11 posts tagged “economics”

Rant alert.  I'm livid and not likely to be so kind.

No offense to the supposed 'millions' of people devastated by Michael Jackson's death.  Believe me, but I don't think anyone's death should be belittled.  However, enough is enough.  The world is on fire with changes that will have terrifying consequences for us and our children, and yet we want to watch washed up has-beens sing at the ticketed funeral of a pop-icon who, while arguably a musical genius, was also obviously conflicted, tortured and misguided person.  Enough doubt lingered over his life to convince many that his relationship with children was anything but appropriate.  <Cue screeching halt and screaming fans />  WHY did I mention that last item?  Because political figures with more power and influence have had their lives destroyed on the basis of mere accusations less controversial than what Michael Jackson was accused of, and yet we have members of the lowest rated Congress in history proposing House Resolutions to honor him??!

Yes, that's right.  Our Representatives - who apparently don't have time to read a 1200 (oh, wait, they added 300 more pages only hours before the vote), make that 1500 page Cap and Trade bill that will literally transfer our wealth to other nations simply by making us pay offsets in a sham-of-an-energy-derivatives market - but they have time to write and bring to the floor a bill honoring Michael Jackson.

Meanwhile, North Korea fired 7 more missiles on our Independence Day - a clear sign of defiance by a rogue state who has a proven history of bullying and bombast (albeit, now backed up by nuclear capability).  Japan - clearly concerned about North Korea, will most likely build up its military capabilities (and some have hinted at a nuclear option).

Then there's Iran.  Simultaneously aiding raids against our forces in Iraq, ruthlessly crushing the people's hopes for freedom (warning: graphic) and still working to build a nuclear weapon, Iran has made utter fools of the US in the eyes of the world.  Some believe that other states, like Saudi Arabia, will seek to arm themselves with nuclear weapons if Iran succeeds in building one.

And....Honduras.  The situation is not as cut and dry as the US Administration says.  Zelaya is not a "good guy" - and the people there are begging for prayer and assistance.  They don't want their government to become yet another pawn of Hugo Chavez.  So, we ignore the cries of Iranians for assistance as they are beaten and shot in the streets, and yet we immediately side with Chavez and Zelaya on Honduras.  "Dude - where's my country?!"

Our government is racked with corruption - from sweetheart mortgages for Senators, to increased pleasure travel on taxpayer money (while condemning auto executives for flying their private jets), to Argentinian affairs - all the while the Federal government has extended its power beyond anything ever intended (and beyond what our system can actually sustain)....and yet, here we are with wall-to-wall coverage of Michael Jackson.

My God, America, get a grip.  You now owe a minimum of $516k per household with our current debt....and that debt is growing (thanks to interest) at least $1.2 BILLION PER DAY.  Oh, and all that money we've been printing?  Is it any wonder that China, Russia and India are just the latest in a line of nations calling for the dollar to no longer be the 'dominant' (i.e. - reserve) currency?  Does ANYONE get what this means?  If our treasury "debt auction" sales drop, we have no way to finance the out of control spending....and we'll be left with an inflated currency, insane interest rates and the inability to fund all the entitlements so many hold dear (social security, medicare, etc.).

But that's ok.  Go watch the Michael Jackson memorial and memorize every fricking detail - because you better be able to describe in utter detail to your children and grandchildren what you were doing when you sold them into peasantry and slavery.

As many of you already know, the Obama administration forced Chrysler into its current bankruptcy, and into the sale to Fiat.  While Chrysler had serious problems before the federal government stepped in, what the Obama administration has done should raise the hair on all of our necks.  There are so many things wrong with this situation, but the primary issue at stake for all of us is how Chrysler's secured creditors are being treated.

Investment 101 teaches us that bonds are a safer investment than stocks (albeit lower returns, etc.).  So, if you were the state of Indiana, and you invested in secured Chrysler bonds as part of your state's pension plan, then you have become a secured creditor for Chrysler.  This means that if Chrysler ever files for bankruptcy, you are first in line to get your money back.  However, with the Obama Administration, not so much.  Chrysler's secured creditors were owed roughly $6.9 billion, and the Obama administration put them in the back of the line - behind the UAW - and has told them they will have to deal with $.29 on the dollar.  This is such a devastating, short sighted and "cronyistic" move.  Indiana took their case to the Supreme Court (after the 2nd Circuit punted the ball), and it appears the Supreme Court is not going to hear the case (even after issuing a temporary stay).  Complicating this picture even further is the fact that members of Obama's team called the lawyer representing Indiana a "terrorist", they've taken other abitrary actions such as mandating a huge cut in their marketing budget, and the funds poured into Chrylser originated from the TARP bailout passed under Bush - which neither administration has used to buy up "toxic assets" as they were intended.  It's arguable that the use of TARP funds for auto bailouts its illegal (and the authority granted to the Treasury unconstitutional).

