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In Defense of the Megabanks

Megabanks like JP Morgan Chase and CitiGroup got a big, fat wad of corporate welfare from the Republicans in the #CRomnibus spending bill that passed this weekend; a provision that allows them to gamble on risky derivatives with taxpayers on the hook to cover their losses. But John Hinderaker at Powerline makes a decent case that the megabanks are actually scapegoats for the failed Progressive Policies of Clinton, Bush, and Obama.

For years, my friends in the banking industry told me that the federal government was forcing them to make bad loans. Mortgages were not the only such bad loans, but while they were the largest, they were also the least problematic from the banks’ standpoint, since the taxpayers, through Fannie Mae and Freddy Mac, stood ready to buy them and assume the risk. The financial collapse of 2008 and the recession that followed were caused primarily by liberal policies enforced by the federal government that went back to the Carter administration.

The TARP bailouts, Hinderaker says, were actually just DC politicians paying back the banks for the bad policies they had forced on them; and the megabanks paid them back anyway; unlike Democrat crony-operatives like Jamie Gorelick and Franklin Raines who made tens of millions on subprime mortgages and got to keep every penny.

Hinderaker wonders what the implications are in this crony corporatist conundrum are in terms of a presidential bid in 2016 for Democrat senator Liz Warren; whose attacks on Wall Street banks have made her the darling of the progressive left. Yet, if she runs, can she count on the millions of dollars in donations from Wall Street bankers that Democrats always get. (Answer: Of course she can; those campaign contributions aren’t looked at as support for political philosophy, they’re bribes and extortion payments to politicians who could destroy the bankers at will.)

I note some Republicans relish the thought of a Liz Warren candidacy. They think there’s no way Americans would elect a far-left radical senator with a sketchy background to the presidency. Recent history says otherwise.

Distracting Americans – from the economy?

If it isn’t Michael Brown or Elizabeth Lauten, it’s Eric Garner(*) or Trayvon Martin or some other media frenzy. In other words, our media “treats” us to a series of frenzies; frenzies that are stupid because – apart from many of the media claims dissolving under scrutiny – there are more important things for the nation to notice.

I’m beginning to think it’s deliberate. For one thing, over the years I’ve seen how the frenzies get nourished (or prevented) by various political fixers, special interests and even government agencies. For another thing, it’s common sense: if the phrase “powerful people” means anything, then certain people have the power to promote (or block) certain media stories to suit their interests.

Finally, whenever you’re confronted with vicious nonsense, you should ask the question “Who benefits?” And again, the series of stupid frenzies does a job: it blots out public notice and discussion of nationally-important topics. It especially blots out discussion of the scandals/failures of the Obama administration.

And that could be Gruber, the IRS scandal, Obamacare, the NSA’s blanket/warrantless spying, Fast and Furious, vote fraud, unconstitutional rule-by-decree, or any number of failures (Iraq/ISIS) for which a Republican president would be crucified. But I think the most glaring problem where President Obama needs a distraction is: his terrible economy.

And now for a little news on the economy. Black Friday retail sales were a disaster by conventional measures. According to the National Retail Federation, sales during the four-day Thanksgiving holiday period plunged by 11% (from $57.4 billion a year ago, to $50.9 billion).

NRF’s CEO Matt Shay offered an absurd explanation – he claimed that sales were down because of (1) Teh Interwebs and (2) an improving economy:

He also attributed the declines to better online offerings and an improving economy where “people don’t feel the same psychological need to rush out and get the great deal that weekend, particularly if they expected to be more deals,” he said.

But Cyber Monday was also weak. And Shay implies that, if sales had not declined (or had even been up), that would have been a sign of a *bad* economy…Riiiiiiiight.

A more sensible explanation is that Americans have less money to spend, because they are struggling to cover basic necessities:

…the Journal analyzed Labor Department data on 2013 out-of-pocket spending for the middle 60% of the population by income — households earning between about $18,000 and $95,000 a year, before taxes.

