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Post 0

Monday, December 8, 2008 - 4:47pmSanction this postReply
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So, the best case scenario is that the President-elect has been lying to everyone about what he intends to do in office?

Or screws things up badly enough that Republicans retake the House in 2010 and force Obama to act like Clinton in 1994?

Post 1

Monday, December 8, 2008 - 6:08pmSanction this postReply
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My recollection is that the president-elect has been saying not so much lies but banalities--"We must move forward," "There must be change," etc.  I am a bit more encouraged by the fact that no clear plan seems to be evident, that all the people Obama has asked to join his team are detailers and none has some grand vision.  That way it may be that the actual circumstances facing them all will dictate what they will be doing, based on old fashioned pragmatic considerations (so far as they are somewhat meaningful).

Post 2

Monday, December 8, 2008 - 7:09pmSanction this postReply
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Perhaps we can take some hope from the example of Thomas Sowell. He was a Marxist until finding out first hand how government actually works. Of course, Obama has already taken quite a bit more time than it took Dr. Sowell to come to that realization. I will continue to be hopeful until events prove otherwise.

Post 3

Monday, December 8, 2008 - 7:50pmSanction this postReply
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Here are some things that are not good news:
  • The precedent for intervening on a major scale, on an assumption it is what the government should do, has been firmly established and is finding no strong objections.
  • The pattern of trying one thing, not getting a cure, and then trying another will probably continue. That is really bad because it creates the uncertainty that is so harmful to markets.
  • If he follows FDR's pattern, the things they try to use make the economy better won't be the right things.


Post 4

Monday, December 8, 2008 - 8:26pmSanction this postReply
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The best thing about the political response to the crisis to date is the politician's inability to do anything, as no matter what they do, they know that if it doesn't work as planned, this time they will be blamed.

I think that Obama, the consumate politician, knows that image is the horse he is riding.  So, he's trying to mold the campaign image of an idealist and immaculate rhetoritician into something more durable, as in "presidential," and of course his key "progressive" constituency views FDR as one of their icons, and it would be totally out of character if Obama didn't allude to him.  And of course we do know that FDR and Wilson before him were total disasters, so let's hope that this is just image-making rhetoric. 

Today the news is that Obama is suggesting setting up some kind of artists' task force to go to the inner city and Apalacian schools and bestow artistic talent to the masses - almost like something right out of Atlas Shrugged, right?  But really not that big a deal.  This is a few tens of millions of bucks, and if a few programs like that keep the progressives busy and out of trouble, they might be worth it just on that account, so that the rest of us won't have to spend huge efforts defeating them on serious issues.  

The fact that he is bringing in a whole lot of people with fairly different philosophies is a little encouraging.  He's making a big show about listening to everyone and then doing what he thinks is right.  Who could argue with that?  So, let's take advantage whenever possible and feasible.  If it is possible to get some people at least strongly sympathetic to fundamental objectivist principle into that crew of advisors, it might make a difference, so long as they manage to not provide any substantial sanction to the wrong people - which, admittedly, might be a real trick.


Post 5

Monday, December 8, 2008 - 8:38pmSanction this postReply
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I've often heard WW2 got America out of the Great Depression but I rarely hear the why. Anyone have any thoughts on that? I'm not sure I see how a war can improve an economy? Was it the production of military equipment that America sold to other warring nations during WW2 that helped the economy?

Post 6

Monday, December 8, 2008 - 8:46pmSanction this postReply
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He's making a big show about listening to everyone and then doing what he thinks is right. Who could argue with that? So, let's take advantage whenever possible and feasible. If it is possible to get some people at least strongly sympathetic to fundamental objectivist principle into that crew of advisors, it might make a difference,

I would vastly prefer that he listen to everyone, and then do what IS right. Which would generally mean vetoing virtually everything proposed by Congress, and forcing them to do a veto override to get things enacted. Oh, and slashing the heck out of the executive branch payroll, so the budget deficit isn't quite as bad. Neither of which is happening, because Obama is a statist who believes government does good things, and so even more government can do even more good things, as his support for the bailouts proves.

It will come down to what bad ideas can muster 41+ votes for a filibuster in the Senate -- which isn't looking too good right now.

