Greece, and the rest of PIIGS, are in trouble because of the potential for capital freezes. These nations, because of their reliance on government sponsored decadence, have mismanaged public funds to the point of insolvency. Because some local and state governments have overspent, investors cannot, with any semblance of reason, risk their capital.

If Greece could continue Keynesian borrowing and spending, Greece would. Germany , the ECB, and the bond markets reject this strategy due to the specter of inflation. Deficit spending has growth potential, if and only if, the government has the confidence of the investor and the people to repay the debt. Because once that government faith vanishes, there is both investor and citizen flight. This is doubly dangerous. The tax base weakens and borrowing costs increase. Once slated for bankruptcy like La Jolla or Harrisburg or Central Falls, economic activity slackens and decay sets in. The government, then, responds by slashing public services and raising tax rates, further depressing the general mood of both residents and private enterprise.

Credit has been lost somewhere, I don’t believe the economists or the politicians anymore. I do not think they are competent enough to institute, to lead or to execute any policy of worth, like FDR’s CCC. The rhetoric has been so shallow politically lately. There seems to be a lack of real imagination or perceptive foresight from those who are tasked with adequately responding to economic, social and environmental problems that will impact the well being of citizens.

But anyways, nice article. Keynesian stimulus seems to working in the short term for the macro United States. Not really for budget burdened local places like Greece and La Jolla, though. I think you’re on to something with the inefficiency/job destruction problem, you should look into automation in the service industry. President Obama mentioned it a while back, something about ATMs. I’ve heard that S. Korea is working on a robot that does household chores. Then think about the impact on the fast food or the hotel industry.

The Empire State Building and Chrysler buildings were completed at the start of the Depression and sat mostly unoccupied until the War, I think. The wealthy didn’t have unlimited ability to do much of anything, and they still don’t. Those who could draw salaries or other compensation for sitting on corporate boards (Frederick Vanderbilt actually got much wealthier) did very well. Most had to be careful but could live on family wealth or personal fortunes but couldn’t grow them easily. I think it took many a long time to recover from the crash.

The entire US economy is based on the need for much higher pays and nearly the entire stock of residential real estate in this country has risen in price during the past few decades so that two wage earners are needed to pay the note.

I have read – and even heard it expressed in comments here – that in fact it may be easier for the modern economy to accept unemployed people living at basic costs of living rates than to try to fully employ them with all the costs associated with benefits; especially health care coverage.

The Great depression wasn’t cured by Keynesian economics. It was cured by the War. The national debt and the imbalanced budget didn’t matter. The national debt skyrocketed. Millions of men (surplus labor to the economist and many people shared the pseudo rationality of the Nazi party actually)) were killed off and (and with them went “a brace of kinsmen), women were employed at low wages but enough to pay their costs of living and even save because most consumer goods were rationed. There was a large pent up savings pool for the post war years.

Perhaps the modern very urbanized societies are making a huge mistake. WE insist on building vast, nearly homogeneous networks than tend to work in very tight interdependence. They are too vulnerable to shocks to the system. There is something fine about countries working in interdependence to ease the tensions and waste caused by war. But there are comments in these pages that seem nostalgic for the the days when war removed surplus labor or surplus population, but only as long as it is someone else’s surplus. They have an undo fondness for countries with natural resources and surplus funds.

I am wiling to accept that at 61 I am an early but unprepared retiree. I know a lot others are doing the same thing. The school aged don’t cost much until they enter colleges. They will probably be paid in inflated dollars someday so those drawing small interest earned incomes will see a lot of it pulled back. House prices will probably only fall in spite of global population pressure because population doesn’t really have a direct correlation with housing costs. They are too much a luxury item. People who think land is a limited commodity are actually dead wrong. Land is not that rigidly limited and access to it – by any means – can make it available to higher and better uses. Means of access can be manufactured. Modern zoning laws have morphed into restrictive use laws designed to artificially limit the development potential in favor of existing property owners to preserve the value of their investment.

What we may have is a fatal interplay of competing interests and forces that nothing can cure. The old regime in France and most of Europe, prior to the revolution, was just such a interlocking and opposing needs and desires. But now the dependencies are international.

Hope is wonderful and it springs eternal – but I wish it had better ideas for the future than the very abstract Facebook like technology industries. They are so abstract and require relatively few people with computer skills who cannot possibly own or occupy so much of the over priced real estate of this country. And it was the huge appetite that real estate created for the rest of the productive industries of this and other countries that really kept the fires lit during the last two decades. It was one of the most important contributors to the GDP.

Warfare is obsolete to cure depressions. The developed world is aging and is relying on automatic warfare as a Keynesian perversion. It’s primary victims are civilians and the obscenity of it is that there are industries willing to make money on it all. It is ironic that the modern world has to eat the less protected to protect their own ways of life and it resorts to some of the flimsiest excuses to do that.

