chamber/sound enhancer).... "job creator"


I know that we agree on what the problems are Art. I just think that its time to stop playing with numbers (the numbers will never favor the guys we want them to favor..... they will always be able to say "we dont have the money for THAT") Its time to start demanding a solution to the human problem.... people need a relaible source of income in order to meet their obligations and its clear that many people are willing to work hard, have worked VEERY hard and still are losing ground by the week.

Meanwhile, wizards who simply play with numbers and produce NOTHiNG have no financial worries til the end of time .... neither do their great grandchildren. Its a crime