The data show they are losing ground. Overall spending for the group rose by about 2.3% over the six-year period from 2007, even as inflation totaled about 12%. At the same time, income for the group stagnated, rising less than half a percent…

There it is. The WSJ analysis did not look at 2014, but I can assure you, trends continued in 2014 (aside from our very recent decline in oil/gas prices). In Obama’s bad economy, people struggle more than ever just to cover food, rent and health care: (more…)

Explaining Obama’s economy

Posted by Jeff (ILoveCapitalism) at 2:18 pm - December 2, 2014.
Filed under: Depression 2.0,Economy,Politics abroad

Readers of GP’s Economy category know that I like to write about how money-printing, now called “Quantitative Easing” (QE), actually drags on the economy (rather than stimulating it). In the long run, QE is just a ripoff to inflate asset bubbles for the Point-One Percent – and stick the rest of the economy with the fallout.

The topic is obscure, but it explains much of what has gone wrong in the U.S. economy as well as Europe, Japan, etc. (Overgrowth of the State explains the rest.) But today, I’ll spare you my verbiage and refer you to Pater Tenebrarum’s. Key passage:

When central banks or commercial banks add new money to the money supply, not one iota of real wealth is created…

However, monetary pumping does disturb the finely tuned dynamic processes [of the economy], as it distorts interest rates and prices. Economic calculation is then falsified and malinvestment invariably ensues. Have the housing bubbles in e.g. Spain and the US not shown this quite clearly?…The emergence of such illusory profits leads to the consumption of capital..

Eventually it turns out that companies actually lack the funds to maintain their real capital. This is what we mean when we refer to the pool of real funding being under pressure: the capital structure has been damaged. Actors in the economy need to…”repair” [the economy's real capital]…Then the economy is in “recession”, but this is really a healing process. It takes time to heal.

Additional money printing actively sabotages this healing process. It achieves nothing but even more impoverishment in the end, especially if it succeeds in igniting another boom by redistributing existing wealth and spurring more capital-consuming activities…

Inflationism is apparently more popular than ever. It doesn’t seem to matter how often and how consistently it fails to produce the desired results, there are always more people in the world who have an epiphany about saving the economy by printing money…[until] the economy has become so structurally damaged…that if banks indeed were to lend out more money [as the money-printers desire], they would be almost guaranteed to lose most of it.

If you have the patience, Read The Whole Thing.

Addendum: By the way, the Swiss don’t get it, after all. Last Sunday, 78% of Swiss voters were against having a sound currency. (Updates my earlier post, Do The Swiss Get It?)

UPDATE: The Japanese people suffer from their latest version of QE, even as their Nikkei stock index sits at seven-year highs. In the end, the U.S. will fare no better (and probably worse).

What’s the deficit, really?

In October 2013, I noted that the U.S. national debt leapt over $300 billion – the day after they raised the debt ceiling. It went from $16.75 trillion to $17.08 trillion, just days after President Obama had publicly lied that “…raising the debt ceiling…is not raising our debt. This does not add a dime to our debt.”

Update: Today, the U.S. national debt is about $18.01 trillion (or as this post is being written, $18,005,549,328,561.45).

$18 trillion! Up from $10.63 trillion when Obama took office on January 21, 2009. The Obama administration is 70% of the way to doubling the U.S. national debt – and still has two years to run!

But here’s the fishy part. Officially, the U.S. budget deficit for FY2014 was only $483 billion. If that’s true, our debt should have gone up a lot less. It should be just over $17.5 trillion.

There are two basic ways to measure the deficit.

  1. The official number: What the government budget states as revenue minus spending.
  2. The reality check: What the government had to borrow, to actually pay its bills.

Let’s take a look at the second one. I don’t have the exact numbers for the U.S. national debt for FY2014′s beginning vs. ending. But it should be obvious that, with the debt increasing by about $1 trillion from late October 2013 to end of November 2014, the real FY2014 deficit (covering twelve months from start of October 2013 to end of September 2014) had to be something larger than $483 billion. Otherwise, the FY2015 deficit would have to be $500 billion in just the last two months alone; and it isn’t.

So if an Obama supporter tries to say “The Dear Leader has reduced the deficit to $483 billion!”, you say: Then why did the national debt rise by roughly a trillion, over that same period? BALONEY.

