Sunday, February 22, 2009
Can talk cause depressions? No, I don't believe talk causes anything but is the result of experience, and while emotion is important, it can be fleeting. Psychology can be longer lived though. I think there is a short term rational response that leads to an irrational longer term response, that is, irrational in the very long term. I think people are captive to their experiences and memories and their reactions to them can lead to exactly this, while in the much longer term, these can be exaggerated. For all those past depressions, life went on, they all ended, and times improved as will happen this time, but when we are in the midst of one, we can't see how or when. In part, people want a depression, they want to be punished for prior excesses, they want frugality and righteousness to be rewarded, and morality restored. Once they believe they have been punished enough, that as bad as things are, worse really won't be that much worse, and that tomorrow will come and be a bit brighter, times will improve. Can this process be hurried along? It is really difficult as we are captive to our past, but it must be tried with every fiber of our being, to do otherwise is to yield to fate. As Chauncey Gardener said, spring will come again. Looking for it better than lamenting winter.
Saturday, February 7, 2009
Why has investment fallen? There is a great fall in investment because those investments were bad, finance and housing number one among them. There is also a great fall in investments that while seemingly good in themselves were predicated on spending from the bad debt they created and from the false profits generated by them, cars and most consumer goods being among these. A false market was created and there was too much investment in these and now these must be written off. There is no lack of goods that more investment would solve but rather a surplus that cannot be afforded. Now there is some investment that can make sense, but this investment is innovative and risky. It is small and scattered. It takes time to develop and grow, and it is not in a position to help us much now. So now we have a long tough slog to write off bad debt, bad inventory, and bad investment. The best way to ease and hurry the process and reduce the overhang is more inflation to combat deflation. Debit cards are interchangeable with cash so that doesn't require more spending but more cash, a lot more cash, say $8000 per citizen, in people's hands is just what is needed. Debit cards may be a useful method of distribution though. They could be loaded quarterly until positive inflation and growth is sustained.