Saturday, July 25, 2009

Unexpected consequences

Meghan McCardle links to the news from the 1930's blog comparing
green shoots in the economy today to green shoots that seemed to be
appearing in 1930. Linked in the same day's WSJ was the story:

Hoover signs London Naval Treaty; now awaiting ratification by Britain and Japan. Under conditions of treaty US will reach naval parity with Britain by 1936; Japan naval building will almost stop.
In 1930 this must have seemed like a small story compared the economic crises
of the day, sort of like voluntarily canceling the F22 program is today. The london
naval treaty gave cover to the usa and britain that didn't want to build ships to stay
ahead of the japanese, when the earlier policy for britain was to stay twice as big as
the nearest competitors, post-treaty parity would be acceptable. Only problem being
what happens when you are fighting the germans and the japanese attack in the

I wish I had more confidence in the government that they were paying attention to things all around the world, what development will bite us in the ass in 2020 when Hillary is just starting
her 2nd term and Obama has just finished chiseling his own face on mount rushmore.

To me buying more F-22's is cheap at the price right now, as is another aircraft carrier
and strategic missile defense. In the 10-20 year timeframe that borrowed money will
either be paid back easily in inflated dollars, or the government will default. The option
where the economy grows it's way robustly at 4% and we pay back all the debts a little
at a time seems unlikely. Borrowing money to build things that will last 30 years is a good
idea (weapons systems, nuke power plants, space based solar power, x- prizes). Borrowing
money to pay welfare is the same as buying groceries on a credit card, you buy, eat and
crap it out, then you owe the money.

Hopefully some of the genius' in washington are looking for future ass-biters and thinking
what to do about them. Here's today's wsj headlines that I think could spell problems down the road:

Biden Says Weakened Russia Will Bend

Biden said Russia's economy is "withering," a trend that will force it to make concessions on national security, including loosening its grip on former republics and shrinking its nuclear arsenal.

California's IOUs: Latest Sub for Dollars

To creditors of California who got paid in IOUs, take it from historians -- things could be worse. You could be getting clamshells or plywood.

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