Meanwhile, the Obama administration has found yet another way of lying to us. I’m becoming convinced that all of the ‘headline’ statistics put out by this administration are manipulated to the point where they’re a fraud, at least partly.

Weekend Nostalgia: Looking Back on Black Friday 1996

Posted by V the K at 9:52 am - November 30, 2014.
Filed under: Economy

1996 — When you could buy a State-of-the-Art computing machine with a 1.6 GB hard drive and 16MB of RAM for a mere $2400. (CRT Monitor not included.)

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Technology has gotten significantly better and cheaper over the past decade — mainly because the Government has kept their greedy, power-grubbing hands from regulating it and let the Free Enterprise System work its magic.

The Big Mac Index

Posted by Jeff (ILoveCapitalism) at 11:22 am - November 24, 2014.
Filed under: Economy,Food,Free Enterprise

Some people consider the price of a McDonald’s “Big Mac” to be a reality check for what is happening to consumer prices. Why?

  • Fast food is widely consumed, outside “the one percent”. A Big Mac may be a price that real people pay often.
  • The price reflects not only food costs, but also costs for hourly labor and benefits, commercial real estate, transportation, energy, manufacturing equipment and packaging.
  • Until a few years ago, changes in the price of a Big Mac tracked changes in the government CPI (Consumer Price Index) fairly well.

In recent years, Big Macs have gone up rather more than the CPI. Why? Several different explanations could be put forward. The least likely explanation is that McDonald’s has suddenly become inefficient at making Big Macs.

Another possible explanation is that the government keeps toying with how it calculates CPI, looking for ways to understate consumer price inflation. That is, to hide it. Which is in the government’s direct, financial interest: that way, the government can make smaller inflation adjustments to Social Security, income tax brackets, inflation-indexed bonds, etc. Plus the political optics are better.

Courtesy of Forbes, Big Mac Index Shows Official CPI Underreports Inflation:

What is the graph saying?

  • In 1996, the average Big Mac cost $2.36.
  • Going by the government CPI (and assuming Big Macs are still a good reality check), the average Big Mac in 2013 should have cost $3.49.
  • But it really cost $4.33, which is a lot more. (The price virtually doubled in 17 years; and of the increase, nearly half is “unexpected” by the CPI.)
  • The increase started in the early Naughties, but more of it is recent, in the last six years.

So, whom do you believe? Our noble government which always looks out for you? Or your lyin’ eyes, when you go to buy a Big Mac?

I believe my eyes. I’m more likely to to hit Starbucks or In-N-Out Burger than McDonald’s; but in all 3 cases, I’m always a little shocked at how their prices have gone up from 10, 5 or even just 1-2 years ago. Poor people, who may eat at fast-food restaurants often, must really feel it.

Bonus question: Why would things have changed in the last six years? Who has been in charge of the government – that is, both the CPI calculation, and our general economic policies?

Obama Redistributing Wealth to the Super-Wealthy

Posted by V the K at 8:01 am - November 17, 2014.
Filed under: Economy

For wealthy bankers and other well-connected cronies in the top 1% of the top 1%, the Obama years have been quite good indeed, and the billionares and nine-figure millionaires are eagerly snapping up the trophies of conspicuous consumption.

The wealth of the top 1 percent grew an average of 3.9 percent a year from 1986 to 2012, though the top one-hundredth of that 1 percent saw its wealth grow about twice as fast. The 16,000 families in that tiptop category — those with fortunes of at least $111 million — have seen their share of national wealth nearly double since 2002, to 11.2 percent.

Demand for billionaires’ most coveted jet, the $65 million G650 from Gulfstream, is so strong that some G650 owners are now flipping their planes for millions of dollars in profit just months after buying them. Bernie Ecclestone, the Formula One auto-racing promoter and billionaire, flipped his for about $72 million last fall — just weeks after he received it.

Sales of personal, V.I.P. jetliners are also strong. Boeing has received several orders from individuals for its 777-300ER (which normally carries 400 passengers) and its even bigger 747-800.