Aside from TARP being the biggest government finance sham in our history (and aside from it basically granting the executive branch their very own slush fund), the rule of law is being arbitrarily discarded in favor of special interests and political paybacks.  If this sale goes through as is, and the secured creditors get royally screwed (as it now appears they will), we are going to see investment capital flee our country at an alarming rate.  After all, who wants to invest in so-called "safe bonds" (whether it be a state or company) if the federal government can step in and 'dictate' that you will only get $.29 on the dollar as a secured creditor, but non-secured creditors who also happen to be big donors to your party will get much more?  Those investors will take their money to countries that actually honor private agreements.  As the situation with Indiana demonstrates, the flight of that investment capital from our nation, and the "rule by fiat" attitude on the part of our federal government will hurt the pensions, retirements, state & local government funds (and more) where each of us live.  The sad thing is, we've done all this before - in the 1930's.  We prolonged the Great Depression by "economic experimentation", protectionism and "punish investors" policies.  All three ingredients are present today as well, so buckle up and hold on tight.

Oddly enough, one definition for the word "fiat" reads: "an arbitrary decree or pronouncement, esp. by a person or group of persons having absolute authority to enforce it"

A good opinion piece (with many stats and facts) on this issue can be seen here.

Glenn Beck has apparently been reading up on one of my favorite authors: Thomas Sowell.  Sowell just released a new book, "The Housing Boom and Bust" - and having read much of his other material, I can say his writing is thorough and detailed, yet accessible and understandable.

The Housing Boom and Bust

Thomas Sowell

  I highly recommend any work of Sowell's, but especially one so relevant to the issues we're facing today.  This is a great "quick summary" video that includes snippets of Sowell discussing the housing market boom and bust:

I call it a much needed British tongue lashing for the House Ways and Means committee.  This is Lord Christopher Monckton testifying before the committee:

"I warn this honorable House that any proposal to inflict billions of dollars of new taxation on all citizens by charging selectively-disfavored industries for arbitrarily-rationed permits to emit a harmless and beneficial trace gas that is necessary to all life on Earth and has little effect on its surface temperature will fall cruelly and disproportionately upon the poor, will threaten their very lives, will gravely diminish the liberty that is the glory of your great nation, will render difficult if not unlawful the pursuit of happiness, will raise little net revenue if the poor are adequately compensated by subsidy, will damagingly distort the labor market by widening and deepening the unemployment trap that already gives millions of your most helpless citizens a better income on welfare than in work, will imprison the poorest earners in a perpetual poverty trap by inflicting upon them a crippling marginal taxation and benefit-withdrawal rate that powerfully deters them from increasing their earnings, will be complex, extravagant, and costly, will savagely compound the adverse effects of recession, of excessive public and private indebtedness, of fiscal incontinence, and of monetary laxity on industries and employment, will create soi-disant “green” jobs by the thousand while destroying real jobs by the million, will establish an unstable and artificial derivatives market in hot air that will enrich a handful of portly middle-men while impoverishing the people, will automatically and ineluctably defeat its own objective by so depressing economic activity that the “market” price of carbon dioxide will tend rapidly to fall as close to zero as it has done in both of Europe’s attempts at a cap-and-trade scheme, will directly encourage fraud by incentivizing not only both parties to every transaction but also the regulatory authorities recklessly to overstate the magnitude of that transaction, will set your enterprises at a profound competitive disadvantage against nations that steer wisely clear of purposeless restrictions on or taxation of the very air we breathe out, will accelerate the transfer of wealth from your citizens’ pockets to other nations’ governments by way of boondoggles such as the UN’s “Clean Development Mechanism”, and will appreciably increase global carbon-dioxide emissions by transferring US jobs and manufactures to less efficient nations whose emissions per unit of production are many times greater than your own, and by increasing poverty and consequently birth-rates and consequently carbon-dioxide emissions worldwide, thereby exerting at prodigious and tragic cost a double influence on the global climate that will be precisely the opposite of that which was, however piously, intended.

