http://www.forbes.com/sites/realspin/2013/01/30/value-destroyers-like-bernanke-fancy-themselves-magician-economists/

Not understanding this key concept – the difference between wealth and ‘money’ or currency – is basically why you have Pelosi saying something like increasing unemployment payments stimulates the economy.

And if you appreciate its implications then you can understand why GDP numbers including government spending are very misleading at best.

Government spending cannot replace private sector deployment of resources to create value. And therefore when the Obama stimulus package was announced back in 09 it was an understanding of this Say’s Law that allowed people to say with certainty that it not only wouldn’t work (to stimulate the economy as in reigniting real growth) but it couldn’t work – and that’s before considering the political effects working to ensure the funds wouldn’t be deployed effectively.

Heckuva job on that Jobs Council, Mr. Obama!

by John HaywardJan 31, 2013 8:18 AM PT1

Farewell, sweet Jobs Council, we hardly knew ye. And neither did the President who formed you, because he rarely bothered to pretend he was interested in anything you had to say.

It seems like only yesterday the White House was promising that its Council on Jobs and Competitiveness would remain super important for years to come, what with all the wonderful “listening and action events” they were going to hold. Actually, it wasn’t yesterday, it was January 18.

These Obama economic contractions are really agonizing. One little quarter of negative growth, and the Jobs Council is instantly kaput. I sure hope the contractions lead to the birth of something wonderful!

I agree with everything you said.

Everyone else,
I am really sorry, Jay Carey was right it was a decrease in military spending; even though, the change in spending had nothing to do with the sequester and everything to do with the election. They moved all the sales to 3rd Quarter to make the 3rd Quarter look good, which is pretty standard practice in financial statement fraud:

http://globaleconomicanalysis.blogspot.com/2013/01/government-expenditures-plus-transfer.html

Banks can’t lend profitably because of new regulation and more importantly due to the repression (government holds short term rates below real inflation rates depressing margins between deposit and loan rates). Another important factor is the pressure to increase capital even as many major banks are under intense pressure to buy more sovereign debt even though the risks (interest rate and credit) are far beyond acceptable. They have to for political reasons – examples Greece, Italy, Spain, Portugal, France……

[i]As I see it, the situation is that we must balance our need to cut government spending and shrink the deficit with our need to stimulate growth, and because it’s a fact in recent years that a lot of our economy is dependent on government spending, these become contradictory impulses.[/i]

IMO these are contradictory impulses only within Keynesian assumptions, which most of us have absorbed – they’re embedded in all the media.

Government spending cannot substitute for private spending, because spending in and of itself does not create value/wealth. Nor does all private spending. It just has a better chance of doing so.

When there is a liquidity crisis government can play a useful role in stepping in and helping to prevent total paralysis, but more often than not politics quickly takes over and government camel refuses to leave the tent.

So there is no contradiction. The surest and quickest way to recovery would be to not interfere with prices resetting (e.g. houses, minimum wages), encouraging debt deleveraging, and to free up resources by radically cutting government spending (government employees, transfer payments) so that private patterns of value creation can – over time – re-establish themselves using those resources.

Here’s a link to a very short column contrasting Latvia, where it was done right, and Greece, where it was not:
http://www.bloomberg.com/news/2013-01-07/why-austerity-works-and-fiscal-stimulus-doesn-t.html

They also were forced by circumstances to take the hard but ultimately more successful road to recovery in Iceland:
http://www.zerohedge.com/news/2012-12-08/guest-post-icelandic-success-story

The problem is obvious. In the short run it is political suicide to implement such policies unless there is no other option.

The problem is that people, media, politicians, academics, etc. only consider one side of the equation, so people are better off when you give them food stamps and can buy good to increase aggregate, i.e. total, demand. However, they will not tell you that the government is crowding out private investment. Personal example, my father’s tool and die shop was forced into bankrupcy when the bank canceled their revolving line of credit so that the bank could meet their capital requirements instead of foreclosing on their mortgages to write down their bad loans. The bank redirected the money to government bonds since government bonds improve the banks capital requirements, so money is siphoned off the private sector and directed toward the public section. This is how the banking crisis hit main street.

Also, the a lot of government expenditures are on economic luxury items, i.e. social safety net, which has increased dramatically, i.e. unemployment, food stamp, disability for depression and carpel tunnel, earned income tax credit, SCHIP, medicaid, etc. This has a dual effect of reallocating resources and decreasing the amount of people who are contributing to all of our well being.

Politically, a lot of the negative affects of policies implemented in the prior four years were postponed until after the election, so the banking regulation, which consolidates power to the biggest banks, and ACA will now be felt.

As far as the middle class’s real income has been erroded since 1980 by inflation in medical costs, energy, taxes both local and social security etc. There are monertists who believe that inflation improves the economy since real growth improves with inflation plus growth improves. The problem is that real growth is in both equations and there is correlation not causation. Inflation does help Wall Street, the politicians and probably the media, since the media can increase prices and wages. Wall Street gets paid when prices increase whether that is because of real growth or because of inflation since they make a commission on the increase in the portfolio. Not to mention that the CPI is not entirely accurate. I just recently learned that it doesn’t include house prices. It includes rental prices, who knew.

