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This is who plans our economy

Posted by Jeff (ILoveCapitalism) at 6:14 pm - October 15, 2014.
Filed under: Debt Crisis,Depression 2.0,Economy,Free Enterprise

Some might disagree with my view that the U.S. is a centrally-planned economy (and thus, non-capitalist; more of a social-fascist economy). But it is. A central planning board carefully rigs the three most important features of a large economy: its interest rates, its money supply, and the practices of its financial markets and banks.

Of course, that doesn’t mean our economy always co-operates with our brave central planners. And it doesn’t necessarily mean that our planners even have a clue. This chart (via ZH) shows some of their cluelessness:

It tells a story like this:

  • In 2009, they thought publicly forecast that they’d have interest rates back to normal by 2011.
  • In 2010, they publicly forecast that they’d be rigging up some normal rates by 2012.
  • And so on, with each new year. Today, they forecast having normal rates by 2016-17.

These are some of the very people (*cough* Janet Yellen) who had no clue that the 2008 Global Financial Crisis was coming.

As to the economy: If it were recovering (for real) all these years, interest rates would indeed have been back to normal by 2010-11. But our economy hasn’t been recovering much, all these years. Just the markets. (Oh, wait.)

What to make of these items?

Posted by Jeff (ILoveCapitalism) at 11:54 am - October 10, 2014.
Filed under: Debt Crisis,Media Bias,National Security

I come across items from time to time, of which I don’t know what to make. Conspiracy theorists make something of them. Not tending to be one, I file them in the back of my mind and await more information.

The latest is, a prominent German journalist discussing how intelligence agencies manage the media, whether by perks, bribes, help in writing stories (which are thus ‘planted’ stories), or harassment and retaliation on journalists who don’t co-operate. The implication is that our biased media is managed, not only by the political Left, but by the U.S. and other governments.

Another is this year’s spate of deaths among mid-level bankers (previously mentioned here). Most of them are officially suicides, but it’s an odd cluster; the more so as the last few years have been great for the financial sector. Whether these deaths are murders (to cover up something) or genuine suicides by the despondent, either way they would suggest a banking system much worse off than is generally believed.

Finally, there’s this chart:

The first implication is that, while the Taliban’s rule of Afghanistan in 2001 was repressive, at least they shut down heroin production. The darker-minded might also suggest that wealthy narcotics interests (and by extension, banking interests?) were particularly offended by the Taliban and eager to see them go. Which, if true, could make Afghanistan at least partly (apart from the al Qaeda/9-11 aspect) a modern-day Opium War.

P.S. If you want to help make sense of any of these in the comments, be my guest!

Alan Greenspan on gold…in 2014

Posted by Jeff (ILoveCapitalism) at 4:31 pm - September 30, 2014.
Filed under: Debt Crisis,Economy

It’s well-known that the former Federal Reserve chair, Alan Greenspan (KBE, Knight Commander of the British Empire), was a gold-standard advocate in the 1960s. And thereafter muffled his principles, as he rose to become the unofficial king of the world’s banking establishment.

In Greenspan’s multi-decade tenure at the Fed (and, going against his former sound-money principles), he gave us the “bubble economy” we know and love. Including the dot-com bubble of the late 90s and the housing bubble of the mid-Naughties. His intellectual heirs, Ben Bernanke and Janet Yellen, have given us the market bubbles of today.

So his short, new article in Foreign Affairs caught my eye. It promises to explain “Why Beijing is Buying [Gold].” Of course it doesn’t explain any such thing. Its point wanders. Why Greenspan even wrote it is a mystery.

And yet, he did write it. In other words, Alan Greenspan, KBE, felt the need to publicly raise the topic of China buying gold, in Foreign Affairs magazine. And check out his side remarks:

If China were to convert a relatively modest part of its $4 trillion foreign exchange reserves into gold, the country’s currency could take on unexpected strength in today’s international financial system…For the rest of the world, gold prices would certainly rise…

For more than two millennia, gold has had virtually unquestioned acceptance as payment…Today, the acceptance of fiat money — currency not backed by an asset of intrinsic value — rests on the credit guarantee of sovereign nations…a guarantee that in crisis conditions has not always matched the universal acceptability of gold.