For decades, a rising tide lifted all yachts. Now, it is mainly lifting megayachts. Sales and orders of boats longer than 300 feet are at or near a record high.

With $85 Billion in borrowed and printed money a month blowing into the stock market, those who are in a position to catch some of that money are doing quite well. Meanwhile, at the other end of the income scale, news is not so good for people who make or build things for a living. the Middle Class is really taking a pounding in the chops under the leadership of ‘The Lightworker.’ and the “party of the working man.”

Since the Senate Democratic Class of 2008 took control, the average real income of the poorest one-fifth of American families has declined every year, falling to $15,534 in 2012 from $16,962 in 2008 (the 2013 data will be released Sept. 16). The average real income of the lowest quintile of Americans is now below the level it was in 1968, the year when the War on Poverty began its spending surge.

The next-highest income quintile, often referred to as the working class, has also experienced a continuous decline in real income since January 2009. The average income of these Americans has fallen 6.5% and is now $1,182 lower than it was when President Reagan left office.

The third quintile—America’s middle class—has seen its average income decline to $62,464 from $65,672. More than half of this decline has occurred since the recovery officially began in the second quarter of 2009

A cynic might wonder if Democrat policies are specifically designed to worsen income inequalities, while Democrat rhetoric is designed to reap political benefit from the growing inequality.

ISIS to U.S.: It’s on

Posted by Jeff (ILoveCapitalism) at 5:54 pm - November 14, 2014.
Filed under: Economy,Iraq,National Security

As noted today on Zero Hedge and The Telegraph, ISIS has released some details of its plans for a gold-backed currency:

What does this mean? As I’ve tried to explain before, the U.S. dollar has been the center of world trade and finance since the end of WW2. Oil, among other things, has been traded in dollars. So other countries need dollars (e.g., before they can buy oil). When they invest in bonds, they also like U.S. Treasury bonds.

All that has let the U.S. get away with running large deficits (both trade deficit and fiscal deficit). Other countries send us real goods in exchange for our paper (or electronic) dollars and Treasury bonds. That is why Walmart and Target have been able to supply cheap goods to Americans, all these years.

ISIS is saying, forget that! ISIS will exclude the dollar from its own financial system, and probably from its dealings with other countries. Remember, if these guys are successful, they will sell (or control) a lot of oil. If successful, they will be wealthy and important. Now they’re saying that their financial system will be founded on precious metals – i.e., NOT on the U.S. dollar or the U.S. Treasury bond. I feel certain that, if they aren’t doing so already, ISIS will also be trading oil only in non-U.S. currencies like the Euro or yen, and/or in gold.

If ISIS succeeds as a country, then, it’s another step in the world’s process of “de-dollarization”, or removing the U.S. dollar as the centerpiece of the world system. Although it is arguably an understandable and well-justified act, it is not a friendly act: ISIS is taking aim at (what they perceive to be) the heart of U.S. prosperity and power in the world.

I expect that the alarm bells in Washington are ringing a bit louder. At a minimum, look for President Obama to escalate his rhetoric against ISIS, with bipartisan support. (Which will mean, in the Democrats’ case, going against their own anti-U.S. / pro-Islam instincts; but they will.)

Do the Swiss get it?

Posted by Jeff (ILoveCapitalism) at 1:18 pm - November 11, 2014.
Filed under: Economy,Politics abroad

We’ll find out on Nov 30th, when the Swiss are set to vote on a citizens’ initiative that will require their central bank to hold 20% of its reserve assets in gold.

As recently as the year 2000, the Swiss National Bank was required by law to hold 40% of its assets in gold. That made the Swiss franc a relatively hard/safe currency. But Swiss voters removed that requirement in a 1999 referendum. Oops.

The SNB soon undertook an orgy of gold-selling, as well as money-printing (keeping the franc pegged to 0.83 Euro). Today, the SNB holds maybe 7-8% of its reserve assets in gold. The new referendum would require the SNB to take it back up to 20% over the next five years. (more…)

Preparing for the $15-an-hour BurgerOrderTaker

Posted by V the K at 10:04 pm - October 23, 2014.
Filed under: Economy

Because no one whose primary job skill is asking “Would you like a hot apple pie for one dollar more?” is worth $15-an-hour. (Especially not the ones at the BK down the street from my office who… hand to Ra… took ten minutes to get me my Whopper, Jr. when there was like me and two other people in their restaurant.)