As far as what we can do, there will be another recession because there are always new recessions. When the Fed stops printing money or maybe even slows down printing the bond market is going to drop like a rock. I think there will be pressure to keep it going till after the next election, but there might not be time, just like Bush couldn’t hold it off. However, we are likely to see an improving stock market for a while.

Finally, outside of the negative effects of the government actions against business, nobody really knows exactly why the GDP figures are going to fluctuate every three months. It is very likely that the expectations of higher taxes, the realization that ACA will be implemented, and people having less money because the economy stinks is the reason for the negative GDP. Carney is pure propaganda. The president in my opinion is boss Tweed from Tamney Hall. Oh, China is slowing down, the EU will eventually break up and is in bad shape. Japan is in recession, which is really the model for where the economy is going, big stimulous and easy money. I’m trying to stay diversified, and I know Wall Street is going to be Bullish until it thinks there will be a Bear and everyone will rush to the exits.

There will be more surprises for the media.

Hope this helps. (Just as background, I studied economics at Columbia University under a Nobel Prize winning economist and I’ve passed all the exams to be a Charter Financial Analyst.)

so much i can comment on in that…
but you DO understand economics, even a capuchin monkey understands capitalism and practices is in some form as a social species. what, as i said before, you dont understand is the knowing of something with the will to tame, control, and wrest it to your will. they know how to wrest it, but not tame and control it, as such behavior is antithetical to life.

once a government moves to the realm of control, and manipulation in any sphere, then you have the message for public consumption, and the real reason, which is often not public. (and not to infrequently is known by the action not making sense in terms of other things, which is why everything is always looked at publicly in isolation)

so when this happens, the time base of the news changes. do they report the facts, or do they report what they want the facts to be in the future coming into the now then the past?

they are only compatible in a steady state. but when the facts are bad, and their purpose is to control not report, then the two are not going to match.

this is true of any steering system, the system has to act in the direction of where it wants to go, before the system goes that way.

so you turn the wheel on a car, to move the linkages, which then move the wheels and steer the car. a steering system is “tight”. that is, the linkages are so tight that there is no real separation to that chain of events, they are as one event. but let those linkages or the system be loose, and the system will lag. there are such systems too, and they are common. just ask the captain of the exxon valdez… or any captain of a humongous ship. it can take as long as a half hour to see the results of a move made on the bridge.

so if the news is a reporting system, which way does the lag go? it certainly doesnt report fact by guess to be first, and or to divide the population by dividing up its knowing which divides up its reality.

X people live the reality of the false message
Y people live the reality of the valid message
the two end up in opposition

now multiply that out by 100 or 200 ideas with each set of X and Y made up of a different mix of groups in the society. now how together are they?

anyway…

In the past the administration of the civil law, except through the agency of the courts, was of small importance, because the law was supposed merely to recognize and interpret customary ways of economic and social behavior. But when the chief object of legislation is to carry into effect an experimental social program, the administration of the law has a different and more responsible function. Legislation is being used as a means of modifying social behavior, not social behavior as an excuse for formulating legislation. The legislator has become an innovator. He is dealing with an extremely complex and elusive material, and it is most difficult for him to define in advance how the objects of the law are best to be realized. The difficulty of the job has not prevented him from very frequently trying it out ; but he has learned something from his failures. He is learning that an extremely detailed and comprehensive statute is usually ineffective, because of the impossibility of anticipating all the conditions which affect the operation of a specific rule. Social legislation is coming more and more to demand results rather than prescribe means. Statutes are being passed in the interest of the safety of employees in factories, which merely define safety as such freedom from danger to life and health as the nature of the employment will reasonably permit. The duty of drawing up a set of regulations which will provide sufficient safeguards for the life and health of the operatives is intrusted to a commission. All that the legislature does is to declare that industrial employment shall be reasonably safeguarded. The commission makes a comprehensive investigation of the conditions upon which the health and safety of the industrial employees depend and it issues orders based on the result of its investigations. These orders can be attacked in the courts, but in adjudicating the case the courts have to accept as final the commission’s record of the facts.

Progressive Democracy Herbert Croly
you can read about croly here, a leader of the progressive movement and very influential
http://en.wikipedia.org/wiki/Herbert_Croly

here is what wiki says about him

Croley was one of the founders of Modern liberalism in the United States, especially through his books, essays, and highly influential magazine founded in 1914, The New Republic. In his 1914 book Progressive Democracy, Croly rejected the thesis that the liberal tradition in the United States was inhospitable to anticapitalist alternatives.

He drew from the American past a history of resistance to capitalist wage relations that was fundamentally liberal, and he reclaimed an idea that Progressives had allowed to lapse – that working for wages was a lesser form of liberty.

you can read the book here
http://books.google.com/books?id=QBUpAAAAYAAJ&printsec=frontcover&source=gbs_ge_summary_r&cad=0#v=onepage&q&f=false

it was written in 1914…

A long time ago, i said read what the leaders of these movements write, as the people who love this stuff, and run for office, read it, know it, discuss it, and are often inspired by it, and many other stuff.

to read this old stuff is to fall off your chair repeatedly till you read enough, then the modern stuff makes you fall off the chair for the lack of its knowledge of this past, which is its own…

For those who care to look their propaganda is blatant lies. http://www.fms.treas.gov/mts/mts.pdf