I started running when I was 15 and became a runner when I was 18. For me running is more than a sport-it is a core part of what I am. So, when I fell and tore my quadriceps tendon I had to redefine myself. On a less metaphysical level, I also had to find ways to preserve my sanity and my relatively low amount of body fat. Since running was out, I turned to a stationary bike (used with one leg) and a Bow Flex. I could do some of my martial arts (punching at least). Eventually I was able to move up to walking, then pool running, then real running.
Last week I managed to injure myself again, this time I tore up my calf. This was mainly due to my over-training and racing too much (every week). In my youth I would have just run through the injury; but I learned some sense and that the world would not end if I was unable to run. Fortunately I already knew what to do: I switched to my alternative fitness program and have been carefully testing the calf. I’ll be back to running soon, but it is good to know that I have a viable alternative for those times when I cannot run.
While the analogy is hardly perfect, the economy can be compared to this sort of injury. For quite some time the United States had been chugging along economically on manufacturing, the housing market, and the financial market. Then the economy was injured. These once strong areas were torn up and the economy was hobbled.
In some cases, people were able to switch careers and some businesses managed to do quite well either by making changes or merely by being lucky enough to be outside the injury area. Parts of the economy have recovered but parts of it are still injured. Recovery, as with any injury, will take time and requires effort. Also, if the analogy holds, the economy will need to change in response to the injury-at least if we want to avoid having it torn up again.
Obviously, there are some important dissimilarities between running and the economy. However, the basic ideas seem to apply: you have to be careful not to do things that are damaging rather than beneficial, you have to expect ups and downs, and when there is an injury, you need to attend to it and change things to reduce the likelihood of the problem occurring again.
In terms of the economy itself, the financial sector and big companies are doing well again. But, they are just part of the economy. Other aspects, such as employment, are still damaged. As far as healing these injuries, we have just had a change in our PT team: the Republicans are now on the team. Unfortunately, they seem to be advocating that we do just what we did when we were hurt. But, doing the same things over and over just produce the same result over an over.
I admit, it is a hard lesson to learn. In my own case, I should know better about when it is time to rest and recover, rather than just doing the same thing: running and racing a lot. Likewise, when it comes to the economy, we need to consider that doing the same thing over and over will not help the economy truly recover. Right now the economy might be like an injured athlete on pain killers: she feels good and is performing, but is actually still injured and hurting under the drugs (or stimulus money). The new coach is telling her that she just needs to keep doing what got her injured in the first place, but that hardly seems like good advice.
Without manufacturing the US economy will not recover. The housing and financial bubbles were both used to cover up the loses in manufacturing jobs from outsourcing and the service sector which specializes in creating low paying jobs won’t be able to create enough jobs either. The housing market will have difficulty recovering for years to come because the supply is getting larger due to foreclosure fueled by losing one’s job and if a large segment of the population can’t find work they won’t be buying a home any time soon either.
The financial sector didn’t recover as it was bailed out by the gov.
The only real solution is to bring back manufacturing by rising the tariffs on imports {especially from China} and tax the H-E- double L out of companies who outsource jobs overseas while lowering taxes for companies who provide for Americans here in the US of A.
Oh and don’t forget we need to begin preparing for the war with China that is coming…
Tariffs are only a band aid. The reason we are not able to compete in the world manufacturing arena is because we have made manufacturing too expensive to do. With taxes, regulations(federal/state/municipal), OSHA, EPA, DEP(state), FDC, lawyers, labor unions especially and insurance companies all taking their unfair share it is no wonder we cannot compete. It really is more simple than you make it.
I’m fine with regulations that keep kids out of factories and protect workers from hazards. But, I do agree that some regulations do impose needless costs and restraints. The challenge is to balance the legitimate need to protect citizens from harm and exploitation with the need to be competitive.
“Unfortunately, they seem to be advocating that we do just what we did when we were hurt.”
This assumes that the cause of the injury is known. What if the Democratic diagnosis of insufficient regulation is wrong and self serving? What if the real cause of the injury is excessive government intervention by, for example, guaranteeing the mortgages of people who can’t afford to buy houses?
Good point. The Democrats and Republicans seem to mainly be offering the same “solutions” (same for each, not between the two parties). Time for some new ideas, perhaps?
This is pretty good.
Now I don’t why the economy confuses me. The people running it aren’t making rational choices, which is very easy when it’s other people’s money…
Thanks TJ!
