Are we following into "Japan" like depression??!

1/2/09

The following article or phrase I repost from other blogger. I have no credit of it. However, it is very correct fact information I want each of you to know. After reading those, whether you agree or not, I strongly believing his analysis.

Bernanke Correctly Judged Nothing

Bernanke considers himself an expert on the great depression and on the Japanese deflation as well. Trying to act quickly, Bernanke has come out blazing with 8 new policy tools, including the TALF, TARP, PDCF, ABCPMMMF, CPFF, TAF, and MMIFF to go on top of Open Market Operations, Discount Rate setting, and setting reserve requirements.

The result so far is deflation. The result in Japan was deflation.

There is only one way to defeat deflation and that is to not let the conditions that foster it to build up in the first place. What caused this deflationary bust is the credit boom that preceded it. What caused the great depression was the credit boom that preceded it. Hoover's policies and FDR's policies made the great depression worse.

Bernanke's policies are going to make this depression worse. Yes, I used the word depression. It may not be as big as the great depression, but the word "recession" does not do justice to what we are in and what is coming down the pike.

Obama's Bridge To Nowhere

John Maynard Keynes died in 1946, but to hear President elect Obama speak you would think he was going to be heading the treasury department. What does Obama propose to do when he takes office in January? Well other than raise taxes, and increase spending he believes in public works. That’s right, that’s his big plan. The same plan that didn’t help us during the Great Depression, or didn’t help the Japanese during their recession in the 1990’s, and they basically paved over everything they could.

When governments decide to follow the Keynesian philosophy they have to get the money for it, and there is only one place where that money can come from. The taxpayers will be paying the bill for all these new, and mostly useless, projects. This means government becomes bigger and has more control over the economy, it becomes more powerful, and governments don’t like to give up power or cut the fat out. Government is already too big, the expansion that Obama wants is practically Orwellian.

Aside from the government getting bigger and more intrusive there is the simple fact that Keynesian economics don’t work. When the stock market crashed in 1929 President Hoover, and later President Roosevelt decided that public works were the way to go. We built the Hoover Dam, put thousands of men to work on construction projects. Yet none of that prevented an even bigger stock market crash in 1936, and unemployment was never lower than 14%, that’s hardly an economic success story.

In the 1990’s the Japanese economy, suffering from a downturn fueled by deflation, the Japanese government desperate to keep unemployment low and to stimulate economic activity went on a building binge. They built bridges to nowhere that would have made Ted Stevens ashamed. All the building didn’t get the Japanese economy moving up until deflation ended, consumers started spending, and business became more productive.

Obama’s economic plan won’t accomplish any real economic growth. The only engine for economic growth is the free market. The Keynesian belief won’t add anything to the economy, but it will add to the debt, the tax burden, and increase the federal leviathan. If Obama goes through with his economic plans we can expect the economy to go from shaky to catastrophic. John Maynard Keynes is dead, it’s time his wrong headed economic philosophy join him.

Inquiring minds might be wondering why people, including some very prominent and otherwise highly intelligent professors believe in clearly discredited Keynesian Claptrap. The answer has to do with belief in something for nothing.

"Something For Nothing" Ideas Become Policy

1) Those with money control policies in Congress. In return for sponsoring policies that make no economic sense, corporations pour massive amounts of money into campaign coffers of those who will support whatever legislation the corporations want. The first thing corporations want is government sponsorship at taxpayer expense. The last thing corporations want is a free market.

2) Inflation (expansion of money and credit) is a stealth tax (theft), demolishing the middle class over time. Inflation allows government to collect more every year in property taxes, sales taxes, income taxes, etc., typically to pay for war mongering and social redistribution activities sponsored by the corporations that benefit from war mongering and social redistribution activities. The expansion of credit scheme "works" until it all blows up in deflationary bust every few generations.

3) Academia is a breeding ground for socialists. I discussed this aspect at length in ..... Academia likes to promote socialism and blame the free market for failures caused by excessive regulation.

4) People want to believe someone is in control. Even though it is crystal clear that the Fed is a huge part or the problem, people want to believe the Fed is in control. It is very discomforting to think the Fed has no idea what it is doing, so people simply refuse to accept the fact that the Fed has no idea what it is doing.

5) People want to trust the experts even though the experts screw them time and time again. The same thing exists in the stock market. People want to believe stocks will go up so they believe anyone who tells them stocks will go up.

6) There is an overwhelming propensity by everyone to seek something for nothing. People will listen to and vote for anyone promising something for nothing. Economic professors and members of Congress are both particularly adept at promoting something for nothing.

End of part of his analysis. Good luck on your investment in new year. If need help, please contact me.