ten years in 3

TEN YEARS IN PART 3

There was a comment after the first part of this ( what I thought was going to be very short ) series, calling me on the presumption that The Can CAN’T Be Kicked Down The Road Again.  He used Quantitative Easing 3 or 4 as an example how we have, indeed, continued to use the same strategies for forestalling economic collapse.  I don’t necessarily agree using that example might actually make his case- there never was an easing on the Easing so really all you have is a fear of NOT easing being a constant can kick that never ended, PLUS, all that is being done is making the original problem far worse since it is just Hair Of The Dog in 55 barrel doses rather than 1.75 liter or smaller doses that even the most hardened alcoholic would consider a huge volume- but obviously he makes a valid point I should address.  The can does indeed get kicked down the road using the same pair of shoes and so when I said “that remedy was already tried and it won’t work again”, I was making a broad assertation and not being very clear about it.  Every time the same old solution is applied to a problem, in a downturn or contraction being part of a collapse rather than an ebb or flow of normalcy,  you get some positive feedback but far less every time at far higher cost with much worse unintended consequences.  So when I say “won’t work” I mean “won’t work like it should with results that make the solution worse than the problem.”  Let me make the case with military spending as it is easier to understand and I can make a clearer case than mucking about in economics.

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Right after the Federal Reserve Bank was created, a few corrupt CongressCritters selling out the country on Christmas Eve as a big Hump You holiday present for that and future generations, we “mysteriously” about-faced on getting involved in the War over in the old countries.  That led to government money going to business and stimulating the economy.  It always ends badly afterwards as expanding businesses then contract, but it wasn’t like this should have been a mystery to anyone as it was business as usual.  But this time, we had a central bank that interfered and tried to stimulate the country out of a downturn, creating the Roaring 20’s.  And, whether by design or ignorance, led to The Great Depression when the interference screwed things up.  I think it was by design, consolidating power, but if I’m wrong than the Fed was unable to fix the economy for ten years.  If I’m right, they are evil crooks willing to kill us all.  If I’m wrong, they are totally incompetent and can’t be trusted to save us next time.  The point is, we had to shove our way into another European war to save our economy by turning into a 100% command controlled entity, no different than the Nazi’s or commies.  And after the war, the fear of returning to a great depression without military stimulus forced us to make the Cold War ( if Russia hadn’t been our enemy we would have created one- and there is your answer why Patton wasn’t allowed to invade Russia or why we didn’t nuke them first thing ).

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So, from 1941 to 1991, we used the military to keep our economy from tanking ( by building tanks-get it? Yuk, yuk ).  But look at the progression of wars.  As time went on, we had fewer and fewer resources available to use in the military.  We had lots of money, created by a careful controlled inflation backed by the growing supply of oil ( in effect, each new barrel allowed X amount of economic activity to be created, equal to the fuels net energy, so that amount of economic activity backed by new money wasn’t inflationary ), with an added small amount thought to be mostly harmless.  But while oil is new wealth and new resources, the whole time we were seeing diminishing returns on other resources such as iron ore, plutonium and the like.  We had to divert more oil, coal ( which itself was going from highest to lower grade with dropping BTU yield ) and hydropower to extracting the resources needed in an industrial military.  The first war brought widespread prosperity.  The last one almost none at all.  Because by the end, starting after the Vietnam War drained us both financially and resource wise, we had to go from a resource rich style of warfare ( huge columns of tanks, the sky darkening with aircraft, millions of men, mega-tons of munitions ) to a microchip rich style ( far, far fewer men, and tanks, and aircraft and ships, but with the ability to hit far better with far less munitions ).  We had no choice.  We only got smarter because we ran out of material to do it the old stupid way.  But the consequence was, these kinds of wars and this kind of equipment did definitely NOT stimulate the economy AT ALL.  Perhaps a minuscule ripple effect in a district here and there, but for all intents and purposes, no economic stimulus.  Hence, war to keep the economy going doesn’t work any more.  We get 10% or less of the benefits for far more wealth inputs.  And it isn’t oil backed wealth anymore but hardly more than printing press money.  So, sure, we can TRY to get war to restore the economy, but it simply isn’t worth the effort anymore.  It is now a net loss rather than gain.

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