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Thursday, May 30, 2013

Willful ignorance, economic edition

Check out the willful ignorance, the solid and obstinate refusal to reason soundly and to learn from thousands of years of human cultural and economic experience, on display here -- First quarter GDP revised slightly lower; austerity bites --
WASHINGTON (Reuters) - A drop in government spending dragged more on the U.S. economy than initially thought in the first three months of the year, a sign of increasing pain from Washington's austerity drive.

Another report on Thursday showed the number of new jobless claims rose last week, and together the data reinforced the view that the U.S. economy may be entering yet another soft patch.

Gross domestic product, a measure of the country's total economic output, expanded at a 2.4 percent annual rate during the first quarter, down a tenth of a point from an initial estimate, the Commerce Department said on Thursday. Analysts had forecast a 2.5 percent gain.

That is much faster than the prior quarter's pace, but likely still too weak to fuel faster improvements in the labor market.

"We are dramatically under-spending in Washington," said Michael Strauss, a market strategist at Commonfund in Wilton, Connecticut.
Prosperity -- a "growing economy" as politicians like to put it -- can never come via consuming wealth, but only from generating wealth; specifically, by consistently generating more wealth than is consumed.

Prosperity just is the state of having/keeping over time more wealth than one consumes -- this is as true for a "big society", such as a nation-state, as for a "small society", such as a family. Just as a family, or a social club, that over time consumes more wealth than it generates or "brings in" is bankrupting itself and heading for poverty, so to with a nation.

It's impossible to spend your way to prosperity; you get there only by working and generating wealth ... or by stealing the wealth that someone else has created.

Let us say that you, Gentle Reader, go to one of the gambling meccas or simply buy a lottery ticket. And, let us say that you win. Big! Now, certainly, you are better off financially (at least, until you catch "lottery winner's disease" and end up in the long run more poor than before your big win). But -- and this is the important point -- your new personal wealth is not the result of the creation of new total wealth within society, but rather merely of the redistribution of existing wealth within society. While you may be better off, our society as a whole is worse off; for, not only was no new wealth created in the process of transferring others' wealth to you, but some amount of wealth was consumed -- destroyed -- in the process.

Yet, the government statistics from which such asinine "economic analysis" as above is drawn will count both the mere transference of others' wealth to you and also the destruction of wealth involved in that transferance as "economic growth".

Or, let us say, Gentle Reader, that you -- OK, not *you*, but those fellows over there -- get your income, your on-going consumable wealth, via a government check, whether as an official employee of some level of government or as a recipient of the forced "charity" of welfare.

Again, no new net wealth within society was created in the process of getting that income to you. Rather, all that happened is that some of the wealth that others had created was taken from them, at the threat of violence and death, and given to you. And, just as in the voluntary gambling/lottery scenario above, this involuntary transference of others' wealth to you not only did not result in a net increase of the total wealth of society, but rather a net decrease: wealth is not simply being shuffled arount, it is being destroyed.

Nevertheless, as you need to live, and as to live you need to consume weath, you -- whether you are a government employee or a welfare recipient -- are going to spend most of (if not more than) that income. You're going to spend the money the governmant took from someone else to give to you ... and the government statistics will count that as "economic growth", despite that what happened is exactly the opposite of economic growth.

Now, Gentle Reader, what do you think will be, and must be, the long-term result of and to an "economy" based upon consuming others' wealth?