Post 7

Monday, December 8, 2008 - 8:51pmSanction this postReply
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My understanding on this (and I'm not an expert in this area at all), is that it was just the passage of time that brought us out of the depression. I understand that producing war goods was not helpful (broken window fallacy), but that when enough time went by, the economy completed its recovery - a recovery that would have occurred many years earlier if it hadn't been for the various interventions.

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Post 8

Monday, December 8, 2008 - 8:58pmSanction this postReply
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WWII was a time of economic hardship and rationing. I know people who suffered the effects of malnutrition. Women did enter the workforce in a large scale for the first time. And depression era makework and experimentaion largely stopped. At the end of the war, restrictions were lifted, some women continued working, and the depression was over and forgotten about as an excuse for marxist tampering with the economy.

The end of WWII ended the depression.

Post 9

Monday, December 8, 2008 - 9:00pmSanction this postReply
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John -- the economy didn't really roar back until after FDR was dead and some of his more idiotic programs got axed or scaled back or overturned by the Supreme Court. The war created the illusion of prosperity by giving lots of people jobs, but it was oftentimes jobs of the "digging a hole (oftentimes a grave) and filling it up" variety, not stuff that actually produced consumer goods and services.

It also helped the U.S.'s competitive position after the war ended that their major competitor's industry and infrastructure was in ruins.

Historians have got it all wrong, saying WWII pulled the U.S. out of the economic slump. It made a whole lot of people's lives harder and full of privation, however much the government's statistics might indicate otherwise, and diverted a lot of money that could have been used for private investment and thus jump-starting the economy into non-productive uses from the standpoint of improving standards of living. For example, NO cars AT ALL were built once the war effort ramped up shortly after Pearl Harbor, because those production lines were all producing war material. The government GDP figures show these production lines producing more, but they weren't churning out any civilian goods that improved people's standard of living. And another example -- those GDP figures include a lot of food and clothing and whatnot that were loaded onto troop transports that were then sunk by U-boats.

Ask people who lived during that era whether they had a better standard of living after WWII broke out -- for example, whether those ration coupons gave as much food, and as good quality food, as the free market gave them prior to the war's outbreak. Substituting a little margarine for a lot of butter is not an improvement. I'd say the net result was that on average the standard of living dropped, however much the GDP figures show otherwise.

Post 10

Monday, December 8, 2008 - 9:32pmSanction this postReply
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I believe the most favored explanation is that the war promoted a serious war effort in all lines of work, not of course by everyone but by the majority of the citizenry.  I think Jim Powell and Amity Shlaes both suggest something along these lines (but best to check them out personally).

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Post 11

Tuesday, December 9, 2008 - 6:40amSanction this postReply
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John Armaos asked: "I've often heard WW2 got America out of the Great Depression but I rarely hear the why. Anyone have any thoughts on that? I'm not sure I see how a war can improve an economy? Was it the production of military equipment that America sold to other warring nations during WW2 that helped the economy?"



Collectivists -- Rand called this type "muscle mystics" the people who worship brute force -- claim that war brings prosperity (at least to the survivors).  I just finished re-reading Brave New World (1932).  Huxley's prediction of television was easy.  It was advertised by RCA on the back of a Scientific American from 1929.  In Charlie Chaplain's Modern Times (1936), the boss contacts the foreman via television.  When people claim that World War II got us out of the Depression, they are not perceiving the hidden losses.

Bastiat's "Parable of the Broken Window" sums it up. 

The claim that war brings prosperity is false.  It fails in many ways, on many levels.  When you buy a car, it is to make your life more efficient, to allow more activity, or at least more pleasure; and you willingly go to the dealership (other seller; ultimately the manufacturer), bidding against other buyers to acquire one.  A tank is the opposite of that.  No one wants them because they don't do much for you.  In fact, their only purpose is to destroy the lives and property of others.  Tanks are a deadweight loss.  You buy a box of .30-06 to go deer hunting.  We can assume that good hunting feeds you.  Artillery shells and aerial bombs feed no one. 

The word "shoddy" comes directly from the fake wool sold to the Northern armies by dishonest businesses during the War Between the States.  No word describes the junk you so carelessly buy for your own business because you do not.  You spend your own money wisely, we hope.  Massive government programs launched in emergencies achieve the opposite.

