Striking a balance is a key to life. One that seems to be sorely missing at this moment in time. In economics we call this balance an equilibrium. If you believe in the philosophy of Adam Smith you think a system which is out of whack will correct itself. Eventually. If you are a fan of John Maynard Keynes, your belief runs toward giving nature a helping hand through intervention. Usually government intervention.
To be honest, I tend to favor Smith over Keynes. (Although neither is my favorite.) The biggest problem with Smith is that nature can take a long while to correct itself. The biggest problem with Keynes is thinking man has the discipline, and the knowledge to strike and maintain a balance. Striking a balance is quite difficult. Maintaining one, perhaps impossible.
Debt
From time to time I link to the Debt Clock. I have already asked you to click here once this year but please do it again. The overall number is eye-popping. Over 25 trillion as I type this. But dig down deeper. Look at family savings, student and credit debt. Take a further look at household and national debt. Finally take a look at the M2 money creation.
The Federal Reserve is following a Keynesian path and pumping money into the monetary system. This chart from the St. Louis Federal Reserve office shows the steep increase in M2 since the start of the year. The Federal Reserve has deeply cut the interest rate on the funds loaned out. The rate currently stands at .25 down from 1.75 earlier this year.
From both the Debt Clock and the M2 chart one can discern the attempt at striking a balance the Federal Reserve is trying to make. It is not this action I disagree with. Instead I worry about the unwillingness for re-balance in good times. Why, were interest rates low to begin with when we were at all time market highs the first months of the year? Shouldn’t the rates have been at 3, 4, or even 5 %?
My fear is the inability of governmental entities in striking a balance. Keynes’ basic philosophy will work but only if humans can put aside for a rainy day. I have seen little of this in my lifetime.
Managing a Pandemic
Public service is difficult. I have had some personal experience on a local level and the job is tough. Making decisions for the public is not easy. A crisis makes it even harder. Dealing with Covid-19, while not unprecedented, is proving to be the greatest challenge many will ever face. This holds true on a personal as well as public level.
I think the problem will be most apparent in countries that have enjoyed more freedom for citizens. But I think people everywhere will struggle with striking a balance in fighting this pandemic. Individuals in countries that practice preparedness will do better than those who live in places where a just-in-time philosophy extends to households as well as production facilities.
There have been a multitude of agencies as well as people that have not responded as effectively as one would hope. Additionally, political leadership has not been on an even keel. But perhaps what disappoints me the most is the divisiveness of the human population. Although, I feel a little better about the split since reading Gina Kolata’s Flu. Apparently a similar split has happened in the past on the best way to deal with an epidemic.
Personal Responsibility in Striking a Balance
Nonetheless, I urge everyone out there to consider the needs of others. A person can look healthy and young on the outside, but suffer from lung conditions such as asthma or cystic fibrosis. Pacemakers are not just operating in the elderly. So for once I am asking you to “assume” something. Please assume anyone you meet, young or old, may have an underlying condition. Give people some space. Further, assume you could be asymptomatic, spreading disease unknowingly. And by all means, if you do have symptoms of Covid-19 take responsible actions.
Striking a balance between public health and public wealth is difficult. We all have a responsibility. As humans, we need to show respect for each other. At some point in the future we will reach an equilibrium. Let’s just hope we remember to repay the funding mechanisms. Otherwise, the difficulties of living through this pandemic will pale in comparison to a future of financial instability.
Very interesting article! Lots to consider!
We were taught by family to always “pay yourself” every month. Although we were not actually even middle class, we knew to make sure one major priority was to save funds for future uncertainty. The unexpected can and does happen. Living below our “means” was our choice. A pay raise meant more money to include in the amount saved, not a new car or bigger home. Private schools for our children was not possible, we became involved in the public education process.
Our national economy counts on people getting into debt, lots of debt, to keep the country’s production up! It is a big cycle of spending, borrowing and always consumer wanting MORE. Now many families are in big TROUBLE. They have not prepared for uncertain times. Dads and moms struggle to provide basic needs for their families. Enter in to the picture, the answer for help are gov money and provisions.
Well, the money has to come from somewhere……… “nothing is free” comes to my mind. The phrase “make American great again” looks like there will be major changes necessary.
God help us become wiser and better stewards of the blessings you have given us.
Belinda,
Thank you for your comment. “There is no such thing as a free lunch” comes to mind along with “Money doesn’t grow on trees.” The financial repercussions of this crisis are as dire as the danger to health. We may truly have a no-win situation and I hate to sound so pessimistic. Faith will help us get through these difficult times.