The Daily Walk of Shame: Keynesians

This Motley Fool series examines things that just aren't right in the world of finance and investing. Here's what's got us riled today. If something's bugging you, too -- and we suspect it is -- go ahead and unload in the comments section below.

Today's subject: Many Keynesian economists are softpedaling the idea that our gigantic -- and growing -- deficit and public debt are highly dangerous. Shame on them, and on anyone who believes there's anything sustainable about the faux economic "growth" we're now seeing. One of economist John Maynard Keynes' most famous analogies may have involved digging holes, but I think it's high time we put down the shovel.

Why you should be indignant: Keynes, a fan of government intervention during down cycles, said:

'To dig holes in the ground,' paid for out of savings, will increase, not only employment, but the real national dividend of useful goods and services. It is not reasonable, however, that a sensible community should be content to remain dependent on such fortuitous and often wasteful mitigations when once we understand the influences upon which effective demand depends.

I've got two big problems with that quote. First, what savings? (In case you've forgotten, the National Debt Clock ran out of numbers on its display.) Second, even Keynes acknowledged the risks of letting random hole-digging go on for too long, with his "sensible community" comment.

That awareness seems entirely missing from today's Keynesian advocates. They happily call for more and more government spending. (More stimulus!) But do they care how that money's deployed, or to what end?

The recent data concerning how many jobs stimulus spending actually created has been rife with inaccuracies and errors. Most outrageously, it recently came to light that some Recovery Act funds went to Congressional districts that don't exist. Other official economic projections have turned out to be flat wrong.

Meanwhile, spending on arguably productive goals like infrastructure seems to be missing thus far. Dig some holes and fill 'em in, folks! (And get future generations to foot the bill!)

What now: The New York Times recently pointed out that the U.S. government is up against a "wave of debt payments" as national debt tops $12 trillion. The government has been paying low interest on that debt thus far. But as many people learned during the housing bubble, payments can skyrocket when interest rates balloon. In response, Nobel-winning, Keynesian economist and New York Times columnist Paul Krugman shrugged about "deficit hysteria."

Why shouldn't we be hysterical?

Our government's fiscal policies were already atrocious before we even rang in 2009. Last year's documentary I.O.U.S.A., featuring well-known folks like Alan Greenspan, Paul Volcker, Ron Paul, and Berkshire Hathaway's (NYSE: BRK-A) (NYSE: BRK-B) Warren Buffett, should have been a wake-up call. It pointed to an unsustainable fiscal situation well before the official "economic crisis" hit.

Obviously, that film was also made before we started throwing money at failing companies like Bank of America (NYSE: BAC  ) , Citigroup (NYSE: C  ) , AIG (NYSE: AIG  ) , and General Motors.

Long ago, Richard Nixon said, "We're all Keynesians now." His prediction seems truer than ever today. Eager opponents of free-market strategies fail to point out that government interference creates massive economic distortions, ample irrationality and inefficiency in federal spending, and the moral hazard inherent in bailouts that reward and incentivize failure.

And while President Obama's policies have led critics to howl about some "new" Keynesian strain in our economic mind-set, the Bush Administration's deficit-driven spending policies were arguably already there. Even Keynes wouldn't have condoned such deficit spending in supposedly "good times."

If the economic crisis taught us anything, it should have made us realize that we can't borrow our way to prosperity. No matter what, we're going to have to pay the bill. Alas, we can't exhume Keynes for any help on that. Our current economic policy isn't reversing our road to ruin -- just paving it faster. And, apparently, digging a heck of a lot of deep, black holes.

Don't think the road to ruin is paved with holes? Let me know in the comments section below.

Berkshire Hathaway is a Motley Fool Stock Advisor and a Motley Fool Inside Value recommendation. The Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days.

Alyce Lomax does not own shares of any of the companies mentioned. The Fool has a disclosure policy.


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  • Report this Comment On December 07, 2009, at 11:41 AM, ssg13565 wrote:

    This is the understatement of the year, 'Even Keynes wouldn't have condoned such deficit spending in supposedly "good times."'

    An integral part of Keynes prescription was to pay down the debt in good times. Government action was supposed to be a counterweight - contract when the private sector was expanding aggressively and expand when the private sector was contracting aggressively.

    You cannot blame Obama for Bush's wasting of a tool that was not supposed to be used the way he used it. In fact, we wouldn't be in this mess partially caused by the real estate bubble, if Bush hadn't been so adamant about inflating when to the point of bursting the bubble.

  • Report this Comment On December 07, 2009, at 11:53 AM, broseff wrote:

    Let's not play the blame game here on Bush or Obama...both democrats and republicans are to blame for the housing bubble. It was the government's wish that Everyone be afforded the chance at home ownership that led to the housing mess. Individuals who were less than qualified were allowed to take on huge loans. This would have never happened had the principles of the of buy what you can afford been adhered to by many. The banks were profiting while at the same time pleasing goverment officials who kept pushing the ideas that everyone should be able to own a home......YES, everyone shoudl be able to own a home...if they can afford it!

    As for deficits, the biggest joke was the first round of stimulus passed under the Republicans...seriuosly, who in their pea sized brains thought that giving people 600 would create a meaningful spark to drive the economy? Yes, the deficit is huge and getting bigger, the government shoudl immediately cancel what remains of TARP(300B of undeployed funds) and start making sure that the second stimulus funds are actually being spent. To this day, less than half of the money has been allocated to projects and less than 50B has been actually deployed!...Granted, you can't just commission a new bridge overnight and start building, but other projects that can be started should have been by now.

    For all the people that support reducing the deficit right away, I would only ask: What spending cuts do you propose and how do you think those congressional districts will react when their communities are threatened?

  • Report this Comment On December 07, 2009, at 12:27 PM, dmmorrison wrote:

    Broseff, good points, though we might add that the Bush team dismantled much of the regulatory oversight that might have prevented, or at least mitigated, the financial crisis. Also, the government has been favoring home ownership for decades, so I don't think it was deliberate policy to create this particular bubble. The problem was that banks and mortgage found they could make a lot of money by using questionable practices, and there was no effective federal watchdog to make 'em stop.

  • Report this Comment On December 07, 2009, at 1:41 PM, BMFPitt wrote:

    "You cannot blame Obama for Bush's wasting of a tool that was not supposed to be used the way he used it."

    But I can certainly blame Obama for doing it himself while in the Senate. I wasn't even born yet the last time we had a President or a Congress that even remotely cared about the national debt as anything but a talking point.

  • Report this Comment On December 07, 2009, at 2:41 PM, FreeMortal wrote:

    Yes, good points Broseff. To build on that, it was the same Fed through 3 Republican and 2 Democrat administrations that ferociously fought regulation that would have minimized (though probably not prevented) the housing bubble.

    Alyce. Who exactly are these "Keynesians" of which you speak? The monatarists run the Fed while the banks occupy the treasury.

  • Report this Comment On December 07, 2009, at 2:42 PM, Deepfryer wrote:

    "In response, Nobel-winning, Keynesian economist and New York Times columnist Paul Krugman shrugged about "deficit hysteria."

