Penn Jillette's counterintuitive commentary

[stilicho]

Some of us would use it to pay off our mortgages and CC bills, which would give the banks cash and help the economy.

That's actually part of the problem. Consumers are notoriously contrary to behaving the way they should to make the economy work flawlessly. We're supposed to save (or pay down debt) when the economy is flourishing and spend (or borrow) when it isn't. Unfortunately, we do exactly the opposite.

This is why stimulus packages are implemented the way they are. Giving the money out to individuals will result in the opposite to intended effect.

 

[gdnp]

That's a good point. Part of the Obama plan actually includes creating real stuff. To the extent that the real stuff that gets built is actually worthwhile, the stimulus plan has benefits beyond the mumbo-jumbo. So, the bridge building and such has real benefits, but the manipulation of who owes what to whom is basically the same as the Winston plan.

(And I'm not so sure about that wind and solar power part, but that's for the science forum. Wishful thinking and deficit spending won't create watts of power.)

It is also important to point out that if the government buys a trillion dollars in toxic assets, this is only a net cost of a trillion dollars to the government if the assets have no value. Unless 100% of the underlying mortgages default, for example, this will not be true.

I know of no case of the government giving away money without something in return: equity, warrants, preferred stock, etc. These may not be worth what the government paid, but they are not worth nothing.

 

[gdnp]

I guess it depends on how you count it – I've seen numbers from $120k to $240k. I rather like the idea of just handing out the money, but I wouldn't make any rules about how to spend it. (Not that this would ever happen.)

Some of us would use it to pay off our mortgages and CC bills, which would give the banks cash and help the economy.

Some would buy big ticket items, like cars and boats, which would help the economy.

Some would spend it on travel, which would help the economy.

Some would start their own businesses, which would help the economy.

Some would spend most of it on lotto tickets, which would help the government.

Overall, the effect would be spread out all across our economy, and just about every sector would benefit.

I suggest you read post #46. Unless I dropped a decimal point, 2 trillion dollars divided by 228 million adults comes out to $8771 per person. If you have heard $120,000 to $240,000 per person, you need to start listening to different sources. $240,000 times 228 million adults is 54 trillion dollars, five times the national debt. No one has proposed spending anywhere near this amount of fiscal stimulus. It is roughly FOUR YEARS worth of US GDP.

 

[mhaze]

I suggest you read post #46. Unless I dropped a decimal point, 2 trillion dollars divided by 228 million adults comes out to $8771 per person. If you have heard $120,000 to $240,000 per person, you need to start listening to different sources. $240,000 times 228 million adults is 54 trillion dollars, five times the national debt. No one has proposed spending anywhere near this amount of fiscal stimulus. It is roughly FOUR YEARS worth of US GDP.

Your conclusions are right as far as the math, but what of the premise (2T)? That's not an upper bound on the spending and incurred obligations of the last several months.

Also, while not complaining about your math, it does minimize the apparent amount of the money printing. Why not add in along with every person every dog and pet cat? They are people too.

Seriously, a better view is the 83M taxpayers, who in total pay about 1T, and your 2T is TWO YEARS OF IRS TAXES.

There is no reason to trivialize the vast sums being squandered in these exercises in manipulating the economy by amateurs with zero business experience.

 

[Merko]

There is no reason to trivialize the vast sums being squandered in these exercises in manipulating the economy by amateurs with zero business experience.

I think the problem is more that the manipulators are professionals with far too much business experience. Thus they end up bailing out their fellow businessmen, rather than restoring a functioning marketplace.

MIT professor and former IMF chief economist Simon Johnson wrote perhaps the best piece I've seen on the causes of the crisis, what should be done, and the reasons for why it isn't done. This is a little funny, considering I've spent quite a bit of time during the last decade protesting the policies of the IMF.

 

[Dr Adequate]

Really believe that?

And you are going to fix the problem of too much spending with more spending?

* facepalm *

:

Lis-ten care-ful-ly. The aim of the stim-u-lus pack-age is to cure the re-cess-ion, not the def-i-cit.

 

[Merko]

So I'm a bit confused as to why any theory other than laissez-faire capitalism, a libertarian's economic position, is still considered viable today?

It's probably a bit like why most people don't put their hand on the hot stove more than once.

Theories like orthodox marxism or laissez-faire economics certainly attract through their simplistic promise that you can understand everything from a few basic principles, but.. reality is not so.

 

[gdnp]

Your conclusions are right as far as the math, but what of the premise (2T)? That's not an upper bound on the spending and incurred obligations of the last several months.

