An exchange about macroeconomics

Here’s an e-mail exchange from today, unadorned. Perhaps y’all will take an interest in the discussion:

From: Kathryn Fenner
Sent: Wednesday, November 26, 2008 9:26 AM
To: Warthen, Brad – External Email
Subject: a suggestion

    Upon reading Peter Brown’s comment (the old ‘it’s my money’ whine) in Adam Beam’s excellent front page piece in today’s paper on the possibility of federal "bailout" money coming to Columbia as "investments," I wondered if it might not be helpful for some of your readers if you did a simple primer on Keynesian macroeconomic theory (since Friedman is generally considered discredited outside the Governor’s circle). Maybe if people understood that, instead of directly taxing us, the federal government can print money, which, if it pays for certain things like wages, can actually create wealth (increase the pie) rather than taking money from your pocket, everyone might calm down a bit. Or at least some people might….
    A lot of us educated in South Carolina public schools–even the fairly good ones (Aiken) missed out on economics–I only happened to take macroeconomics as an English major at Carolina b/c a friend recommended the professor teaching the honors section (Martin). I would have taken another social science for my requirement for sure otherwise. I also only happened to take an excellent course on the history of the New Deal because it was taught by an excellent professor (John Scott Wilson), whom I had studied under for another course.


Kathryn Braun Fenner
Attorney at Law

On Wed, Nov 26, 2008 at 11:36 AM, Warthen, Brad wrote:
    We touched on economics in my senior year, at Radford HS in Honolulu. You know how we did that? We played a game over the course of several days, in which we were supposed to be marooned on a desert island, and we had to make decisions about how to spend our time. Most time was spent obtaining food, but we could also budget time away from food-gathering to make tools to save time, etc. Scads of fun, much like such computer games of latter days such as Sim City — only we did it on paper.
     That was about it.
    We also read
The Autobiography of Malcolm X, which Barack Obama ALSO read in high school in Hawaii, and found inspirational. Our teacher for that class was Mrs. Nakamura, so we were way multicultural.
     That’s about it. I know what Keynesian economics is in this context, very roughly — it’s like, spending to stimulate the economy, right? — but I would not presume to set myself up as an expert. Oh, I know one other thing — his middle name was Maynard, like Maynard G. Krebs, whom you are probably too young to remember.

From: Kathryn Fenner
Sent: Wednesday, November 26, 2008 12:43 PM
To: Warthen, Brad – Internal Email
Subject: Re: a suggestion
    Dobie Gillis was in syndication and played in the afternoons when I got home from school, man. Maynard went on to be Gilligan, a vastly inferior show. I’m only six years younger than you, not that your face gives that away (what is it,  a portrait in the attic? Some secret Hawaiian face cream? I mean from reading your columns, you got plenty of sun playing outdoors in the tropics and subtropics)
    The game you played was more about microeconomics, which most people probably grasp more intuitively–it’s our household economy, our business. The mess we are in now calls for macroeconomic solutions, which no one in the MSM seems to spell out in a nice graphic for the newbies–how when the government prints money, you get inflation, but you also can get jobs and spending money and ripples through the economy (bottom up works a lot faster–not stimulus in your pocket that you save or pay off credit cards, but jobs for the unemployed who buy groceries and other necessities and thus get the ball rolling again in terms of generating transactions that not only support a civilized lifestyle (as opposed to homelessness or Harvest Hope) but taxable income to repay the "printed money."
    Whatever happened to the notion of "from those to whom much is given…."?  Rotary is such a great example of the fulfillment of the expectations by the fortunate, but some of the bloggers and Peter Brown and Sanford and his cronies (Joel Sawyer’s letter was way off base) need to step to the plate. Dennis Hiltner said something to me the other day that drew Socialist me up short, "The employers who depend on workers who depend on bus transit should pay them enough to afford the true cost." I sputtered, but then I thought, "Surely Palmetto Health could take $10 per shift from the MDs and give it to the custodial staff?" I guess that’s redistributionist, huh?