    Why shouldn't we be hysterical?"

    If you want to understand the answer to this question, maybe you should read some of Krugman's articles on the subject:

    http://krugman.blogs.nytimes.com/2009/11/30/the-dogbert-theo...

    http://krugman.blogs.nytimes.com/2009/11/23/deficit-hysteria...

    I think it's funny how conservatives are just soooooo concerned about the possibility of inflation, which may or may not even happen. Apparently these people have forgotten that we are currently in the worst financial crisis since the great depression?

    Of course, conservatives aren't exactly known for their ingenuity or their problem-solving abilities. While they were busy mindlessly bashing the government, they haven't offered up any realistic ideas (other than their usual "do-nothing" approach).

    Talk about not seeing the big picture. Sigh.

  • Report this Comment On December 07, 2009, at 2:45 PM, jcwmd wrote:

    Broseff - great points. As we have learned in the current health care debate:

    * One man's waste, fraud and abuse - is another woman's mammogram. Hence all the "outrage" at adopting the new breast cancer screening recommendations.

    * One woman's waste, fraud and abuse - is another senior's drugs. Hence all the "outrage" at cutting Medicare funding.

    Everybody wants to cut spending and reduce the deficit - as long as it's somebody else's benefits that get whacked. At some point - and I'm not sure we're there yet - tough decisions will get made and they'll be orders of magnitude more than they would be today.

    Broseff - guarantee one thing - you won't see anybody in this thread respond to your last question with anything that might impact them personally. I'll give you a simple example - federal taxes on gasoline haven't gone up in decades and gas is a lot lower than the $4.50 / gallon we recently experienced. How about we add 25 cents to each gallon to pay down the national deficit or pay for the stimulus projects that are subsidizing green wind and solar projects?

    I know - we're in a recession and we need to spend - I believe that too. But you won't see anyone volunteer when times are good either. Shame on all of us!!

  • Report this Comment On December 07, 2009, at 2:47 PM, Deepfryer wrote:

    "I've got two big problems with that quote. First, what savings? (In case you've forgotten, the National Debt Clock ran out of numbers on its display.) "

    I hope you realize Keynes didn't make that quote in 2009. I mean, what are you trying to do here, argue with his ghost? How could he have known that the so-called conservatives would have racked up such a massive amount of debt?

    "Even Keynes wouldn't have condoned such deficit spending in supposedly "good times."

    Of course he wouldn't. Why would we need deficit spending in good times? Do you even understand Keynesian economics?

  • Report this Comment On December 07, 2009, at 2:59 PM, ed1007 wrote:

    As ssg13565 noted Keynes suggested that government spending run in cycles. In boom times revenues should outpace expenditures, in down points of the cycle the expenditures would outpace revenues, in effect spending what was saved.

    Unfortunatly, as long as the way to get into office is to con your fellow citizen into thinking that you are giving them something expenditures will NEVER be less than revenue.

    "A democracy cannot exist as a permanent form of government. It can only exist until a majority of voters discover that they can vote themselves largess out of the public treasury." – Alexander Tytler

    "or until those in power do it for them...." - Ed

  • Report this Comment On December 07, 2009, at 3:07 PM, money4eds wrote:

    We need to live within our means. If you or I run out of money we are broke or bankrupt. The goverment just prints more. No money no printing! On this issue of politics many of our elected have been in Washington a lifetime. If you want change don't re-elect anyone.

  • Report this Comment On December 07, 2009, at 3:10 PM, johnis9 wrote:

    I agree with "It was the government's wish that Everyone be afforded the chance at home ownership that led to the housing mess. Individuals who were less than qualified were allowed to take on huge loans. " This thing is repeating again as the news that economy is recovering is percolating. I hope we win some lottery in China and payback their loans. Debts are no good

    www.bit.ly/lookat9

  • Report this Comment On December 07, 2009, at 3:19 PM, Deepfryer wrote:

    "Unfortunatly, as long as the way to get into office is to con your fellow citizen into thinking that you are giving them something expenditures will NEVER be less than revenue."

    I disagree. If you look at the data from 1973 until now, you will see that during their time in office, every Republican president has increased the US national debt as a % of GDP.

    During that same time period, every Democratic president has DECREASED the US national debt as a % of GDP, during their time in office.

    So I would say that the conning of American citizens that you speak of only takes place during certain political climates.

  • Report this Comment On December 07, 2009, at 3:38 PM, pberardi wrote:

    The seed for eternal irresponsible deficit spending was sown long time ago. The root of all this irresponsible and destructive spending dates back to the inactment of the federal income tax or to be more precise, the withholding tax employer system.

    As long as government gets its hands on your money before you do, there will never be responsible fiscal and spending policies from Washington.

    Yes, deficits will expand and decrease based on economic growth and conditions and once in awhile we may even see a balanced budget like we did in the late 90's. But rest assured, our deficit problem is systemic and can only be corrected via constitutional amendment.

    Neither Republicans and Democrats can be trusted to manage our nation's fiscal resources. What we've allowed to happen to social security, medicare and our treasury is downright criminal!

    Go back and see what the federal government spent not only in nominal terms but as a percent of GDP before the inactment of the withholding tax and look at the same number today and dare tell me that federal spending adjusted for inflation has not grown at a far greater rate than our economy.

    The more money we send to Congress the more they will spend. It really is that simple. We need a formula driven constitutional amendment that dictates to our elected representatives what they can spend as a percent of GDP with exceptions such as war and depression.

    It's time we dictate to them instead of the other way around!

  • Report this Comment On December 07, 2009, at 8:24 PM, RVAspeculator wrote:

    Great post Alyce! I could not have said it any better myself.

  • Report this Comment On December 07, 2009, at 8:33 PM, xetn wrote:

    Government does not live on the taxes it collects, it manufactures money out of thin air via the actions of the Fed and its fractional-reserve banking system. Monetary inflation (increasing the money supply) is a hidden tax on everyone because it reduces the purchasing power of the money. It also causes wage rates to increase over time which tends to increase the taxes you pay through bracket creep. The dollar has lost over 95% of its value since the creation of the Fed.

    As for the deficits etc. they are the result of both parties buying votes and rewarding their benefactors through regulations that favor certain businesses at the expense of their competition or via tariffs that protect domestic companies while increasing the cost of everything the consumer purchases.

    Government does not produce anything and is a giant sink hole for your wealth. All government programs are nothing but a transfer of wealth from producers to non-producers.

    Obama's jobs creation program is a joke because government does not know how to create anything except new spending and new taxes. The only thing that creates real sustainable jobs in production. Jobs are a function of production not the other way around. What creates production is real saving leading to capital formation.

  • Report this Comment On December 07, 2009, at 8:36 PM, CKSIN wrote:

    I guess this is a problem not unique to the americans. ppl know there is a problem n each solution requires sacrifice n some may require to sacrifice more than the others. so the Q is, who is the hero that is willing to bleed more...? the answer is nobody. so everyone just pretend n let the fireball cont to roll n let nature take its own route...hopefully it will miss their house n live another.