Also, while not complaining about your math, it does minimize the apparent amount of the money printing. Why not add in along with every person every dog and pet cat? They are people too.

Seriously, a better view is the 83M taxpayers, who in total pay about 1T, and your 2T is TWO YEARS OF IRS TAXES.

There is no reason to trivialize the vast sums being squandered in these exercises in manipulating the economy by amateurs with zero business experience.

I am not attempting to trivialize anything: thus my use of 2 trillion, as I thought that this was an overestimate of the amount that the government was spending on the TARP and the fiscal stimulus combined. It is not trivializing this vast sum to point out that contrary to what 2 people have now posted that this is not nearly enough to give 6 figure sums to every taxpayer in the country. How is it trivializing to point out other posters gross exaggerations with more precise figures?

As for amateurs with zero business experience manipulating the economy, Obama is taking advice from people like Paul Volker who last I heard was credited with the policies that ended the stagflation of the Carter presidency. I suspect the federal reserve, a quasi-independent agency with governors that were not appointed by Obama and do not answer to him or congress, also knows a bit more about the economy than you. This does not imply that they are screwing up, just to write them off as amateurs just because they disagree with you is disingenuous.

ETA: If you trying to point out that 1.3 trillion (this year's projected deficit) divided by 83 million taxpayers is $15,600 per taxpayer, I will agree that this is a disturbing sum. My share of this debt is likely to be much more than the average taxpayer, and I don't like it one bit. Unfortunately, I fear that the alternative would have been a failure of the banking system, 20% unemployment, and a decade-long depression.

 

[mhaze]

I think the problem is more that the manipulators are professionals with far too much business experience. Thus they end up bailing out their fellow businessmen, rather than restoring a functioning marketplace.

MIT professor and former IMF chief economist Simon Johnson wrote perhaps the best piece I've seen on the causes of the crisis, what should be done, and the reasons for why it isn't done. This is a little funny, considering I've spent quite a bit of time during the last decade protesting the policies of the IMF.

You are factually correct - we are blithely asked to believe that some vague trickle down effect of giving away the country's reserve of wealth is "A Good Thing".

For some choice and selected group? One analogy would be the ship's crew and captain filling up the lifeboats with treasure, then rowing off with their friends, abandoning the women and children in a boat with an uncertain fate, but certain troubles.

Your conclusions are right as far as the math, but what of the premise (2T)? That's not an upper bound on the spending and incurred obligations of the last several months.

I am not attempting to trivialize anything: thus my use of 2 trillion, as I thought that this was an overestimate of the amount that the government was spending on the TARP and the fiscal stimulus combined.....

From Bloomberg News this week: "The U.S. government and the Federal Reserve have spent or lent or committed $12.8 trillion" in new pledges. This they note is almost the value of everything the United States produced last year. "

Per family unit:

$154,000. About equal to average net worth.

Profligate, irresponsible spending. (NOTE: I'm using the 83M number of family units - the number of tax returns is about 138M, but many of these are pro forma, students, etc.)

Just calling it like it is. Stay focused on the numbers, ignore the misdirection and smokescreens.

• Inflation and devaluation of the dollar, loans and US debt is paid off cheap
• Ordinary households zoom over the One's 250K "no new taxes" pledge
• Imported goods double or triple in price in dollars

 

[GreyICE]

This is addressed to Obama, right?

No, it was addressed to Penn. It applies equally to you, however, as you have conspicuously fail to present anything resembling that.

Good job bringing that to everyone's attention though.

 

[shuize]

Turning into a skid is counter-intuitive?

 

[gdnp]

From Bloomberg News this week: "The U.S. government and the Federal Reserve have spent or lent or committed $12.8 trillion" in new pledges. This they note is almost the value of everything the United States produced last year. "

Per family unit:

$154,000. About equal to average net worth.

Oh, I see. "The U.S. government and the Federal Reserve have spent or lent or committed $12.8 trillion" in new pledges." So we are adding not only what the federal government has SPENT, but also what has been LENT by the government or by the fed, and money that has been COMMITTED but not yet lent or spent. And that number was being compared to giving $200,000 to each adult, which has now somehow magically morphed into $154,000 per family unit, which at 83 milllion somehow is less than half of the number of adults in the US. Maybe there are more polygamists in the country than I thought.

