This just in: I haven’t been blogging for a while. I’m not exactly sure why but “futility” comes to mind. I’m just one person shouting into the wind. However, I think the time has come for me to post a few times; at least enough to clear my head.
Today, I’m going to talk about economics and the coming recession. A recession can have a few definitions but generally, it is a fall in Gross Domestic Product for 2 successive quarters. In short, we become less productive for about 6 months or more.
The two options available are Monetary and Fiscal.
Monetary refers to the abundance or scarcity of money. When there is more money in circulation, we tend to spend it. When we spend it, companies have to produce more. Jobs are created etc. To put more money into circulation, the Federal Reserve lowers interest rates. Lower rates mean we can borrow money cheaply. We buy houses and then fill those houses with stuff. Historically, the FED will take a 6.5% interest rate and maybe lower it to 2% or something like that. However, right now, money is already cheap (2.25%) so there is not much room to lower it even more. So, monetary policy is basically neutralized…not available to make a big impact.
Fiscal refers to government spending and taxation. The government can raise taxes that will take money out of consumer pockets and thus, cut spending. So, doing the opposite – cutting taxes, will put more money into people’s pockets and increase spending and thus, get the economy moving. However, we have already cut taxes more than we can afford to (see skyrocketing national debt). But wait, the government can increase spending and that will put money back into the economy. This works! However, if we are already spending more than we have, this should be kept as a last-ditch effort. For example, deficit spending is considered one of the best ways to get yourself out of a recession, once you are already there.
Tariffs are a form of taxation. In spite of what you are hearing from the White House, Americans are paying the taxes we are imposing on Chinese goods in the form of tariffs. There is no economic justification for the current tariffs. Yes, there seems to be some political justification but that is more of a Trump Personality issue. If we remove the tariffs, that gives us immediate relief from one of the biggest taxes out there.
Immigration, or lack of it, is a real problem. If we don’t allow immigration, we will not be able to sustain any real economic growth. This is because our population growth without immigration is dropping every year. If we have a fixed population and we want to have economic growth, then those that are working, have to be more productive year after year. Imagine how much you contribute to our economy right now. Next year, you must do even more, then more again. Immigration is not an economic burden. Immigration is an Economic Necessity if we are to avoid a recession. It is an Economic Necessity if we find ourselves in a recession and want to get out of it.
Green Energy is the next big economic driver in the world. If we want to be a part of it, we need to start playing. Economically, I am progressive. I’m looking forward and all I see is Green. Someone that is conservative is holding on to a past that is fading in our rearview mirror. Yes, you can invest in coal…but I wouldn’t recommend it and it is an industry in decline.
Trade opens more markets for our goods. Trade deals help amplify the benefits of trade. For us to make these agreements, we need to do two things: (1) make sure the interests of the other parties are also satisfied or they will not play and (2) make sure that people entering trade deals with us are confident that we will hold up our side of the deal. Right now, the entire world is side-stepping the United States on economic issues because we satisfy neither of these two requirements.
That’s enough for now. Time to save the world.
Up, up and away…
Jim