If the dollar or any other fiat currency were universally acceptable at all times, central banks would see no need to hold any gold. The fact that they do indicates that such currencies are not a universal substitute…

In essence, the world’s former top banker has just publicly hinted that:

  • Gold is money.
  • China will start buying it.
  • China will become the world’s new financial powerhouse.

You’re not spending enough!

Posted by Jeff (ILoveCapitalism) at 9:11 pm - September 29, 2014.
Filed under: Debt Crisis,Depression 2.0,Economy,Liberal Lies

In saner times of yore, people who spent their entire income were put down as spendthrifts, and people who didn’t were praised as savers.

It was well understood that savers financed the world’s productive capital and so helped to create the Industrial Revolution. The IR used capital to boost the productivity of labor, so that human beings could enjoy good stuff like higher living standards, longer lives, middle-class education and retirement, an end to infant mortality and child labor, etc.

In today’s crazy times, language is turned on its head (to keep the craziness going as long as possible). Savers are now called hoarders, people who hoard money.

Earlier this month, the Federal Reserve Bank of St. Louis published an analysis of our moribund economy, called What Does Money Velocity Tell Us about Low Inflation in the U.S.? The key sentences:

…the unprecedented monetary base increase driven by the Fed’s large money injections through its large-scale asset purchase programs [ed: Quantitative Easing, or "QE"] has failed to cause at least a one-for-one proportional increase in nominal GDP… [ed: though it has certainly boosted the financial markets for "the one percent"]

During the first and second quarters of 2014, the velocity of the monetary base2 was at 4.4, its slowest pace on record. This means that every dollar in the monetary base was spent only 4.4 times in the economy during the past year, down from 17.2 just prior to the recession…the sharp decline in velocity…has offset the sharp increase in money supply, leading to the almost no change in nominal GDP…

The answer lies in the private sector’s dramatic increase in their willingness to hoard money instead of spend it. Such an unprecedented increase…has slowed down the velocity of money…

(Emphasis added.) Get it? If only people would spend all their money, again and again – rather than hoarding it because they need it for bills, or worry about the future – THEN the economy would grow. THEN the Dear Obama-Yellen’s plans would work.

In reality, the economy is restrained by excessive debt and even more, by lack of freedom. As government gets bigger and consumes (or takes over) more of the economy, the private sector shrinks. As government plans, regulates and intervenes more heavily, the private sector gets sicker, lazier and more fearful. Just as Big Government creates more problems than it ever solves, the opposite – Freedom – ultimately solves more problems than it creates.

But that’s not what Establishment economists, politicians, bureaucrats and media want people to know. They’d rather blame, in this example, people who “hoard”. Look for the scapegoating of so-called hoarders to become a drumbeat, as the economy continues to languish into the 2016 election.

If we hit a new financial crisis, they’ll also be sure to scapegoat mysterious “speculators”, as President Nixon did in the 1971 crisis. But they’ll never put the blame where it belongs: on 8+ decades of money-printing and Big Government.

CBO Says $10 Trillion in Additional Debt in the Next Ten Years

Posted by V the K at 8:56 am - April 17, 2014.
Filed under: Debt Crisis

The CBO has published a new report indicating that, assuming fairly optimistic projections for economic growth and tax receipts, the National Debt will increase from $17 Trillion to $27 Trillion in the next ten years.

If you ask the President and his party how they intend to deal with the country’s impending fiscal catastrophe, they have a simple answer for you: “War on Women! Racist Republicans! Koch Brothers!”

If you ask the “opposition” party how they intend to deal with fiscal oblivion, they have an answer, too:  “We’re very concerned about the debt and deficit. Now, let’s talk about immigration reform.” (Gotta get Jeb Bush’s gardener out of the shadows.)

And this is why we’re boned.

