According to the DailyKos reporting a Fox News poll, Obama’s “economics” is more popular than Reagan’s economics. I never lived through the era of Reagan so I don’t know what it was like under the execution of his economics.

I do know that the four principles stated in Wikipedia about Reaganomics are economically sound:

1. reduce the growth of government spending,
2. reduce marginal tax rates on income from labor and capital,
3. reduce government regulation of the economy,
4. control the money supply to reduce inflation.

You always want to reduce government spending so that more productive uses of money can take place in the private sector. Taxes are always a disincentive to work and be productive so they should always be lowered. The best case scenario is we abolish all taxes on income.

Regulation is all the rage these days from the left and the right. The reason why we are in this economic mess was due to regulation so more of it is not going to help. Regulation is any intervention into the market and the government has been intervening for decades. (Read Meltdown for a comprehensive look.)

We should never let the government run the printing presses and dilute the value of existing dollars. Deflation is a good and inflation is an evil–everyone benefits from lowered prices. Idealy, the market would take care of what medium is used as money.

While Reaganomics looks good on paper, Obamanomics is bad on paper and in execution. The comparison of Obama to FDR was already a bad sign. Few Presidents has done more to harm the economic well-being of Americans than FDR. He took a recession upon entering office after criticizing Hoover’s absurd government spending and made things many magnitudes worse by injecting Hoover’s policies with steroids.

Obama is taking Bush’s economics and injecting it with steroids. Bush’s economics was poor and has largely extended length of the recession. Obama’s economic actions since taking office will make things even worse. You cannot solve a problem caused by excessive spending and credit with more spending and credit. To think that America is going to become prosperous once again by going into even greater debt is exceptionally poor financial advice.

It is unnerving to see a poll suggesting Americans believe we need more socialism over free markets. However, I hope that this is just a wanting to believe that Obama can solve the nation’s economic crisis than a real indication of people’s perceptions. Everyone wants to be out of this crisis and back to the good life.

Free markets made this nation the economic engine of the world. Centrally planned systems have driven nations into destruction through all of history.

The Washington Post had an interesting article written by Reid Hoffman, founder of LinkedIn, about letting start-ups bail us out. I wouldn’t be calling what he talks about a bail out–it would be a real stimulus. I love start-ups and have made it a point to only work for small companies–the smaller the better.

While I absolutely agree that it will be up to new businesses and innovative entrepreneurs to bring the United States and world economy out of this crisis, I do not agree with the means by which Hoffman suggests. The last thing we need is for governments to create more bubbles–we are living the result of the last government created bubble.

Hoffman says that “we need incentives for business innovators.” That is very true. However, the incentives should not be to “encourage small business with loans”. The SBA has always attached terms to their loans and it must be used for specific purposes that they deem important. This is influencing the flow of capital to industries or sectors that the government wants. This is creating a bubble.

Secondly, where is the government getting the money to lend? The government has no money today. It didn’t have money yesterday either but, it is in worse shape now than it has ever been. If the only means to get this money is to tax, borrow, or print then one group will be made worse off for another. Redistribution of capital never makes the economy better off. If an idea has merit, capital will find its way there–that is how the free market works.

While this proposal is a better alternative to creating jobs using war or public works projects, there is still an infringement of Liberty as long as the government needs to take from one group in order to lend money to another.

“Venture capitalists are biding their time — not for want of good ideas, solid management or stable capital but to ensure that they can get the most bang for their buck. Similarly, venture capital firms are waiting for the slide to stop and the recovery to begin before investing.”

I’m not sure if that is entirely true. As the founder of LinkedIn, I will assume that he knows better than I do. I am not in the VC circle. Regardless of whether that is the truth, there is an economically sound reason why people don’t want to lend.

No one knows when or how the economy is going to turn north again. The government is intervening on a weekly–if not daily–basis thus creating an environment of uncertainty. It is much riskier to make long term investments that VC’s generally make if no one knows what the rules are going to be six months from now.

Start-ups are going to lead us out of our current predicament but, it will not be because of government “stimulus” or loans. If these companies can find a way to flourish it will be inspite of the government and not because of it.

I may not have a degree in economics but, neither do these AP writers who wrote about recessions turning into depressions. As someone who reads a great deal of works from the Austrian School of Economics, there is just an enormous amount of misinformation in that particular AP article.

The article wastes time by going into what defines a depression. I don’t see how the terminology is going affect the real situation that people are facing. So while the article tries to define what a depression is, it makes many economic fallacies.

“Morici says a depression is a recession that “does not self-correct” because of fundamental structural problems in the economy, such as broken banks or a huge trade deficit.”

There are no such things as recessions or depressions that do not self-correct. They always self-correct. The depression or recession can also be called a correction. It is a correction on a massive scale due to the massive boom created by artificial means–eg: arbitrary interest rates set by a central bank.

When stock prices go up to astronomical levels in respect to the company’s earning potential, then there is a bubble. When that bubble bursts and the stock price pulls back, we call it a correction. It is exactly the same when entire industries or economies are in a bubble and that bubble bursts. A correction is taking place. To try and stop the correction is trying to maintain an illusion.

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Fantastic video based on Ron Paul’s speech to congress asking “what if” questions. Great speech made better by fitting music and creative art.

Sears Chairman, Eddie Lampert, suggests that stockholders should read Hayek in these troubling economic times. He specifically suggests Road to Serfdom and The Fatal Conceit.

Sadly, I have not actually read these two works by Hayek–I really should. It is nice to see that Lampert is suggesting stockholders to read about the Austrian viewpoint of the situation we are in. It is good to see that not every head of big corporations are capitalists in good times and socialists in bad times.

“As a country, we need to rebuild confidence and trust and to understand what happened. Whether by business or by government, the misdiagnosis of situations leads to poor prescriptions for rehabilitation and recovery. When the misdiagnosis is done at the federal government level and involves large parts of a national economy, the consequences can be swift and significant.”

We absolutely need to understand what happened. The mainstream media has misdiagnosed the problem and is applying the wrong treatment. The swift and significant consequences of a poor prescription will be a long and extended depression.