  • Report this Comment On December 07, 2009, at 10:41 PM, Aneirin wrote:

    "Government does not live on the taxes it collects, it manufactures money out of thin air via the actions of the Fed and its fractional-reserve banking system."-xetn

    Firstly, the Fed cannot print money. That is the Treasury. The government does print money, but if it manufactured all of its money, I can guarantee you the dollar (and the U.S. probably) would be long gone already. Secondly, to constantly demonize inflation and call it evil is silly. Often, it is necessary to use inflation (by selling currency domestically or globally) to keep the currency at a valuation which makes trade easier. Too much is obviously bad, but a small amount will stimulate capital flow and improve the economy without hurting lenders. Bracket creep is problematic in the short term (like the AMT, which is in need of repair) but has not had any gigantic long-term impacts as brackets are normalized. I do think that brackets should be indexed to inflation.

    And finally, your implication that fiat money and fractional reserve banking lead me to think that your belief is that the gold standard should be re-adopted along with and end to fractional reserve banking. The major problem is that the current market value of all 145 metric tons of gold which has been mined so far is only about 5.4 trillion USD. Since much of it is locked up in electronics, jewelry, and other applications unavailable to the gold standard, and some is held by people who won't sell anytime soon, the amount available for use as currency backing without fractional reserve banking is not nearly enough to cover all of the value of goods and services in the U.S. alone. Thus gold would have to be re-evaluated by the government at several times what its cost is now, and investors would be quick to dissent with this new valuation (especially with a statist price floor, where trade would just have to stop due to no one wanting the overvalued currency). This would cause the U.S economy to lose much of its value, hurting it domestically and globally as an inevitable depression formed. Gold is outdated as a currency.

    This article overgeneralizes Keynesian economics. It says that Keynesianism involved "moral hazard inherent in bailouts that reward and incentivize failure." That sounds more like supply-side economics (Savings and Loans institutions). Secondly, it acts as though it is Keynesians' fault that the deficit is so high. Bush caused the deficit, and he was not Keynesian (he was a supply-side believer). The U.S. is not about to collapse; after the economy gets back in shape, cutting the wars and raising some taxes can close the deficit.

  • Report this Comment On December 07, 2009, at 10:47 PM, Luwingo wrote:

    "Of course he wouldn't. Why would we need deficit spending in good times? Do you even understand Keynesian economics?"

    Deepfryer, one might well ask you the same question. See why right here: http://mises.org/daily/3916

    Keynes was WRONG. His entire General Theory was based on a series of quite badly constructed paradoxes and blind faith in the Utopian argument that the world needs to be led by "enlightened" men like him. He had little patience for those who disagreed with him and cared nothing for counterarguments from far better economists (like Hayek and Mises) that were derived from first principles.

    Fortunately, Keynes did reject large parts of his own theory before his death, but the damage done by his intellectual legacy remains with us to this day. The notion that one can spend one's way out of debt, or borrow one's way into prosperity, is as wrong now as it was in 1936. The only thing that hasn't changed since is the willingness of politicians to listen to what they want to hear- and what they wanted to hear in the 1930s was exactly what Keynes told them.

  • Report this Comment On December 07, 2009, at 10:51 PM, Luwingo wrote:

    "Often, it is necessary to use inflation (by selling currency domestically or globally) to keep the currency at a valuation which makes trade easier."

    That's one of the most ridiculous arguments I've ever come across. If this is what you truly believe, then ask yourself why the byzant, the gold-coin currency of the Eastern Roman Empire, held its value almost constant for nearly 600 years and was traded throughout the Mediterranean and the Bosporus as the currency of choice for the region?

    Inflation is a tax, nothing more and nothing less. Even "steady" and "predictable" inflation of 2% a year would result in a halving of purchasing power within 40 years. Think about this very carefully: it means that a dollar earned at the beginning of your career and saved for retirement will be worth less than half a dollar in constant terms by the time you retire. The number of goods and services you can buy with that one dollar is greatly reduced, and so too is your potential quality of living. That is the effect of inflation, and it IS evil.

  • Report this Comment On December 07, 2009, at 11:38 PM, predfern wrote:

    The great French economist Bastiat talked about the broken window fallacy, what is seen and what is not seen. The only way to create wealth (and jobs) is with productive business investment. Government takes money away from the private sector.

    The Swedish finance minister recently told Forbes magazine that Sweden went to far with the welfare state. As a result it has had two lost decades. Sweden is finally turning things around by privatizing industries and implementing free market health care reforms. The finance minister recommends that the U.S. NOT implement socialized medicine.

    Reagan disproved the notion that growth leads to inflation.

    Japan is on its second lost decade with infrastructure spending. Remember the broken window fallacy. Unless infrastructure really helps commerce it is detrImental.

    Big government countries like France have high unemployment. This is because the government employs fewer workers than the private sector.

    After WWI there was a recession. This was cured by tax cuts which lead to the roaring 20s.

    The Austrian school of economists is correct. The Keynsians are wrong. Take that Robert Reich.

  • Report this Comment On December 08, 2009, at 12:35 AM, SnapDave wrote:

    Bush is such an easy target. I wish some of you would see some nuance though. Bush’s biggest failure was that of not vetoing both Republican and Democrat controlled congresses spending. And please don’t bother with the war spending argument. Military and war funding has and will sometimes go down, unlike all other government programs that are considered cut if they don’t increase at double the rate of inflation.

    I like the selective memory of the commenter who thinks deregulation of financials started with Bush.

    Krugman is a tool.

  • Report this Comment On December 08, 2009, at 12:36 AM, SnapDave wrote:

    Bush is such an easy target. I wish some of you would see some nuance though. Bush’s biggest failure was that of not vetoing both Republican and Democrat controlled congresses spending. And please don’t bother with the war spending argument. Military and war funding has and will sometimes go down, unlike all other government programs that are considered cut if they don’t increase at double the rate of inflation.

    I like the selective memory of the commenter who thinks deregulation of financials started with Bush.

    Krugman is a tool.

  • Report this Comment On December 08, 2009, at 2:33 AM, ET69 wrote:

    Well , Well everyone is in a hissy and telling us which economist to read and why they have it right ---in a paragraph or less! O.K... If that is the game then I want to recommend the fella who understood Capitalism better than anyone I have ever read...you guessed it .... Marx. You name 'em: Smith, Ricardo, Malthus he wrote about all of them. Start with vol 1 of 'Capitalism '---believe me ---love'em or hate him---you will learn alot.

  • Report this Comment On December 08, 2009, at 2:49 PM, Gorm wrote:

    1) This country should be run like a company. It is NOT. Just look at China. It performs like a conglomerate of business owners, ie buying up commodities when prices are depressed, managing its currency to benefit trade, looking long term. Right now China has more well educated professionals than it can employ!! Our Congress is a bunch of special interest captives more interested in their career than their country.

    2) Spending is NOT the same as investment. We sacrifice industries in trade negotiations to what end? We have eroded our manufacturing base falsely believing we were evolving to a higher sphere, ie information and services. Do you spend more of your income on STUFF or SERVICE?

