Obama's Economic Thinking

So far the thinking of the new economic team is seriously disappointing.

They are reported to have reached out to divergent economists who [wait for it..........] all agree that the stimulus is needed.

So, mainstream economists call other mainstream economists to solve a problem created by mainstream economics. That is just dumb.

The reason we are in this mess is that mainstream economic thinking is wrong. Even Bush understands the mainstream: 'Free people, free markets, free trade.' This is the same thinking that gave us the Great Depression.

It's also the thinking that gave us Enron, the mortgage meltdown and a severe recession tetering on depression.

Throwing money at the problem - - the Obama solution - without examining the framework is a prescription for disaster.

Even in mainstream, textbook economics, monetary policy - throwing money at the problem - does not work unless people want to borrow.

Nobody wants to borrow now and even the few who do want to borrow can't.

Here's the problem: everyone is convinced that the economy will become worse, not better.

Here's the solution: convince people that the economy will get better.

Here's how to do that: point by point, list each situation in the economic framework that has contributed to the problem, Then list each action to be taken and how it will correct that one particular situation.

For example:

Problem: bonds based on sub-prime loans have tanked and frightened bond buyers.

Solution: no bonds based on mortgages will be offered for sale without a rigorous examination of the mortgages which underlie the bond, with the examination's results published in the bond prospectus and verified by an outside regulator. This is not rocket science, it's very similar to the disclosure the SEC used to require for any security.

Problem: rising unemployment.

Solution: reconfigure national labor laws so that the creation of jobs is favored over the creation of capital. There is a real concern that there is already too much capital in the world and not enough jobs.

For details, see the discussion of the jobs theory of economic growth here: http://www.mkeever.com/apply.html

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Don't any of these people read economic history??