News & Analysis
Obama Adviser Says U.S. Should Mull Second Stimulus
U.S. should consider drafting a second stimulus package focusing on infrastructure projects because the $787 billion approved in February was "a bit too small," said Laura Tyson (pictured left), an outside adviser to President Barack Obama. The current plan "will have a positive effect, but the real economy is a sicker patient," Tyson said in a speech in Singapore today. The package will have a more pronounced impact in the third and fourth quarters, she added, stressing that she was speaking for herself and not the administration. Tyson's comments contrast with remarks made two days ago by Vice President Joe Biden and fellow Obama adviser Austan Goolsbee, who said it was premature to discuss crafting another stimulus because the current measures have yet to fully take effect. The government is facing criticism that the first package was rolled out too slowly and failed to stop unemployment from soaring to the highest in almost 26 years. – Bloomberg
Dominant Social Theme: Even if it didn't work the first time, more is better.
Free-Market Analysis: It is verging on irresponsible for such mainstream news sources as Bloomberg to continue to report on stimulus packages without explaining in some detail why they may not be working. Yes, stimulus packages simply do not work. They appear to work because large, inefficient companies retain workers – and that's what is most evident. If workers are retained then jobs are maintained.
But one actually has to dig a little deeper to understand the conundrum of stimuli. The more money that is thrown in the economy by the public sector, the worse the underlying economy gets. Again, this is not to be seen on the surface, but, like the time-value of money itself, it is an ineluctable outcome of trying to cheat the business cycle.
It is an economic fact. Let the government pour money into the private sector and businesses will not be able to shed jobs or make news ones because the companies that would create new jobs cannot find the funding. Nor will entrepreneurs be able to break through in an industry clogged by dysfunctional companies supported by all sorts of tax breaks, additional regulatory prerequisites and government outlays.
This is just what happened in Japan and resulted in Japan's lost decade. Japan, first of all would not let its banking sector founder. Second, Japan funded numerous large, losing companies for years. This is not complicated stuff. It's clear to many who look at the current crisis in a clear-eyed way. The Internet is full of such analyses, described with greater or lesser clarity. But then again, here is the way Bloomberg describes it:
Democrats have bemoaned the pace of the package's implementation. House Majority Leader Steny Hoyer, a Maryland Democrat, said on "Fox News Sunday" June 5 that congressional Democrats are "disappointed" stimulus funds weren't distributed faster. "The money is just really starting to come out in more significant amounts now," Tyson said. "The stimulus is performing close to expectations but not in timing."
This is right out of a Keynesian playbook. The same kind surface-y analysis that would blame an economic downturn on "less spending" insists that more spending, more quickly, will create more jobs sooner. This is exactly the kind of analysis that allows politicians to claim that government "creates jobs." But in fact there is no evidence, really, that government can create a single job, except a government one. Government is not an entrepreneurial entity. When it tries to be, it fails.
Conclusion: Let the American government generate another stimulus. It likely will work no better than the first. What it will do, along with the trillions the Fed has dumped into the markets, is create massive price inflation over time. The net result of these stimuli will be to continually destroy the dollar, especially in relationship to precious metals. Gold and silver will be the main beneficiary of ongoing stimuli, which is, ironically not what the monetary elite likely wishes to see at all. The powers-that-be may however, as we have mentioned previously, want the dollar to erode so as to more easily replace it, at least partially, with something else.
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Posted by L A Sayre on 07/17/09 06:55 PM
The French statesman, Alexis deToqueville (1805 - 1859) said "The American Republic will endure until the day Congress discovers it can bribe the public with their own money." It appears we are at that point today.
Reply from The Daily Bell
In France too.
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Posted by Trevor W. Heaver on 07/08/09 10:27 PM
The mere fact that musicians may be able to generate income through touring or t-shirt sales to replace income lost (or, more properly, never earned) through copyright infringement via file sharing, does not make the latter practice morally right. A copyright is a property right. Those who take property from rightful owners without permission are engaging in theft. This concept is implicit in the name The Pirate Bay.
In a number of discussions I've had with people who share musical files, advancement of cultural common ground was never brought up as a justification. Rather, the predominant attitude has been that they engage in the practice because no one can effectively stop them.
I do agree though (for better or worse) that when virtually no one pays attention to an existing law, then the law has likely ceased to be relevant and should be discarded or modified.
Thank you for your excellent publication. I look forward to reading it every weekday.
Reply from The Daily Bell
"I do agree though (for better or worse) that when virtually no one pays attention to an existing law, then the law has likely ceased to be relevant and should be discarded or modified. "
Thanks. That is the issue, isn't it?
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Posted by Ron Carr on 07/08/09 06:22 PM
Since first coming across your site i have made it a daily stop. thoroughly enjoy reading your commentary and the interviews.
