Whew! This is a long one . . .
How would you propose we define "optimal" or "efficient" in terms of swinging this discussion back to its original theme: recession?
I don't believe optimal automatically equates to "best", exactly because that term implies subjectivity.
I prefer to use words as they are already defined. I equated it to "best" because that is one of the quick definitions of optimal that I pulled up. Here is another:
optimum, optimal (most desirable possible under a restriction expressed or implied) "an optimum return on capital"
Gee, "most desirable" sounds pretty subjective too. In fact, every definition I can find for optimum or optimal has a subjective component to it. So maybe we better go back to your original term, and just use the definition economists use for it:
Efficiency, when used in an economic sense, generally refers to using resources in such a way as to maximize the production of goods and services.
So let's get back to your original question that brought this up and its follow up:
The question is, what "entity" is more efficient in the use of the money supply? . . . In my mind the question then becomes: does the government generally use resources more optimally [efficiently] than the private economy?
I think that the pat answer to those questions is that a private market economy is going to be more efficient in its use of resources than a government-controlled economy. But, I also think that the question presumes that economic efficiency is all we care about and that it trumps all else. This gets back to my question about what is the purpose of a central government? If all we want our government to do is to provide for conditions that allow private enterprise to do whatever it wants in order to keep the economy as efficient as possible, then your questions are pertinent.
But it has been shown time and again that most people want more from their government than that. Most people want some equity to be enforced in the distribution of resources, so that some can't hoard them all from others. Most people seem to want government to ensure that public works projects are completed (things like museums, parks, baseball stadiums, roads and bridges, etc.) for the benefit of all to use. Most people want to be protected from private industry poisoning us in their drive to become more "efficient." Cadmium and lead in your children's play toys anyone? Crude oil in your seafood? I didn't think so.
To try to have a debate on the theory of market economics as it relates to our system of government without acknowledging that government is tasked with a lot more than just making sure we use our resources efficiently is just that: a bunch of theory with little practical application to our real problems.
Using your example, if an entity (whether private or public) were to use its allocation of money (resources) by merely destroying it, could that be considered "optimal" by any reasonable definition? I don't believe so. Further, "timber-barons" can't possibly (and don't) consider merely clear-cutting as an optimal strategy as it precludes the possibility of continuing to sell the product (a genuine renewable resource) over time.
I would suggest you do a little more research in this area before making such a blatantly false suggestion. You might start by going to the Pacific Northwest and trying to find all the Old Growth Forest. There is scant little left, so you will have to look hard. Almost none of it exists on private lands, so you can confine your search to government lands, but even there it is tough to find. But finding the clear cuts are easy. Go up to the top of Mt. Hood and look around. You will see a patchwork of clearcut forests as far as the eye can see.
Timber barons have been clear-cutting old growth forests in this country for the past couple of hundred years, and continue to do so today. A little background. Old Growth Forest is really a term of art, referring to a specific type of forest that grows naturally and takes anywhere from 500 to 1000 years to mature. It is typified by certain ecosystems that develop within this mature forest structure. These ecosystems provide much enjoyment for people who like to hike in and camp in these forests, and observe the beauty and unique plant and animal life that grows there. But this is not an economically-efficient use of this resource.
Timber companies prefer old growth trees because they make better pulp wood for paper production than newer growth trees (i.e. trees that are less than a hundred or two years old). They routinely clear cut these forests and yes, they do sometimes even plant back some trees. But they have removed the natural fertilizer for the generally poor soils in these forests, they plant the trees in orderly rows, all the same age, and . . . well, you no longer have a natural forest. It can no longer support the ecosystems it once did. It no longer has the same natural beauty. It will take another 500 or more years for the natural forest to regenerate itself. But it won't, because every fifty to seventy-five years or so the timber companies will clear cut it again, not willing to wait for the trees to get any larger before they harvest their resource.
So you see . . . if all you want is an efficient use of resources, then all the old growth forests in the world should be clear cut so we can turn them into useful pulp for paper. That is the most "economically efficient" use of that resource.