Various outlets are reporting that McDonald’s is currently testing automated cashiers in the hopes that they will soon roll out all over the country. The machines are touch screen and will enable customer to order and pay for their food without having to wait in line and interact with a live cashier.

Similar machines are already being used in Europe

Which will make it a little harder for all of the cheap foreign laborers Obama wants to import to find work.

On the subject of the minimum wage, useless DIABLO Chris Christie… actually said something pretty smart about that.

“I’m tired of hearing about the minimum wage,” Christie said during a speech at the Chamber of Commerce. “I really am. I don’t think there’s a mother or a father sitting around the kitchen table tonight in America saying, ‘You know, honey, if our son or daughter could just make a higher minimum wage, my God, all of our dreams would be realized.’ ”

“Is that what parents aspire to for our children?” the possible 2016 presidential candidate asked. “They aspire to a greater, growing America, where their children have the ability to make much more money and have much great success than they have, and that’s not about a higher minimum wage.”

And he must have drawn some blood with that remark, because it seems to have ticked off the right people.

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.)

A miracle: French Nobel laureate makes sense…almost

Posted by Jeff (ILoveCapitalism) at 10:07 pm - October 14, 2014.
Filed under: Economy,Free Enterprise,Liberal Integrity

From France24 (via Zero Hedge):

Hours after he won the economics Nobel Prize, [Jean] Tirole said he felt “sad” the French economy was experiencing difficulties…

France is plagued by record unemployment and Tirole described the French job market as “catastrophic”…arguing that the excessive protection for employees had frozen the country’s job market.

“We haven’t succeeded also in downsizing the state, which is an issue because we have a social model that I approve of – I’m very much in favour of this social model – but it won’t be sustainable if the state is too big,” he added…there will not be “enough money to pay for it in the long run”.

He doesn’t quite make the connection, that a social model which is unsustainable (his notion) is not any sort of model that any economist should “approve” of.

But for awhile there, he almost made sense.

Japan: Has it really been in deflation?

Posted by Jeff (ILoveCapitalism) at 10:31 pm - October 3, 2014.
Filed under: Big Government Follies,Depression 2.0,Economy

In the comments to my recent post On Deflation (and “too-low inflation”), a commenter expressed a frequently-heard belief, that a negative “example of deflation is Japan from 1990 to the present.”

I appreciate all comments and, without picking on the person, I wanted to examine the claim. Is it true? Here is a chart (from tradingeconomics.com) that shows Japan’s consumer prices since 1990:


Points that stand out:

  • Japan’s CPI today is over 10% higher than it was in 1990.
  • It’s true that from 1998 to 2013, Japan had a slight CPI decline; perhaps 5% total, over the 15 years.
  • Japan’s CPI is now shooting up again.

Clearly, Japan has not had a large deflation. But perhaps the commenter’s (restated) point might be that Japan has had basically-stable prices since 1990, and the stable prices have done nothing to help Japan’s moribund economy. Here’s how I would answer that.

Japan has long had a relatively government-planned economy. And, over the period shown above, Japan has pursued inflationary, “stimulus” policies of government spending, deficits, expanded national debt, and money-printing. How has it worked out for them?

It hasn’t worked out well. As we see above, Japan’s inflationary policies may have prevented a large-scale deflation (not that that is necessarily good; see my other post). The inflationary policies also seem to have done nothing to fix Japan’s multi-decades of a debt-burdened economy.

In the midst of a 20-year lame economy, stable consumer prices have been a saving grace for Japanese households. But now that Japanese CPI inflation is on the rise in 2014, real living standards in Japan are dropping and “Abenomics” is gaining well-deserved unpopularity among the Japanese.

Japan is not an example of the failure of pro-freedom and sound-money policies, because Japan didn’t try them. Japan is an example, rather, of the failure of what they did try: Big Government, pro-debt, inflationary policies.

