Wednesday, July 7, 2010

Our Orwellian Economy

Our economy is in the final acts of an Orwellian drama. Just as in Orwell’s fiction, the individual and the truth are usurped by the power of the state.

· Our Ministry of Housing had a goal to make homes affordable for the lower class. Now that these homeowners are desperately underwater, rich investors are buying up the lower end real estate. Many members of the lower class that were helped by the Ministry of Housing are destined to rent forever.

· Our Ministry of Lending had a goal to make mortgages affordable for all. Now, the indebtedness of our total mortgage market is equal to the value of our mortgaged housing stock. So in the aggregate, anyone with a mortgage is just a high priced renter locked into a 30 year lease.

· Our Ministry of Jobs had a goal to increase employment. It has heavily subsidized the non productive public and financial sector jobs market. To pay for these subsidies the productive private sector was heavily taxed. And now, even more taxes must be levied on the shrinking private sector to pay the unemployment benefits of displaced workers as their jobs are shipped overseas or staffed by illegal aliens.

· Our Ministry of Free Markets had a goal to create fair and stable investment markets. It has manipulated almost all market conditions and gamed the system by bailing out some to the most egregious speculators. This policy has created two of the largest investment bubbles in our nation's history. Not to be outdone the current ministry is using even more extreme measures to create the biggest bond bubble in the history of the world.

· The Ministry of Sound Investing had a goal to manage interest rates for the benefit of investors. It is now punishing savers with zero percent interest rates and using the windfall to bail out speculators.

· Our Ministry of Sound Money had a goal of controlling prices. One dollar in 1950 is now worth 12 cents.

· Our Ministry of Sound Government had a goal to reward citizens for voting appropriately. For the past 15 years our politicians have used ultra long term debt to purchase votes in the next election. Mathematically it has become impossible to pay back these promises with future income, so by definition it has become a Ponzi scheme.

· Our Ministry of Sound Accounting has created bookkeeping techniques to hide the Ministry of Sound Government’s Ponzi scheme.

Presently our Ministry of Freedom is saying that we need to borrow large amounts of money from hostile foreign nations to increase our children’s standard of living and keep them safe in the future.

Debt and consumption are good. Saving is very, very bad. Our non productive government and financial sectors must be heavily subsidized to create economic growth. The productive private sector must be heavily taxed to create more jobs. Up is down. And left is right.

There are many allocation problems with our economy today that are creating a high level of unemployment. Non productive government favorites receive ever increasing pay, benefits, pensions and subsidies. This must be paid for by the ever decreasing pool of private sector jobs.

As an accountant I don’t understand the math behind our policy choices in the ministry over the last 15 years. Why do our comrades in government feel that more borrowing for more subsidies to the financial and the public sector will produce more private sector job growth? It has not worked for the last 15 years. After massive spending and subsidies we have less private sector jobs today than a generation ago.

The pay and job growth in the non productive sectors of our economy have exploded.

Alas, in the end we must listen to the Ministry of Fairness when they say, “all citizens are equal.”

And, as good citizens we must understand that, “the government and the financial sector are more equal than everyone else.”

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