Well, everyone else is talking about economics and the stuff going on with the now $838 billion stimulus bill, I figure after a few Twitter conversations I should weigh in a little. Because, as @matthewgood says: Everyone is a macroeconomics expert right now.

And he’s right. The past few weeks and even back before the first bailout was issued, everyone was espousing their ideas, waxing intellectual on the topics of how the government should spend money, where it should go, how big that number should be, etc. There are a few differing camps and they seem, often times, to be broken up between the more liberal and more conservative. That line between Democrat and Republican is always rough and each side claims to have proven results in their case.

As far as macroeconomics go, it’s pretty simple really. While in Washington state last month, I talked to my cousin Josh (who has a doctorate in political science and teaches at SUNY Buffalo) about this stuff a bit. We carried the conversation over to facebook via a few articles we’d read, and he explained that it doesn’t really matter where the money goes or how it’s spent, it just matters that it is. “It’s Keynesian economics 101,” he told me. Just by spending that money – wherever it may go – we’ll increase GDP and thus revive the economy.

I trust my cousin more than most people on these issues–mainly because he’s been into politics for as long as I’ve known him, and now has a doctorate in poli-sci–but, being me, have to question that line of thinking. Now, there may not be a question of whether spending that money will start some motion, the question lies in how effiicient that spending is going to be. Because large spending didn’t seem to help out during the Great Depression or with the New Deal, didn’t help during the Panic of 1893, and hasn’t helped more recently with stimulus checks and automotive bailouts.

The two differing sets of ideology are summarily this:

• Free Markets should exist outside of government meddling and be allowed to run their courses no matter what.
• Government should have a say in how Free Markets are run and step in at any time to fix things.

I am not opposed to government regulation, but I am opposed to bad, arbitrary government meddling. A lot of our problems now are due to 1.) The unethical behaviour of those with the most power (I lump in certain politicians), and 2.) Poor or inefficient regulation. I think regulation can be good, if it’s done intelligently. But so far, we don’t seem to have a good track record with knowing how to regulate markets effectively. This has gotten to the point where we now need to re-regulate our regulations in order to fix what’s been screwed up in the first place by regulatory legislation.

So, starting with the first problem I’ve pointed out above, those with financial power have abused the markets to better their positions. This is seen in the mortgage crisis, bad loans, automotive collapse, the stock markets, etc. In a capitalistic system of free markets, you would normally allow this collapse to take place in order to build a better system the next time around. That’s the phenomenon that will inevitably happen in a system left to its own devices.

Here in America though, we believe everything has to be constant (except, apparently when it comes to presidential campaign marketing – though that’s another topic for another time), so we meddle with those markets by instituting legislation. Sometimes it works, more often than not it just bogs down the system, making things more expensive. We push legislation into effect to stop global climate change – regardless of whether the science is *actually* valid, and regardless of whether it matters. We think we have to keep a static system, that any change is bad.

I contend that when industries or companies fail due to their misdeeds, newer, better, more innovative identities will take their places. That’s how the system is supposed to work. GM goes under because their cars aren’t selling. Their cars aren’t selling because the company hasn’t been smart enough to make the cars people want to buy. Whose fault is that? Who should take responsibility? If they disappear will not a newer, smarter, more appealing car manufacturer take their place?

Instead we take tax-payer money and put it back into an industry, that has been failing for a while, to keep it alive just a few more years. To give them another chance. That’s not responsibility, that’s stupidity. That’s gambling. Read the rest of this entry »

We certainly don’t need a system based on the wholly implausible proposition that, in the end, government knows better than people. We should resist at all costs the historically challenged claim that politicians, or the officials they appoint, can possibly know better than free, liquid, well-informed markets in which, every day, hundreds of millions of people put their own money on the line to choose their own future.

- Gerard Baker, Times Online

I really like Gerard Baker’s viewpoint. First off, he’s a Brit in the US. Second, he’s got tons of foreign experience. His perpective is often different than everything I see in the media.

This particular piece he’s written is intelligent and, I think, pretty accurate.

From the AP:

Federal Reserve Chairman Ben Bernanke bluntly warned reluctant lawmakers Tuesday they risk a recession with higher unemployment and increased home foreclosures unless they act on the Bush administration’s $700 billion plan to bail out the financial industry.

…

Bernanke’s remarks about the risk of recession came in response to a question from Sen. Chris Dodd, D-Conn., who seemed eager to hear a strong rationale for lawmakers to act swiftly on the administration’s unprecedented request.

“The financial markets are in quite fragile condition and I think absent a plan they will get worse,” Bernanke said.

Ominously, he added, “I believe if the credit markets are not functioning, that jobs will be lost, that our credit rate will rise, more houses will be foreclosed upon, GDP will contract, that the economy will just not be able to recover in a normal, healthy way.”

…

Dodd later spoke disparagingly of the administration’s proposal. “What they have sent us is not acceptable,” he told reporters after presiding over a lengthy Senate Banking Committee hearing at which Bernanke and Treasury Secretary Henry Paulson urged swift action by Congress.

Even in this so-called crisis which as more “normal people” up in arms than the war in Iraq does, the same old Democrats can’t seem to put aside their agenda and political prejudices to act swiftly to fix a problem. They all know better than the other person. So we get stifled. Again.

And yes, this has happened before. Try every time GWB or McCain or other legislators have attempted to pass regulation laws for the now collapsed Fanne Mae and Freddie Mac. Reasons? Well, I leave that to you to decide… but I will offer the suggestion that a lot of it is due to Dodd being in the pocket of some very wealthy former CEOs of said lending firms. And when I say “in the pocket” I mean that Dodd has received the most amount of money from those CEOs during his career from 1989-2008. source

Look at the number two on that list. Yeah, that’s after only 3 years in the senate. That much money is BIG incentive to stifle good solid legislation that could have prevented, or at least helped to prevent, what we are currently dealing with.

And even with that you think we would be quick to learn that there is a problem. Every time GWB urges lawmakers to act swiftly and put aside partisanship, the opposite happens.