The Obama White House and China Premier Wen Jiabao have jointly announced a plan to spur economic development in both countries. Americans will be given tax incentives and cash bonuses to purchase goods that are manufactured in China. This policy will spur Chinese growth, and their government in turn will invested the expected profits in US Treasuries and other such federal government bonds. The money from the sale of the bonds will be used to give more cash payments and tax credits to citizens to buy Chinese goods.
“This is a win-win situation” said Under Assistant West Coast Promo man, Albert Perkie, as he readied a massive government-sponsored ad campaign to get Americans to buy Chinese. “Once this round-trip multiplier snowball effect gets rolling, we expect the GDP of both countries to soar. because, really, what could go wrong? Massive amounts of debt incurred by people buying things they don’t need will be what gets the economy rolling again. We expect the Eurozone will want in on this great opportunity too.”
He declined to answer asked if the US government would advertise using Google Adwords, as Google appears to be banned in China now but expressed hope the US government would soon be advertising the innovative new government Perki bonds on Google to Chinese consumers.
Perki bonds are a new concoction from Goldman Sachs and thus have been nicknamed PerkiVamps. American consumers sell their future income streams for an upfront payment. The streams are then sliced and diced into a “festive assortment” of financial instruments that while even more opaque than SIVs and CDOs, we are assured they can not help but be profitable. But wait, there’s more. Credit Defaults Swaps on PerkiVamps can now be leveraged 100 to 1 or higher! Even better, the government is now allowing small investors to buy them for their retirements accounts. And get this, the more you buy, the less your tax will be, thanks to the just enacted Happy PerkiVamp law which gives tax rebates based on volume purchases. So jump on in Americans. Now you too can participate in what used to be the exclusive domain of investment banks. Again, what could possibly go wrong?
You had me at “what could go wrong?”
It’s not far from the truth. Our economy is based on spending money we don’t have (individually and collectively), mostly on stuff we don’t need. We produce 4 times the energy we actually need and waste the rest. Because if we didn’t, millions of people would be unemployed.
Reports indicate that consumers are increasingly shying away from credit cards. What happens to the economy of we only spend what we make?
We emphasize what we measure, and what we measure is total economic activity. If we’re more active, we’re growing. and growth is (in theory) good. Even where socialism has been tried, it has used this same outmoded method of economic measurement.
But the reality is, much of that activity is not productive– it’s waste. We’re now more frosting than cake.
IMO we better start looking at alternative models, and measure something else.