What World War II did was make a lot of people very active -- the ones who lived.  If you do not have a Red Book (Guide to US Coins by Yeoman and Bressett), I'd be happy to send you one.  They are annuals and I have several recent ones around here.  Coinage production skyrocketed as the government created more and more fiat money.  Half dollars 1938 about 6 million, 1942 about 60 million.  Silver was about 50 cents an ounce and coined at $1.29 -- and that was "hard" money, not the fractional reserve stuff. 

From 1936 to 1938 unemployment caused by New Deal meddling rose from 3.5 millions to perhaps 9 million.  By 1942, the US Army had over 5 million men in uniform. So, a lot of unemployed men just disappeared.  They did no useful labor for five years.  Over 400,000 were killed.  Their places were taken by others who did useless, counterproductive, destructive work, being paid for by fiat infusions of cheap tokens.

At the end of the process, much of the civilized world was destroyed or in ruins, except the USA. So, relatively speaking, we were well off.  The Dow Jones Industrial Average did not return to its 1929 level until 1954.  Granted that the 1929 level was inflated by cheap money, as was the 1954 measure, the fact remains that World War II only prolonged the Depression. 

 In fact, if you look at it all objectively, in terms of gold as money and standard of living as personal conveniences, it might be argued that we never got out of the Depression, that we are, at best, at some marginal improvement over 1928.

(Funny thing -- or not so funny -- I got some of my numbers from The Bureau of Labor Statistics.  They said: "Between 1932 and the end of the decade, the Bureauís wage survey activity was primarily geared to the information needs of the new Federal agencies created by the New Deal; and the Bureau expanded, with a doubling of staff and budget between 1934 and 1941."  Do you think that putting people to work at the BLS got us out of the Great Depression?)

(Edited by Michael E. Marotta on 12/09, 6:59am)


Post 12

Tuesday, December 9, 2008 - 8:42amSanction this postReply
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Reply to post 5.

The most used indicators of the health of an economy are GDP (gross domestic product) or GNP (gross national product) and the unemployment rate. Government spending is a component of both GDP and GNP. It doesn't matter how the money is spent -- fighting a war, building roads, foreign aid, or other. There is a table about 60% down this page that shows GNP and unemployment rates for selected years 1929-40. For 1945 GNP was 212 ($ billion) and the unemployment rate was 1.9%, both substantial improvements over 1940.

(Edited by Merlin Jetton on 12/09, 8:42am)


Post 13

Tuesday, December 9, 2008 - 10:48amSanction this postReply
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Merlin, I am surprised that you did not take into account the percentage of GNP/GDP of the Federal Budget. Your data makes it look like war and other government spending are good for the economy.  The problem with amphetamines is that they lack protein or even carbohydrates are not themselves vitamins, so you get a lot of "stimulus" from them, but they come with a well-known cost ...  as does government spending.

MJ:"... and the unemployment rate was 1.9%, both substantial improvements over 1940."

Well, yeah, with 6 or 7 million American men engaged in a horrible potlatch of carnage...

  • GOVERNMENT SPENDING % GDP


http://www.truthandpolitics.org/outlays-per-gdp.php
from
"Table 3.1: outlays by superfunction and function: 1940--2009," in Office of Management and Budget, Historical Tables, Budget of the United States Government, Fiscal Year 2005 (2004), Washington, pp. 45--52

Image:USDebt.png
http://en.wikipedia.org/wiki/Image:USDebt.png
US Debt from 1940 to 2007. Red lines indicate the public debt and black lines indicate the gross debt, the difference being that the gross debt includes funds held by the government (i.e. the Social Security Trust Fund). The second chart shows debt as a percentage of U.S. GDP or dollar value of economic production per year. (Note: The two charts above do not include the recent rise of the public debt to above $10 trillion on September 30, 2008. ) Data from the FY 2009 U.S. Budget historical tables at whitehouse.gov/omb

(Edited by Michael E. Marotta on 12/09, 10:54am)


Post 14

Tuesday, December 9, 2008 - 10:59amSanction this postReply
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World War II was accompanied by wage and price controls in the presence of inflation, and it was this that eliminated unemployment by preventing unions from raising wage rates to keep pace with inflation. Without the wage and price controls, the unions would have perpetuated unemployment by keeping wages above what they would have been in a free labor market. They would have done this by forcibly preventing non-union workers from bidding down wages. What the wage controls did was take away the unions' power to keep wages above the equilibrium wage rate at which a free labor market would have set them. The same thing could have been accomplished in a free labor market that was free of union coercion.

