Monday, February 16, 2009

Too many assets are not our problem

I have heard intelligent people propose burning down the excess inventory of the housing stock as solutions to the current "problem."

I have heard intelligent people say things like, "There are too many gas stations."

The idea that we could raise our wealth and, thus, standard of living as a nation, by destroying valuable, viable, assets is insane!

The housing stock of a nation whose population is growing is a valuable asset!

It looks like there are too many gas stations only because Americans are driving less, due to job loss and income loss.

The problem is not the supply of things.

The problem is that we do not use all the capital and resources and assets that we have.

As Adam Smith once said, "The wealth of a nation is not only measured by its gold, but by the abundance of its consumables."

There is nothing wrong with our economy. We merely have productive assets and capital that sit idle. The problem is our unwillingness to use all means to engage that capital to produce the wealth that it is capable of producing.

That is a an ideological as well as a psychological constraint. Nothing more.

The only thing that a society can have too much of is:


You can never have too much of the good things. That is the very definition of wealth.


googleheim said...

RE: California

If they shut down California, then there could be a panic and real bank holidays as well.

What would the result of that be ?

googleheim said...

Why was only $50 billion of the current spending bill of $800 billion allotted and earmarked for stemming home owner foreclosures ?

If that is gauged correctly, then the so-called liars who got loans ( for some reason THE prime focus of Bizradio hosts Lucia, Walmsley, Cofall )are only 50/800 = 5/80 = less than 10% of the solution addressed to fix the problems.

Again, according to puritan ( and destructive ) free marketeers the market should have been able to clean the home loan problems.

It's the leverage chain comprised of the mortgage companies, banks, and the financial instruments leveraged 30:1.

googleheim said...

Frontline on PBS made their synopsis of the current meltdown.

Here is what they missed, and what we generally picked up here at MNE :

1. Frontline did not mention any of the forex swaps the Fed/Treasury used to make money while also stemming worldwide bank collapses.

2. Frontline did not mention anything about money sent to the UK and EU banking systems via the unknown money soldiering.

Frontline did however show how Geitner was against each allowance of bank failure starting with Bear Stearns & then Lehman while Paulson was for it since he warning Fuld all summer long to get a buyer, etc.

During the times of spheres of influence, Europe cut up China into their respective dens of opiated colonization.

It is not unlikely that China was re-expressing their historical oppression by taking advantage of the U$A.

China purposefully devalues it's Yuan so it can mega profit in the U$A with U$D while reinvesting said U$D in the U$A so that the golden goose continues to produce.

They are not truly saving in their own denomination, so the China-ification of America is part of the current financial fiascos.

googleheim said...

Of course the China-ification of the U$D/U$A is a function of the Kissinger / Bush I / Greenspan / Bush II paradigm ??

Do we really need China's help to buy our debt ?

Mike Norman said...

No, China does not "need" to buy our debt, you know that. China accumulates dollars as a consequence of exporting to the U.S. Those dollar reserves are then swapped for an interest bearing account known as a Treasury. The money to buy gov't securities and pay taxes comes from government spending. China's "funding" of the U.S. is a non sequitur.