Update: It’s funny because it’s true:FBI Uncovers Al-Qaeda Plot To Just Sit Back And Enjoy Collapse Of United States>

A recently declassified CIA report confirmed that all known al-Qaeda-affiliated organizations—from Pakistan to Yemen, and from Somalia to Algeria—have been instructed to kick back and enjoy the show as the United States’ federal government, energy grid, and industrial sector are rendered impotent by internal dissent, decay, and mismanagement.

 

The Ukraine crisis – and the dollar’s decline

Posted by Jeff (ILoveCapitalism) at 11:18 am - April 14, 2014.
Filed under: Debt Crisis,Economy,National Security,Obama Incompetence

We know the Ukraine crisis is hot, with Ukraine and Russia accusing each other of terrorism and east Ukraine basically expecting a Russian invasion. But what interests me is the larger backdrop: the erosion of the U.S. dollar as the world “reserve currency” (or centerpiece of global finance and trade).

You see, the more President Obama tries to isolate Putin, the more he pushes Russia and its trading partners – such as China, India, Germany, Iran – to speed their efforts to integrate their economies and financial systems, to the exclusion of the U.S.

Consider the following news items. None are earth-shattering, but each reveals a bit of the picture.

So, Russia annexing territory (the Crimea) is not really a big deal to Washington; it triggers token U.S. sanctions. But Russia trading with its own neighbor (Iran), in a way that bypasses the dollar-based financial system and thus the U.S. ability to eject little countries from world trade – that gets Washington’s attention. That tells you where the sore spot is.

To continue:

Do you see where this is going? Not toward Russia being isolated. Maybe, in time, toward the U.S. being isolated.

UPDATE: Ordinary Russians are only annoyed, not frightened, by U.S. sanctions.

The dollar’s removal proceeds apace

Like aging, the overthrow of the U.S. dollar (as the key world currency) is a gradual process. In the last month, I’ve blogged on Russia as a U.S. financial opponent, growing ties among the BRICS nations, and growing Germany-China ties, all tending toward the decline (or eventual elimination) of the dollar from those countries’ relationships with each other.

Today it’s growing Russia-Iran ties (that remove the U.S. dollar from their partnership):

(Reuters) – Iran and Russia have made progress towards an oil-for-goods deal sources said would be worth up to $20 billion, which would enable Tehran to boost vital energy exports in defiance of Western sanctions, people familiar with the negotiations told Reuters.

In January Reuters reported Moscow and Tehran were discussing a barter deal that would see Moscow buy up to 500,000 barrels a day of Iranian oil in exchange for Russian equipment and goods…

[A] source said the two sides were looking at a barter arrangement that would see Iranian oil being exchanged for industrial goods including metals and food…

The Iranian official said missiles would also be part of the deal, together with Russia providing assistance with building two nuclear plants in Iran…

Missiles? Yikes! But this is what you can expect, with Jimmy Carter President Obama at the helm. He should have assisted Iran’s (aborted) Green Revolution back in 2009-10, when he had the chance.

Hat tip, ZH.

This is who leads us

Posted by Jeff (ILoveCapitalism) at 11:21 am - April 1, 2014.
Filed under: Debt Crisis,Depression 2.0,Economy

Janet Yellen, who is President Obama’s new chair of the Federal Reserve Bank (Politburo that plans our economy), and who is thus the most powerful woman in the world, gave a speech yesterday where she bemoaned the fact that inflation isn’t high enough (in her view).

To humanize her speech, she told about three people who are long-term unemployed. If only there were enough inflation for these poor people to find jobs. It’s Yellen’s noble job to manipulate the economy until they can. But guess what? Two of the three have criminal records. Might that have anything to do with their unemployment?

One was Dorine Poole, who lost her job processing medical insurance claims when the recession hit.

“When employers started hiring again, two years of unemployment became a disqualification,” Yellen said in her speech yesterday to a community development conference in Chicago. “Even those needing her skills and employment preferred less-qualified workers without a long spell of unemployment.”

