October 17, 2011

So Now Our "Economy" has "Regions"...

In the article posted above the author inquires which of the "regions" of the United States "economy" needs or warrants more quantitative easing. Although I think the idea of quantitative easing is just as effective of a fix as putting a Band-Aid on Louis XVI's neck wound, this is not the point I want to bring up. I want to point to the mindset that the author uses when writing this article. Buttonwood seems to think that he can decided when and where QE would be effective by looking at all of this graphs. Showing correlations between QE, unemployment rate, and projected growth is only slightly more useful than a Colorado weatherman. These numbers that are "projected" and the data that is "collected" are based on a moment's glance. These numbers give us less real information than a stop sign. All of the aggregates and measurables are trying to describe a single moment in time when in reality all the variables that were assumed in those previous calculations have now changed. The dynamic world we live in has changed while the graphs trying to describe what the world looked like 2 months ago are now being published. The author seems to think that his graphs and numbers have something to do with now but in reality things have changed and the graphs haven't, which renders them useless.
My second thought when reading this article is the fact that the author is able to split things up into very nice subsections. The "region" of the "United States economy" that needs a "round" of quantitative easing can be seen through the graphs. From what I know about Austrian economics, however limited that knowledge may be, I do not believe there is such thing as the "United States" economy, much less "regions", because the world is network of exchange. The network of exchange that occurs in the United States is not just contained on our soil. Imagine this; all the exchanges that occur in the world are shown by a line connecting the origins of the interactions, now in order to isolate the "economy" of the United States drawn a line around the area we know as the United States. Look at all the lines you just drew a line around! These lines, or exchanges, are not looked at as part of the United States economy even though economic activity in and around the US depends on those interactions just as much as any interaction. Trying to analyze the United States economy as a separate entity even though it is really just a part of the this huge world network is like trying to view the human body as separate individual parts even though they are all dependent on other parts of the body to function.
The last comment I have to make is that the author uses the term "rounds" to describe a session of QE. Although this policy may only be in effect for a period of time, the economy keeps going. I try to think of the changes in variables that would occur during the QE time, but when the QE stops what will happen? All the variables that the Fed is trying to manipulate will change again and then the outcome of the QE policy will become even more foggy. Buttonwood, the author, clearly sees the economy as his Econo-car where if he puts in a bigger motor it will go faster and gain horsepower. The economy is clearly not a machine because the world wide network is made up of people and we are not machines.

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