a rant in three parts (part 2)

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this one may not be ready for prime time, but if it'll push the last one below the fold, it's good enough.

and for the lost, it's part 2 of this one.

the myth:  the only reason america is still in this recession is because our leaders don't have the balls to crank up the presses and spend our way out of it.

the basis for the myth:  world war II ended the great depression, thus proving forevermore that massive spending solves massive economic crises; ergo, nothing short of another world war II-level stimulus will solve our current economic crisis.

yeah.

ever heard of the broken-window fallacy?  it's a staple of austrian economics, and hazlitt's version goes something like this: 

A kid throws a rock at a window and breaks it, and everyone standing around regrets the unfortunate state of affairs. But then up walks a man who points out that this is not a bad thing after all. The man fixing the window will get money for doing so. This will then be spent on a new suit, and the tailor too will get money. The tailor will spend money on other items, and the circle of rising prosperity will expand without end.

you can see the problem with this scenario immediately, right?  this "circle of rising prosperity" occurs at the expense of the poor guy whose window was broken--the money he might himself have spent on a new suit or other items went instead to something he wouldn't have needed had the window not been broken in the first place.

easy to see the truth when it's just one little window, but apparently not so easy when you scale it up a few orders of magnitude.

consider:  between 1940 and 1945,  the united states of america spent billions of dollars and employed millions of people to essentially do nothing but build lots and lots of really expensive rocks, and throw 'em through the windows of the world.

did all this destruction solve the depression?  not by a long shot--it enriched a handful of bankers and industrialists to be sure, but by the end of world war II, there was nothing left but a world full of broken windows, a huge american workforce and military suddenly left with nothing to do, and an america that was monstrously in debt.

which brings me to my point:  it wasn't world war II that ended the depression, people--it was its aftermath.

in august 1945, we were the last man standing, an untouched-by-war industrial powerhouse to which the destroyed countries of the world, allies and former enemies alike, were forced to turn in order to repair their broken windows.  and we were all geared up for production, had an enormous skilled workforce and a captive market--how the hell could we lose?

now, compare and contrast the america of 1945 to the america of today.

back then:

• america was brimming with wartime factories that could easily be converted to make things the world needed and wanted--and we had virtually no competition.

• government was still small, and had infinite room to expand.

• the bankers and the corporations hadn't yet leveraged the financial and commodities markets into the bloated, voracious monsters they are today.

• there was no medicare, medicaid, welfare or food stamps to drain the national treasury, and social security payouts were barely a blip in the budget.

• personal debt among the citizenry was almost non-existent.

• almost half of americans lived on farms, and produced their own food.

• our underclass was far smaller, far less entitled, and far better behaved.

• the veneer of civilization was far thicker.

i could go on, but you get the point, right?

in other words, back in 1945 we were a lean, mean america whose bubble was just beginning to expand; today, we're a fat, soft, bloated america whose bubble has burst, all the stimulus in the world won't reflate us, and the new lean, mean, more productive economies of the world are circling our cooling carcass and licking their chops.

and you think larry summers and his "spend our way to prosperity" cronies don't understand this?  of course they do.

so if they already know massive spending isn't gonna work, why is it that they're preaching this fallacious gospel, you ask?

well, if i told you now, there'd be no need for a part 3, would there?