Poole was convicted of felony theft 20 years ago after she fell in with a “bad circle,” she said in a telephone interview…

Jermaine Brownlee, a skilled construction worker and apprentice plumber, “saw his wages drop sharply as he scrambled for odd jobs and temporary work,” Yellen said.

Brownlee said in a telephone interview that he was convicted of possession of heroin last year and currently is on parole.

OK, so was Yellen just caught by surprise? Did her speechwriter goof? Nope:

Yellen met personally with both people and knew about their records before the speech.

So basically, the most important person in our economy is determined to create inflation until she sees even the least employable people of all – namely, convicted criminals – in demand as employees. “Fasten your seatbelts; it’s going to be a bumpy night.”

CAVEAT: Lest the excitable accuse me of being a doomsday theorist (gasp!), I shall duly warn that in no way am I predicting instant hyperinflation as of tomorrow morning. In fact, for now, Yellen has officially adopted a less-inflationary stance as she “tapers” the Fed’s recent inflation-creating efforts. I have said “for now” and “officially”, because I think it’s Kabuki theater. As the Taper progresses over the next several months, it will cause markets to drop – whereupon Yellen will revert to full inflation-creating mode (gladly, under political cover). The point here, about her speech, is that it tips her hand.

A conversation I keep having with people

Posted by Jeff (ILoveCapitalism) at 3:58 pm - March 29, 2014.
Filed under: Debt Crisis,Depression 2.0,Economy

Other: How ’bout that economy?
Jeff: The U.S. dollar’s days are numbered. I don’t know when, but sometime in the next five years (and maybe even beginning as soon as this year), the dollar will be kicked out as the key world currency.
Other: That’s crazy. We’re Number One. Other countries need us to trade with.
Jeff: Not necessarily. In fact, it would be good for other countries to keep more goods for their own people, rather than sending them to us just for our crappy paper dollars.
Other: But dollars are how you, like, buy stuff. Countries will always need dollars.
Jeff: Why? They can set up payment and trade systems in their own currencies, without us. And stupid Obama is helping to push Russia, China and India together as we speak. That’s half the world.
Other: But Germany and Japan will stick with the U.S.
Jeff: Really? Why? Japan is a sinking ship. Germany isn’t, but Germany traditionally does business with Russia and China. They could wake up and re-align at any time.
Other: That’s crazy. Germany has been pro-U.S. for 70 years. They’ll never change.
Jeff: Hmm, why are you so sure?
Other: How ’bout them Niners? It’s been raining cats and dogs.

Now consider this news item: Bundesbank, PBOC in Pact to Turn Frankfurt Into Renminbi Hub.

Germany’s Bundesbank and the People’€™s Bank of China agreed to cooperate in the clearing and settling of payments in [China's] renminbi…

The central banks signed a memorandum of understanding in Berlin today…

“Frankfurt is one of Europe’s foremost financial centers and home to two central banks, making it a particularly suitable location,” said Joachim Nagel, a member of the Bundesbank’s executive board. “Renminbi clearing will strengthen the close economic and financial ties between Germany and the People’s Republic of China.”…

In a sign of closer economic ties between the two countries, China plans to open a fourth consulate in Germany…About 800 Chinese companies have bases in North Rhine-Westphalia, Germany’s industrial heartland…

German companies including Siemens AG, the country’s biggest engineering company, and Volkswagen AG are embracing the renminbi internally as a third currency for cross-border trade settlements…

This isn’t new; it’s a trend. China has been inking pacts with country after country in the last five years, so they can stop needing the U.S. dollar. That’s how and why the dollar is getting set for a fall.

I don’t think this trend has been reported much, in U.S. media. I try to spread the word, as I can. The U.S. has worsened its own problems in the last six years, and is moving toward some tough times. Get ready. Have your life in order: health & relationships fixed, debts paid, career solid. Also, don’t hide under a rock, but just in case things get really bad, consider maybe having some emergency supplies, gold and/or guns.

