T Nation

Inefficient Capital Allocation Destroyed Economy


#1

We are on the brink of a massive recession, and it is due to the inefficent allocation of capital.

For DECADES now, our government has invested our money in the wrong places...places that earn no economic return for our country in the long term...Entitlement programs like Social security, welfare, medicare, etc...

these programs create short term boosts in GDP at the expense of destroying our countries long term solvency by destroying our competiveness in the market and increasing our debt burden...

They've slashed interest rates to artificially low levels only to cause no further increases in economic growth...creating an illusionary cost of borrowing...devaluing our currency...

They've also used short sighted judgement to appease the masses in times of duress...fighting pointless wars and bailing out an inefficient banking system...Both of which have led to no long term economic growth...

They choose to kick the problem down the road, hoping that it would go away...But, it hasn't...It has only grown larger...

The fact of the matter is this country is only still alive right now because public debt holders are betting on the US too...everyone in the world is...However, they can only support us for so long...and then the entire pyramid will collapse upon itelf...


#2

Paul Krugman says you are wrong and he won a Nobel Price for being awesome.


#3

It's also not as simple as collecting more tax revenue by increasing taxes...

if you increase the tax rate, it will only decrease revenues, drive jobs away from this country, and increase tax avoidance....you will end up with the same net tax as you will have decreased the tax base in the process...

even if you were able to collect more taxes from the rich, you would have to invest those dollars in projects that earn more return than the private sector could do...This is unlikely as those dollars would go to fund entitlement programs and inefficent agencies...

So now you see why this country is unsustainable, right now...

I don't care about democrats or republicans...I view things objectively, and there is no way this country can survive without making massive spending cuts and figuring out how to make this country more open for foreign investment...


#4

There are a lot of smart people who are wrong.

I've met plenty of them...

the money spent on entitlment programs will only end up leaving this country to go to far superior investments...This is just how our world operates...

Wealth flows to nations who create the most value....It doesn't flow to nations because they are entitled...

There may have been a point in time...were welfare type programs did create value in the US because the US was the end point for that wealth...

However now that wealth is certainly flowing oustide of this country as we are not growing...our growth throughout the late 2000s as you know was largely driven by the housing bubble...which was illusionary...


#5

Exactly, Paul Krugman is the only person with a real grip on what's going on in America. We should all be thankful he is looking out for us. Tea Party is racist.


#6

I never heard of krugman lol....Then again, I don't like reading about economists or their theories(I have a investment background rather than economics - I much prefer dealing with things at the business level than macro level)....

Regardless, I understand economics fairly well...and everything in economics comes down to this one debate...

Are recessions due to Underconsumption or Misallocation?

I personally believe recessions are caused by misallocation...

Yes the wealthy are hording money right now...cash bank reserves have went from 800 billion to close to 2 TRILLION in the last year, as people are scared right now...

However, the reason they are not spending is because capital was misallocated in the past, and it will reallocate itself to correct the mistake....

I think the US government should play a role in fixing this, but it mainly has to do with policy rather than spending...


#7

Oh, you should definitely read Krugman.

Not only is he the way, the truth and the light, you are also practically a barbarian with all that structure of production stuff.

Did you get a Nobel price for being the second coming of the Messiah?

Thought so.


#8

lol can't do that...I don't want to be influenced by his writings...he thinks we can live in harmony, but this world doesn't work like that...

I'm leading my own movement...


#9

I think Orion is being sarcastic.


#10

How dare you.


#11

I don't think liquidity is trapped...I think thrift is occuring because restructuring must take place...

so as i said before...this is the same issue that has been argued for centuries...

underconsumption or misallocation...

I personally believe keynesian ideas only lead to people making bad investments due to easy money policies distorting the true cost of borrowing...they force governments to take on massive debt to create unproductive jobs, effectively acting as inefficent central planners....and it creates social dependence on the state...

Do i think that government can help somewhat?...Yeah i do...the market is not perfect, and the private sector tends to act too slowly...I feel our government has lost their chance to do that, though...i think they've reached a point where they can't borrow their way out of this mess...and If they do manage to get growth with more debt, it will be a pyrric victory...

i think we just need to accept that restructuring needs to take place..which means millions will lose their jobs and benefits, but this is life...out of this dark period, the US will rise again to be a great nation...


#12

Obama won a Nobel Prize too


#13

Well, if all the cool kids get one it is only fair that the black kid with the big ears gets one too.

Anything else would be racist and anti earist.


#14

....