MasterPo says: This blog is about topics and issues that are of importance to me. I am not one of the countless blogging lemmings that are tripping over each other scurrying down the hill and off the cliff of blogging oblivion trying to write the greatest blog on the latest topic de'jour. Your comments are welcome.

June 20, 2010

Perpetual Motion Economics

A strong, healthy, prosperous and especially growing economy simply can not function like a perpetual motion machine.

A “perpetual motion machine” is a theoretical and largely mythical device that not only performs some type of work but does so at the same time it produces its own energy for operation. Once set into motion the machine creates its own operating energy, for all intents and purposes, eternally.
Thus it is referred to a “perpetual motion”.

The quest for the invention of such a device dates back to at least the middle ages and continues to this day. Over the centuries many very creative and imaginative designs have been thought of and tried. But the realities of our physical world make such a device an impossibility (at least with our current level of technology and understanding of physics). Friction, air resistance, fluid dynamics resistance, gravity and more physical forces all come to play to stop a perpetual motion device from working no matter how promising it looks on paper.

And economy is just the same.

As of writing this just-released data shows the housing market has sunk dramatically. This is being blamed, among other reasons, on the expiration of the Federal government’s $8,000 home buyer credit. Thus is can be concluded that a great many people took the plunge to buy a house in order to get the credit in spite of all the other economic issues at hand.

In theory, this credit was supposed to kick-start segments of the economy linked to home building, maintenance, and selling.

The government offers a home buyer credit.Builders buy materials and hire people to build new homes.People buy the new homes giving money to builders and realtors.These people pay taxes on the money they make building/refurbishing homes and selling them.The government gets money back to give out again as additional home buyer credits.

A perpetual motion machine! (in theory)

But now that the credit has expired buyer have slowed their buying which means builders have slowed their build, which means they don’t buy materials and hire people as much, etc etc etc.

The point is to show an economy simply can not function, much less even hope be strong and healthy, when it’s government being the start and stop for the economic activity. In this example, people have to be willing to buy homes (new or used) regardless of credits and incentives.

Government cannot be the instigator and the beneficiary of the economic activity. The example described above is akin to a patent on total life support – the heart and lungs may be working pull the plug and all stops. Not a good definition of “life”.

A perpetual motion machine is a myth.
Perpetual motion government support is equally as mythical.

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