Don’t say you weren’t warned. Russia, China and India have problems too, but some (not all) of those problems stem from U.S. dominance and will be solved as they slowly re-organize the world in their favor.

Left-wing economists: They’re that stupid

Zero Hedge remembers how the Great Housing Bubble of 2003-7 was something Paul Krugman had called for:

Before you say “But that was in 2002!”, consider more recent examples of Krugman stupidity, like his calling in 2012 for the government to boost (supposedly) the economy by faking an invasion of space aliens. The Krugtron quote from Time’s account:

“If we discovered that space aliens were planning to attack, and we needed a massive build-up to counter the space alien threat, and inflation and budget deficits took secondary place to that, this slump would be over in 18 months,” Krugman says…

A second instance, from PuffHo’s account:

“So if we could get something that could cause the government to say, ‘Oh, never mind those budget things; let’s just spend and do a bunch of stuff.’ So my fake threat from space aliens is the other route,” Krugman said before a laughing crowd. “I’ve been proposing that.”

So he said it more than once; only half-joking at best. The man loves his malinvestment.*

(*Borrow-and-spend that creates market bubbles, overbuilding, leaf-raking, wars or other activity that is economically inefficient, or useless, or even destructive.)

Related: It struck me that one way you can tell a left-liberal is: government spending always sounds like a good idea, to them. Should government spend, to stimulate the economy? Check. Spend more on education, so people will (supposedly) be more educated? You betcha. It never occurs to the left-liberal that government just might be incompetent at most things. So that the proposed spending would do nothing at all – or would even make things worse, as it only subsidizes incompetence. For example: Subsidizing an incompetent system of educators. The possibility just doesn’t cross a liberal’s mind.

The Banker Suicides

Posted by Jeff (ILoveCapitalism) at 12:12 pm - March 18, 2014.
Filed under: Debt Crisis,Economy

I don’t know what this means; I’m just noting the oddity. Eleven investment bankers have committed suicide, so far in 2014. ZH gives the list.

Why would they, with the markets near all-time highs? The conspiracy-minded note the connections to Big Banking (JP Morgan, Deutsche Bank, etc.) and suggest that some of these men did not commit suicide, but rather, ‘were suicided’ as either cover-up or revenge in one of the recent Big Banking scandals (LIBOR rigging, “London Whale” trading losses, alleged forex (foreign exchange) and gold market rigging now under investigation from the German regulator Bafin, etc.). The New York Post notes that the brother of the most recent suicide had some connection to London Whale, as the Senate Finance Committee had cited the brother’s emails in their investigation of it.

But I have no idea what the answer is here. For now, it’s just weird.

UPDATE: Maybe another detail to file here would be the recent suicide of Jeffrey Corzine, the son of disgraced Democrat (and Obama bundler) Jon Corzine. The straightforward explanation is in the media reports that son had a history of severe depression. The conspiracy-minded might also recall that the father was (is?) a top Big Banking insider, who had seriously burned some people in the MF Global scandal (for which he was never charged or otherwise brought to justice).

Obama, not fixing his Debt Bomb

Last week, President Obama released his new budget proposal, which in February he said would be the end of austerity. First let’s ask, what is meant by “austerity”? As a policy, was it ever tried?

As discussed by myself and others, “austerity” means tax hikes (not spending cuts) in practice. Lefties hurl the word “austerity” to demonize the idea of spending cuts. But few of the countries which left-liberals accused of cruel austerity in the last few years cut their overall government spending levels; the majority continued to increase spending. So spending cuts can’t explain those countries’ poor economic results. What can? Well, most of them raised taxes.

Clearly, we should end (or reverse) the tax hikes. That would be a great “end of austerity”. But Obama’s meaning is that we should undertake spending increases; which, for reasons touched on below, probably mean deficit increases.

Before going into Obama’s proposal, let’s review the current state of the U.S. budget. (more…)

What’s Gotten Into the GOP?