Any restriction on the emission of carbon dioxide is unnecessary. It is simple to establish theoretically, and has been so established, that the UN’s climate panel has exaggerated the true effect of carbon dioxide enrichment on global temperature sevenfold. To confirm that theoretical result it is simple to verify empirically, and has been so verified by direct and repeated satellite observation, that the diminution over time in the outgoing long-wave radiation from the Earth is one-seventh of that which the UN’s computer games had been instructed to predict. Carbon dioxide is accumulating in the air at less than half the rate the UN had imagined. Not one of its games had predicted the rapid global cooling of the past seven years. Sea surface temperatures have fallen for five years. Sea level has not risen for three years, and is predicted to rise by little more than a foot this century. Worldwide hurricane intensity in October 2008 was at its least for 30 years. Global sea ice shows little trend in 30 years. The ice sheets of Greenland and Antarctica are thickening. The Sahara is greening. There is no “climate crisis”. The correct policy response to the non-problem of “global warming” is not to cap or tax carbon dioxide emissions. It is to have the courage to do nothing."

Ironically enough, our "do-nothing" Congress has no courage, and certainly not enough courage to actually do nothing.

Having just read two books on the history of the Great Depression, covering Hoover and Roosevelt's administrations in a fair amount of depth, I was both shocked and yet not surprised to hear that the infamously ignorant and arrogant Chuck Schumer recently said this about Herbert Hoover:

"Those on the hard right say, “Cut government spending, let’s go back to the old Reagan days.” Well, the last president who did this when we were in this type of situation was Herbert Hoover.  Herbert Hoover said the government should do nothing when we were in a recession, not a depression.  We did nothing and it related [sic] to a depression."

His ignorance of history and economics is astounding.  The recession we're currently in is just now approaching the severity of the early 80's recession.  Reagan cut spending, and cut taxes.  Federal tax revenues doubled under Reagan's tenure, and we launched the longest period of peacetime growth in the 20th century.  JFK also cut taxes, and tax revenues went up as a result as well.  Hoover did anything but "nothing"!  Dear Lord, if only he had done nothing.  Instead his programs were merely substantial appetizers for the anti-business, anti-wealth, heavy tax burden, politicized "stimulus" of Roosevelt's failed New Deal.  I wonder if Schumer is even remotely aware of the role the Fed played in the Great Depression?  Fed policies contributed directly to the deflation so rampant in the 30's, and many economists have argued that the Depression would have still occurred without the 1929 stock market crash.  In fact, Fed policies on the money supply contributed heavily to so much money being used in speculation...a key ingredient leading up to the crash.

Once again, the blame for much our current fiscal crisis lies at the feet of both our government and the Fed.  Looking back, sobered-up economists now realize that the 'easy money' policy of Greenspan's Fed was a bad idea.  So was the strengthening of the Community Reinvestment Act under Clinton.  So was the ability to sell mortgage debt as securities on the world market.  So was the relaxing of loan qualifications - all under the guise of advancing a socio-economic agenda, and not actual market common sense.

The thing that's so sickening is how our politicians grandstand, beat their chests and pour on the holier-than-thou act.  They'll attack the banks, the oil companies, the stock market investors - and ubiquitously - the "rich".  How hypocritical and odd that they've forgotten that we middle class folk are heavily invested in the stock market as well via retirement funds.  Please do not buy into the myth of class warfare.  We are ALL Americans here.  You do not make the poor rich by making the rich poor.  You do not increase the quality of life for anyone by attacking someone who has more material possessions than you.  Crooked CEOs, while a popular news image, do not represent the whole of the wealthy.  We've GOT to face the facts - wealth redistribution is not only immoral, it will drive permanent wedges between sections of our nation who depend on one another, and truly NEED one another.  We've got to STOP being petty and whining about subjective fairness, and do what is JUST.  Justice is blind for a reason.  Our founders intended small and limited government for a reason!  With Progressive ideas and "plans", government spending is the guarantee, and your tax rates will bend (upwards) long before spending drops.  With the largest national debt and deficit in history, does anyone truly think that the higher tax rates for those making above $200k will stop there?  You do not have the right to take someone else's money, whether it be at gun-point or via the IRS.  This is one bed we don't want to make, and we definitely don't want to lie in.

