New Era Of Accountability?

Hey Peachtree City, how do you spell R-E-L-I-E-F, well I’m not actually certain at this point but may I at least suggest that you exercise some time away from the gloom and doom of CNN and the other local networks.  How many times do we have to be beaten over the head with what is clearly evident….the economy sucks right now!  Ok, everyone inhale….now exhale.  There you go!  See even the air seems fresher because there may be a few less ions of carbon due to fewer cars and trucks on the the road.  See, I guess you are feeling a little bit better already. 

Now, let look at the recent turn of events.  The Obama team made it pretty clear the other day that company CEO’s benefiting from TARP money (our tax dollars) should cap their salaries at a mere $500,000!  Wow, what backlash followed from Wall Street after that announcement.  “Shameful” was the word President Obama used for the billions in bonuses paid.  Can you believe that these guys actually had the cohones to even complain about the caps!  Now had you or I drove the business we were running into the ground I can assure you that we would not even be around to see any further compensation…..period!   Yes, we are captive audiences as it seems like the whole global economic train is coming to a shocking and sudden halt! 

So what’s really going on!  We are watching as the Bernie Madoff’s are slapped on the hand while companies like Panasonic, Macy’s, Sprint, GM, Time-Warner and others are now fighting for survival and laying off folks by the thousands.  Even Delta now the world’s largest airlines after its merger with Northwest reported losses in 2008 of $1.4 billion.  And..yes the war on terror.  Oops, President Obama has officially expelled that terminology….the Iraq war has cost $2.4 trillion over the period 2001 - 2009 according to Homeland Security Research.  Of course, this does not include the hundreds of thousands of our brave soldiers that will now be dependant on Uncle Sam to assist them with war-related disabilities! 

So where am I going with this you say?  Also, what is the correlation to the current market?  Okay folks here it is……it comes right back to accountability!  But who should we hold accountable.  Heck…who can we even trust anymore?  Is President Obama’s $900 Billion dollar stimulus package the defibrillator to jump start the economy again?  Well according to a well know twentieth-century British economist John Maynard Keynes….YES IT CAN!  His theory which challenged the modern day orthodoxy stated that a slump (okay.. a depression) is simply a short-run problem resulting from a lack of demand.  Further, if the private sector was not prepared to spend to boost demand, then the government should instead by running budget deficits.  When times were good again and the private sector started spending, the government could cut back spending and pay off the debts they accumulated in the downturn.  His idea was to balance your budget in the medium term but not in the short-term. 

Whew…I hear the lot of you classical economist already!  Where is the equilibrium factor!  Further, I know folks we are around $6 trillion dollars of debt that need to be paid or eliminated some kind of way.  However, one of Keynes famous quotes pretty much make a poignant statement about the focus on short range policies, “In the long run we are all dead!.”  Amen brother if we don’t find something that works soon! 

Okay so maybe you did or didn’t survive economics (or even took Econ) related to Keynesian economics but these policies basically called counter-cyclical demand management policies specifically state that when economic activity is depressed the government should spend more and when the economy is booming the government should cut costs. Before you shoot the messenger, I’m not saying whether this is sound strategy or even it it makes sense!  Just presenting another side outside of conventional thinking.  Continuing on….Keynes argued that the solution to a economy in depression was to reduce interest rates and for the government to invest in the infrastructure which is part of the present day Obama package.  Keynes stated that the injection of income results in more spending in the general economy which in turns stimulates more production and investing.  These activities ends up basically “stimulating,” a chain of events who’s total increase in economic activity is a multiple of the original investment.  That my friend is what is know as a money multiplier.  More on the money multiplier at another time. 

So what an I concluding?  Maybe nothing….maybe just planting the seed for thought!  However what I
am saying is that in this time of financial and credit confusion do your homework.  Additionally, maybe its time for us to study other options to these problems and issues…..Clearly the same thinking that got us into this mess cannot get us out!  We all have been affected in some shape or form.  So do your homework but  at least be open-minded to other strategies and ideas that may defy traditional thinking. 

By the way, this crisis has also presented us with a great opportunity to talk to each other more and help out when and where we can.  I hope you are taking that opportunity to do something good in your neighborhood!   Now that’s change we can all be a part of!!!