One minor point about copyright protection. The history of it could be traced to Martin Luther, who lived at a time when it did not exist. indeed he wrote and made his living by publishing pamphlets, which were copied freely. Then came the printing press and the monarchs decided to get into the action to decide who could and could not make a copy. Copyright thus came into existence. Kings put it to use primarily as a censorship tool.
It was later - 19th century i believe - when its control shifted to the author. Though in my view it remains a censorship tool.
Again - love your site.
Reply from The Daily Bell
Thanks for the history and kind words. Free-market economist Murray Rothbard felt copyright was far preferable to patent law. But it is obvious that a real debate about these issues has been entered as a result of the Internet.
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Posted by Steve-MA on 07/08/09 05:52 PM
For many, many years I would buy records and had a large collection. Then I found CD's and purchased those and developed a large collection. In time my sound system became my computer and I continued to purchase perhaps 20-30 CD's a year. Then one day, I purchased a CD, placed it in my computer and it would not play. About that time Sony's Rootkit and its effects became known.
Many, many years have passed, and thousands of dollars that would have gone to purchase music did not. The industry has created the pirates and though I value intellectual property rights, I cannot help but cheer the pirates on. The economic damage that has been done by oppressive over-zealous copyright and playability protection must have far exceeded any recovery that these companies have or ever will collect.
Even DVD's which FORCE me to read warnings that take seconds to read, yet stay on the screen for what seems an eternity, and continuously remove my power to do what I want and how I want to watch entertainment that I have purchased lead me to the direction of purchasing pirated dvd's in Asia to play on a region-less (hacked) player, not for economic gain but simply to recover my being able to sit down and play what I want, when I want without such onerous distractions where I am forced to look at that damned red crescent (oops, circle) with the line through it, or to read warnings in French and soon, I guess Swahilii ... Go pirates!
Reply from The Daily Bell
Your irritation is obviously shared by others.
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Posted by Jann Higdem on 07/08/09 02:48 PM
Laura Tyson. Another CFR on his team.
More: Click to view link
Reply from The Daily Bell
There are many.
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Posted by WYZ on 07/08/09 02:07 PM
Elaborating on a sub-point in the article, those who would sell need to take care not to upset the expected purchaser of their offerings. A very basic free-market principle, someone who is mad at you is not going to buy from you. And if they are really mad they will go out of their way to undermine you and your business.
IMO opinion this is a significant contributor of the music industries decline in sales over the years. (Combined with fighting rather than moving into digital on-line music choices and so-so creative output the past two decades.)
During past strikes in Major League Baseball, the team owners deliberately gave up winning public sentiment for their position over the players and the players union. Why, because they knew that when games resumed, the fans would return to see the players. If fans disagreed with the players, they would not return after the strike was resolved which would be an even bigger loss for the owners financially.
The recording industry could learn a lot from how MLB owners handled public opinion during strikes, though it may be too late as they have already caused major damaged to their goods.
Reply from The Daily Bell
Good points.
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Posted by FLR on 07/08/09 11:44 AM
I was rather disappointed when the Pirate Party joined the "green" faction in the EU parliament. My mother was one of the 7% who voted for them, but I am sure that they will lose a lot of their "free market" supporters if they align themselves with the modern day Communists.
Reply from The Daily Bell
Hopefully they won't.
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Posted by Roberto Carlos Alvarez Galloso on 07/08/09 10:36 AM
There are times when copyright laws are needed. My books: "Defensive Documentation", "Cutting Health Care" are registered by the US Copyright Office and the Canadian Intellectual Property Office. My third book "My Olympic Moment" is registered with the US Copyright Office. My reason for explaining this is that there is a need for Copyrights in order to prevent people from plagiarizing contents that were written by the original author.
Reply from The Daily Bell
Congratulations on your publications. Good points. Copyright law came about via common law - as a necessary evolution of intellectual property rights. However, the law needs to be practical as well as enforceable, especially in the 21-century. The question is not so much whether a line should be drawn as where.
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Posted by Jack Swift on 07/08/09 10:25 AM
You correctly note that patents and copyrights are property interests. The challenge presented by the Pirate Party is that private property rights must yield to collective rights. The battle is not new, only the terrain.
Reply from The Daily Bell
It may be that the arguments of the Private Party are collectivist. . But the issues are overdue for serious vetting.
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Posted by John Wiggin on 07/08/09 10:15 AM
Patent law has been used to rid the world of thousands of inventions that would have given health and power to the people and taken power away from those who profit from our oppression.
Reply from The Daily Bell
Copyright law is preferable.
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Posted by More Info on 07/08/09 06:53 AM
Interesting information about copyrights and patents. Thanks.
Reply from The Daily Bell
Thanks for reading.
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Posted by Peter Davis on 07/08/09 06:53 AM
You would think they'd wait fo the first one to work before trying a second. Or maybe they already know it's not going to work.
Reply from The Daily Bell
Throwing good money after bad?