    3) Effort is NOT the same as success. As a nation we are too forgiving. Our expectations are too low. We are too apathetic. We keep voting in losing leadership without ever holding them accountable for improvement. To succeed we should ELECT the best to lead and represent us. Every position has term limits, rotated in a fashion so we aren't forever dealing with raw talent. There is NO retirement from Congress. Each Rep or Senator leverages their reputation serving your country and earn your benefit in private industry when their term is done.

    Bottom line, this country needs to be run as a business. Like it or not, China could show us a few things.

  • Report this Comment On December 08, 2009, at 4:09 PM, Erik1993 wrote:

    A note to President's who caused the deficit bashers - check Article 1 of the constitution: the House starts all appropriations. In the end the President signs, so Congress is just as culpable for the US deficit. In fact it should be the first on on the dock...or for those further out there, the first ones against the wall.

    I agree on raising gasoline taxes - I live in Europe right now, so even $4.50 / gallon is cheap. In 2008 we had $10 / gallon for diesel and around $13 for gasoline. Raising the gasoline tax would add big incentives for better automobiles, more efficiency, etc. Don't waste the money on renewable subsidies. There is always someone out there who will build the better mouse trap - why pay to keep the fat cat sitting by the mouse hole? Make carbon emmissions expensive and use the money to get the debt to a more manageable level.

    I am also resigned to the fact that my retirement will not be as soon or as bountiful as the generations now retired or about to. As part of my congressional districts giveaway (N. Dallas / Collin County), make medicare and social security into block grants to the states - states can't run deficits, so they can spend the cash until it runs out. I am still young enough to save for when they run out.

  • Report this Comment On December 08, 2009, at 4:58 PM, BABentley wrote:

    Fools,

    I grew up mainly Private-Sector (and my career is, so far, Public-Sector), but I'm used to having to pay my bills. Revolving-credit is a mistake and liabilities should be paid off as promptly as one may arrange, particularly when so paying them doesn't forestall an investment that you securely believe will involve greater practical returns than paying off the liability will avoid in expenses. I could stand paying higher taxes to pay off the liabilities, IF I believed that the taxes would be spent efficiently. As a Civil Servant, I'm convinced that there is no either/or here. (Do I pay the taxes or do I leave my share of the national debt unpaid?) Still speaking as a Civil Servant, I'm convinced that our civils would be better served by less government. I feel that government should put a priority on paying its debts before we rebuild other countries. (There are countless other programs where I feel that our government is where it doesn't belong.)

    I've heard the Keynesian argument before, but I'm convinced that it needs to be tempered with sense and discretion. Spending our way out of debt, let alone borrowing to pay our bills, is Not the answer. I don't plan to retire for about another two decades: I need for this country to remain functional, else all of my investments (time, effort, money) will be a pure waist. (Also, if this country goes down the tubes, where do I go when I go home?!?!)

    Note: Whoever wants to call me a partison of either aisle, I Tend for one aisle, but I don't particularly ally with either party. There're both pretty messed in their heads.

    I bid you well,

    Bruce

  • Report this Comment On December 09, 2009, at 12:03 AM, dividendgrowth wrote:

    Any "good" thing pushed to extreme is bad.

    Humans often forget about moderation, and ideologues are the worst kind.

  • Report this Comment On December 09, 2009, at 11:49 AM, Ziege19 wrote:

    "If the economic crisis taught us anything, it should have made us realize that we can't borrow our way to prosperity."

    That's a common, and gross, over simplification.

    The USA DID borrow its way to prosperity. America financed its economic expansion with debt. America borrowed its way to victory over the Japanese and Nazis. Every law or med student who took out student loans borrowed their way to prosperity. Every successful business owner who financed their startup with loans has borrowed their way to prosperity.

    The thing to look at is what the debt is for, and whether or not the specific investment offers a return which provides enough utility to the investors to warrant the debt payments. This article makes no attempt to do this, relying only on boilerplate: Debt bad, big government bad, free market good, Keynes bad, me no like bad, me like good.

    This article is ideology posing - clumsily - as economic analysis.

  • Report this Comment On December 09, 2009, at 11:54 AM, whereaminow wrote:

    "The thing to look at is what the debt is for, and whether or not the specific investment offers a return which provides enough utility to the investors to warrant the debt payments."

    The thing I look at is whether or not the creditor was allowed to choose what, and how much, was loaned, or if he simply had to hand it over to the benevolent overlords. The former concept is lending, the latter is stealing.

  • Report this Comment On December 09, 2009, at 11:54 AM, whereaminow wrote:

    "The thing to look at is what the debt is for, and whether or not the specific investment offers a return which provides enough utility to the investors to warrant the debt payments."

    The thing I look at is whether or not the creditor was allowed to choose what, and how much, was loaned, or if he simply had to hand it over to the benevolent overlords. The former concept is lending, the latter is stealing.

  • Report this Comment On December 09, 2009, at 12:49 PM, databasemarket wrote:

    Govt loaded the gun, but Wallstreet pulled the trigger.

    We need govt to watch Wallstreet and Wallstreet to watch the govt.

  • Report this Comment On December 09, 2009, at 12:51 PM, databasemarket wrote:

    Govt loaded the gun and Wallstreet pulled the trigger.

  • Report this Comment On December 09, 2009, at 2:00 PM, Ziege19 wrote:

    "The thing I look at is whether or not the creditor was allowed to choose what, and how much, was loaned, or if he simply had to hand it over to the benevolent overlords. The former concept is lending, the latter is stealing."

    -Ok, but that's an entirely different issue than whether or not it is impossible to "borrow our way to prosperity". And it, also, is ideology and NOT economic analysis.

  • Report this Comment On December 09, 2009, at 2:34 PM, oldhunter wrote:

    We won't grow our way out of our $12 trillion debt; neither will we erase it by cutting spending. We will have to raise taxes in spite of what conservatives might want. The taxes raised to pay down the debt should be earmarked so they can't be spent in any other way and should be discontinued once the debt reaches some predetermined % of GDP..

  • Report this Comment On December 09, 2009, at 9:20 PM, otd365 wrote:

    I tremble with fear when I read this seemingly well formed monetary hysteria. It's either the keynesian people, the democracts, the socialists ..i e fault. when monet was invent its purpoes was to facilitate commerce between producer and consumer. Humans enjoy the priviledge in their off hours from supplying for personalneeds to produce excess of that need. That surplus can be bartered, or exchanged for anything that they may want

  • Report this Comment On December 10, 2009, at 7:44 AM, Fool wrote:

    Broseff - You couldn't be more wrong.

    "Individuals who were less than qualified were allowed to take on huge loans. This would have never happened had the principles of the of buy what you can afford been adhered to by many."

    The government didn't cause the "housing bubble", we did. Good old American consumers are to blame. To impatient to work and save to buy the home of their dreams, they used unsuitable loan programs to buy homes they could not afford. In many cases, committing fraud along the way claiming income they didn't earn. Leading to low and no doc loans in the mortgage industry to be refered to as "liar loans".

