Economists talk about the continued decline in sales and prices of houses in terms of excess inventory and returning prices to pre-bubble levels. Of course, excess inventory is true; too much supply and weak demand will depress prices. But we need to look at the declines in sales and prices from the social point of view. Decline in prices is decline in homeowner wealth, historically the largest portion of the wealth portfolio of the middle class. Decline prices also indicates an inability of households to move up in their housing, whether from renting to owning or from smaller to bigger houses. In other words, the decline in sales and prices indicate that escalator of social mobility is stalled for the American middle class. And that is the making of a social disaster.
Companies are obtaining greater output from their employees, increasing labor efficiency and piling up profits, much of which appears to be hoarded. This has been the news during the entire "recovery". A "statistical recovery" as it has been called.
Dwelling on this admirable increase in efficiency misses the point, however. The question is, why has there not been private investment in new businesses to take advantage of the large pool of skilled and unskilled labor eager and willing to work? Why has there not been private investment in new kinds of industry, to take advantage of the years of scientific discovery in America's great research universities? Why has there not been private investment in new businesses to take advantage of the huge supply of empty factories, empty warehouses, and empty commercial officies, when the commercial occupancy has been at the lowest in years?
For some reason, the free market place of capitalism is not working. The factors of production, which are at their cheapest in decades, remain underutilized. Capital literally lies around, waiting to be taken and profit wrung out of it, and nobody appears to care. Why? Why? Why?
My instinctive guess has to do with the role of government in business. Notice that the Democratic government intervened in the economy to favor with government subsidy and policy incentives a few particular industries. These industries, such as green energy and high speed rail transportation, are not efficient and will always, for the lifetime of their operation, require high subsidies obtained through high taxation. Companies are compelled by government to look at these subsidies and incentives like the California or Yukon gold rush. They don't have to do anything to reap the governmental gold. They can even lie and deceive and get away with it. They can promise to build a factory in Michigan to make car batteries for electric cars, then put the factory in China, and still collect their subsidy. They can propose to build wind turbine farms for generating green energy, then purchase Chinese turbines, and still collect their subsidy on electricity.
The point is not that the government should require "buy American" policies. We don't want buy "American policies", because all they would do is indirectly tax consumers and indirectly provide another subsidy to the companies. We want the companies to be efficient; but to be efficient by using the inexpensive resources, ideas, and labor lying around in the states by starting new businesses. Why hasn't Microsoft, or Dupont, ConAgra taken some of their profit and invested it in new businesses whose prospective products would be beneficial to them. I remember DEC doing this, surely it shouldn't stop.
The point is that government subsidies abrogate the market and prevent companies from looking around and taking advantage of the underutilized resources here in the states. And governmental social welfare polices disincentivize labor and households to make themselves available, as by moving, for new jobs. Companies see this phenomenon, so why start up a new business offering new jobs when workers would prefer to collect unemployment checks, or welfare checks, or food stamps, or remain on Medicaid, and stay in California or New York City or wherever. The Great Recession was caused in part by government modifying sensible market rules about purchase and investment in mortgages (permitting uncreditworthy customers to buy mortgages by paying nearly nothing down), and now the Great Recession is being prolonged by government policies that disincentivize private investment and private companies using the underutilizes resources open to their purchase.
The failure of these policies to create economic growth great enough to lower unemployment is already proved; how much more failure should these policies drive the economy into, before the American public and opposition parties man up and support refudiation of these failed economic policies?
Thanksgiving day, my wife's family descended upon us. My wife's mother, age 84, lives near us, so my wife's brothers and families come her for the holidays when celebrating with their mother is important. Though elderly and frail, she is intellectually vital and alert. She has been a life long Democrat, as was her family, tracing their political lineage to contact in New York City with Eleanor Roosevelt, whose picture, presenting an award to a grand-relative in World War II, hangs on my wife's office wall. My wife's mother enters our home a few hours before dinner, and immediately asks, who elected this simpleton? She was referring of course to Obama. The Wikileak documents had yet been leaked, so the complete picture of Obama's intellectual foolishness was unavailable. But my wife's mother, who avoids political discussion, senses the sweat of nervous rot coming from the White House; the failure of intelligence is obvious even to her. Wikileaks documents reveal a president who pushes international policy in unproductive and damaging directions, acting without even the faintest understanding of international reality. One gets the impression that he is acting out some adolescent speculation written for a college term paper--perhaps his senior paper at Columbia on a nuclear weapon free world (a thesis Columbia carefully removed from public access at the beginning of the presidential campaign). Obama's international strategy is not a scandal; it is far beyond that. It is not a farce; there is no Aristotelian comedy here. It is fantasy theater. Nothing is going to turn out well. It is more like a tragedy, for which we all shall suffer. Belmont Club explains why.
I ran my 5.2 miles route today, 8 three-one-half minute intervals of running separated by three-one-half minute intervals of walking, ten minute warm-up and 10 minute cool-down. I also worked out for fifteen minutes on the monkey bars at the deserted children's play gym in the park. I did three sets of 8 repetitions of fully extended pull-ups, separating the sets with three-one-half minute rest. The first set I did well, the second set I strained and used body English on the last two reps, the last set I could pull myself up only half way on the next to last rep and on the last rep couldn't pull myself more than one-quarter of the way. I haven't done this exercise for two weeks. But it is also possible that my body is slightly depressed. When I ran, I was short of breath and couldn't run for more than a minute without mouth-abdominal breathing and even with that was barely able to control my breathing at all. This was better, however, that when I ran on Wednesday and yesterday Thanksgiving Day, when I was then also short of breath but could barely get around my 2.3 miles route. Why? An eye infection last week might have been just one manifestation of a minor virus that also hit my lungs? The fierce Santa Ana winds of Tuesday early morning inflamed my lungs? I was just tired from helping my wife deal with her mother's excursion to ER on Tuesday evening and preparations for Thanksgiving? We'll see how things work out over the next day or two.
A wonderfully informative video from Reason.tv. And should you think the lesson is obvious, ponder this fact. In his book Audacity of Hope (by-line Obama, but who knows who really wrote it), Obama writes about American values, but no where mentions private property rights as the basis of our wealth. And this omission from a man who was heralded as a "professor" of constitutional law. There is a river of ignorance about human nature and economics flowing from Marx through twentieth century socialists and fashionable communists and community organizers to Obama.