Posted by V the K at 10:04 pm - February 11, 2014.
Filed under: Debt Crisis,Noble Republicans

I predicted it in December, and today, the House GOP completely caved in on the debt increase and presented Mr. Obama with a blank check to continue borrowing, printing, and spending the money to support the massive expenditures his FSA demands. Not even purely symbolic amendments for bipartisan committees on debt reduction or entitlement reform… which they could have embarrased Democrats into voting against… were offered. “This is not the time to fight,” said Congresswoman Michele Bachmann (R-MN), trying out the GOP’s inspiring new 2014 campaign slogan.

Update: Mr. Paul Ryan and Mr. Eric Cantor were guests at the president’s lavish state dinner last night. (The one where Mrs. Obama wore the $12,000 designer dress.)  You might want to drop them a line on twitter and ask them how the caviar was.  (Paul Ryan on Twitter – @PRyan) (Eric Cantor on Twitter – @GOPLeader)

Analysts think the Republicans are just beaten down and exhausted, or that they don’t want to risk antagonizing the delicate sensibilities of the swing voters their highly paid consultants tell them are the key to holding onto their phoney baloney jobs. (Base? What base?) There is another possible explanation.

Maybe the GOP has gone L.I.B. (Let It Burn).

Imagine you’re a GOP congressman, and you know full well the country is on an unsustainable fiscal and economic course. You look at the 2012 election as the last chance to turn the country around; and the country (expressed in terms of stupid people voting in large numbers) said, “We don’t want to turn around, we want to burn!”

You can see two predictable outcomes to this course; tyranny or collapse (probably one followed by the other).

Having reached that conclusion, your next rational course of action might be self-preservation. This can take the form of not antagonizing the people who are likely to be running the forthcoming tyranny. It might also mean making as much money as you can now to insulate yourself against collapse later.

If you look at the current behavior of the GOP as self-preservation in the face of imminent catastrophe, it makes perfect sense why they are submitting completely to the Democrats, and seeking to make as much money as they can off their big, rich donors. (Paul Ryan, especially, seems to be angling for a lucrative position at the US Chamber of Commerce.)

(more…)

Recovery for the One Percent: Record inequality

To “celebrate” Dow 16000 and S&P 1800, both of which the stock market just hit intra-day, I’ve gathered a few links on rising economic inequality in the U.S. A few remarks first, to set context.

As a capitalist, I have no problem with inequality – when it comes about for the right reasons, that is, when sovereign consumers have awarded it by their actions in free markets. The problem is that, under President Obama, we have inequality for the wrong reasons.

Obama puts government in control of more and more of the economy, and he has the Federal Reserve bailing out the biggest players on Wall Street (as well as the government) and goosing the financial markets ever higher. That doesn’t come for free.

Whenever someone is bailed out, somebody else was “bailed in”; somebody else lost wealth (or purchasing power). Obama’s policies stealth-transfer it from the wages, pensions, savings and balance sheets of productive people to those who happen either to (1) receive government spending, or/and (2) own financial assets (stocks, bonds, etc.).

Many of those are productive people; but many are not and, in any event, everyone should have to earn wealth the real way, by pleasing their employer or their customers in the market. None merit bailouts. No one deserves government-orchestrated wealth transfers (stealthy or otherwise). No one.

I want small government, natural rights under Rule of Law, sound money and free markets because they are both moral and populist. They form the only moral social system (the only system that lets people be free and doesn’t steal from them, or enslave them). And, as a consequence of being moral, they form the only practical system where masses of deserving poor and middle-class people can and will get ahead.

The Big Lie of Leftism is that leftism somehow stands for the People, or the little guy. It doesn’t. As we see today with President Obama’s policies, producing a result of record inequality – for all the wrong reasons.