13 thoughts on “An exchange about macroeconomics

  1. Charlie

    Keynesian economics was discredited in the 70’s when we had stagflation. Keynes predicted that you could not have both inflation and a stagnant economy at the same time. Keynes was wrong.
    Fed Chairman Paul Volcker went against his own Keynesian beliefs and hiked interest rates to tame inflation. This resulted in a recession which was followed by a 20 year economic boom which ended with the bubbles of Alan Greenspan and Ben Bernanke.
    In Japan, the Keynesian advice was followed, and it did not work. They were literally giving money away, and it did not stimulate the economy. In short, you can’t create wealth with a printing press. You can only destroy it with inflation.
    Why do politicians persist with Keynes? That is simple. Keynes is a government solution. It is the hammer to the nonexistent nail. The alternative is to give over to the free market and let it correct itself. Politicians are unable to do this. This is because they are stupid. They bleed their patient and are amazed that he does not recover. And the answer is to bleed more until he dies, and they lament that they did not bleed him sooner.
    Whether the stimulus is monetary or a public works program, it does not address the fundamental cause of recessions which is malinvestment of resources. Malinvestment comes from cheap money which spurs financial types to do stupid things like write mortgages for people with bad credit. Naturally, the Keynesian answer is more cheap money and deficit spending.
    All you have to ask yourself is this–where is all this money coming from? Where are we getting the cash for these bailouts? And if it as easy as printing up the money, why not mint out a million dollars for each US citizen? Wouldn’t that solve our problems?

  2. p.m.

    “Maybe if people understood that, instead of directly taxing us, the federal government can print money, which, if it pays for certain things like wages, can actually create wealth (increase the pie) rather than taking money from your pocket, everyone might calm down a bit.”
    Here’s hoping people, particularly those in the Office of the President-Elect, don’t believe Ms. Fenner’s absurd assertion that printing more money creates wealth out of nothing. She should call Ron Paul and get an earful of down-to-earth money theory. Printing more money would just devalue U.S. currency and dig the hole we’re in deeper.

  3. Lee Muller

    The concepts of “macroeconomics” and “microeconomics” as being separate systems, is the invention of Paul Samuelson, to justify government interventions that had no direct impact on individuals and their businesses.
    Ever since, scores of government economists have tried different angles to breath life into the failed policies of the 1930s, known in America as “Keynesian”, but predating him by several generations.
    Government cannot create wealth, because wealth can only be created by adding value to something material. That is business, of which government does a quite inferior imitiation. Mostly, the people who call themselves “the government” just seize wealth from the creators and spread it around to buy votes from the indolent masses.

  4. Doug Ross

    I think if I understand Ms. Fenner’s idea about economics, what I should do this Christmas is run up some big credit card bills and then use my color printer hanging off my PC to make copies of twenty dollar bills which I then deposit in my bank and use to pay off the credit cards. In her mind, I’ve just created wealth not just for me but for the bank, the vendors, and the credit card companies.
    I can see why you might buy into her “theories” Brad as you also think that raising gas taxes by $2.00 would be a good idea for the economy.

  5. david

    First, distrust, discount and generally disregard ANY attorney who thinks that it is important that you know what her maiden name was. Sheesh, what a self important boob Fenner must be!!
    Secondly, if she thinks simply printing money creates anything but less valuable money, Fenners ideas should be especially avoided and ridiculed. And yet she has the hubris to tell us which economists we ought to believe and which not.
    Another nitwit to ignore.

  6. Lee Muller

    Even today, Warthen prints an editorial attacking Sanford for his criticism of First Carolina Bank giving its resigning CEO, Mack Whittle, an $18,000,000 severance package a month early so it can apply for TARP bailout money.
    He also takes his usual swipe at free market capitalism, saying the bank failures prove it doesn’t work. The FACTS are that the bank failures were caused by Democrats, with the complicity of a few Republicans, cooking up legislation which required banks to lend mortgage to over 10,000,000 blacks and 5,000,000 illegal aliens who lacked the ability to repay the loans.
    Then the loans were guaranteed by government agencies FNMA, FMAC and HUD. The board members, mostly Democrats and 60% Clinton cronies and Obama advisors, falsified the annual reports in order to pay themselves $400,000,000 in bonuses.
    They also paid off their protectors, Joe Biden, Chris Dodd and Barney Frank with sweetheart loans. Our own James Clyburn was a big champion of this bank fraud scheme. John Spratt sat idly by and watched his party leaders loot the Treasury.
    But you won’t see many newspapers printing the truth about it, much less editorials calling for punishment of Democrats who now infest Obama’s economic team.

