May 7, 2009--An Exchange of Rants
I’ve been having an extended email exchange with a circle of relatives and friends of one of my dearest (and I mean that) Florida Republican friends. A few of these fellows voted for Obama, but even some of them are growing disenchanted with him—they appear to be mainly concerned about the rising budget deficit and how it will be retired and are worried about too much governmental intervention in the banks and auto industry.
Others, further on the right, fear (and I use that word advisedly) incremental socialism, though I can’t seem to get them to tell me what they actually mean by “socialism.” Oh well. I'm also hearing from them that they know more and more people who are cashing out and actually taking steps to leave the U.S., seeking safer havens.
I was wondering about all of this early this morning and thus wrote the following back to them:
It is of course very different now than during the Depression. Our economy is more globally interconnected and this makes things more complicated. But a case can also be made that this ultimately makes us more secure, not less, because everyone has a strong interest in seeing us and themselves succeed. There's no place to hide. Those folks ____ talks about who are leaving and taking their "money" with them do not understand this. Where will they go to hide? What assets should they take with them? Cash? Gold? Impressionist art? Their real estate? Stocks? Bonds? And what would they do with them if they could figure that out?
I understand, as you say, the impulse to protect our families, but we have to be smart about it. I also understand the desire to do things that help others and our country. I'm sadly not hearing very much about that. There's too much fear, a lack of historical understanding and how that relates to our current circumstances, and too much opinion pretending to be evidence-based. And I'm also not hearing anything much about how these are exciting times, full of opportunities. With risks of course. About how we have to get back to inventing things and working hard. There’s too much about passive investing, leveraging, and excessive dependence on the false bounty of the virtual economy where so-called wealth accrues via the inflation of various kinds of bubbles. In the 1920s case, inflated stock prices based on unsustainable lending (buying on margin) while more recently we have seen our bubble result from the commodification of real estate. Sort of our version of the Dutch tulip mania of the 17th century. (Studying the history of manias, by the way, is very useful to understanding our own seemingly more intricate economy.)
Ironically, one tends to hear most of the ranting and whining from small-government types who are most comfortable participating in and benefiting from that portion of the economy that is almost totally dependent on governmental behavior--either via deregulation (which is a government function) or exploitive and unfair tax policies and advantages (also government derived). These inconsistencies and pass-along advantages to the already affluent depend more on government policy than entrepreneurship and hard work. The biggest whiners are those least inventive who want to make easy money without effort. Simple by clicking around on their computers.
Small government doesn't just mean how much the gov't spends or how many are on the gov't payroll. It also means how big a role government policy plays in the larger economy. And during the Reagan to Bush years (including Clinton, who was more a follower of Reaganomics than he would likely admit) the government's role was enormous. Getting out of the way, as via their ruinous tax polices, is actually a big-government role. "Big" also means how much power government has and exerts. And during those years it was enormous.
That's one of the downside aspects of the Reagan-Bush kinds of tax policies--the wealthy amass more money without substantial effort (mainly through investing) and do not do much with it that is truly productive. They simple roll it over into other secondary and tertiary forms of passive investment. How many use their vast new wealth for venture capital projects or to expand businesses? The evidence is strong that most of their contributions to the larger economy have been to that portion of it that is unsustainable and non-productive.
Having said this, partly as the result of current smart, historically-based government intervention, there are gathering signs that the economy is freshening. Just glance at today's news--more hiring is going on, fewer are becoming unemployed, housing prices in some of the hardest hit areas (say, Sacramento and South Florida) may be bottoming out, consumer confidence is rising, almost all of the biggest banks passed the "street test," and of course the stock market is sprightly.
Won't it be additionally ironic that those who have been looking for a place to hide and have been ranting the most about approaching "socialism" will be the first to benefit? What will they then say? I'm sure they'll figure something out. If they need help, Rush will tell them what to think.
I’m sure I’ll hear back from the gang before lunchtime.
Others, further on the right, fear (and I use that word advisedly) incremental socialism, though I can’t seem to get them to tell me what they actually mean by “socialism.” Oh well. I'm also hearing from them that they know more and more people who are cashing out and actually taking steps to leave the U.S., seeking safer havens.
I was wondering about all of this early this morning and thus wrote the following back to them:
It is of course very different now than during the Depression. Our economy is more globally interconnected and this makes things more complicated. But a case can also be made that this ultimately makes us more secure, not less, because everyone has a strong interest in seeing us and themselves succeed. There's no place to hide. Those folks ____ talks about who are leaving and taking their "money" with them do not understand this. Where will they go to hide? What assets should they take with them? Cash? Gold? Impressionist art? Their real estate? Stocks? Bonds? And what would they do with them if they could figure that out?
I understand, as you say, the impulse to protect our families, but we have to be smart about it. I also understand the desire to do things that help others and our country. I'm sadly not hearing very much about that. There's too much fear, a lack of historical understanding and how that relates to our current circumstances, and too much opinion pretending to be evidence-based. And I'm also not hearing anything much about how these are exciting times, full of opportunities. With risks of course. About how we have to get back to inventing things and working hard. There’s too much about passive investing, leveraging, and excessive dependence on the false bounty of the virtual economy where so-called wealth accrues via the inflation of various kinds of bubbles. In the 1920s case, inflated stock prices based on unsustainable lending (buying on margin) while more recently we have seen our bubble result from the commodification of real estate. Sort of our version of the Dutch tulip mania of the 17th century. (Studying the history of manias, by the way, is very useful to understanding our own seemingly more intricate economy.)
Ironically, one tends to hear most of the ranting and whining from small-government types who are most comfortable participating in and benefiting from that portion of the economy that is almost totally dependent on governmental behavior--either via deregulation (which is a government function) or exploitive and unfair tax policies and advantages (also government derived). These inconsistencies and pass-along advantages to the already affluent depend more on government policy than entrepreneurship and hard work. The biggest whiners are those least inventive who want to make easy money without effort. Simple by clicking around on their computers.
Small government doesn't just mean how much the gov't spends or how many are on the gov't payroll. It also means how big a role government policy plays in the larger economy. And during the Reagan to Bush years (including Clinton, who was more a follower of Reaganomics than he would likely admit) the government's role was enormous. Getting out of the way, as via their ruinous tax polices, is actually a big-government role. "Big" also means how much power government has and exerts. And during those years it was enormous.
That's one of the downside aspects of the Reagan-Bush kinds of tax policies--the wealthy amass more money without substantial effort (mainly through investing) and do not do much with it that is truly productive. They simple roll it over into other secondary and tertiary forms of passive investment. How many use their vast new wealth for venture capital projects or to expand businesses? The evidence is strong that most of their contributions to the larger economy have been to that portion of it that is unsustainable and non-productive.
Having said this, partly as the result of current smart, historically-based government intervention, there are gathering signs that the economy is freshening. Just glance at today's news--more hiring is going on, fewer are becoming unemployed, housing prices in some of the hardest hit areas (say, Sacramento and South Florida) may be bottoming out, consumer confidence is rising, almost all of the biggest banks passed the "street test," and of course the stock market is sprightly.
Won't it be additionally ironic that those who have been looking for a place to hide and have been ranting the most about approaching "socialism" will be the first to benefit? What will they then say? I'm sure they'll figure something out. If they need help, Rush will tell them what to think.
I’m sure I’ll hear back from the gang before lunchtime.
posted by Steven Zwerling at
7:00 AM
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