OK, now for some data. First, via Marc Faber and Zero Hedge, here is household net worth by wealth percentile:

household net worth by wealth percentile

You can see that, in the last six years, the share of wealth held by the bottom 75% has plunged from 12.7% to barely 10%. (more…)

Recovery for the One Percent (take 3)

I got onto this idea last May; for take one click here, and for take two click here. My key notion:

Even as I read about the stock market making new highs, I keep reading about more Americans on food stamps than ever before, more Americans quitting the workforce, old people who can’t get a decent income…business people who can’t start businesses…This is in Obama’s fifth year. Whom is Obama’s economic recovery for?…

Obama’s policies benefit the Big Government – Big Banking – Big Labor elites – in that order of seniority…[so] Why aren’t we all laughing in Obama supporters’ faces, when they pretend to stand for the People?…

Part of President Obama’s toolkit to benefit the One Percent is the Federal Reserve’s ‘Quantitative Easing’ policy, which I have explained (and slagged) many times; for example, here and here.

Nothing has changed since May. Now a former Federal Reserve official, Andrew Huszar, explains – and apologizes:

Confessions of a Quantitative Easer

I can only say: I’m sorry, America…I was responsible for executing the centerpiece program of the Fed’s first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street. But I’ve come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time.

As I’ve been saying for years! Except that, even more than a Wall Street bailout, QE is also a Big Government bailout. Whether the Fed buys Wall Street’s mortgage bonds, U.S. Treasury bonds, or anything else, the new money sooner or later funds the government’s spending and deficits, including Obama’s $6 trillion (and rising) of additional U.S. debt.

Although Huszar’s piece neglects the Big Government angle (focusing almost exclusively on the Wall Street angle), it gives some interesting color and is worth reading in full.

UPDATE: If you prefer wonky video, CNBC interviews Huszar here.

Krugtron the Laughable

Posted by Jeff (ILoveCapitalism) at 11:12 am - October 23, 2013.
Filed under: Academia,Debt Crisis,Economy,Liberals,Unhinged Liberals

In the last two weeks, Huffington Post (to its credit) has published a 3-part takedown of the noxious New York Times columnist, Paul Krugman, by the fetching economic historian, Niall Ferguson:

It’s long, but I found it a pleasure on several levels. Ferguson is a civil human being (see the video at the bottom of part I) and always an engaging and thoughtful writer. And Krugman merits the takedown, as a writer who habitually over-states his own rightness and denies his past mistakes (such as his 2002 call in favor of having a housing bubble). Krugman recently called himself “Krugtron the Invincible”, which Ferguson adopted as the title for his series.

Via Cyniconomics. Victory dance (and summary) from Ralph Benko at Forbes.

For fun, here’s Dilbert from June 3:

Dilbert cartoon about Paul Krugman

The Reality of America’s Finances

Posted by Jeff (ILoveCapitalism) at 11:26 am - October 21, 2013.
Filed under: Big Government Follies,Debt Crisis,Government Shutdown

That’s the title of a nice post recently from Jon Gabriel at FreedomWorks.

America’s fiscal crisis is not that our debt ceiling was too low, the fiscal crisis is that our debt is too high. When I mentioned this to left-leaning folks, they seemed indifferent…So I made this infographic…

RTWT. As a further tease, here is Mr. Gabriel’s graphic:
America's finances: deficit, revenue and debt

ADDENDUM: Gabriel notes one leftie talking point that’s been making the rounds, “Obama lowered the deficit.” Umm, not really!

First, President Obama’s annual deficits are still larger than President Bush’s were. (Count the FY2009 deficit as Obama’s because his signature is on that budget, not Bush’s. In 2008, the Democrat Congress deliberately held back the FY2009 budget from Bush’s signature, so that Obama could sign it in early 2009 with lots of so-called “stimulus” spending added. Not fair to make Bush responsible for that. Also, even aside from that, Obama’s average deficit is still vastly larger than Bush’s average.)

