Mr. Geithner, Meet Econ 101

Periodically, as my old economics professor John Kenneth Galbraith used to say: “Sometimes, it’s good to return to Econ 101” (aparaphrase.)

The cycle of growth starts with demand, and to most people that’s understood as sales. Another old mentor of mine once said: “Nothing happens until you sell something.”

That statement from an old tool and die maker is just as profound as the statement from one of the world’s most renowned economists, JKG. Yet, it’s important to understand that sales can be misleading.

For example, much of what we are seeing today is the result of the consumer not paying their mortgage, not paying theirmproperty taxes, and not paying their credit card bills. In fact, they’re maxing-out their credit cards.

Circumstances have provided a window of opportunity for people to choose to abrogate their debt responsibilities in order to buy the newest iPad. Historically, nobody would have ever thought to strategically default on their debt, yet today, it’s a widely accepted practice.

These kinds of discretionary sales, however, are fleeting,and dictate why businesses are currently not hiring.

Imagine if you owned a business and believed that sales will ultimately decline. As a result, you would be very hesitant to reorder product. Without reordering, not counting inventory build, there would be less need for production.

Here’s where it gets a little complicated. Most people think of production asproductivity, whereas productivity is producing more with less man-hours. Production is just simply manufacturing a product, regardless of the number of employees involved.

With decreased sales, overtime shifts disappear as production plants sit idle week after week, month after month, and year after year.

Obviously, if the production facilities are too expensive to maintain you would be forced to take action by downsizing employees or moving production offshore where labor costs are dramatically lower. (Unfortunately, most small businesses can’t implement the offshore strategy.)

Next, decreasing employment leads to reduced personal income. Regrettably, as taxes rise and day-to-day costs (food and gasoline) go up, workers need not only a secure income, but also an increasing income, just to keep pace.

Given that unemployment is a corporate strategy (witness Cisco’s stock rise after announcing 6,500 layoffs) and will be with us for many years (Bernanke’s Federal Reserve) it only stands to reason that for the foreseeable future it will be very difficult for most people to afford the necessities, let alone any discretionary spending, and thus no sales.

No sales, no production, no production no employee, no employee no increasing income, no increasing income no sales, and on and on.

In fact, a cycle Japan has been experiencing forover twenty years. Unfortunately, ourcruel cycle has just begun. Yes, it’s good to revisit Econ 101, but it can also be extremely painful.

Galbraith was a commie flunky with a good PR agent.

This article recites utter nonsense as has already been pointed out by a previous poster.

My focus is on the non-sensical idea that economic growth depends primarily on consumer demand. Consider the highly successful and growing Apple Corp product line of iphones and ipads. What came first? Consumer purchases or Apples investment in research, engineering, production, distribution and marketing? All before the first sale to a consumer.

What is killing America’s economy is a Government bent on doing all it can to disincentivize private investment. High Taxes, eroding dollar values, extreme anti-business overregulation, and manifest uncertainty that makes investment planning and analysis impossible (e.g. how much will Obamacare actually cost employers?)

America needs low tax RATES, minimal regulation, maximum market freedom, and reasonable predictability for their planning and decision making. Repeal Obamacare, cut corporate estate social security and individual tax rates, eliminate the NLRB FTC Dodd Frank and all of the other top down economic constrictors, stop bailing out failed institutions and stop funding corrupt ones (Fannie Mae etc). Stop regulating wages and benefits of projects and institutions that receive some federal funds. Stop deficit spending. Get out of the healthcare business; out of education and out of energy policy. Our economic nightmare could be over within 18 months of sensible policy changes that recognize the importance and need for enhancing private investment return opportunities. Cut Federal employment by 50% and Federal wages and benefits by 30%.

Galbraith’s “intellectual” heirs have tried and failed with their stupid schemes of phoney artificial demand stimulus. In the real world is plainly known as WASTE, and it has failed miserably.

Frankly, the economic principle most abused right now is TANSTAAFL-- There Ain't No Such Thing as a Free Lunch.

On Friday, some idiotic woman called Rush to talk about "free birth control" being touted by Obama's minions. Rush missed the chance to throw TANSTAAFL in her face.

I personally don't care if health care providers want to provide birth control with no out-of-pocket cost. I do object to the government mandating it--and then probably forbidding them to raise their rates. NOTHING is every really "free"-- someone has to pay the costs. When the government tells a company that they have to give away stuff without charging for it--that's f&^king robbery.

I am now at the point where I want to b&^tch slap any politician who promises "free" stuff to voters.

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