  7. Kathryn Fenner

    When Brad asked if he could post this exchange, I hesitated because of fears of bringing out the “more heat than light” whack jobs who populate the blogosphere. I relented because I thought it might stimulate THOUGHTFUL debate, not knee-jerk cant about stagflation and cheap lawyer jabs.
    I print my maiden name so that people who knew me by said name prior to my relatively late marriage might recognize and locate me, as they can men married or not.

  8. Lee Muller

    Ms. Fenner,
    It is your antiquated, naive notions of economics which are being criticized. Those of us who are knowledgeable in economics and finance are not engaging in “knee-jerk cant about stagflation” when we note the failed policies of Paul Volker, who is another recycled Obama appointee.
    Obama’s economic team are only slightly less disturbing than his Marxist rhetoric and the threats of Democrats in Congress to seize the assets of private retirement accounts.

  9. Doug Ross

    Ms. Fenner,
    A simple question: When the government “prints money” to create the wealth that you claim will result, where does the value in that printed money come from?
    Can wealth be created from thin air?

  10. Lee Muller

    I suspect this is the first time Mrs. Fenner has considered such a question.
    When government prints paper currency which is not redeemable in gold or silver or some other form of hard money, they are devaluing all the money in circulation, and buying real goods and services with it before the sellers realize that the fiat currency is worth less than it had been.
    When merchants and workers realize that they must demand higher prices in order to compensate for the devaluation, this symptom is recorded as “price inflation”. The government is using devaluation to tax everyone, and to cheat its creditors.
    There is also a wealth transfer from from lenders to borrowers, if the borrowers can repay in cheaper dollars. If a borrower can increase his income to keep pace with devaluation, he can repay his old loans that much easier. That is why many debtors (like the government) like high inflation for a short period of time. The problem for individual debtors is that most of them cannot increase their incomes to keep pace with deflation, much less to earn extra cheap dollars with which to repay their debts.

  11. p.m.

    Learn something, Ms. Fenner. I’m no whack job. The government cannot create wealth merely by printing money, no matter what any pie-eyed academic taught you at Carolina. If the government just printed money each week to pay its employees, the dollar would systematically lose its buying power at an even greater rate than it’s losing it now.

  12. Steven Earl Salmony

    Are we suffering from the illness, amnesia, that is resulting in our forgetfulness with regard to the value of the Earth and its environs? Have we been mesmerized by a Tower of Babel?
    Perhaps we are forever forgetting about Earth and its environment because too many people, especially the economic powerbrokers, their bought-and-paid-for politicians and their minions in the mainstream media, are worshipping a “totem”. At least to me, there appear to be many too many people for whom the economy, in and of itself, is the primary object of their idolatry. This behavior is observable, obvious and flagrant. In many instances, these worshippers make what they evidently believe are rational arguments that suggest manmade financial and economic systems are somehow essential to, and an integral part of, God’s Creation; that indicate the growth of the global economy will occur from now on, even after the Creation is ravaged and its frangible climate destabilized by unbridled overproduction, unchecked overconsumption and unregulated overpopulation activities of the human species. Aside from the “Economic Colossus” nothing matters to them.
    Today, it appears that the financial system of the economic powerbrokers is collapsing like a “house of cards” and the real economy of the family of humanity is threatened. Experts in political economy are saying internally inconsistent and contradictory things. Communications about financials and the economy are generally confused and in disarray. Confidence and trust in the operating systems of finance and the global economy have been undermined by the invention of dodgy financial instruments and unsustainable business models as well as by the promulgation of con games and Ponzi schemes. Transparency, accountability and honesty in business activities have been largely vanquished. A great economic system is being undone by con artists, gamblers and cheats. In such circumstances, does the manmade colossus we call the global political economy remind you in some ways of a modern Tower of Babel?
    Steven Earl Salmony
    AWAREness Campaign on The Human Population,
    established 2001

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