Second: actually, the Tea Party lowered the deficit. In 2011-13, they have dragged Obama reluctantly into the sequester budget cuts – which Democrats officially haaaaaaaate, remember? Don’t mix up your talking points, lefties! :-)

Thoughts for the day

“Gaius Gracchus proposed a grain law. The people were delighted with it because it provided an abundance of food without work. The good men, however, fought against it because they thought the masses would be attracted away from hard work and toward idleness, and they saw that the state treasury would be exhausted.”
- Marcus Tullius Cicero

“Politicians get up and promise you all sorts of free stuff. They say, I’ll give you more and more stuff, and you won’t have to pay for it…My own view is that we have to tell people the truth, and we’re going to have to demand sacrifice of the American people. The idea of borrowing a trillion dollars more than we take in [each year] is not just bad economics, it’s immoral. I’m not going to do it, and I’m not going to promise what can’t be delivered.” – Mitt Romney

“We had a chance, in 2012, to elect as president a man who built his entire career and fortune on turning around financially troubled enterprises. But the voters rejected him because Obama claimed he was going to give women cancer and outlaw tampons. That is when I knew our country was f—ed.”
- V the K

ObamaLies – in action

First, the facts.

  • October 16: U.S. national debt is $16,747,370,534,090.62.
  • Then they raise the debt ceiling.
  • October 18, at 3pm: U.S. debt is at $17,075,590,107,963.57.

That’s a $300+ billion increase, in two days. It’ll continue (albeit, at a slower pace). It moves the U.S. mathematically closer to its coming default, and the added interest will cost taxpayers (especially if interest rates rise in the future).

Now, here’s what Obama said during the shutdown. October 3:

I want to spend a little time on this. It’s something called raising the debt ceiling. And it’s got a lousy name, so a lot of people end up thinking, I don’t know, I don’t think we should raise our debt ceiling, because it sounds like we’re raising our debt. But that’s not what this is about.

It doesn’t cost taxpayers a single dime. It doesn’t grow our deficits by a single dime…it’s not something that raises our debt.

Or, October 8:

…it’s called raising the debt ceiling, I think a lot of Americans think it’s raising our debt. It is not raising our debt. This does not add a dime to our debt.

‘Nuff said.

On the inevitability of default

In recent days, I’ve ridiculed President Obama’s claim that not giving him a debt ceiling increase would somehow force him to default on U.S. debt payments. (Since current revenues cover the minimum debt service many times over, making any debt default the president’s choice.)

But over the longer term, U.S. default is inevitable – if we keep raising the debt ceiling.

If you’ve ever seen a bankruptcy, you know that the path to default is to take on ever more debt – to supposedly “pay your bills”, in Obama’s expression – as you fail to cut your spending down to what you can afford.

By raising the debt ceiling so that Obama can borrow even more, America comes closer to default. NOT raising the debt ceiling – that is, giving up the deficit habit now, and running immediate balanced budgets – would postpone or prevent America’s coming default.

Some may answer “Ah, but letting Obama borrow more will keep things smooth and buy time to fix our other problems.” All I can say is: People told me that in early 2009, some six trillion dollars ago (of U.S. debt). Bullhockey. It’s how an alcoholic or drug addict thinks: tomorrow is always the day to officially clean up; never today.

Under present leadership, a U.S. default is inevitable. The only question is what form it will take.

  • Less likely: We could yet have an ‘honest default’, where we admit that we can’t repay our creditors and we negotiate cutbacks to our debt – and to our spending.
  • More likely: We will have a ‘dishonest default’ where we borrow, spend and print money until the dollar is confetti, and we never officially default, but we pay our creditors in dollars that buy far less than the dollars they loaned us (or were promised).

Either way, it’s a default (our debt is no good; our creditors don’t get what they were promised). And it’s the road we’re on. “Thanks, Obama!”

More details:

  • Niall Ferguson on why “the fiscal position of the federal government is in fact much worse today than is commonly realized”.
  • Jim Grant on America’s past defaults – honest and dishonest – and the one that’s coming.
  • Seeing the inevitable, China has called for the dollar to be overthrown (removed) as the world’s banking reserve currency. Read about it in the IB Times, the New York Times (which twists the facts to blame the Tea Party, natch) or the LA Times.

UPDATE: Obama has just called on America to stop listening to ‘the bloggers’, by a strange coincidence!