Upon closer observation, the student spots a leak in the swimming pool and sees the President trying to refill the pool and plug the leak at the same time. Unfortunately, there are many cracks that started 30 years ago, and it has become even worse over the last 8 years. We could let rainwater refill the pool over time (free market), but the pool is leaking and evaporating too fast (deflationary spiral.) The remaining water will freeze next winter because the pool pump is broken (liquidity trap, banks not making loans) and the pool cracks will further breach causing the even more water to leak out in the spring. A real economist knows there is never a constant volume of water in the pool. After all, the government just added half a trillion gallons. It should have been lots more, except someone was standing on the water hose screaming MORE TAX CUTS! Last year, the Fed added 2 trillion gallons in the deep end where all the wealthy bankers hang out and where the largest cracks are leaking the most water. The President wants to help the professor RENOVATE his pool by making the shallow end deeper and the deep end deeper. That way he lifts ALL boats. But the professor only believes in the free market, not government, thus clouding his judgment. He would call his insurance company and file a homeowners’ policy claim, except they are backed by AIG who are now owned by the government. Too bad, I guess the pool will drain leaving the shallow end high and dry while the deep end has just enough water for the privileged few. The student realizes the professor is a hack and drops his class. The student was last seen reading a book on Keynesian economics.

I’m fairly good at math, but something mysterious occurs when the numbers are flanked by dollar signs. The digits become obdurate and insubordinate, refusing to march in their designated columns. Ones refuse to carry over when adding. Nines rebuff their impoverished and borrowing neighbors to the right when subtracting. Remainders slip away behind my back while dividing.

For me, opening a new checking account is like giving a toy of many small parts to an irresponsible child. The pieces are all together on Christmas day, but give it a week and they have scattered to the winds, a diaspora never again to be reunited.

Economics is wizardry to me. And so, when the magicians face off over bailouts and stimuli, I dive behind the nearest rock lest I be caught in the crossfire of their hurled spells. I hear the arguments of the contestants and try to follow them through their twists and turns, but then realize that these are mysteries that were not intended for the minds of muggles.

But I do wish to venture a question.

Consider two analogies that have recently been urged to demonstrate the utter foolishness of the recent stimulus plan. One compares the national economy to home economics. A family is in deep debt and in danger of losing everything, including their home. How do they propose to recover? They run to the Best Buy and heat up the Visa on purchases of big screen televisions, computers and other gadgets. The moral: one cannot spend one’s way out of debt.

The other analogy is that of a pool. In an effort to deepen one end, water is drawn from the other, carried down and poured back in. The utter foolishness of the effort is apparent to all.

If these analogies are good ones, then the current plan is sheer idiocy. Are they?

There is a difference between the two as presented. If the dynamics of the “Best Buy” example were imported into a pool example, the problem would be a low water level with the attempted solution of draining water from the pool altogether. But the original pool example presents us with an essentially closed system. Nothing is coming in or going out. The foolishness is seen in the attempt at raising the level simply by moving the resources from one area to another. What is “spent” does not exit the system, but neither can it do anything to increase the volume of that closed system. This is almost as silly.

Here’s my question. Once we distinguish between closed and “open” systems, other possible analogies suggest themselves. First, in an attempt to stay as close as possible to the pool analogy, perhaps we should picture the pool of water not as one uninterrupted body of water, but as a system of channels and locks so that water might be contained in or released from the various sections. Perhaps, then, the aim is not so much to raise the overall level as it is to restore proper flowage throughout the system.

Or, if I can be heard at all from behind this rock, might I attempt an entirely different analogy? Perhaps we should think of a cargo ship that is listing and in danger of capsize because of a dangerous imbalance of the goods in the hold. Here, “spending” need not be seen as analogous to throwing cargo overboard (though, in actual shipping, sometimes this is prudent), but is more a matter of seeking to restore a balance as the load is more evenly distributed.

I ask the question and suggest the analogies with the greatest timidity. Now I’ll retire back to my hiding place and listen for any commentary from the wizards.

____________________

"Puddleglum" by Weatherwax (one of the Muddlings).

Jeeves to the Rescue

I may have a better example of how to treat the "recovery."

Why don't we always allow our banks and insurance companies and car makers, and home developers and commercial developers and individuals, loan and sell everyone everything that they want regardless of whether they have a decent job or not and at low or no interest rates?
Then when the value of the collateral (deeds) becomes worthless, bundle them into great big bundles and sell them or insure them.
Then when the bundle buyers go broke, let us ooze billions every month or so into their bank account instead of letting them go broke?

They way you are keeping the government regulation out of business and allowing them to resolve their own created problems!

Be sure and let cars be sold by unscrupulous dealers and car companies at no down payment, cash back, six years to pay--and then extended to whatever, and to people with no job.

Allow everyone to have 15-20 credit cards with or without a job. Suck as much as you can out of some at 25% interest to pay for those who won't pay. That way everyone can have a fur coat and a Corvette.

It sure does work doesn't it? No regulation of business except a depression every 30-40 years in order to right the wrongs.

This explains it all!

The professor has a swimming pool. Obviously he has a home. He is one of the comfortable ones. Totally insensitive to the plight of the people without jobs, and barely hanging in there after losing their home or in grave fear of losing it.

People like Fred say they worry about what they’re going to leave their kids. It’s always “for the children,” isn’t it?

Ranting, raving, lunatic maniac, why don’t you get a life? The pool story is ridiculous. The stimulus has nothing to do with swimming pools. It has to do with preventing the economy from collapsing and people from starving to death.

It is obvious we’ll all be better off if we can get people working and earning wages again.

Did everyone see the protesters on TV this weekend.. No not the "Whiner class" or the "What's in it for me" crowd... But Conservatives and free thinkers.. protesting the bailouts and the coming taxes...
AMERICA IS WAKING UP.. Stand up and be counted folks..
Tax Cuts yeah right:
New Carbon tax coming will raise the cost of Gas up $1.27 a gallon Gas will be going over $3.00 a gallon.. Electricity is going up 68%
TO those of us that have to drive for a living.. Sucks to be us I guess..

I will not lower my standards.. So UP YOURS..

I certainly don't know what the solution to our recession is, and I know doing nothing is probably a bad idea, but your little story about sums up how I feel about the stimulus packages. (haven't we had about three or four by now...if you count the car industry, the banks, aig, freddie and fannie?)

from the Guv to supplement its balance sheet in order to prepare for a 4th quarter loss of $60B. According to Reuters, this loss equates to a hemorrhage of $460,000 PER MINUTE!
-------------------------------------------
Caution - The Surgeon General has determined that constant blogging is an addiction that can cause a sedentary life style.

In this classic movie the computer Hal 9000 ask...."What are you doing Dave...... Nothing Hal..... My point exactally, we are doing nothing, just as this example shows....PEACE