Letter Re: Some Thoughts on Economic Stimulus, From a Macroeconomic Perspective


I sent the following letter to my legislative representatives:

Here is macroeconomics as I see it:
Wealth comes from commodities, manufacturing (improving commodities), and agriculture (same principle).
Service industries do not create wealth, they distribute it. This includes financial industries.
Government consumes wealth as it re-distributes it. Even in the admittedly vital services such as protection of its citizens.

There are already (pre-”stimulus”) more government employees than there are employees in manufacturing and agriculture in the US.

The aforementioned being true, increasing the size of government is like a snake thinking it can sustain itself by eating its own tail. Three things will happen. 1) It will taste bad. 2) It will hurt. 3) Ultimately the snake will die.
Another way to look at it is to acknowledge that if government spending produced prosperity, the US would be at its most prosperous.
This proves the common wisdom of the advice to those who find themselves trapped in a deep hole. The first thing to do is to stop digging.

Consume less. The only credit problem we have is that too many (individuals, businesses, financial institutions, and governments) have used too much credit and amassed too much debt. This means you. When you have to incur debt to pay the interest on your prior debt, you are running a Ponzi scheme. Does this sound familiar?

Reduce taxes and simplify laws to give incentives to wealth creation. 1) Oil (or any energy production scheme that investors will back) will stem the flow of hundreds of billions of dollars out of our country. We have a lot of potential energy sources. These dollars can be used for further investment and job creation in our country. 2) Agriculture – Our country is blessed with the ability to efficiently produce food for our people and others throughout the world.

Reform the financial industry. Their accounting books should have all their assets and liabilities on them. Acknowledge that derivatives are a form of gambling (though even in Las Vegas the house makes you buy chips up front to show you are good for the debt).

Allow institutions that have made bad gambles to fail. If you want to finance something, help small and solvent banks that have made prudent business decisions to buy (or assume) the assets of the insolvent institutions at fire sale prices. So what if we have to learn the names of the new big (only) players in finance.

Stop demonizing the rich who have come to their wealth honestly. There are only three things they can do to prevent their wealth from helping the economy. 1) Burning it. 2) Burying it in the back yard in a (really big) cigar box. There it cannot help finance jobs or investment. They are not likely to do this anyway since this strategy cannot make them more money. 3) Investing it in financial instruments that are the (so far) legal equivalent of gambling. As noted previously, regular gambling is safer for the economy.

Final thought:
Government did not make our country great. Our Constitution made it great by freeing people from tyranny (be it from cheats, liars, bullies, or government) to become the best they can be by depending upon themselves. Please read the book “The 5,000 Year Leap” authored by Cleon Skousen.

Regards, – Kris N.