Why the US has economic problems and what you can do

US economy is not working because Americans forget what economics is about

Why is the economy not working? Let me explain economics so simple even Obama could understand, yet he will not. Nor will his Einstein advisers with wing-tip shoes and fancy degrees. I wish he would read this.

  • The simple answer is this: Americans have to build a better mouse trap to compete with countless legions of hungry, educated and clever capitalists in the emerging markets who are lean and ready to do economic battle with US citizen Joe Blow who is looking to politicians to solve the mess.
Economics is ground up not top down, if politicians understand this we will all be better off in the USA

The solution is not a top down industrial policy that wise men (yeah right) in Washington choose. That is, which industries including banking and real estate, to develop, help, bail out or steer. The solution is to let the markets work, and people with their own innate intelligence and creativity will find the solutions to their personal economic issues. I mean can you imagine if the government ran Apple, what the company would have turned into? The solution to economic problems large and small will always be this. To let the markets work. The result of unintended consequences of aggregate economic activity created by individuals acting on their own enlightened self-interest.

Everything else is gobble goop analysis.

Economic challenge to the reader

What is so hard about that to understand?  I defy anyone to counter me on this point. Anyone at all can give their best shot as to why capitalism does not work and if there is a better way. Just leave a comment. I gets hundred of readers to this website daily so there has to be one person that can come up with something better for an economic solution.

Think of yourself as a consumer

As a consumer I will always try to buy the best product on the market for the lowest price. Americans as individuals, not as a country mind you, need to figure out how to provide services and goods of better quality for a lower price. It is that simple.

And before you hem and haw about unfair trade, if trade is unfair then use it to your advantage. For example, manufacture a product in China and import it here with your quality control, design and marketing. If the economy is unfair, find the way it is unfair and use it to your personal advantage and this will create wealth for those around you.

  • Economics is not top down but bottoms up, it always has been. Government’s roles is to protect your personal liberties so you and I can find the best way to solve our own problems.

The basis for the free market solution to the US economic problems

  • From Adam Smith and enlightenment thinkers you have the idea that individuals acting on their own enlightened self-interest will bring society on aggregate to a higher level culturally and economically than other social economic model. The USA will be a better place to live socially and economically.

From the Austrian economics we learn about value What is valuable?

  • The human mind is what determines what is of value. The human mind alone. Something is valuable because you think it is. Period, end of sentence. This is illustrated in the diamond water paradox and answer the question why Karl Max was wrong. It also answers why a stock is worth what it is priced.
  • I will pay for something based on what I think it is worth. This is so obvious that even a child could understand it.
  • Value is determined subjectively by the human mind.
  • To paraphrase Shakespeare ‘There is nothing valuable or invaluable, but thinking makes it so’.

What is the role of the market?

  • The market though the price system orchestrates valuation between people who demand goods and people who supply goods. Consumers and producers are coordinated. Is there a better way to do it? No, because non-price rationing results like seen under communism where people had to stand in line for eight hours for a loaf of bread. The shop workers had a sense of power and entitlement, and no one was happy. My family lived through this surreal experience.
  • Yes, you can make exceptions to the market allocation system of course. Public goods like the environment and help for the poor. But even with these, the market system can help. I have always said in a rich society like we live in we can help the poor.

I am not an economic evangelist for capitalism. What I convey is simply the way economics works and how to jump-start the US economy. This includes returning prosperity to the middle class. That is reduce the burden of government so you and I can find our own solutions. People have been lulled to think the burden of government is light, it is not, your income would be over double what it is now if the markets were free.

How can America recover? Americans need to read books by Adam Smith and other economics like: Carl Menger 1840-1921, Ludwig von Mises 1881-1973,F.A. Hayek 1899-1992. After they as individual understand how economics works, spend the time thinking about the better mouse trap. The government needs to reduce the heavy bonds and burdens placed on US citizens that prevent this from happening.

4 Replies to “Why the US has economic problems and what you can do”

  1. Mark.

    You have explained very well how it can and should work.
    I sense that the problem is not economic but ideological.

    I will cote Garry North when he mentioned:

    “Liberal arts academia worships power. Academics did not actively criticize all aspects of the Soviet Union, Red China, and their satellite nations. The intelligentsia did criticize a few peripheral aspects of Communism, such as its limits on the freedom of speech. The intelligentsia did not criticize central economic planning in terms of its inevitable waste of resources and its decades-long failure to increase the standard of living.Academic economists publicly denied that the Soviet Union suffered from widespread poverty. They trusted the published statistics issued by the Soviet Union. The handful of economists who said that the statistics were fabricated were ignored. How many economists in 1970 had ever heard of Naum Jasny (d. 1967), who showed for years that the statistics were fake? Hardly any, and those who had heard of him usually rejected his warnings. The Austrian School argues that centralized political power makes nations poorer. All call for a vast decrease in political power, taxation, and regulation. They call for a comprehensive surrendering of power by Washington. Academia will not tolerate this. It is subsidized by the state. Its bread and butter is supplied by the state. Eliminate all academic subsidies from the state, including the state’s enforcement of accreditation, and college professors would wind up at the unemployment office – the privately funded unemployment office.
    The Austrian School argues that centralized political power makes nations poorer. All call for a vast decrease in political power, taxation, and regulation. They call for a comprehensive surrendering of power by Washington. Academia will not tolerate this. It is subsidized by the state. Its bread and butter is supplied by the state. Eliminate all academic subsidies from the state, including the state’s enforcement of accreditation, and college professors would wind up at the unemployment office – the privately funded unemployment office.”

