On Economics

First things first, I never got around to publishing the last of my observations from my trip to the South West, so here it is.

On October 29 we drove from Santa Fe to Sedona Arizona. We stopped at the Meteor Crater. Although interesting, the $15 admission was insulting. The people we paid $30 (there were two of us) to did not put that crater there and its not like I pay to see trees or mountains. Anyway even a space nut like me was unimpressed, it is just a big hole in the ground out in the middle of nowhere, a good 10 km from I-40. I will say this though, the road from the interstate to the crater would be awesome for riding. Except bring lots of water.

Other than the crater the drive was very long and uneventful, thank goodness the speed limit in Arizona and New Mexico is 75mph, if it were 100km like it is back home I would have lost my mind.


And that's it. I should have taken some notes about my experiences in Sedona, but I was too busy with other things, like packing and getting ready to go home. One of these days I will try to remember Sedona, but for now, let me just say, if you are under the age of about sixty, don't go, you will feel too young. Sorry to the Sedona tourist board, but its true guys, I think Lesley and I were the only people in town who did not own a business or collecting social security.


Now I wanted to talk briefly about economics. Why? Because I give a damn, that's why!


Alright its no great secret, I am a dyed to the wool leftist pinko commie. Even so, I am actually not so leftist that I oppose balanced budgets, or modesty in all things government does. Which I suppose makes me a big yellow stripe middle of the road person, but whatever. The point is, while I don't much care for what our conservative government is doing most of the time, this time my rant is not just a pissed off Liberal, rather it is founded on the fact that the Tories are being, well frankly, a bunch of economic children.


Consider this, classical Keynesian economic theory tells us that during periods of prosperity governments should keep balanced budgets so that when it rains the government can flood the economy with money to keep things going until the metaphorical rain stops. That is what every single nation in the OECD (Organisation for Economic Co-operation and Development) is doing, they are spending like drunken sailors, even countries with budgets now over a trillion dollars (yes trillion, as in one followed by twelve zeros, that's $1,000,000,000,000 into the hole), well every nation is spending like crazy except one, Canada.


You know the funny thing, our Finance Minister Jim Flaherty, used to be a minister in the Eves government here in Ontario. They were the same sorry bunch who told us the budget was balanced going into an election, some how, six or eight weeks later it turned out there was a $6 billion budget deficit on a $100 billion dollar budget. Ooops! My favourite part, they were going to balance the books by selling stuff, highways, hospitals, roads, you name it. Well we are in a recession now property values are plunging, as if going against the grain of bajillions of economists was not bad enough what else is Minister Flaherty doing to balance the budget? Sell federal properties! Come to crazy Jim's buy an acre of land, a motivated seller must move this land by the end of Fiscal Year 2009!

I would like to propose a fictional measure of economic prosperity, lets call it monetary momentum. Suppose we take one dollar, and follow it, maybe it changes hands three times in one day, now suppose we track the number of transactions of every single dollar in an economy. Now obviously we cannot trace every dollar, but we can say the average number of transactions, the average size of transactions, this gives us the monetary velocity of an economy.

To compensate for inflation in the next bit, suppose we create a new constant, the cost of say, a McDonald's Big Mac, lets say instead of measuring using dollars we measure amount of money in terms of number of big Macs a person could buy. So for example while I will bet money changes hands very quickly in a place like Hatti, I will also bet you can't get too many Big Macs. Conversely, whereas money moves more slowly in the United States, there are an awful lot of Big Macs you could buy.

Now if we take the monetary velocity and multiply it by the amount of Big Macs in an economy, we have a very good indicator of the economic health of a nation. During periods of prosperity, this product (which I call the monetary momentum), velocity times Big Macs, should be very large. During periods of economic decline, naturally the monetary momentum shrinks. During the good times government should basically try to stay out of the way (yeah and I called myself a commie?) During the bad times what can government do? Print money? No good, sure in the short term you can buy more Big Macs but in the long term the value of money goes down, inflation, and you get less Big Macs for your dollar, hence overall monetary momentum shrinks. What else can government do? Remember there is no difference between borrowing money and simply printing more, because all modern paper money is nothing but government debt.

Put this way I think economics makes a lot more sense, at least it makes a lot more sense to me. Frankly it seems obvious, you cannot force people to spend faster, thus increasing velocity, you can only play with weight, that is number of Big Macs floating around. So you do just that, you float a wack of bonds, lower interest rates, dump cash into the economy and as money starts picking up velocity you slowly remove the money from circulation so that inflation remains under control. But as long as momentum is unacceptably low, you inject more Big Macs into your equation.

What did Jimbo do? He's keeping his Big Macs all for him and his buddy Steve. Great guys, go explain that one to an unemployed auto worker in Oshawa. Go piss away some money, please.