Tuesday, February 14, 2012

The Perfect Argument Against Bailouts and Big Government Spending in One Picture



They say a picture speaks a thousand words. Here's a comic that does. It shows why we should be against all nationalization of industry and bailouts of industry and banks as well as tax increase and adding debt to our already un-payable debt.




Of course the free market system (which, by the way, we haven't ever really tried - there's always government control and cronyism) has its warts... But the way we do things now (bailouts, credit rate control, printing money, government take over of industry, government controlled education, medical care and retirement) just doesn't work. The fact that we're heading for bankruptcy (Greece is showing us what's going to happen to us soon enough) shows that we must stop this big government mentality.


If an industry like banks or big companies like General Motors or TEPCO in Japan go bankrupt, let them! Why do private companies get to keep profits but when they lose money the government wants to socialize their loses and stick it to the taxpayer?


And some taxpayers actually agree with this twisted logic?


Say in the case of a company like GM. If we bail them out, the same incompetent management get to keep their jobs. If they go bankrupt, a new group comes in and buys them up. The new group gets rid of the bad parts. The factories are still there, the buildings are still there, the new company needs someone to run those factories; they get rid of bad management and bad workers and start again. That's why they buy a bankrupt company in the first place; they think they can make it profitable!


But, when the government bails them out? The incompetents keep their jobs (and donate to the next election of those government people) and confused people in the public sector think that those industries should be nationalized. Yes. Nationalized and run ostensibly for a profit. Like the profitable venture that our, say, Japanese government has us at public debt of 229% of GDP.


What's wrong with this logic and this picture?  


Anyway, the same old same old way of doing business that we've been doing for the last 40 years, since 1971, has got to stop. 


Haven't we screwed up the world for our kids and their kid's kids enough as it is?


9 comments:

Mr. Nobody said...

Is it a defect of the human condition that so many people seem so present-time oriented? It seems many people in the world only look ahead to their next meal, next day, next week, or possibly next month.

How many people look at their next year, next decade, or the rest of their life?

Well, many people in many cultures, are, and were, willing to put up with far worse. Is this another defect of the human condition?

Wasn't it Einstein who said his definition of insanity was someone who kept on doing the same thing over and over again, and yet expected different results?

mikeintokyorogers said...

Hi Mr. Nobody,
Welcome back. You were missed. Yes. That was Einstein. It astounds me that the government keeps doing the same thing over and over... It just makes one want to shake their head....

Anonymous said...

Hello again Mike,

What do your tea leafs say in what will happen in Japan in the next 1-5 years?

mikeintokyorogers said...

Hi Anonymous...
I think the government is going bankrupt. I think people need to stock up on water and food and silver and gold. After the fall who knows what's going to happen. Read this, it is excellent and this guy is always right: http://modernmarketingjapan.blogspot.com/2011/12/kyle-bass-letter-to-lps-japan-europe.html

Anonymous said...

Mr. Nobody wrote, "Is it a defect of the human condition that so many people seem so present-time oriented?"

I think it's planned that way.

Consider:

College classes focus on things such as "What would your tombstone read" or "If you know you only had a year to live"... etc

It's in popular music too:
AC/DC - "Life for today, forget about tomorrow"

In the themes of popular movies:
"Sometimes you just have to say, What the fuck" - Risky Business a.k.a. a trend setter of an older generation.

Norms and values imposed from the top ruling classes upon the lower classes, that's all.

- clark

Anonymous said...

I mean, to get some of what I'm saying, you may need to be aware of what many People claim (the Daily Bell for one) that the 1960's counter culture was a controlled opposition,... go from there,... and, just look at how far the powers-that-be go to marginalize Ron Paul today,... imagine what they do when you're not looking, so-to-say.

- clark

Math said...

Greece is part of the Eurozone, thus why it cannot control its debt. The US is different. Don't use logical fallacies please (this is a false equivalency)

If you use this argument, anyone could say that since socialism works quite well in some places (ex: nordic countries) then it's what's best for the US. The situation in those countries are extremely different and you cannot base your premise on that.