But if you give a damn about beauty, ecology, and the importance of natural ecosystems as a carbon sink, water filter, and oxygen producer, then you think that maybe economic efficiency isn't the sole purpose of government. Maybe government should also try to protect some natural resources from being efficiently destroyed just so that we can have another sheet of paper to write on and then throw into the trash. Just maybe.
Accordingly, as much as they may wish to optimize sales today by clear-cutting, it's in their interests not to pursue that strategy.
You see, the problem with that thought is that economic efficiency in the private sector tends to be controlled by a very short-term view. When a resource can't be adequately renewed for hundreds or thousands or millions of years, market economics ignores that problem and just tries to use up all the resource it is allowed to get its hands on before someone else does. Look at how we are handling our oil resources on this planet for a prime example of that. Drill, baby, drill! This is the problem when you try to apply abstract theories to real-world situations: you ignore the human element (i.e.: greed).
For those that may not be aware, $100B of interest is being added to our national debt every 60 days- that's obscene.
Our Gross Domestic Product is in the range of $14 Trillion. That's obscene! Why do we need to make and sell so much stuff, much of which is disposable crap or useless services anyway? Big numbers have lots of dramatic impact, but taken out of context they are pretty meaningless.
By the way, much of that debt is public debt and the interest payments on that find their way back into the economy. Lots of people own U.S. treasuries and live off the interest, so that money is going right back into the economy, either sooner or later. It is just a little too simplistic to say: all debt = bad. I will agree though that some fiscal responsibility is necessary to avoid economic collapse, and I will agree that we are in need of such in this country. But I don't see it as full of doom and gloom as you seem to.
There are only two possibilities for why this is: ineptitude on the part of our political leaders (both past and present) or it's being done on purpose- to destabilize our country economically to such an extent that it collapses in upon itself, ultimately succeeding in what cannot be be accomplished using sheer force alone.
I'm not much for wild conspiracy theories of which there is little proof, so I'll go with option number one. Political leaders have shown ineptitude throughout the history of civilization. Why should we expect things to be any different today? Leaders of private industry show plenty of ineptitude themselves, which is why businesses go bankrupt all the time. Just look at the mistakes BP executives made which has cost them billions of dollars of monetary resources. Just because of a couple of bad management decisions trying to cut corners in order to maximize their efficiency. So again, I don't think strict market economics is the holy grail you seem to think it is.
So, a few questions remain:
1. Can we get out of debt by creating more debt?
I think what you really mean by this is: Can we get out of debt over the long term in spite of creating more debt in the short term? I think the answer is yes, we can. Not that we necessarily will, but we certainly can.
2. Is the utility of debt negative? (Or: could the money currently allocated for interest expense be better (more "optimally"
) spent?)
You try to predict a particular answer by the way you phrase the question. Could interest be more efficiently used elsewhere? Perhaps, in some people's eyes. But that ignores the utility of using debt to leverage resources you currently have in order to get what you want but can't completely afford right now. Could you better use the mortgage interest on your house loan than by giving it to the banks? Sure, but then you might not be able to afford a house in the first place without taking on that debt.
Under your theory, no one should own a house unless they can afford to pay for it outright, as to do anything else is not the most efficient use of their resources. And as I keep saying, the world does not live by economic efficiency alone.
3. Should the public or private economy be tasked with job creation going forward?
Why does it have to be one to the exclusion of the other?
4. What internal and external parties might have a vested interest in U.S. economic destabilization?
You'll have to answer that one yourself. As I said, I'm not much for wild conspiracy theories. But I suppose the Pope could be behind it all.
One more aside. Many of those who support reducing government debt hand-in-hand with the concept of limited government tend to fall back on the founder's wishes as some higher justification for those views (just see the ads of my favorite local tea party candidate, Rick Barber, for an over-the-top example of that). But the newsflash is that this country was FOUNDED on debt:
"Debts incurred during the American Revolutionary War and under the Articles of Confederation led to the first yearly reported value of $75,463,476.52 on January 1, 1791. Over the following 45 years, the debt grew, briefly contracted to zero on January 8, 1835 under President Andrew Jackson but then quickly grew into the millions again."
Source
Food for thought.