And by the way:  New York, look, I get that you want liberal Senators in office. Ok, fine.  But could you PLEASE elect someone with a brain?  And a moderate grasp of our nation's history?  And at least a basic understanding of business and economics?  Sheesh.

And to all politicians:  Please stop preaching hope out one side of your mouth, and class warfare out the other.  You are a disgrace because you are feeding on divisions in our nation (that you created to begin with) to further your own power and pocketbooks.

An Open Letter to the Congress
and the President of the United States

For the last 35 years, educators and analysts at The Heritage Foundation have been intimately involved in the nation’s great public policy debates. In all that time, we have never encountered legislation with such far-reaching and revolutionary policy implications as the American Recovery and Reinvestment Act currently before Congress. And never have we seen a bill more cloaked in secrecy or more withdrawn from open public exposure and honest debate.

In addition to being the single most expensive bill ever proposed, this measure calls for a massive expansion of the federal government’s reach into the day-to-day life of virtually every citizen, business and civic organization in the nation. That, in itself, should be the subject of an extensive public conversation and thoughtful debate. Instead, we have seen Congressional leaders schedule snap votes on a 1,434-page bill that no one—repeat, no one—has had a chance to read in its entirety, much less digest and deliberate.

This bill has been advertised as an economic stimulus bill—despite the fact that the Congressional Budget Office estimates it will actually weaken our nation's long-term economic growth. While the stimulative utility of the bill is, at best, questionable, it would unquestionably rewrite the social contract between the American people and their government. For example:

The bill reverses the bipartisan and highly successful welfare reforms of 1996 and drastically expands the welfare state. For instance, it will start rewarding states for adding people to their welfare rolls, rather than for helping them find gainful employment. And contrary to long-established practice, it will entitle able-bodied adults without children to receive cash assistance.
 
It does extreme violence to the concept of federalism—bailing out states that have spent irresponsibly at the expense of taxpayers in states that have been fiscally prudent.
 
It greatly shifts the responsibility and power over health care delivery and decision making from individuals to government. Among other things, it would create a new federal health board to decide which medical services are “effective” in America, paving the way for government effectively to overrule the clinical decisions of private physicians.
 
It deliberately censors religious speech and worship on school campuses by prohibiting use of any “stimulus” funds for facilities that are used for sectarian instruction, religious worship, or a school of divinity.
The list goes on. These and similar provisions will mean fundamental changes in our society. In many instances, the bill would establish policies that directly challenge widely held American values.

We are appalled that Congress is even contemplating such profound changes with so little openness and due diligence. In the past, major policy changes in our welfare system, or health care, or trade policies, etc., were always, quite properly, preceded by extensive public conversation and full debate. That is how a democracy should make important decisions.

The failure of Congress and the Administration to allow that debate is damaging to our democracy. Both chambers of Congress suspended their budget rules to push it along. And both the President and the leaders of the House and Senate have violated their solemn promises that the bill would be available for several days of public review prior to voting, so that the American people might have a chance to learn what is in the bill and to make their views known to their elected officials.

This reckless approach to governance can only undermine public faith in our elected officials and our government as a whole. We call on Congress and the Administration to live up to their promises and stated ideals, and give the democratic process a chance to work.

Sincerely,

Edwin J. Feulner, Ph.D.
President
The Heritage Foundation

The Heritage Foundation · http://www.facebook.com/l.php?u=http://www.myheritage.org%2F
214 Massachusetts Ave, NE · Washington, DC 20002 · 800-546-2843

I hope I'm wrong - I really do.  But remember today when the day comes that inflation and unemployment hit levels that we've not seen in over a generation.  Remember today when our government decides we either need another stimulus bill, or protectionist acts to "save American jobs" (which will only hurt our jobs even more).  Remember today when our government reaches deeper into the private sector to begin mandating salary caps for more than CEOs.  Remember today when the brightest and best minds in business leave our country in search of much better opportunities in places like Asia.