As for your second argument, it's based on speculation that the people who will buy the company will be able to make it work again, that the old management was bad etc

However, this argument doesn't hold well. What if the reason a company failed was because of a temporary change in consumer taste?

*(Ex: GM is making trucks, consumers decide they want small cars because a study reveals small cars have a big advantage, GM can't sell its trucks and goes bankrupt while trying to move from trucks to cars. Now GM couldn't predict how consumer taste would change, because that is impossible. This doesn't mean the management is bad or incompetent. Now, if the government bails them out, they can start making cars, be profitable and the other company who would have came in to buy it can invest in something else and GM will be profitable too.)*

Obviously, this is a counter example of what is possible. Your argument is based on speculation and on the premise that a company going bankrupt is a company with bad management. This is not always the case, and when it's not the government can and SHOULD intervene. (See government spending multiplier)

And a the last part of the paragraph also shows a lack of knowledge on how the economy works. Those company hire people to work there. Having them means people can work and it contributes to the economy. The goal is to have a growing economy, because this means more jobs and a better quality of life for people (thus why people should want that) You need the government to help boost aggregate demand.

Concerning the part where you say Japan's debt is 229% of their GDP, Japan's debt has always been very big but debt in percentage of GDP doesn't mean much. What matters is how expensive the debt is (and how you control it)

See, countries can borrow money from other countries (or even from itself) to inject that money into the economy and make it stronger. By doing so, what they borrow becomes debt, but if you end up with an economy that's near full employment, then there is absolutely no problem with that. The debt will cost you something (you don't repay the debt immediately) and since your economy is stronger, it doesn't matter much. And you can keep doing this thus boosting the debt while also making your economy stronger and having the debt servicing will be acceptable. So the argument that high debt is inehrently flawed and simply not true.

I am not arguing that Japan is in a good state right now though, I'm simply pointing out that your premise that debt=bad is wrong. Japan's situation, again, has nothing to do with other countries' situation. That this happens to them does not mean that it will happen to other countries with higher debt.

All in all, I think you should dedicate some time learning about economics, then you can have a meaningful debate about this.

To people saying ''t astounds me that the government keeps doing the same thing over and over'' :

Some government spend a lot and end up having a stronger economy (they boost aggregate demand). This is why governments around the world do it. The problem is you only see when government do it badly. The world doesn't work like that. Governments get a lot of things right but when they do no one complains and no one talks about it.

mike in tokyo rogers said...

Math's comments are laughable. There's a book for you to read, Math, it's one of the most famous books on economics. It's called "Economics in One Lesson" by Henry Hazlitt. I suggest that you read it, Math. I can't even begin to address your comments because they are so full of misconceptions and errors that I wouldn't know where to begin. But this is simply astounding: "See, countries can borrow money from other countries (or even from itself) to inject that money into the economy and make it stronger. By doing so, what they borrow becomes debt, but if you end up with an economy that's near full employment, then there is absolutely no problem with that. The debt will cost you something (you don't repay the debt immediately) and since your economy is stronger, it doesn't matter much." Ha! Ha! Ha! Name ONE example where that has ever happened in history of Fiat currencies. You can't because it never has and never will. NO fiat currency has ever survived over 100 years... We are seeing the end of the current financial system and, pardon my French, but stupid Keynesian ideas like your go down the shitcan of history. Wake UP. The government cannot do anything right. They never have.

mike in tokyo rogers said...

Dear Math (or should I say, "Lack of ability to do 3rd grade math")
I'm not impressed in the least by some clown with a Phd in economics. I am a successful business man, business owner and have started up 4 different companies until now.
The NIkkei 225 performance (as well as Japan's current economic malaise shows that real-world economics trumps your Keynesian fallacies I haven't time to argue (or interest in posting) your nonsense that has been proven wrong for nearly 100 years and is being proven wrong right now in front of your face..... Guys like you will be squealing for more government stimulus later this year when the Japanese economy collapses.... Ho hum...