This actually made me angry…
It should.
I bet you everyone involved has bought gold just as Glenn Beck did. Yet they accused him of being a Chicken Little when he has said this would happen for a few years. Yes, that crazy Glenn Beck said this would happen.
This is also another good point. Monetizing debt by a nation makes it difficult for corporations to make money with inflation. The bottom line gets more difficult to make. Layoffs and less raises occur and voila!……. Corps look bad and the government gets off scott free because Libs are too stupid to see what is going on.
I think I have said inflation, crazy inflation like Carter years, is coming for a while on this site. The only thing stimulus money does is delay and/or make the situation worse. Then monetizing debt puts the ‘nitrous oxide button’ on the process.
Yeah, I saw this on Ace of Spades HQ. I kind of agreed with his take on it. I’m not much of a gold standard guy, but if the people in charge of the money spigots are going to be this stupid, it’s as bad of an idea as any. I’m not crazy about QE2, but I don’t think it, by itself, is the scenario Ron Paul and friends make it out to be. Kind of reminds me of Hayek’s reasoning on why is wasn’t a Republican. Basically, I don’t believe anyone really knows that much about what the right thing to do is, but I’m sure they will all adjust their stories in hindsight.
Cut costs and lower taxes WTP. It really is that simple.
TJ,
Is it just me or are these video more instructive than all commentary by economists, politicians, pundits and bureaucrats combined?
[youtube=http://www.youtube.com/watch?v=TTA4FdzzATg&fs=1&hl=en_US]
Here it is. I think….
Excellent!
“…chugging along economically on manufacturing, the housing market, and the financial market.”
And software development, biological advances, and engineering were nowhere to be seen. Not much productivity out of those areas, that’s for sure. Just a few insignificant blips.
“The only real solution is to bring back manufacturing by rising the tariffs on imports”
Yes, trade wars raise all ships.
Mike (and DaPoet) you have demonstrated time and again that you have no understanding about how economies work. Why continue pontificate based on what you read in Newsweek or the MSM?
I have always found it odd that while every other country protects it own industries by refusing to lower their own trade barriers so that US companies can’t compete fairly in those markets. That for the US to do the same by refusing to become the dumping ground for cheap imports that end up putting American’s out of work is somehow the beginning of a trade war.
WTP we already engaged in a trade war with China and India and because of short sighted conservatives such as yourself we are losing that war.
As long as US corp.’s continue to out source jobs overseas the CEO’s running them shouldn’t act surprised when those American’s put out of work due to their short sighted policies don’t have the money to purchase their products.
Do you understand the difference between money and wealth? Do you understand where wealth comes from? Do you understand that a job does not have a nationality? There are no American jobs. There is just work that someone wants done. It doesn’t matter who or what does this work. If the labor costs too much relative to the end product, the production of goods will either move elsewhere, possibly replace the human labor with machines, or cease to be economically practical, and thus eventually disappear. Jobs do not exist for the benefit of the employed, they exist for the benefit of the employer as a means of providing goods and services to the employer’s customers. See Detroit, or what’s left of it.
WTP…
Simply put our economy relies on those who have money to spend…What part of no job = no money to spend do you not understand…
Simply put, again, it is you who does not understand fundamental economics. You must produce before you can consume.
And, BTW this is not chicken/egg, it’s horse/cart.
http://pajamasmedia.com/blog/smackdown-in-seoul-obama-gets-an-f-in-south-korea/2/
It doesn’t take a Nostradamus to figure out that another $600 billion in circulation will decrease the value of the greenback in global markets. So it wasn’t hard for the Chinese in Seoul to tar the Obama administration, deflecting attention from their predatory currency policies. Forget that there would be no need for QE2 if the Chinese had not rigged the value of the renminbi in the first place. The U.S. got blamed in Seoul — and China largely did not. Obama handed the Chinese a weapon, and they turned around and drove it right through him.
President Obama tried to deflect criticism by saying that the Fed acts independently of the White House. That’s the theory, but the reality is that one phone call — “Mr. Bernanke, please hold off QE2 for a little while so that I can defend the world’s system of international commerce from Beijing’s predatory trade policies” — would have avoided the second debacle in Seoul.