If their is life on other worlds they may be very ready to put the self tortured animal species out of its misery. There aren’t many animal species that will resort to cannibalism as human beings will. It’s probably fatal if they do it too long under pressure from too large numbers or too little food.

If the modern world engages in too much cannibalism – it may keep its tottering economies alive (sustainably?) put it starts to loose it’s mind. It doesn’t seem to be able to make necessary economic changes in one area without causing someplace else to sag. It doesn’t seem to be possible to invest in new industries without destroying the old. And it happens so quickly, who can really stop to anticipate effects before it is too late or the damage was done?

trevorh’s rant covering “comfy government jobs”, the “bloated welfare system”, and “stupid unreasonable and militant unions” has provided me with some insight into a conundrum pointed out in the 50′s by JK Galbraith (“The Affluent Society”). He acknowledges that there are indeed union workers who use the union to avoid doing their fair share, but notes that all the lost productivity and inefficiency attributable to slacker union members doesn’t amount to a hill of beans compared to the loss of productivity found in one typical cyclical recession (sorry, I’m paraphrasing b/c I don’t have the book with me). Yet with regard to recessions, we throw up our hands and say that they are some sort of natural phenomenon and the best we can do is to weather them as best we can. But based on trevorh’s comments, I now see that this seeming hypocrisy is rooted in our sense of morality. It’s better to have inefficiency due to incompetence than due to laziness. I don’t think I agree with this prioritization, but I certainly believe it is strongly entrenched in our culture. So thank-you trevorh for giving me this insight.

Life moves so quickly. A kid graduates from high school, and a year later he/she is greatly changed. If his early adult life is spent unemployed, the effects are permanent.

This greatly damages our culture, the American culture.

Better to have him working at anything than at nothing. If he is working on a public road construction or even digging ditches, it helps him and his family and relatives, and binds our culture together.

Anyway, more comfy government job is not the solution, especially taken into account how overpaid and wasteful in nature these jobs are. Maintaining the current bureaucracy and government dependent class without causing more serious internal bleeding to the system is already a MIRACLE. Going this route is exactly what causes current problem in the first place, going further into it is a disaster.

government printing money and borrowing indirectly from central banks, diluting the value of paper money in order to give more handout and easy comfy jobs is very short-sighted.

What is the additional side effect of this?
An extremely wealthy tiny class of well-connected people with insider information that takes tremendous advantage of this maneuver.

What is probably the good solution now?

2 things: short-term and long term.
In the short-term:
- Unclog the money hoarded by well-off people and corporations to increase demand. Stop the psychological war on them to buy votes! Once surplus people (and country) start spending (and importing) there will be more jobs.
- Clean up all the crony rich that doesn’t produce real value. This includes overpaid lawyers, stupid managers ,executives and political leaders, manipulative financiers. Also in the US, a considerable number of vampiric doctors, health provider system and insurance. And of course government jobs in Europe.

In the long-term:
- Equality of wealth generating vehicle (stop the stupidity of equality of outcome, it’s equally of source of outcome which goes together with equality of opportunity creates equality of outcome). This includes the physical one which is capital. Whether it is physical hard capital like land, building, factories, oil fields, corn fields or non-physical one like voting right as in shares and stocks.
- Equality of innate ability to generate wealth and accumulate capital. Enough with the clueless high-breeding welfare dependents as well as the Ken and Barbie dolls with little employable skills.
- Make sure the people at the top have the morality and ability and competence so that they deserve to be there.

We have to evolve forward in a more balance way, yes we want ALL good characteristic not just one, but we have to have a balance of how many of each type. The bloated welfare system and government job is unintentionally social engineering the society to evolve in a very Mike Judge’s “Idiocracy” and unbalanced way.

The way we move forward in a more sustainable manner is more people become self-employed (so they have more influence on the unemployment situation) as in the usual self-employed and in workers owning voting right in the corporate world (not through stupid unreasonable and militant unions, but it’s ok for union if the company is not public).

We have to stop the crooks from killing the second way. Sorry Larry Page, I used to have respect for you, no more now after that evil stock split. And I am boycotting as many Google’s services as I can.

I am ok with super low interest rate so people can go forward with the first way easily. The banks just need to do more diligent work to determine who to give loan to instead of spraying credit around and then package the bad loan into sophisticated securities to scam others.

Either way, we need morality, integrity, honor and compassion to actually achieve it in a positive way. We don’t want a brutally competitive uncivilized jungle society. Life in that kind of society is not worth living. That kind of society will also kill off the genius who are capable of major discoveries and inventions to move us forward because these are often very nice, very honest and even gullible people.

Sigh…. telling these facts really has given me chronic depression now. Can somebody else do this too? I am sure there are people who are well aware of these facts as well. You need to come out of your nice (but coward) outer shell and tell!