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July 05, 2011

Some day, son, all this DOOM! will be yours.


After a short hiatus, I am pleased to be back harshing your mellow and acting as your guide to the slow-motion collapse of Western Civilization. Onward!

In case you missed the news, my home state of Minnesota has shut down in a budgetary duel between DFL Governor Mark "Brave Sir Robin" Dayton and the GOP-dominated state House and Senate. This is interesting to outsiders mainly because it's likely to prefigure the national budget debate.

Greece is the vanguard of the western world in terms of sovereign debt: it is essentially in default right now, being kept alive only by emergency transfusions from the rest of Europe. But the transfusions will not save the patient, but only extend her suffering (and enervate the other EU nations in the process). It's important to remember that the ECB and the IMF don't care about the Greeks, especially; they are not "rescuing" the Greeks so much as they are "rescuing" the French and German banks who are holding a boat-load of shitty Greek paper.

The Greeks recently passed yet another "austerity" program that is unlikely to work, given that all the tax increases will likely be ignored by a Greek populace who treats tax evasion as a national pastime.

The sovereign-debt crisis is in large part due to decades of heedless welfare-state spending. Europe is in relatively worse shape than the US, mainly due to having had a two-decade jump on us in building their welfare state, but the collapse is coming, and the beneficiaries are not happy about it. The entitlement mindset, so prevalent both here and in Europe, will doom any "austerity" programs.

The Sorrow and the Pity of Another Liquidity Trap. Best bit:

Although I worked for three years in the Clinton Treasury Department, and am a card-carrying member of the economist guild, I predicted none of this. Like most of my peers, I was wrong. Yet the most interesting thing is that I could have -- should have -- been right.
I've always said that humility should be the dominant character trait of an economist, but it almost never is. Brad DeLong is one of the good guys, and this essay is a good insight into how economists and scientists can fall into a very seductive trap: the idea that a given theory or idea is so beautiful that it must be right. If reality conflicts with the theory, then reality must be brought into balance with the theory rather than the other way around.

The shipwreck metaphors just keep coming. It's an overused metaphor, really. I prefer the classic simplicity of DOOM!

It's a jobless and wageless "recovery". Personally, I think that focusing on jobs is dumb because businesses do not exist to provide employment to their workers; they exist to make a profit for their owners and investors. Employment is a side-effect of this goal, not the end goal itself. If you want to drive employment, make it as easy as possible for new businesses to start up and conduct their affairs. (And while you're at it, get rid of the stupid minimum-wage law.)

If the recession has done anything, it's made US business far more efficient...but that just means that businesses can now do the same amount of work with less people. The only way to provide employment for more people is to radically grow the economy, not to force existing businesses to hire more people.

UPDATE: If you're middle-aged and unemployed, you may never work again. I'm not sure this is completely accurate -- certain skill-sets will always be in high demand -- but the general case, sadly, is probably true.

Ima go out and look for a job, but first Ima watch American Idol.

digg this
posted by Monty at 09:11 AM

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