I thought I had a basic understanding of ecomomics. Obviously, I do not. The experts seem to think that the US gov't can do unlimited "bailouts" of all kinds of businesses. In my simple mind, that will lead to partial or even full gov't ownership of the means of production and capital. So are we going to have five year plans like Lenin did? I hope it all works for the better, but I am a bit distrustful of all this intervention. Can the government actually forstall a deep recession or even depression? I just don't know the answer. <img src="/ubbthreads/images/graemlins/confused.gif" alt="" />
I don't think this has anything to do with economics anymore...I doubt you can isolate economics in today's society as a science due to the impact of the media...if they work out that selling newspapers with doom and gloom headlines brings in more profit than giving an up-beat positive message to society...then the Kensyian theory of kick starting an economy falls flat on it's face as the headlines of boom now and pay for it later kills off the ability to be able to afford to pay for it later....
and the opposite theory of Moneytarist economics also fails because reducing inflation so that there is not too much money chasing too few goods simply gets translated into "recession" and "hard times ahead" when in reality the bed rock of society is that people need to work to produce goods to make a living which in turn need to be bought to enable the salaries of the workers to be paid. Reduce the salaries by killing off workers to stream line the business according to demand and eventually there is no demand because eventually there is no-one who can buy the goods. Workers are also consumers and it is this catch 22 that the Banks and the Motor Companies are trading on.
It used to be said that if you owe the Bank £100,000 you worry and if you owe them £1,000,000 they worry....now it is a case of if the Banks owe £1 billion plus....the government worries....and in turn if they bail out the Banks the tax payers worry...
The irony is that the government are unavoidably tasked with making sure society does not break down and therefore these large employers who could dump a load of jobless people onto the market and effectively cause panic if they failed are waking up to the fact that if they have cocked up they cannot go wrong....because they cannot be seen to fail...so the government will step in.
The truth lies somewhere in the Government encouraging the Banks to loan money to people for houses who are on limited incomes so they are off the ladder of poverty and onto the ladder of success not realising that these people cannot afford to pay for these homes in the long run and when the problem arises the Banks are going back to the government and saying bail us out because we only did what you were encouraging us to do.
The Government taking this step of wanting more people to feel like they were successful was the key error and "winning" votes like this probably gives the reason for acting in this way.
If the government had stayed out of it all and the Banks opperated on tight fiscal lines these people would still be renting or living in cheap accommodation but would be dissatisfied with the government and their lot in life as a whole.....it is like saying that there will always be somebody who has to be poor in society for the system to work....but they in turn must also work...and yet no-one wants to be in that position. That is why your population is ever increasing through migrant workers who are the only people prepared to do low paying jobs....but even that is transitory because once these people become citizens they no longer want to put up with this.
So by the "back door" you end up in the same situation as a totalitarian government who effectively takes on board the responsibility of looking after the people....but in our capitalist system that can only be done by borrowing money and accounting for this expense.
However....where is this money coming from? The banks have'nt got it...they are broke...so all that is happening is that the government is effectively printing more of it....which is how African and other third world countries go under....
The answer lies in Moneytarist economics....too much money in a system causes rampant inflation and bankruptcy of the system....to avoid this the money has to come from existing stocks....this means much higher taxes....to get in the money "borrowed" or "underwritten" as loses....ultimately it is the same thing as poverty....it just gets whitewashed better....you are not poor....you are well off and therefore taxed....after tax is a different matter....
To avoid all of this some radical changes are needed.....the realities of what needs to be understood though are too harsh....at least for elected governments to contemplate saying them openly to the people...so both the US and the UK are stuck with the same problem....politicians who just want to be in office and who will say whatever and do whatever this takes....including borrowing to the hilt to enable them to have their short term popularity.
