To my mind, neither article gets at the heart of it. Everything they discuss is true, but those are the symptoms and side effects, not the underlying disease. The underlying disease of the Soviet Union was that the socialist economic model simply did not work, and no amount of ideology could …
To my mind, neither article gets at the heart of it. Everything they discuss is true, but those are the symptoms and side effects, not the underlying disease. The underlying disease of the Soviet Union was that the socialist economic model simply did not work, and no amount of ideology could make up for that. Our problem is that capitalism stopped producing organic growth. Instead of diagnosing the root causes, the US government adopted socialist methods for "massaging" the markets and the economy, leading us down the Soviet path. Soviet central planning manipulated and perverted incentives, resulting in epic capital and resource misallocation. This is what destroyed the USSR and is now destroying the US.
Between artificially low rates, bailouts, the Fed's "free market operations," and massive deficit spending, there has been an epic misallocation of resources across the entire economy. The US has been systematically suppressing discount rates and inflating cash flows, but the capital allocation system relies on discounted cash flow analysis, which depends on correctly pricing risk and assessing cash flows. Healthcare is an obvious example of capital misallocation, but how many industries and companies would be viable in their current form if capital were allowed to find its true price, future cash flows were adjusted for unsustainable debt subsidies, and markets were allowed to clear? We have no idea how much asset value would have to be written off if free market price discovery were to return.
The Soviet big economic lie was easy for regular people to see - empty store shelves spoke louder than the fake five-year plan reports. The US's big economic lie is hidden in unsustainable balance sheets. While some of the more pernicious symptoms are visible, very few understand the true scope and depth of the problem. Both authors recognize the problem but look at it more from a cultural than economic perspective. It is hard to say whether the chicken or the egg came first, but it is clear that we are in a vicious loop where the culture destroys the economy, which further degrades the culture.
Thank you for bringing it back to core economic principles. To be fair most people have a hard time comparing one big number to another and can always question when a number is clearly in the wrong, whereas the cultural phenomena get people right in the gut. Where oh where is the economic renewal project that we can pair with the journalistic one occurring here?
You are correct. However, what will get people in the gut is their empty wallets. So until we have the illusion of wealth created out of thin air that landed in our credit cards and auto loans, the problem will seem to be manageable. As the illusion that the Fed can print money endlessly.
Here are my thoughts on the Ferguson's debate.
To my mind, neither article gets at the heart of it. Everything they discuss is true, but those are the symptoms and side effects, not the underlying disease. The underlying disease of the Soviet Union was that the socialist economic model simply did not work, and no amount of ideology could make up for that. Our problem is that capitalism stopped producing organic growth. Instead of diagnosing the root causes, the US government adopted socialist methods for "massaging" the markets and the economy, leading us down the Soviet path. Soviet central planning manipulated and perverted incentives, resulting in epic capital and resource misallocation. This is what destroyed the USSR and is now destroying the US.
Between artificially low rates, bailouts, the Fed's "free market operations," and massive deficit spending, there has been an epic misallocation of resources across the entire economy. The US has been systematically suppressing discount rates and inflating cash flows, but the capital allocation system relies on discounted cash flow analysis, which depends on correctly pricing risk and assessing cash flows. Healthcare is an obvious example of capital misallocation, but how many industries and companies would be viable in their current form if capital were allowed to find its true price, future cash flows were adjusted for unsustainable debt subsidies, and markets were allowed to clear? We have no idea how much asset value would have to be written off if free market price discovery were to return.
The Soviet big economic lie was easy for regular people to see - empty store shelves spoke louder than the fake five-year plan reports. The US's big economic lie is hidden in unsustainable balance sheets. While some of the more pernicious symptoms are visible, very few understand the true scope and depth of the problem. Both authors recognize the problem but look at it more from a cultural than economic perspective. It is hard to say whether the chicken or the egg came first, but it is clear that we are in a vicious loop where the culture destroys the economy, which further degrades the culture.
Thank you for bringing it back to core economic principles. To be fair most people have a hard time comparing one big number to another and can always question when a number is clearly in the wrong, whereas the cultural phenomena get people right in the gut. Where oh where is the economic renewal project that we can pair with the journalistic one occurring here?
You are correct. However, what will get people in the gut is their empty wallets. So until we have the illusion of wealth created out of thin air that landed in our credit cards and auto loans, the problem will seem to be manageable. As the illusion that the Fed can print money endlessly.