    As you well know a free market is dynamic it changes and adjust all the time but Obama and his academic team think they are smarter then markets. For them “the Einstein advisers” markets need to be control. They have the “knowledge”

    These life time top bureaucrats hare rewarded by Title, Honorific diplomas, Medals, Honors, Prises etc.. Over the years and progressively they created there own irrational universe and reward system.

    Consciously or not they had to do this or face the evidence that there is no financial reward for most of them in the real market place where one has to create real value in order to be paid.
    Who would voluntary purchase there service ?

    No demand would be insulting for the thousands so called prestigious academic minds. How can this be?
    So they have created there own parallel and parasitic universe and there feeding tube is the leviathan state.

    Since the State is power they are perceived by many as having the capacity to manage the economy. America has a cancer and it’s am invasion of pretentious “ill-educated” idiots that are destroying the economy. A market economy would replace most of them so don’t expect them to be pro market.

    “Success today, whether its in a job or owning a business, is all about creating value– what can you do thats so valuable to someone else that he or she will voluntarily be willing to pay you for it?”

    The US certainly does not need 20,000,000 bureaucrats to get markets to work.

    1. Mark Biernat says:

      I would say one of the main reasons that the Austrian school of thought, Carl Menger, Eugen von Bohm-Bawerk, Hayek, Ludwig von Mises, Henry Hazzlitt, Murray Rohthband, Hans Sennholz gave such a robust defense of free market economics was they believed in the premise that the future can not be quantitatively predicted nor is human action predictable. We as individuals are the masters of our own economic life. We are not inhuman cogs in a machine or economic engine.

      I almost like them better than Adam Smith. Adam Smith was a start, but the above economist took it a step further. I read a lot of their orignal works and need to read more. It for me is connected with the idea of liberty and bettering the human condition.

      An example of this unpredictability mentioned above is, how can anyone predict the rise of Apple or the fall of Boarders books. There are too many variables in life, nature and human nature to anticipate all the needs, desires, intentions and innovations that might come along. If we could, we would have all invested in MSFT in the 1980s and would today be able to predict the next big thing, like the Internet was for the 1990s of the fall of AOL and the rise of GOOG. Think about how the unpredictability of human action and the infinite array of consumer choice that drives production rises and falls.

      Only a market economy where individuals are free can give rise to order out of seeming chaos. Have you ever been on a trading floor, like on Wall Street? It looks like chaos but it works. Individual liberty coordinates actions between individuals via the market with symphonic precision and accuracy.

      What is crazy is the Federal Reserve is the ultimate central planning bureaucratic strong-arm. Of all things, money, the most vital commodity, is controlled by the government and centrally planned.

      You are right centralization causes poverty. That is the main dishonesty of government. It gives people promises and warm fussies. It makes them feel good inside, but when it comes down to it people get poorer and poorer. This is why decentralized bottoms up rather than centralized top down is important.

      At the heart of John Maynard Keynes was central planning and credit expansion. He believed stimulate the ‘animal spirits’ by letting the credit flow free and easy will get the economic engine going. Stimulate ‘it’ with government money and spending. The problem is there is no ‘it’ at all. The economy is me and you. People interacting and living their lives. There is no engine to start, that is an economic fantasy.

      The paradigm of academia built around Keynesian was not concerned with liberty at all in fact. Liberty was not an issue for them. Just turning the crank on some economic engine with centrally planned government intervention.

      What amazes me is why so many people do not understand economics this way? On one level I am not my brother’s keeper. If some person wants to believe the government will rescue them more than they can help themselves through using their own talents and brains, which all of us have, good luck. But on the other hand, it does affect me when people vote and choose people who will take away my liberty, not just economic liberty.

  2. Gerald Hickly says:

    Force the congress to balance the budget.

    What effect would there be on the U S Economy if the Fed. never got paid for the Trillions of government debt it is buying?

    1. Mark Biernat says:

      You can balance the budget in a matter of years and not have default. Ron Paul out lined such a plan. There are many ways to do this. balancing the budget seems like a pipe dream in the Obama era, yet it is possible to reclaim our nations greatness. One would be a balanced budget.

      The economy which is artificially constructed on a government build house of cards would fall and a new economy would rise based on productive people and innovation.

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