And what a debacle it is. Now, the global currency war that had started in the months before the G-20 will surely injure all economies. In recent weeks, 18 nations — 19 if you include the U.S. — were depressing the values of their currencies. If you’re looking for a historical parallel, think about the tariff war of the 1930s that deepened the Great Depression.
And we all know what happened after that.
“Unfortunately, they seem to be advocating that we do just what we did when we were hurt. But, doing the same things over and over just produce the same result over an over.”
Please be specific here. I’m really not sure exactly what practices ruined the economy directly, that had not been in place when the economy was doing quite well, as measured over the last 30 years. That is until we find what the root cause is in the 70s: People given mortgages that were well beyond their means because Carter forced banks to do so. It seems to me that there is a natural ebb and flow, and that leaving it alone works much better than what was done.
Actually, your anology, Mike, if we continue along that line, shows that you should not take action while you’re injured and that you should let nature take its course.
You want us to pay no attention to the man behind the curtain, and we keep waiting for things to get better, and you keep blaming Republicans. The Democrats give handing us a bowl of dog crap and insisting its caviar.
Three things have worked everytime, but Democrats reflexively avoid them at all costs, until threatened with the boot:
1) Stability: Stop talking about change, you’re hurting the economy
2) Lower taxes, or keep them low
3) minimal regulation
Magnus,
I think that it is very important that when we say “lower taxes” and “minimal regulation” we need to be explaining why this works. As is apparent here, not to mention damn near everywhere, including in some so-called conservative and even tea-party domains, the understanding of why these two items are important is not understood.
1) Government is a poor provider of services because it has no natural restrictions on bringing in more revenue via raising taxes and thus has no incentive to control costs. Businesses must control costs relative to revenue since they have no power to force their customers to pay more if the customers do not want to nor the power to keep competitors from taking away their customers. Of course monopoly situations do impact the latter, but monopolies still have no power to force customers to give them money.
2) Excessive regulation leads effectively to government running the business. See 1.
Unfortunately we’re in such a big hole that while lower taxes is definitely a good thing, and it generally does increase revenue in most situations, it may not be a viable solution right now. Though I would emphasize that taxes should not be raised, if at all, until spending is well under control.
Yes, I agree that we may have to raise taxes, but not until jobs are created.
I’d also comment on your statement that government is a poor provider of services. You’re correct here. Note that because there is little real restriction on government spending, the brakes that are applied to the government really amount to additional layers of bureaucracy, which can have the effect of increasing inefficiency and slowing timely service.
For instance, in the Army, there is paper work for everything. This is an attempt to mitigate waste and fraud, But it is a massive strain on the individual, though a needed evil for the whole Army.
My complaints about the limits of government services have always been based on the very real logistical limits of centralized distribution of anything, let alone multiple resources. It can never be as efficient as a company that provides a single service to make money. The Soviets were the classic example of this. Entire portions of the territory lacked sufficient food etc, while other parts were ok. One of the “evils” of the communist system was that everything was centrally distributed. And the Soviet bureaucracy was gargantuan, perhaps even dwarfing our own. It needed to be, but they reached the limits of command economy. Those who refuse to learn form this place ideas in higher regard than human lives.
“Unfortunately we’re in such a big hole that while lower taxes is definitely a good thing, and it generally does increase revenue in most situations, it may not be a viable solution right now. Though I would emphasize that taxes should not be raised, if at all, until spending is well under control.”
Don’t even bring up taxes until spending is down! Seriously dude. Increased taxes ONLY are effective in prosperous times. This is whre Kenyesian Economists get their self fulfilling stats from. We do not need any death spirals here.
Taking no action while injured just delays healing. The same might apply to the economy.
Or you might just get off this healing metaphor before you dig a bigger hole.
Never! 🙂
“Taking no action while injured just delays healing.”
That just contradicted your whole blog post….you said that you now cease running when you injure yourself.
How about we stop spending when we’re out of money?
Oh no, that’s Glenn Beck radicalism again….
I did say I stopped running. But, I also said that I take action. For example, I switch to biking and water running. The only times I did not take any action were the two days after my quadriceps tendon repair. On the 3rd day I was back on the bike, peddling with that one leg. Likewise, that could be how to get the economy going: working with what we have until it is repaired.
I’ve consistently been against deficit spending. I agree-we need to stop borrowing money and spending what we do not have.
Hmmmmm, looks like we are dragging others with us. Luckily it looks as if other ‘Tea-Party’ like parties are out there.