    Over the past year, newspapers have been full of sob stories about individuals or families that can no longer afford their homes. Not one that I read delt with a job loss or medical emergency. In all of the cases they could never afford the home in the first place. Not two weeks ago the front page of the Washington Post had another such story. A woman on food stamps bought a $700,000 townhouse. She lied on her application claming to make $150k a year. She is quoted as saying she hoped the monthly payment was around $2000 a month. At the closing she found out it would be almost $6000 a month. Against the advise of a friend that told her not to sign anything and walk way, she signed anyway.

    As hard as the government might try, it can save us from our own stupidity.

  • Report this Comment On December 10, 2009, at 8:10 PM, KWMILLER44 wrote:

    Keynes was for increasing government spending during extream recessions to substitute for the decline in consumer and business expenditure that accompanies a "demand led" recession or depression. Such spendings was to be financed by government borrowing from the private sector...not from abroad. And this borrowing was to be repaid from increased tax receipts during the subsequent recovery. That is, over the entire cycle the budget would be balanced....surplus in the recovery paying for deficits in the recession.

    Your use of the term Keynesian to mean irresponsible, undisciplined, excessive expenditure by congress ever since WWII, but especially during the Regan and Bush years and this past year does grave injustice to Keynes and his theory. Aspects of his theory may be naive in practice (e.g. will elected officials maintain a cyclically balanced budget) but Keynes's name should not be sullied because of the failure of congress to exercise self control.

  • Report this Comment On December 11, 2009, at 11:56 AM, Keal7 wrote:

    This bears reposting

    "If the economic crisis taught us anything, it should have made us realize that we can't borrow our way to prosperity."

    That's a common, and gross, over simplification.

    The USA DID borrow its way to prosperity. America financed its economic expansion with debt. America borrowed its way to victory over the Japanese and Nazis. Every law or med student who took out student loans borrowed their way to prosperity. Every successful business owner who financed their startup with loans has borrowed their way to prosperity.

    The thing to look at is what the debt is for, and whether or not the specific investment offers a return which provides enough utility to the investors to warrant the debt payments. This article makes no attempt to do this, relying only on boilerplate: Debt bad, big government bad, free market good, Keynes bad, me no like bad, me like good.

    This article is ideology posing - clumsily - as economic analysis.

    Ziege

  • Report this Comment On December 11, 2009, at 1:40 PM, MrsCathyGF wrote:

    Debt, too much of it, more than one can pay off and still tread water, is ALWAYS a prescription for hardshipitis. Always. If the bureaucrats want to look good, the best way is to stand back, GET OUT OF THE WAY, offer incentives to expand private enterprize, and then take credit. What, are these guys fond of, the Three Stooges ? The bureaucrats seem to love the self inflicted pain of wacking their noggins on a wall. And running in place like Curly ! WHHHHYYYY YOUUUUUWWW !! NYuk, Nyuck !

  • Report this Comment On December 11, 2009, at 2:25 PM, SkyWestNM wrote:

    To my Fool brothers and sisters:

    Perhaps, and I say perhaps because I support the thesis with only my anecdotal experience, one culprit may be our current governmental preoccupation with maintainence of being in power.

    No one party nor official wants economic turndown blame pinned on him or her or their political party. So economic artificial stimulation follows on the part of both aisles (parties and leaders) to artificially stimulate the economy in both good times and bad. Hence, Kenyesian theory of governmental saving surplus in good times just won't happen.

    Secondly anyone who has fooled around with popularity in social systems knows that saying "no" curries neither favor nor votes. So we see our country's leaders saying yes to both "butter and guns" trying to please everyone. How can any system survive economically with an inherent systemic, built-in "yes and my successor can figure out how to pay for it". The leveraging of future generations, given our current system, seems assured.

    Sky

  • Report this Comment On December 11, 2009, at 4:08 PM, BadassMFer wrote:

    Fellow Fools,

    Finally a forum to put my $50,000 Economics BA to good use. Keynes' theories were not disproven. Yes, they have evolved but there is no question the Government can effect a sluggish economy with fiscal and monetary policy. Lets be very clear that we are in this position due to Bush's "Reagonomics II" policies. Deficit spending and liberal monetary policy during a period of growth is NOT Keynesian. Keynes also was very clear to use his theories in times of growth as well, to slow the growth to a sustainable pace. What Bush did was inject the economy with supply side, war time spending at that. Obviously we did not learn from the late 90s? TARP is the RTC all over again, just monsterously larger in scope, and additionally just so happens to keep the Bank's directors employed.

    Obama's spending policies to create jobs have basically treated the symptoms and ignored the disease.

    All competent economists agree on one thing. There are only two factors which shift the output yield curve permanently; Productivity and Natural Resources. A fine time to go green it is. That leaves us with just one factor left, just productivity. And productivity is best increased through EDUCATION.

    I want everyone who reads this post to imagine the bailout funds going to the American people for education. Imagine an education system which is entirely free from any monetary barriers to entry. Imagine the growth that would result. Now take a look around the Globe and see the countries that are passing us.

    I am a Monetarist with strong Rational Expectations theory beliefs. We end this "double dip no jobs recovery" very simply. Raise rates and strengthen the dollar (also will give the Fed future ability make meaningful unanticipated rate moves in the future - we are stuck on the ground floor now). Balance the deficit (sorry, more taxes and less spending). Strengthening the dollar has a huge impact on international trade that we need badly right now. Meaningful government investment in education for all. Take back the TARP & Bailout monies and let the banks fail as they should have in any good and true model of capitalism.

    The longer we put off taking the crucial steps for longterm recovery and economic health, the longer we will be in this situation.

  • Report this Comment On December 11, 2009, at 4:14 PM, Trustearner wrote:

    Gosh it's lonely thinking as I think. You see, I have this impression that the most important thing any individual can do, or any family, or any business, or any government is to cope successfully and, if possible, cope so successfully as to do better than barely survive... maybe even to prevail. And, as strange and far out as it might seem in light of all the biased noise going on in the world, I have this -- okay, maybe it's insane -- but I have this perception that SOLUTIONS to problems, and prevailing over them in such a way as to

    do well in life, require as accurate a discernment of what is actually going on in the world, AS OPPOSED TO glomming onto a BIASED assessment of things, and angrily circling the wagons of one's reason around that bias. Does this make sense to anyone but me? Last year I read twelve books on how propaganda techniques have been hypothecated, tested in various ways to see which tricks work, or work best, and forumlated into a veritable science. And now, all about me I see that if I (or anyone else if there is anyone else) am hampered more in trying to get a grip on what problems are real, and what real things have led to them, is that EVERYBODY seems to prefer agenda biased noise to reliable information. Jimminy Christmas! Is almost everybody nuts? Or is it me? If I want to access some information about what is going on with the president's policies all I can find is crap written by people who are angry that they (or the strange and complex processes which produce the electoral college reps from the respective states were in the minority at last prior voting time. I mean, gee whiz, if the election of a president only has to be a majority, then it is possible for half the people not to get what they wanted. So do those of that minority have to continue to belittle, berate, insult, villify, make distorted claims regarding... the guy they could not muster up enough fellow supporters to keep out of office. As for me, I voted for McCain; but just because he did not win doesn't make me want to read nothing but far-out extremist views about how (because THEIR candidate of choice didn't get the majority of electoral college votes -- the man who DID is totally incompetent, illegitimately in office, associated with a conspiracy to collapse the country, responsible for all debts of the nation... and blah, blah, blah, blah, blah... ad nauseum. What ever happened to facts not cherry picked just to bluster and whine and spin conspiracy theories. Again, maybe since I just want the facts on all sides of any given issue, and would like to read or hear some logical argumentations pro and con to help me COPE, and help others COPE, and help