So, it wasn't the war itself that eliminated the unemployment, but the economic controls -- the wage ceilings -- that accompanied it, by negating the coercive power of the labor unions to keep wage rates artificially high.

But the fact that World War II was accompanied by full employment does not mean that it was a time of economic prosperity. A large percentage of the population was made materially worse off, because production was diverted from civilian goods and services to war armaments.

Moreover, because civilian production was severely curtailed, housewives and other civilian personnel had to work longer and harder just to make ends meet. Contrary to popular opinion, World War II did not bring prosperity but impoverishment! (For a fuller discussion of this issue, see George Reisman's Capitalism, pp. 590-594)

- Bill



Post 15

Wednesday, December 10, 2008 - 7:19pmSanction this postReply
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Agreed.

I recall, as a kid in the Deep South, hearing FDR spoken of right next to Jesus H. Christ.  If you wanted a fight in smalltown Georgia, start badmouthing either of them.  I wonder if Obama will be remembered that way, and with as little reason?  Wilson got us into WWI to bail out his banker friends, who had bankrolled the Allies, which set the stage for WWII, which FDR sucked us into via his trade war on Japan, as part of his master plot to carve up the globe, or such the evidence in "Roosevelt's Road to Russia" makes a good case for.


Post 16

Wednesday, December 17, 2008 - 6:00pmSanction this postReply
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In Post #10 I try to explain why WW II helped end the depression but I fail to notice that this "ending" was artificial since the employment the war produced was mostly conscript labor and that doesn't count as real employment in capitalist economics.  In fact it took quite a while for the depression to really end, for non-conscript employment to catch up to its pre-depression level. 

Post 17

Saturday, December 20, 2008 - 6:26pmSanction this postReply
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Tibor,

You're right that WW2 was an artificial economy with the employment contrived via the draft (NOTE: 91% of those who served in the US military were draftees; that rush to enlist is pretty much a contrivance of Hollywood and the statists (is that redundant?)).

As noted recently, the level of investment didn't reach it's previous level (391 DJIA in 1929) until November of 1954, and it didn't reach that level ADJUSTED FOR INFLATION until 1962 when JFK dropped the top tax rate from 91% to 70%. From there it stayed pretty flat until Reagan cut it in half, to 35%, in 1981, and sorta deregulated several industries, the biggest boost coming from further cuts in Transportation (Interstate Trucking) and Communications (actually providing more competition, such as breaking up the Bell monopoly).

As few years later, when things shook out, we had the Internet boom (not the dot-coms, just the net) and Amazon and iCommerce which never could have happened under the old regimes.

Post 18

Sunday, December 21, 2008 - 6:07pmSanction this postReply
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It is true that the draft did to some extent contribute to the restoration of full employment during World War II, but it was not the primary factor responsible for it, because many of the men who were forced to serve were primary breadwinners, who were simply replaced by women and youths who entered the labor market in their stead. To that extent, there was no increase in the total number of jobs. The increase in employment that occurred during World War II was due primarily to the imposition of wage and price controls, which prevented unions from raising wage rates above the equilibrium level at which the free market would have set them in the absence of union coercion.

But, as I indicated in Post 14, the full employment should not be viewed as a sign of economic recovery, because despite being employed, there was very little that workers could buy with the money they earned. During the worst years of the depression, in which only 75% of the work force was employed, people could buy pretty much whatever they wanted, if they made enough money to afford it. However, during World War II, when there was full employment, no one could buy a new car, a new house or even a major new appliance, because the government forbad their production. Moreover, gasoline, rubber tires and consumables like meat, sugar, candy, chewing gum, etc. could be obtained only with great difficulty. And many of the items were of poor quality. The terms "prewar quality" and "wartime quality" in common parlance at the time signified the difference. (See Reisman's Capitalism for a fuller discussion, pp. 262 and 592-593)

The claim that World War II ended the Great Depression is either false or so misleading as to be false by implication.

- Bill





Post 19

Sunday, December 21, 2008 - 11:15pmSanction this postReply
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Good points Bill.

Remember folks, the Soviet Union had zero percent unemployment.

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