Not only has our Congress passed the largest wasteful spending bill in our history - it was written in secret & without Republican input, rushed to a vote (after they broke a commitment to give the public 48 hours to review it),voted on without being read, and politician after politician has lied about the intended effect of this bill.  The Republicans are a bit like the boy who cried wolf at this point.  They've not stuck to their principles for so long, now that a real wolf has come, their cries for restraint, proper review and fiscal common sense are going unheard (which is a shame).  The greater evil though - in my opinion - is that the Democratic Party has taken full advantage of us in the broad light of day, using economic trouble as an excuse to decorate the largest Christmas tree in history of their pet spending projects...many of which reverse the welfare reforms of the 1990's, reward businesses and state governments for bad fiscal behavior, and discriminate against those they are sworn to protect.  They are thieves, liars, without honor or principle, and utterly devoid of common sense much less a moral compass.

And shame on us for voting these people into office (and that includes the bunch of "conservatives" over the last 8 years that were anything but fiscally conservative).  I love my country and so passionately hope that there are enough people who "get it" - things are going horribly wrong.  The rumor is that this bill is going to be "monetized" - does anyone get the fact that that means "we're going to print money for this" as opposed to "borrowing it".  We have a 10 trillion dollar debt, a 1 trillion budget deficit, we've committed to close to 7.76 trillion in bailout money since October - in effect we've increased our debt more in the last 4 months than in the last 200 years combined.  Our economy has been the world's envy for years - but even the most prosperous nation cannot withstand this kind of recklessness.

Remember this today - because life as we've known it - everything we've taken for granted -  is over.  What may be ahead for us now is far different, and Obama's right, it's going to get worse before it gets better.  Ironically - it doesn't have to get worse.  But it's going to get worse because no one in our government seems to have even a fundamental grasp of economics, much less integrity and the honor keeping their word. 

(Cross-posted with my other blog: http://incrementalthought.com/)

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Forbes recently wrote an article stating that the total cost of the bailouts would reach $7.76 trillion.  We've heard such high numbers proposed for so called "stimulus", that it's easy to become desensitized as to how much money our Congress is trying to spend.  I recently heard* a great explanation of this amount that puts "$7.76 trillion" in perspective:

7.76 trillion is equal to (everything below is adjusted for inflation):

• The entire cost of the New Deal
• The Louisiana Purchase
• The Marshall Plan
• Every NASA project ever
• the S&L Crisis
• The Korean, Vietnam and Iraq Wars
• Plus....World War II....combined!

What our politicians and media aren't telling us is that if even half of that came due, our nation would be "downgraded" (our credit rating would be downgraded, we'd pay higher interest on debt, and borrowing money would become extremely difficult).

Think about it...President Obama and Congress are saying this plan will create 4 million jobs....at the cost of $225 thousand per job, when the average household income in America is $42k.  The private sector could create those jobs for the cost of the job (what a novel idea) - far less than what the government is trying to do.

How many of you have seen headlines stating that world leaders are calling for a new "World Financial Order"?  Does anyone realize that these same leaders are calling for a new currency standard?  And do you realize that implementing a new global currency standard means un-pegging their currencies from the US Dollar....making the dollar worthless?  To make matters more complicated, China just announced that they will no longer by long term Treasury Bills (which is how we finance our long term debt).  The only way we can make up for that is to print money (check out the chart below which indicates how much MORE we're printing now). 

MoneyPrinting

It doesn't take a genius to know that printing more money is not a real solution, in fact it will make things much worse.  Some economists believe we are in a deflationary period prior to inflation - the likes of which this country hasn't seen since the 70's (and some believe it will be far worse than the 70's).

Contrary to what we're taught in school, the New Deal did not save us.  The economic 'experimentation' of FDR's administration (as well as the protectionist moves of Hoover's), extended the depression for the better part of a decade.  We're in the process of repeating history - and our leaders are not listening to us! (only 37% of Americans support the bill).

Just like our parents told us - money doesn't grow on trees.  We cannot spend our way out of this, especially when that spending has much more to do with extending the political power of the majority party deep into the private sector, and nearly nothing to do with real measures that can stimulate economic activity.  I find it incredibly tragic and ironic that our way of life is being sold down the river right under our noses, and hardly anyone has the guts to explain what's going on...

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If you haven't already, you need to call this number and tell your Senators to vote NO: 202-224-3121

* From Glenn Beck's radio show