The Wrath of Keynes, part 2

A writer in the Las Vegas Review Journal notes the odd resurgence of Keynesian economics.  The key paragraphs:

In brief, Keynesianism -- as set forth by Keynes 73 years ago in his "General Theory of Employment, Interest and Money" -- holds that the twin answers to unemployment and economic downturns are massive government deficit spending and "cheap money" -- the artificial driving down of interest rates to "free up more credit."

This is relevant because this precisely describes the massive and inherently inflationary market interventions that have been brewed up in Washington since the middle of last year, sponsored as enthusiastically by Republicrats as Demopublicans -- despite the fact that Mr. Hazlitt, way back in 1959, demonstrated not only that these Keynesian remedies did not work, but that they often had precisely the opposite effect of that intended!

I guess great minds think alike. 

Are They Stupid, or Do They Think We're Stupid?

Talking about the Stimulus package today, the President said:

... he mocked critics who say the bill has too much spending. "What do you think stimulus is?" an irritated Obama told a gathering of House Democrats. "That's the point."

Am I to understand that the President of the United States thinks the point of a Stimulus package is just to spend a lot of money, no matter what the money is spent on?   Is he really this dumb, or does he just think the rest of us are?

The point of a Stimulus package is to spend that money somewhere that will get the Economy moving in such a way that it will keep moving after the Stimulus money is gone.

Let me give you an analogy.   (Fair warning:  Mrs S says my analogies are usually pretty bad)

Let's say you have an old buddy who's out of work, and living in your spare bedroom, eating your food, watching your TV, etc. .

• STIMULUS:   You loan him $500, which he uses to get his car fixed, which allows him to get a job, eventually move out, and pay you back.

• NOT STIMULUS: You loan him $500, which he uses to buy Cheatos and p0rn.  Next month he's just as broke, and wants more money from you.

Most of what's in the 'Stimulus' bill is not stimulus.  It's Cheatos and p0rn.

The Wrath of Keynes

When discussing the "Stimulus package",  there's been a lot of talk about economist John Maynard Keynes.

Now, I'm not an Economist, not even an amateur one.  I had one class in macro-ec in High School, one in college, and since then, I probably read one book on economics every couple of years.    But I was under the impression that noone in Economics took Keynes seriously anymore.  His theories were thought of as quaint, ancient, and discarded.  It was the Ptolemaic system of economics, where the government was the center of the economic universe.    

And it was an uncontroversial view that his policies actually made the Great Depression worse.

All of a sudden politicians and the media are pitching these policies as if this was a cutting-edge theory, with no mention of the issue that nobody has taken him seriously for 50 years.  WTF?

It just makes me want to scream "Keeeeeeyyyyyyynnnes!"

What if Cars were made like PCs?

The failure of the big 3 automakers has kind of dropped off the radar lately, what with the government handing out billion dollar bailouts right and left.   But I want to make my proposal for how to fix our ailing auto industry.

There's an old viral email joke about "What if your car was made like your PC?".    But I want to discuss this as a real possibility.  

Currently, when you buy a Chrysler, you get a Chrysler engine, a Chrysler chassis, a Chrysler transmission, a Chrysler cabin, and a Chrysler body and styling.   This is at best a mixed blessing.  (e.g. we love our Chrysler 300C hemi engine, but despise other aspects of the car)

But when you a  buy a PC (e.g. a DELL), you don't a computer designed from the ground up by DELL.   You get:

• a CPU (designed by Intel or AMD)
  
• a motherboard designed for the CPU, but manufactured by a 3rd party (e.g. ASUS)
• a GPU (designed by ATI or NVidia)
  
• a graphics card, designed for the GPU, but manufactured by a 3rd party (e.g. BFG)
  
• a power supply, manufactured by a 3rd party
• memory chips, manufactured by a 3rd party
• lots of off-the-shelf connectors and components

The only thing you get designed by DELL is the case, keyboard, mouse, and manuals.   The biggest service a PC manufacturer does is to select all the above components for you, and make sure they all work together.

What if cars were made this way?   As a thought experiment, imagine splitting the automakers up into smaller companies, so that there are several companies that make engines, several who make chassis, several who make transimssions, etc.   And then there are companies which function as Styling houses,  which design a final product (body, interior) from the available parts, and assemble the whole thing.

I think such a division would produce better, cheaper cars than the current situation.

Update: I guess I'm not the first person to come up with this idea.   A more in-depth exploration of this idea can be found here.

Our Economic Crisis, explained

Our current economic crisis in a nutshell:  Too much debt, not enough assets.

You can't fix this problem by spending more.   Any additional bailouts, stimulus packages, etc. will make the problem worse, not better.

Could someone please explain this to the government?