    the nation COPE... maybe that is a sign that I am crazy, and just don't fit in the kind of sanity that is all the irrational, extremist, agenda-spun NOISE. But... sorry... what I really wanted to do is comment on the point about Keynes's ideas on digging holes, or whatever. What difference does it make who thinks it if someone wishes to say a certain kind of solution idea is a good idea or a bad idea. It makes a lot of sense to me to guess that the enormous indebtedness of the U. S. today has been snowballing since WWII. And, as best I can gather, that is a problem. And, it also seems to me that there are economic cycles... I've been examining them for years and years, and reading various ideas about why they happen, how their timing is only predictable within at best approximate limits, and such. (Hey, I went totally to cash in my equities investments in November 07, and jumped back in in the first week of March 09, so I neither bled when the blood was in the streets nor failed to jump back in right at the bottom. But I was just GUESSING when the peak-out of one cycle would occur, and when its bottom would occur. Next time I might miss by a mile maybe. Does anybody see what I'm saying here? As a person who wants information about things AS THEY ARE, rather than gerry-rigged and spun and cherry picked and twisted beyong the point of recognition of the basic facts... I have to work my butt off to sort out the little bit of reality out of a veritable garbage heap of

    agenda-biased noise paid for by special interests who call it "information" when they do everything in their power to feather their own financial or political nests, and everything in their power to villify any agenda other than their own self-serving one. Noise, noise, noise! And, well, sometimes just something I think of as "cutesyness" in sharing facts and arguments. And (up to here is background, now I'm going to say what all this was necessary to set the stage for...

    WHY are the few good (COPING-FRIENDLY) facts and arguments in the article being commented on here as filled with cutesy or propaganda-style fluff? Notice that I'm not saying there is no meat, and no good argumentation concerning it. I'm saying that it is all watered down, or noised up, or whatever, with fluff about a "walk of shame" and references to Keynes ideas as if they are total crap. I don't agree with every twit of Keynes' ideas. I sure as heck don't agree with all of Ayn Rands or Alan Greenspan's (although I shouted 'brovo' when Mr. Greenspan testified before the U. S. Congress that he was disillusioned with the results of his former notion that "the market" would solve all the problems of the U. S. economy best when and if left to cure itself. For crying out loud, humans are not angels, whether they are individual "persons" or corporate "persons." And corporations are run by PEOPLE. And people tend to be corrupted by power. Give a corporation enough power, give it complete power to police itself, and what will happen? Just what DID happen. Duhhhhh. But watch what will happen when someone reads this who is unwilling or unable to accept ANY observation about a phenomenon so predictable. MILLIONS of dollars are spent by bankers and by corporations that profit off national security fears and by WallStree lobbiests to shout down anybody who predicts that huge businesses (run by humans) if given total authority to police themselves, will be corrupted by that power sooner of later. It is human nature. And to state this "obvious" fact is going to evoke noise like thunder. Where MILLIONS are spend by an "interest" to give itself all the freedom to do whatever will increase its bottom line, it's not hard to find very, very intelligent people who have been hired to shout down anybody who tells it like it is. Shucks! NOBODY likes to be "regulated." I can't park my motor vehicle in my own front yard on the grass, because my neighbors don't want to see our neighborhood turned into a slum. Well, bravo. Neither do I. And if my neighbor starts parking on the grass in his front yard, it will... definitely will... have a direct impact upon the value of properties in this neighborhood. That is a fact. And thank heaven my neighbors and I are sufficiently intelligent, and sufficiently caring about our own property values and those of others who live around here, to recognize that the laws or regulations that will fine a neighbor who doesn't understand, or doesn't accept, that others have a right to keep the neighborhood from going down, are not just nonchalantly and for no reason "picking on him." So, okay. Banks are at subject. Banks that bought mortgages in bundles -- mortgages made to home buyers who never had any evidence they would EVER be able to keep up their mortgage payments in the long haul (and other near-100% risks, and rated (or honored ratings) of those bundles as collateral on loans. How honest was THAT?

    And how honest is any propaganda saying that banks have to be left alone to do things like that, and should be, because "the market" will work to cure the dishonesty. It will work to cause a lot of people who relied upon A-rated bonds that were worthless to lose their investments secured by them, when there is one of those routine market down-slides but -- " No, no, no..." we are told by those whose job it is to defend the banks against regulation, saying it will destroy them."

    Destroy them? Are ws saying that, if banks are not allowed to lie and rip off their shareholders or those they borrow from, that they will fail? Wow! We are in a heap of trouble then, either way, aren't we. We're damned if we (or the nasty old mean old government) regulates them; and we've just found out what it feels like to be damned if we DON'T. And I'm not arguing against keeping enough banks afloat to allow the industry to keep going doinw what good banks do But I'll be accused of that, by those hired to make the scare talk whereby it is hoped that the people will be led to believe that keeping banks honest would destroy them.

    To heck with Keynes. Where are the essential facts we need to deal with to COPE SUCCESSFULLY in this nation with the ABUSES of some bankers that have occurred in recent months, years, or what have we.

    I'm no groupie of any large, powerful interest. I'm no groupie fo any political party. I'm no groupie of any one theoretician who -- on basis of some strongly believed-in ASSUMPTIONS, go way out on an abstract theoretical limb in trying to explain a dynamic and make certain predictions about it. But where can one go to get UNVARNISHED, UN-CHERRY-PICKED, UN-CUTESY, UN-AGENDA-BIASED information and argumentations based on them these days!!!!!

    Is The Motely Fool able or desirous of avoiding the APPEARANCE of bias, as well as the application of it?

    Cutesy might entertain. But it clouds bottom line realities and logic.

    Oh, well. Maybe that's unavoidable and inevitable, and no one in his right mind would crave news that is not fluffed up or distorted. If there is ANYONE out there who feels as I do about cutting the crap and getting honest and down to essential facts, help me out here. I'm fixin' to get villified for bucking the tide of distracting noise that dulls the ability of people to figure out and COPE WITH the realities underpinning our economic and political and... other kinds of.. issues in need of being resolves for the health and future of our nation..

