Building Pyramids

I heard an anecdote the other day. It was about Roosevelt and Keynes. Roosevelt allegedly asked Keynes what to do with the public works monies in the 1930s and Keynes answered and I paraphrase: “Why not build pyramids? Americans like pyramids.”

Okay, on the surface a frivolous use of money. But what would happen if we “built pyramids” today?

- First of all, we’d have to find a place. I nominate somewhere in Michigan outside of Detroit. Immediately we put let’s say 10,000 people to work building our mythical pyramid. At $50K a piece that puts $500 million in the local economy (and saves the government a significant amount in unemployment). So now the local Walmarts, Home Depots and McDonalds et al have to hire more workers too to accommodate the extra demand. And, of course, order more inventory from their suppliers from all around the country. And guess what? Local tax receipts will go up, saving jobs for teachers and public servants. And the real estate market will probably pick up from people coming into the area.

- Of course we need stone to build a pyramid. How about the quarries of Indiana? Now we’ve added a few thousand jobs there. The local businesses prosper. Now the same effect we saw in Michigan is beginning to happen in Indiana on a smaller scale.

- How about cement? From what I understand there’s a very big plant in Texas. Time to up production. More jobs. More money in the local economy.

- Then we need tractors, trucks, tools etc. That means jobs at the Caterpillar plant in Illinois, at the GM , Ford and Chrysler plants in Michigan and the Midwest, Stanley Tool works in Connecticut - and, of course, all the vendors for those companies – the tire companies, electronic companies, sheet metal companies, etc will have to stock up. And more jobs, revenues for the local delis, supermarkets, gas stations, convenience stores in all those areas

- Of course, since all this manufacturing activity will generate greenhouse gases, we’ll need to develop systems to make this growth sustainable. More jobs, more R&D, more ancillary services.

- And once our pyramid is done, now we have a tourist attraction smack in the middle of Michigan. That means hotels, motels, food franchises, convenience stores, etc

- Without doubt, the teamsters and trucking companies will be happy about toting all these needed materials around the country. And, then, we’ll need workmen’s comp – so the insurance companies in CT will get a nice hit, not to mention the financial services industry to finance some of this added growth.

- And what’s happening in the public sector. Tax receipts are going up, unemployment disbursements are going down, maybe some of these workers are even deferring their “retirement” beyond 65, so they continue to pay their payroll taxes and delay their receipt of entitlements.

HOLY COW! WE’VE STARTED A FULL BLOWN RECOVERY JUST BY BUILDING A STUPID PYRAMID.

Now, the reason for this diatribe is not to give everyone a lesson in Econ 101, but rather to counter all those posts that say government spending is necessarily bad. Yes, we need to make the stimulus funds work more quickly, but you can’t argue that they’ll create jobs.

Consider the alternative. Do Nothing? Now you’re looking at an unemployment rate (not counting the underemployed) of about 15%. Do a tax break to the wealthy instead? Well, it would help some, would probably result mostly in luxury good consumption and/or savings/debt retirement. Savings aren’t bad – as long as the banks are willing to loan out the money – in this environment a dubious assumption.
So, if building a “stupid pyramid” can result in all that growth, think what building something really needed might do.

What if they gave a depression and no one came?

I took a lot of economics courses in my time (not that I remember much!)

But, despite the few things I can remember about Keynesian economics and Milton Freidman's monetary theories, I'm more confused than ever now.

What happens when almost everyone has NOTHING?

What if we just kept on doing what we're doing now -- going to work, the grocery store, the movies, everything -- but we just didn't use money.

It's a beautiful idealistic thought (I've never been accused of being a pragmatist).

The one problem, though, is some people would try to take advantage of it and the whole thing would become unglued before it got started.

Oh, well......

Will Our Generation Ever Be Able to Retire?

I was thinking the other day (always dangerous!).

Our parents generation had for the most part pensions and social security.

Our generation -- unless you're a public employee or one of the dwindling number of unionized workers -- for all intents and purposes, has no pension.

If you were to look at everyone over 50 years old and cut out the top 5% in terms of net worth, I bet you (and this is strictly a guess) that the average liquid savings is less than $100K.

Social Security, as we all learned in Econ 101, is not in actuality a trust, but a transfer payment. Our generation funded the social security payments of our parent's generation. But the problem is, there were more of us than them. The situation reverses itself with the next generation.

So....

No pensions. Not a lot of savings. Dubious prospects for Social Security.

Yikes!!!!

Socialism here we come.