Please don’t stimulate my economy…

Country Politician - George Bingham

In my other recent blog, In Defense of Capitalism, I argued that increased government activity would exacerbate this crisis. I argued that, in the long-run, investment will fix itself. As I read the news, I hear good and bad things. I cringe when I hear that the government is going to spend $850 billion for a stimulus package. But, I am encouraged when Barack Obama wants to cut taxes to stimulate the economy. I fear that government spending, on this scale, is bound to be inefficient and may makes things worse. But, I also know that tax cuts tend to stimulate economies in the long run. When people can spend their own money, they tend to benefit an economy. Money is invested wisely, looking for returns. The government is a bureaucratic mechanism that is extremely slow to work. When it does finally work, it tends to lend and trade favors not always for the social economic good. Governments tend to overspend on shotty merchandise. You need only look at the J. Edgar Hoover building to see how poorly the American government spends its citizens’ money. What makes you think they will use $850 Billion any wiser?

Money Supply Blues

Up up and away!

As I hear more and more about this economic crisis, the pundits and politicians’ voice begin to merge and it becomes a sort of white noise. There isn’t much sense to be made out of most the reports, so as a statistician I prefer to look at data and see what the real story is. Data sometimes lies, but to be frank it lies a lot less than politicians and businessmen scrambling to keep their jobs. I went to the Bureau of Labor Statistics (BLS) website for some graphic interpretations of various economic data. As I had said back in March, the United States is in a recession, perhaps the worst in a very long time. But what does the data say about this? Inflation is currently at 3.7%, not much different from last year. The unemployment rate (6.7%) increases every month, but we’re still nowhere near where we were in 1982 when the rate was around 10 percent. What really worries me is not the labor indicators, it’s the monetary indicators. Check out the latest data and you will see what worries me.

Despise not foul speculation

As any oil-watcher has noticed, the barrel of oil’s price has dropped dramatically in the past couple weeks. This afternoon, the barrel fell to $120. Considering at the beginning of July, the barrel was $147, that means is that in a little under a month, the price of a barrel of oil has dropped nearly 20%. To me, it shows how bidding in the market will usually overshoot equilibrium before moving back, much like a pendulum. What worries me is that this price drop has occured amidst cries of foul speculation, and proposed taxes on windfall profits. Who makes these cries and propositions? Politicians do, and since these events have occured simultaneously, I am afraid those same politicians will claim these asanine policies brought the price of oil down. Nothing could be further from the truth.

In Defense of Capitalism

In a recent opinion piece in the Washington Post columnist E.J. Dionne lays the economy’s woes at the feet of capitalism. From the article I believe Dionne is saying that a more governmental redistribution program would alleviate our suffering from this most recent credit crisis. I was most shocked to find that most Washington Post readers agreed with his critique of the system of capitalism. Many readers agreed with Dionne that the New Deal had gotten us out of the Great Depression, and a more active governmental role in today’s economy would make us better off. This shows a flawed understanding of the capitalist system. Although I don’t have many readers, I would feel amiss if I didn’t defend this system against such misunderstood attacks.