  • Report this Comment On December 12, 2009, at 9:04 AM, TrustIsEarned wrote:

    Some like to propogate the untrue argument that the government, FannieMae and FreddieMac in particular, caused the credit crisis. These institutions and Congress were not blameless, and few in our society were. But the credit crisis was mainly a failing of the private sector and free enterprise. See http://www.mcclatchydc.com/251/story/53802.html. As Alan Greenspan acknowledged in testimony before Congress, there was a flaw in his model of how the world worked. As Vanguard's John Bogle wryly noted, "That's a pretty big flaw." (Or words to that effect.) The anti-government crowd is in denial, but if we come through this crisis without a depression (likely but not certain at this point), it will be government intervention and "pump priming" that have saved us. But fundamental corrections are needed, and the sooner the better, if we are to build a solid foundation for recovery and have an "Age of Responsibility" that will benefit our children and grandchildren. The question today is whether our polarized political system can yield to leadership that puts the nation's best interest ahead of short-term politics. The jury is out on that question.

  • Report this Comment On December 12, 2009, at 3:49 PM, stromsky wrote:

    It doesn't matter how much debt you have or "rack up", if in the end you intend to claim bankruptcy. Do you honestly think that our governments actually intend to ever pay off that debt?

  • Report this Comment On December 12, 2009, at 6:24 PM, Trustearner wrote:

    I concur that "the government" does not cause economic crises. That would be grossly simplistic. But to say that "we" (whoever that is supposed to refer to) caused it is equally naive. The economic dynamic in a nation -- and I'll stick to the U. S. here -- has many players. Government (if we define it as the sum total of all governmental policies being applied as well as being given lip service at any given time) is one of the players.

    Voters qua voters are "one" of the players. The purveyors of propaganda on behalf of huge, wealthy, powerful businesses that prefer not to be regulated and pay millions to try to steer voters, is one of the players. The lobbying financed by the wealthiest and most powerful interests is one of the players. The incumbents in the many elected offices together with those appointed by those of them able to appoint, are one of the players. But wait, you might say, isn't "the government" those lawmakers, that president, the particular justices who are currently sitting in the Supreme Court? I know, I know, it's confusing, isn't it?

    In one very actual sense, "the government" is everybody and nobody in particular. Arguing over which is responsible for the so-called "banking crisis" currently underway, as to whether it's "the government's" fault or the people's fault is like arguing over whether all cows are black or all cows are white. The Congress is the veritable vocal chords of the vox populii is it not. We elect them. They are our representatives. Right? They take our wishes to Washington and exercise our choices. Right? Get real. They go to Washington and are inundated by pressures, yes pressures from back home to a modest extent, and by lobbying to an enormous extent. Campain funds sort of dillute what those disorganized voters back home wanted, now don't they. Don't they now? The lobbiests are ORGANIZED and well-paid and well-funded. And the wealthier and more powerful a given interest, the more persuasive it is. After all, where will campaign funds come from NEXT TIME the voters go to the polls. Doesn't the amount of MONEY spent on a campaign allow a candidate to hire the best speech writers, hire freaking psychatrists or propaganda spinners or advertisers or public relations image-makers. And can't almost any

    set of campaign promises be bent, folded, spindled, put into expertly engineered nice sounding but ambiguous phrases allowing an elected official, when someone tries to pin him down say, "What I meant was...(followed by what he ended up doing, no matter what)?

    The people's fault indeed... unless, of course, we mean the wealthiest, most powerful legal persons (which includes a few enormously powerful international mega-corporations who may have their main office in the U. S., but offices and plants and a customer base that are predominantly located in countries OTHER THAN the U.S.

    Want to separate the essential facts relating to the nature of a huge problem with the U. S. economy? Then stop talking grossly simplistic terms such as "the government" and "us" (meaning us qua consumers, or us qua voters). Start trying to stand things on their own feet, such as: What say to "we" (qua voters) have over whether a war will be declared on grounds of cherry picked intelligence which welcomes facts on the pro side and sloughs off facts on the con side or, better yet, which is created out of thin air. What do the people have to say about it when existing intelligence agencies are telling the nation's leader something he doesn't want to hear, so he creates a new one, and makes sure the people who run it are screened to be those who understand what the boss wants to hear?

    As one who has read widely and deeply into many kinds of theories in economics, political philosophy, philosophy generally, the tools of reason, logic... I can vouch that in each and every so-called "school of thought" there are unprovable assumptiions made, and set up as "unquestionable but self-evident facts (i.e., facts NOT IN NEED of being proved because... get this now, they are OBVIOUS.

    ]

    Extremists of every kind are convinced that their thinking is based on OBVIOUS SELF-EVIDENT principles, turned to postulates... and when you feed postulates into a computer and it cranks out logical results... BY DEFINITION those results always lead back to -- guess where -- TO THE POSTULATES FED INTO IT.

    To say that "the banks" did not cause the credit problems of the U. S. or that "the government did" or the people did, is talking gibberish. And interests who are GETTING THEIR WAY in the full dynamic, LOVE IT when "the people" or "we" are fighting amongst ourselves out in voter-ville, and having an interminable shouting match, which assures that the actual nature of a problem does not get seen, and nothing EFFECTIVE that would cut down on profits of interest which may or MAY NOT care if the whole U. S. goes down the tube, as long as they get what they want... like nothing better than to see a going-nowhere shouting match going on.

    If we want to define what the actual issues are, and come up with actual workable solutions to them, we will never get anywhere asking question such as: Did the banks do this? Did the government do this? Did "we" do this (evidently refering to the population qua credit consumers)?

    A good place to begin solving ANYTHING is to start taking out the buzz words (that mean nothing in particular), get rid of sound bites (some of those just contain enough actual application as to seem to say something when they say nothing useful), start defining who the players are in any given scenario as apply to that scenario (not one of a thousand other scenarios), take not of what are the unprovable assumptions which each set of groupies bases its own particular set of

    "I believes," and... that would be a good start. Of course it would be contrary to human nature and contrary to human history, but it would be a great start.

    But then... maybe only a genius would be able to pull back from all the sound and fury and think in such a way.

    Count me out. I don't even know how to spell genius.

    I spell it geenious. And gosh it's lonely way up here in a think tree nobody seems to want to climb. I guess the shouting match, and the unsolvable problems will just go on and on. But, oh, just one last thing...

    The one about the U. S. government having no problem because it never intends to pay? Good heavens. There are far wose things than paying one's debts. And they already are manifest. But if someone thinks he can just explain that away, or pretend the consequences are not here, and are not dire... then there is an unprovable assumption behind that denial that may appear self-evident to one saying that. He also might believe, on basis of said postulates, that chickens have teeth.

  • Report this Comment On December 12, 2009, at 6:49 PM, jambenfool wrote:

    I agree with Fool's observation that conclusions lead from axioms. While I don't mind hearing from the libertarians venerating their particular axioms in the posts on which he comments, perhaps TMF is not the best place to advocate. It actually makes me less sympathetic to have to wade through to get to the investment information. The walk of shame should focus on Madoffs, not people with alternate axioms.

    Thanks for listening.

  • Report this Comment On December 12, 2009, at 7:07 PM, tkell31 wrote:

    Solve the deficit? No problem. First lets stop spending money like every individual is worth the money and effort because we arent. It's a noble idea, but the reality is you can't save everyone because a lot of people can't save themselves from...themselves. Absent giving all kids a chance I'm not sure why we get so caught up in protecting adults from themselves. Want to eat yourself into an early grave and live morbidly obese? Fine by me, just dont expect the government to pay for your medical bills. Don't want to work? Fine with me, just dont expect to get a free ride. Head south because it's cold in NY when you are homeless. Want to murder, rape, steal etc? just fence off South Dakota and put all the criminals there, what they do from that point on is up to them. We are really making this way too complicated and expensive.

