Axil,
The Way Out
The crash came about because of private debt not government expenditure. It first surfaced in mortgages because this was the weakest sector but there are others, like credit card debt, banks and commercial real estate that are almost as bad. This happened because of government policies and bad regulations made to try and maintain an unsustainable standard of living. The government nationalized part of this debt, so we are all forced to pay for the mistakes of others. There should be consequences for the major offenders but there are none.
The international crisis remains because the underlying problems were not addressed by the bail outs and quantitative easing. Current government polices were not designed to deal with such major problems and the government economic advisors appear to be brain dead. Possibly they came up with something useful but the government ignored the advice. The outcome is the same. QE3 will not fix the problem and failure to fix the debt crisis places renewed pressure on the banks. A collapse of investment follows.
The key to recovery is investment. Budget deficits and low interest rates are not enough. Tax incentives for investment are talked about but are probably not enough either: time will tell. Broad brush statements about investing in research are not enough. Projects need to be identified, otherwise the government will surely misplace the money. Consider the $19 billion to be spent on the ITER Tokomak that even if it works will not make saleable power and DOE's refusal to fund any research at all on cold fusion (or LENR if you prefer.) It is most unlikely that the $billions spent on gigantic lasers or Tokomak hot fusion research will result in an economic power plant. DOE has the wrong kind of people administrating policy. We can't afford their mistakes.
It seems we have to look abroad for solutions. How can China design and build Pebble Bed Reactors and start work on Thorium reactors and we can't? The first Thorium reactor was invented and built here in the 1950s. The only reason we went with our current designs was because the military wanted the plutonium they produced. Now it takes a decade to approve some water moderated design with all their disadvantages.
How many times have we been promised to end our reliance on foreign oil? Nixon was the first President and all the others since have promised reduced reliance, yet our use has increased from 36% to 66% It's easy enough to run vehicles on natural gas while waiting for a better electrical battery or storage system. With the cheap power from a Thorium reactor one could even make gasoline for less than we now buy it from overseas. It would provide lots of jobs to do those things.
China has been so successful because the government can directly stimulate investment. It needs some thought about how something like that could be done in the US. Pournelle's Iron Law has been in effect so long that none of the existing government departments could be trusted to do it. Possibly a private non-political company, made up of bright people from industry, could be formed to allocate the money. It would be worth a try.
Meanwhile very low interest rates should be maintained to keep interest payments bearable. A serious effort should be made to reduce non productive expenditure, from ending wars to closing whole departments that do very little. The very rich, like those earning more than $1 million a year should pay more tax. While this would have small effect on the deficit it would be psychologically important to those really hurting and every bit helps. In the long run, the insane tax code should be redone, but we can’t wait for that. If the government can't eliminate bunny inspectors (really, they have some checking on use by magicians) they are not really trying. They should hire Maurice McTigue.
Rolling Back Government: Lessons from New Zealand.
http://www.hillsdale.edu/news/imprimis/ ... 4&month=04
“Let me share with you one last story: The Department of Transportation came to us one day and said they needed to increase the fees for driver’s licenses. When we asked why, they said that the cost of relicensing wasn’t being fully recovered at the current fee levels. Then we asked why we should be doing this sort of thing at all. The transportation people clearly thought that was a very stupid question: Everybody needs a driver’s license, they said. I then pointed out that I received mine when I was fifteen and asked them: “What is it about relicensing that in any way tests driver competency?” We gave them ten days to think this over. At one point they suggested to us that the police need driver’s licenses for identification purposes. We responded that this was the purpose of an identity card, not a driver’s license. Finally they admitted that they could think of no good reason for what they were doing—so we abolished the whole process! Now a driver’s license is good until a person is 74 years old, after which he must get an annual medical test to ensure he is still competent to drive. So not only did we not need new fees, we abolished a whole department. That’s what I mean by thinking differently.”