Thursday, March 12, 2009

A Few Thoughts for Thursday

Just a few things going through my mind on Thursday (aka Friday Eve).

I've been thinking about the economy, like no one else has that topic on their mind. Right now, we are inundated with bad news, it seems you can't turn on the TV or radio, or even read a newspaper without hearing of some dire news about something. Just recently the latest has been the threat given to the various levels of government by Chrysler Canada. The threat is a simple one, extract concessions from the Unions and promises from the governments or else they will simply close all the factories in Canada. The Unions are angry and the Ontario government is unimpressed. Peter Foster of the National Post suggests letting the Automotive Companies fail.

So what should happen to stimulate the economy? I mean conventional thinking, at least the thinking of today is for governments to throw gobs of money at the failing industries, such as the Automotive and the Banks. Personally I think if history has proved anything, it is that bailouts to the automotive industry has tended to be a good thing, for one they use the money well and second they pay back with interest. As for the banks, I've got a few ideas for them.

Jo-Anne suggests giving money to consumers instead of the banks. That way consumers can buy goods and services and stimulate the economy. A good idea but a few problems, the main one being inflation. Still it's a good thought.

Is it a good idea for government to stimulate the economy by adding money, or priming the pump if you will. It seems Keynesian economics is not in fashion, after years of neo-liberalism and monetarism. The central tenet of Keynesianism is:

he innovation in his core argument is to stop taking prices and wages as perfectly flexible, arguing instead for a certain degree of stickiness. Thanks to stickiness, it is established that the interaction of "aggregate demand" (in his sense) and "aggregate supply" (in his sense) may lead to stable unemployment equilibria. His work on employment went against the idea that the market ultimately settles at a state of full employment—a central tenet of Classical economists. Instead he argued that there exists a continuum of equilibria, the full employment equilibrium position being just one of them. (This idea underlies the choice of the title "General Theory": the classical theory being just a special case.)

So, is there another way, here's my suggestion. First of all, I think the government should incorporate a little bit of Chinese Justice. You might remember the Tainted Milk Scandal, I believe the end result was the shooting of a few managers and others in high management of the guilty corporations. Now imagine a few CEO's of the banks and investment companies being marched out to a wall on Wall Street and shot by a firing squad. You wouldn't have to do all of them, just a couple and I'm sure the credit markets would open instantly. Think of it as the "Marketing Division of the Sirius Cybernetics Corporation" response. The Hitchhikers Guide to the Galaxy described them as:
A bunch of mindless jerks that were the first ones up against the wall when the Revolution came

I think you get the point.

More seriously and I think Jason Calacanis of Mahalo was right. He opined on an episode of TWIT that the way out of this economic mess will be one entrepreneur taking a risk and hiring or keeping one persom employed. The risk is to keep one person employed when conventional wisdom would say to lay off. It is a risk because it goes against the news of the day. The word of the day is 'layoffs'. but what if one says, "I'm not bowing to conventional wisdom, I'm going against conventional wisdom".

Recently Chrysler announced the laying off of 1200 workers. All that does it maintain the dire economic news. By laying off 1200 people, the economy has just shrunk by that amount. Actually it has shrunk by more. But, consider if the Chair of Chrysler had thought it through and figured the best solution would be to keep people employed andn producing goods. Perhaps a few concessions from the Union might be a good idea, but I'll not go into that. For certain he would have taken it on the chin by shareholders for not balancing the book or getting rid of inventory. But how do you get rid of inventory when the people to buy the inventory can't afford to because they are unemployed. That would have been an incredible stimulus for the economy, plus the good news that would have come instead of all the bad news? Sure stocks would have gone down, but why is the stock market the be all and end all.

People watch what happen and think, 'perhaps things are starting to get better', this gives them optimism and they start to hire and produce again and the result, the pump is primed.

There is one difference between this method of recovery and the one that is being suggested, it doesn't cost a cent of taxpayers money. By the way, I heard that some hospitals in Windsor are cutting back staff, again another example of the economy shrinks. I suppose the assumption is people don't get sick when the economy is bad. What if that hospital accepted the challenge and didn't lay off anybody.

I realize this is simplistic, but then again, complexity doesn't always work. In fact when it appears the simple is counterintuitive, it may be the right solution.

What else am I thinking about?

Well, I got the new U2 CD, No Line on the Horizon. I can say it is a good CD, perhaps not a good or as great as The Joshua Tree or The Unforgettable Fire.

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