FFM

We should spend. However, we need to spend wisely. This is more like the last depression then the last recession. What got us out of the depression was a world war. An increase in demand is not going to come from the consumer. Unlike recent recessions, the average consumer's net worth has significantly dwindled because of the perspicuous fall in the value of his home , around 40%, with no sign of it recovering soon. This 40% drop in home values results in at least a 60% drop in net worth because of the excessive use of leverage.  Further, unlike the previous depression our government is much deeper in debt because of the burden of additional social programs and two wars going on. This occurrence has caused the average American to be more frugal. He is not anxious to spend like yesterday. Further, even if he was, his ATM called a second mortgage, is no longer available to him.

Reposted from New York Times, May 30, 2011 Her Inheritance: An Eagerness to ServeBy RAYMOND HERNANDEZ A few months before Kathy Hochul was born, her family was living in a 31-by-8-foot trailer not far from the hulking Bethlehem Steel plant near Buffalo. When things got a little better, they moved to the second-floor flat of a home in working-class Woodlawn. The family was just getting by then: Ms. Hochul’s father, Jack Courtney, did clerical work at the plant at night and attended college during the day; her mother, Pat Courtney, stayed home and raised six children. But they were unusually aware of the needs of those around them: On holidays, the family brought into their home developmentally disabled children who had no relatives to visit. And they collected food, clothing and furniture for families who were struggling in the region, hard hit by industrial decline.

Capitalism 4.0 is really Adam Smith capitalism with government playing its role of umpire as envisioned by Adam Smith and Milton Friedman. Watch the full episode . See more Need To Know. ‘People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public or in some contrivance to raise prices.’ (Adam Smith, The Wealth of Nations, 1776).

In order for a ball to bounce it needs some resilience. The same is true of an economy. The participants in the economy need to be willing to spend and in order for this to happen they need to feel good about the future, have confidence in their personal financial situation and have some cushion in case of the unexpected happening. The American consumer is not ready to go back to the days of yesterday when they not only spent everything they earned, but borrowed against the future.

"Not everything that counts can be counted, and not everything that can be counted counts." (Sign hanging in Einstein's office at Princeton) I am all for improving the quality of teachers and therefore the quality of education. However, we are putting too much emphasis on test results and not giving enough attention to the quality of managers or administrators. It is the administrations job to coach, motivate and evaluate the teachers. Administrators in our school system spend very little of their time helping and evaluating teachers. In the private sector a managers job is defined as getting things done through others. Instead school administrators bury themselves with paperwork, meetings and kissing up to the School Board.

I recently read an article in the New York Times May 22nd edition  discussing the amount of money and effort the Bill & Melinda Gates Foundation is investing in trying to improve the public education system in this country. the article said; "For years, Bill Gates focused his education philanthropy on overhauling large schools and opening small ones. His new strategy is more ambitious: overhauling the nation’s education policies." My first reaction was great. Maybe now, with Bill Gates committed to improving education in this country, we may finally see the results that we  want. Then I paused and thought about the word "we". How can I be sure what Gates wants is what  we want?

Where is the needed demand coming from to create sustainable jobs? Families in this country were rocked by the 2008 meltdown of the finacial markets and their resultant net worth. Not only did the value of their homes fall, so did the value of their retirement funds with the freefall drop of stock markets. The stock market recovered and home prices are still falling . It is a mistake to believe we will return to the days of borrow and consume anytime soon. We shouldn't. We consumed too excess. If this country is going to remain the super power that it is, it must consume less and save more. If this is true, where will the jobs come from? We must get better at exporting. Germany does it, why can't we? We also need to invest in our future including broadband, education, high speed rail where there is demand, fixing our roads, bringing back our free markets and others. We should not be spending for the sake of spending, but rather for the sake of our future.  We need free ma

Spending to stimulate the economy is a good thing; however, it needs to be targeted towards investments in the future such as education, finding alternative energies, high speed rail where it makes sense, yes domestic oil production and high speed internet. If government used the same accounting rules as private industries, these items would not be considered expenses. They would be assets to be used to enhance our future productivity, The time to do these things is now when money is cheap and we better do them if we want to compete in the future. The PBS program Need to Know has a segment describing how the country who invented the Internet is falling behind other nations who are investing heavily and leaving us in the dust . What we don't want to happen is for Americans to consume the way they did prior to 2008. We cannot afford it.

There is much debate about whether the tax rates should be kept low or raised to the rates prior to the George W. Bush years. This is the wrong debate. Instead we should be deliberating whether we need to reform our economic system. If our markets were more free we would have a wider distribution of income and the result would be more tax revenue to the government with lower rates. The republicans speak with pride how the free market system is the best economic model for increasing the living standards of the nation and the citizens of the country. They resolutely  proclaim that government needs to cut back on regulation and allow the free market to work. I personally find this hard to argue against. However, what I do not understand is why most free market advocates are not up in arms  over our markets and industries being taken over and controlled by a small group of firms in many of our industries. The founder of the concept of free markets said:

"Over the past months, there has been some progress in getting Americans to accept the need for self-restraint. ..........  The public hasn’t bought it yet, but progress is being made........ The breakthrough, if there is one, will come from the least directly democratic parts of the government, from the Senate or some commission of Establishment bigwigs. It will be enacted when voters realize we need to build arrangements to protect ourselves from our own weaknesses. It will all depend on reviving the republican virtues upon which the country was founded"   David Brooks, NY Times, 05/06/11   One of the vehicles to accomplish the above goal is free markets; markets that are not only free from unnecessary government intervention, but also from control by small groups of large corporations. This has happened in too many markets by too few corporations.   The result is that wealth is unfairly distributed, goods and services become more costly, innovation is suffocated, p