How to create a recovery in the USA

http://market-ticker.org/akcs-www?post=167922

Yepp!

Posted 2010-09-30 11:22
by Karl Denninger
in Editorial
WSJ Opinion Page: A True Path Forward?
 

From this morning....

Solution No. 1 was to throw nearly $1 trillion of stimulus at the economy. But Keynes failed. Then they sprayed the economy with gallons of Chairman Ben's Quantitative Elixir, or QE. Nothing happened. They could have extended the Bush tax cuts, but instead the Pelosi Democrats punted the subject past the November election, the equivalent of kicking the ball straight up in the air.

It looks to me as if there's only one policy they haven't tried: economic growth.

More recognition of the problem - and a potential solution?

Ok, let's look at an actual path forward.  Do this, we win.  Don't do this, you need to come up with a path that does as much as this one will.

Shut down the Chinese abuse engine.  Right now.  Either they revalue up 20% today, and to 40% within two years, or we hit them with tariffs representing the full wage and environmental differential in their products.  I know they say they can't, and that it will cause "problems."  But the problems are of their own making - slave labor wasn't our policy, it was theirs.  They could have enacted labor and environmental reforms over the last 10 years, and kept making promises they broke.  We, for our part, didn't enforce the mandates.  Ok, we start.  Right now.  Oh, and incidentally, this is not just China.  The same thing applies to Mexico, Vietnam, India and everywhere else.

This will get rid of the $3 T-shirt and $30 DVD player.  I recognize this.  That's ok, because.....

We're going to build nuclear power plants.  On each and every military facility.  We will pre-empt state and local challenges and lawsuits, and just do it.  Those who don't like it, too damn bad.  The Navy will run them at a supervisory level and civilians will build them.  We will build a mix of Pebble Bed, Fast Breeder and Thorium Salt reactors.  The first two will be built in a fuel-cycle neutral mix.  The latter will get its fuel from coal ash.  This is a sustainable, green, and permanent energy solution.  If the Government is going to spend money, this is what we will spend it on.

Those who are on welfare may either take one of the jobs at the above plants or lose their benefits.  Exceptions are available only for documented full disability.  Fraud in that claim will lead to 20 years in the slammer.  No exceptions.  If you're able, you work or you starve.  End of discussion; no more freeloading.

We repeal the 16h Amendment and all other income and payroll taxes.  The Fair Tax is implemented immediately.  January 1st 2011 - cold start.  This will result in an instantaneous flood of capital and businesses coming to the US.  The electrical plants above will produce the power they will need.  It will also instantaneously restart Capital Formation which is NECESSARY for us to get entrepreneurship and innovation going again - right here, in this country.

We either repeal Obama's Health Law and implement my plan OR we set a percentage of GDP we will spend on health care at the Federal Level and implement the Canadian system.  Choose one.  Have the debate in public, pick one, make it happen by 12/31/2011.  The ability of companies to bill out $5,000 for an MRI to "uninsured" people while the insurance company pays $150 is an obscene rip-off and must end.  Further, the idea that you can show up with no money and no insurance and force someone else to pay, instead of having that responsibility attach to you as a valid debt to the government is also obscene.  This is rank profiteering on people's DEATH and must end - right now.

No more illegal immigrants.  Period.  This is non-negotiable.  Come here legally or you will be held to account for a criminal offense, serve your time, and then be deported.  End birthright citizenship when your mother comes here unlawfully.  For those who are here now, they can stay - as adopted kids.  If that's unacceptable they can leave with their parents.  We have too many people for the number of jobs at present, and those who are not here legally must lose first.  I am all for LEGAL immigration - and once we settle out our growth plans, if we need more workers then let's start letting people in, starting with those who lawfully stood in line.

ALL of the frauds in the financial system are prosecuted.  Every one.  We will make space for these crooks in the prisons by legalizing marijuana and treating it like alcohol, except that we will sell it at Pharmacies where the people doing the vending have a lot to lose (their six-figure annual income!) if they sell to minors.  It is time to end our failed prohibition experiment and besides, we need the prison space for all the banksters.  They're a HELL of a lot more dangerous to our society than some dude smoking a joint.

Clarify and extend The Federal Reserve Act to require that actual price inflation, measured by a basket of items representative to the spending in the actual economy (goods and services) deflates at 1/2% per year.  Yes, deflates.  Technology improves.  The natural progress of a society is toward better efficiency and lower costs.  Therefore, this should result in small deflation over time.  I recognize that this will make lending for speculation or consumption inherently dangerous as in such a regime recessions are necessary to contain balance in the currency and banking system.  This is how it should be!  This also means that you can save your retirement over your working life without engaging in ridiculous and dangerous speculation in which virtually EVERY person ultimately loses.

Recognize that this growth will be a one-time deal.  We'll get something approaching 10% GDP growth for 3-5 years.  But then it will be over.  Government spending must decrease as entitlements are removed and debt must be paid off - no more games.  We cannot build or guarantee indefinite compound forward returns - that's mathematically impossible.  This rock is vast but it is finite.  We use the above plan to stabilize and grow our economy, restoring what we had in the 1950s and 60s - and to prepare for a more-or-less steady-state future where the gains of the future come from technological advance, not leverage and financial fraud.
You want a growth plan? 

There it is.

Now do it Washington.