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.

May 7, 2011

Financial Lessons from Chernobyl

The American economy today, especially all the attempts at “stimulus”, bears a striking resemblance to the events that lead to the April 1986 Chernobyl nuclear accident.

On that fateful day in the Ukraine the nuclear reactor operator s were trying an experiment to generate emergency power from the turbines in the event of a reactor scram (an emergency shutdown). Problem is nuclear reactors (especially of Russian design) don’t turn on a dime and controlling the output of the reactor at low levels proved very difficult. In order to try to achieve the minimal power levels needed a large number of the cadmium control rods were removed from the reactor.

Nothing changed. The power level remained low. So more control rods were removed.
Still nothing. So even more were removed, violating well established safety and operations procedures (not just Russian but worldwide throughout the nuclear industry).

Sudden – the power spiked off the chart!

The reactor operators pushed back in all the cadmium control rods.

But it was too late.


The Chernobyl nuclear accident was now history.

Now compare what the Obama administration has done with the American economy in terms of bailouts and stimulus.

Billions for the AIG bailout
Billions for the bank bailout
Billions for “stimulus”
Cash for Clunkers
Cash for Caulkers
Tax credit for home buyers
"Shovel Ready" jobs
99 weeks (so far) of unemployment benefits

And yet as of writing this unemployment is at 9%, up “unexpectedly” (yea, right!) from 8.8%.The market is down and shaky.New home sales have hit a 15 year low.Consumer confidence is poor.Consumer spending is in the tank.Business hiring is very slow.Gasoline has soared.

Yet the Federal government keeps pouring more and more money into the economy and bailing out or saving this or that business and sector. This is equivalent to essentially removing all the controls and safety devices of the economy. Meanwhile, the expected boost just hasn’t come.

And just like with Chernobyl when enough of the controls have been removed – Boom!

More likely Crash but the end result is the same.

History repeats.


MBTN said...

Just to set the record straight, the AIG bailout was on Bush's watch as was the bank bailout. Stimulus? That also was started under Bush ($168 billion in checks mailed to taxpayers).

Tax credit for homebuyers? Well probably the biggest tax benefit is the mortgage interest deduction. That was a result of 1986 tax reform (Reagan).

Finally, yes unemployment is still "high", but the real question is whether or not unemployment would have been higher is not for our fiscal policy. Unfortunately, that is an academic point since nobody can go back in time and see what the economy would have done without stimulus.

MasterPo said...

To your first point, President Obama more than expanded upon it. MasterPo highly doubts President Bush wouldhave taken over GM, paid cash for clunkers, cash for caulkers, etc.

To the second point - what is your point??

And to your third Irrelevant since there is no way to prove it, whereas now we do have 9% official unemp even after spending aaaaallllll that money.

If spending aaaaalll that moeny has gotten us where we are then there isn't enough money in the world to bring us back to pre-2008 levels.

MBTN said...

My point is that ALL administrations, Democratic and Republican, have engaged in some sort of stimulus of one sector of the economy or another. It is unfair to single out Obama as the only perpetrator. This has been going on since the beginning of politics.

I agree with your response to my third point. In fact, you made my point for me. The fact as we don't know what the economy would have looked like without any stimulus. If you agree with the stimulus, you will say that it saved us from worse conditions. If you disagree with the stimulus, you will say that it didn't work because unemployment is still "high". There is no way to prove which position is right.