You know what? If I buy a house for half a million with 20% down and the government were to finance it, then they would have just loaned my family $400,000. Wow, that's almost 3 times as much as under your program. Of course, I have to pay it back. Gee, just like the bulk of the rest of 12.8 trillion dollars up there: A lot of it was given out as LOANS that have to be paid back. Which makes sense, since the purpose of much of this money was to recapitalize the banks that didn't have money to lend. That's a lot different than writing everyone a check now, isn't it? In case you haven't heard, some of the banks are paying the money back already. With interest. Have you subtracted that money from the 12.8 trillion figure?

 

[mhaze]

No, I haven't subtracted it. I'm trying to state the problem accurately, which the prior guesstimate of 2T isn't even close to. Now, what are you trying to do? Minimalize the danger of excess debt?

You know what, that flat does not work at this scale. We are literally talking about debt that will be inherited by the next generation, and I object to any sort of ridiculing, minimizing, or even "taking an optimistic view" on the outcomes of that.

Further, for what it's worth, I expect a great deal of this back room funny money "loans" to not be paid off. This seems like a reasonable position. Ever had to assess credit worthiness or ability to pay?

 

[Dr Adequate]

* facepalm *

:

Lis-ten care-ful-ly. The aim of the stim-u-lus pack-age is to cure the re-cess-ion, not the def-i-cit.

If mhaze thinks Jillette was right, if anyone thinks that Jillette was right, please say so.

Obama, whom Jillette admits "drips smart" is trying to fix the recession, not the deficit. The deficit comes later.

Sheesh.

 

[mhaze]

Lis-ten care-ful-ly. The aim of the stim-u-lus pack-age is to cure the re-cess-ion, not the def-i-cit. .....Obama, whom Jillette admits "drips smart" is trying to fix the recession, not the deficit. The deficit comes later.

May I suggest that some of the Smart be not dripped, but used to comprehend the bounds of the current synergy between depression and deficit?
Wait...Penn already covered this with the analogy between skidding and crashing.

Never mind.

 

[GreyICE]

May I suggest that some of the Smart be not dripped, but used to comprehend the bounds of the current synergy between depression and deficit?
Wait...Penn already covered this with the analogy between skidding and crashing.

Never mind.

Ah, so the depression was caused by the deficit. So basically... you're blaming it on Bush.

I wouldn't go quite that far, I am not a radical Bush lover, but even I can see that the root cause of the depression is deeper than Bush, even if he didn't help, and probably hurt quite a bit.

 

[mhaze]

Ah, so the depression was caused by the deficit. So basically... you're blaming it on Bush.

I wouldn't go quite that far, I am not a radical Bush lover, but even I can see that the root cause of the depression is deeper than Bush, even if he didn't help, and probably hurt quite a bit.

You did not understand. I refer to the deficit of 2010, 2012, and 2014. This is not about placing blame in the past but understanding short term future effects of our current actions.

Gen. Honore said it well:

http://www.youtube.com/watch?v=QVBY_SqzJtI

 

[GreyICE]

You did not understand. This is not about placing blame. Gen. Honore said it well:

http://www.youtube.com/watch?v=QVBY_SqzJtI

So Bush destroyed the country with his politics, but we shouldn't take that as a reflection on the viability of his politics?

 

[Dr Adequate]

Lis-ten care-ful-ly. The aim of the stim-u-lus pack-age is to cure the re-cess-ion, not the def-i-cit. .....Obama, whom Jillette admits "drips smart" is trying to fix the recession, not the deficit. The deficit comes later.

May I suggest that some of the Smart be not dripped, but used to comprehend the bounds of the current synergy between depression and deficit?
Wait...Penn already covered this with the analogy between skidding and crashing.

Never mind.

No, if you have something to say, you should not sidle awkwardly away from saying it ...

Unless you just realized how stupid it was, in which case you shouldn't have said it in the first place.

 

[gdnp]

No, I haven't subtracted it. I'm trying to state the problem accurately, which the prior guesstimate of 2T isn't even close to. Now, what are you trying to do? Minimalize the danger of excess debt?

You know what, that flat does not work at this scale. We are literally talking about debt that will be inherited by the next generation, and I object to any sort of ridiculing, minimizing, or even "taking an optimistic view" on the outcomes of that.

Further, for what it's worth, I expect a great deal of this back room funny money "loans" to not be paid off. This seems like a reasonable position. Ever had to assess credit worthiness or ability to pay?

Once again, you mix the deficit spending by the US government with the expansion of the money supply by the fed. The deficit spending needs to be paid back, or at least the interest on it needs to be paid. The fed, however, expands and contracts the money supply all the time. This has profound effects on interest rates, inflation, economic growth, the strength of the dollar, etc. It does not, however, lead to a debt that the government needs to repay.