  • Report this Comment On December 12, 2009, at 7:36 PM, Trustearner wrote:

    To jambenfool, you are right. My message may have contained more thatn a reader might learn for a hndred books, but in the wrong forum.

    To tkell31 : You are right in saying, or implying, that no nation can spend more than a sustainable percentage of its GDP, for sixty years, and continue to do so for much longer.

    However, before totally stepping back and out of this forum, let me say that my investing strategy has been a fuzzy strategy, more art than science, and I am happy in my private investing history of a quarter century or so to have outperformed the market on-average by only a few percent. I have done so by seeing the challenge to be more one of treating investing as an art than as a science. No formula works for long, that I know of. No set of rules works (Hey, the worst year I ever had was the year that -- AGAINST MY EVERY INSTINCT -- I stayed in the market rather than getting out at the peak of an economic cycle. Since then I try to sense when the economy is about to stall out, and I bail out. In fact this is why I went to cash in November 07 and got back in in March 09. If there is a double dip, at least I came out of the first dip with what I went into it with. What I'm saying is that many things in this life are measurable only with crude approximization, and likewise predictable on a historical basis even more crudely and approximately. So my approach to investing is more comparable to the concept of "Kentucky windage" in target shooting, where one cannot measure and predict what the winds of chance will do to THE BEST LAID PLANS of an investor. But one can feel the winds and observe their ebb and flow and get more of a FEEL for them, and adjust for that. The situation morphs. A fixed formula would work only if it were of a nature to remain linear and continue at an even pace. To be perfectly candid, one of the main reasons I have, on-average beat the market over a quarter of a century is directly attributable to the fact that I got out (on basis of fuzzy, Kentucky windage thinking, alone) before a couple of dips, and back in (on same fuzzy basis) before things started to pick up again. So... yes, my way of evaluating the nature and causes of ECONOMIC and political problems in and of the U. S. have not been based on any hypothetical model, but upon watching and weighing many, many variables, and trying to figure out not so much who is wrong, or what is wrong but, rather why the winds and tides of change might be rising here, and ebbing there, and likely to rise next somewhere else. It's fuzzy logic, and virtually impossible to describe to anyone else, but it has worked well for me, on average, with increasing success. If I can average better than, say, the S&P 500 over a long span of years, I shall keep on thinking as I think. And I NEVER try to influence anyone else to buy or sell anything in particular at a given time. As sure as I were to do so, they would lose their shirt, as I lose mine. So I just keep on muddling along, watching, trying to FEEL my way rather than calculate it on basis of any set of do's and don'ts, and hope for the best. Hopefully, this I have shared in the proper forum. Investing is an art, and not a science, and it constantly remorphs from one constellation of factors to another constellation. So, for me at least, the best course is to try to keep my finger on its pulse and be ready to adapt, and adapt, and adapt...

    And now, with that, I will cease to make waves. Merry Christmas to all, and good-investing in the year ahead.

    Best wishes to all other fools,

    geenious

  • Report this Comment On December 14, 2009, at 12:50 AM, 1Demeter wrote:

    Interesting that most of the responses here are sharp enough to put a stake through the heart of this article's simplistic reasoning. Too bad we didn't hear more of this kind of criticism from our media and our citizens over the last 30 years, instead of the kowtowing and the baloney economics that were mostly PR for Wall Street.

    Our problems today are not just economic. We have a dysfunctional Congress that owes its soul and its reelections to corporate America and sadly, a President who seems bent on making nice and not making change through leadership. Both are utterly pathetic and are followed closely by a Court that at present hasn't seen a corporation it doesn't love more than justice for the individual. Our founding fathers are rolling in the their graves from the self-serving stuff that passes for patriotism (think Limbaugh et. al.)

    Republicans are unconcerned about deficits when the tax code or the laws are tilted to benefit the already well off at the expense of the rest of the nation and apparently still unconcerned that we are paying (i.e. borrowing) for two utterly pointless wars, one of which was completely willful on the part of the President. Both of these could be fought smarter and for less money.

    Democrats, on the other hand, seem ready to turn over 30 million citizens to become premium peons to health insurance companies with little effort at reducing costs and providing real competition. And why should they? At the behest of the Republican President they panicked last winter and handed out gazillions to the SOBs who put us into this fix -- and they still haven't got the courage to find out where the money went to and why it still isn't being loaned out to small businesses etc. Clearly, they had to supply the cash but did they have to hand it out no strings attached? The guys "fixing" the problem are from the same firms that caused it, so is it any wonder that most of America doesn't trust government anymore? Both parties seem to be Baloney Artistes of the first order. Only a handful of Congress people talk sense and are consistent.

    This nation is going down the tubes economically and politically and nobody has the courage to say it out loud. American business was effin' selfish to the point of suicide. The smart money is now moving across the Pacific, and it's not because Americans can't do the job but because our body politic can't agree about what to do to get out of the deep doo-doo we're in. Our Congress seems utterly incapable of thinking beyond the end of their reproductive organ, their religious salvation theories and who will pay for their next election!

    Finally, even if we use the Keynesian "fix," whatever money we "borrow" and spend will go to nations that now do the manufacturing for the globe: China and India. This is not investing in America. We will be buying our solar panels and our wind turbines from them (and the Germans) because the Congress and the nation have been in thrall to the oil companies. We have carried the banner of the individual uber alus to its logical conclusion, which is that no one is willing to give up anything for the common good -- and we will all hang -- both separately and together --as a consequence.

  • Report this Comment On December 14, 2009, at 1:57 PM, Fool wrote:

    Fake References For Fake Jobs

    CareerExcuse.com

    The New Obama Economy.

    The minute you take away the stimulus, all the GDP growth, all the jobs that are associated with that stimulus spending, will vanish. Obama can't take the stimulus away without destroying the phony recovery. That means multi-trillion dollar annual deficits as far as the eye can see, or until the USD is woth less than the paper it's written on.

  • Report this Comment On December 14, 2009, at 3:46 PM, VegasMartin wrote:

    Our leaders ought to read up on the Austrian School of Economics.

    http://www.ShootTheBears.com

  • Report this Comment On December 14, 2009, at 5:41 PM, outoffocus wrote:

    Good article that sparked a very thought-provoking conversation.

  • Report this Comment On December 15, 2009, at 12:22 AM, RobertC314 wrote:

    I had to stop reading here:

    "It doesn't matter how much debt you have or "rack up", if in the end you intend to claim bankruptcy. Do you honestly think that our governments actually intend to ever pay off that debt?"

    That is the true "American Way"... God help us.

  • Report this Comment On December 17, 2009, at 5:19 PM, dumasamerican wrote:

    go to www.cloward-piven.com read it and weep it is the anti american way and we are screwed

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