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The Upside Down U.S. Economy

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PostPosted: Sun Jan 03, 2010 1:29 am    Post subject: The Upside Down U.S. Economy Reply with quote

The U.S. government has turned the world's greatest economy into the world's biggest joke. Domestic demand for efficient private goods will be weak, while domestic demand for inefficient public goods will be strong. Government intervention is like ordering a tall guy to paint the floor and a short guy to paint the ceiling.

Government believes it can micromanage something it doesn't understand. I have much more faith in Wall Street, which created and captured enormous real wealth in the global economy, and distributed that wealth to the masses.

Also, I give credit to the Fed for improving monetary policy, since the Great Depression. At least the Fed, unlike Congress, knows it can't micromanage a large economy without undesirable effects.

All government has done is burn money to mostly spin the economy's wheels. Consequently, the U.S. will be a much weaker engine of economic growth, pulling the rest of the world's economies, for at least a decade.

The U.S. economy was better off before big government:

American Prosperity and Price Deflation
Written by Richard M. Ebeling
May 2008

The decades between 1865 and 1900 were the years of America’s industrial revolution. Before this time, America had an economy of primarily light industry and farming. By the beginning of the 20th century, however, the United States had surpassed all of the European nations in manufacturing, including Great Britain and Imperial Germany, the industrial giants of the time.

Mass immigration from Europe, huge capital investments, and technological improvements provided the means for America’s growth and rising standards of living that soon became the envy of the rest of the world.

During the years after 1865 prices in general slowly fell from their Civil War highs. A Consumer Price Index that stood at 100 in 1865 had declined to 57 by 1900, or a 43 percent decrease in prices over a 35 year period. On average prices went down around 1.2 percent each year over three and a half decades.

At the same time, indices of money wages in agricultural and manufacturing employment both rose during this period as labor was becoming more productive due to capital investments, even with a rising population resulting from millions of immigrants joining the American work force.

The index of money wages in agriculture rose by almost 40 percent between 1866 and 1900, while money wages in manufacturing went up 20 percent during this period. Thus, on average, money wages in general increased by about 30 percent for workers as a whole.

In combination with the productivity gains and the capital investments that resulted in the 43 percent decrease in the price level, this meant that in the last 35 years of the 19th century the real standard of living of the American people increased by almost 75 percent as measured by the positive change in the average American’s buying power in the market place.
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