UPDATE: David Stockman tells the story of Japan, with charts. RTWT. They inflated massive stock, debt and real estate bubbles in the late 1980s; the bubbles burst; and ever since, they’ve piled up more debt and money-printing in trying to re-inflate their bubbles. Like we’re doing – with no better results.

On deflation (and “too-low inflation”)

Posted by Jeff (ILoveCapitalism) at 1:16 pm - October 3, 2014.
Filed under: Big Government Follies,Depression 2.0,Economy,Liberal Lies

If inflation is about rising consumer prices, deflation means falling prices. If you have watched CNBC or any financial TV these last few years, you have seen people often raising the bogeymen of either deflation or his new buddy, “too-low inflation”. (A printed example here.)

The people raising these bogeymen are there to help Big Government and Big Banking. They gain from pro-inflation policies – such as high government spending and deficits, zero percent interest rates, massive money-printing (to cover the government’s deficits and boost the financial markets).

Who loses from such policies? You, the person with a productive job. Each year, the dollars you get from your wages, salary, pension or savings hardly go up – and buy you less than the year before. You’re the sucker at the poker game, and they frighten you into going along.

In reality, falling prices – or the steady, stable prices of “too-low inflation” – are a help to consumers in good times and bad. What sane person doesn’t benefit from (and desire) everyday low prices?

Inflationists claim that if consumer prices decline (as in deflation) or fail to rise (as in too-low inflation), the economy will suffer, because people will postpone buying consumer goods. You should ask: Really? When has the prospect of next year’s stable-or-lower prices ever stopped people from buying what they need and desire now?

Prices have been stable-or-declining for years on computers, smartphones, flat screen TVs, eye LASIK operations, game consoles, and more. Have people stopped buying them? Quite the opposite. Or suppose that prices stayed the same, or even went down, for gasoline, food, rent, health care and education. Would that hurt you and your family, or help you?

Inflationists also claim that deflation (or too-low inflation) means economic depression. And we’ve had an occasional episode, such as the Great Depression, where deflation was *correlated* with depression.

But remember the saying, “correlation isn’t causation.” In the Great Depression, the deflation actually helped a lot of people. By making paychecks go farther, it kept the number of people who were turned out of homes, starved, etc. from being even larger than it was.

And we’ve all been carefully ‘educated’ to forget that deflation and/or low inflation are historically *more correlated with good times*. Via Zero Hedge and The Cobden Centre, here is a chart on that. It shows how deflation prevailed in America in the 19th century, which century overall was the greatest for economic growth in our history.


Cobden Centre gives the source, and further notes:

In their research article ‘Deflation and Depression: Is There an Empirical Link?’ of January 2004, Federal Reserve economists Andrew Atkeson and Patrick Kehoe found that “..the only episode in which we find evidence of a link between deflation and depression is the Great Depression (1929-1934). We find virtually no evidence of such a link in any other period.. What is striking is that nearly 90% of the episodes with deflation did not have depression. In a broad historical context, beyond the Great Depression, the notion that deflation and depression are linked virtually disappears.”

Which makes sense, because in the real world, economic progress means lower prices. As more things are produced with greater efficiency for lower costs, their prices drop – so that you can afford to buy them. It’s a good thing.

What frightens the inflationists is that if we stop the money-printing and other bad policies, they’re out of jobs. The government would have to balance its budget; so the government would probably have to cut spending (i.e., bureaucrats). Companies would have to cut unproductive consultants. Universities would have to cut economists, among others.

Interest rates would have to rise (to historically-normal levels). Real estate prices would come down (making homes more affordable). Stock and bond prices would come down (hurting Wall Street, but making retirement more affordable on Main Street). Bad investments would have to be liquidated (like some bad debts, or the craziest of the “green” or “dot-com 2.0″ companies).

And, to allow for real growth and recovery, government would have to restrain itself (removing its jackboot from the economy’s throat; which Europe and even Japan have still not done). But at the end of it, we’d have a healthy economy where the working person can make ends meet; their wages, salary, pension or savings will buy them a good life. Which we don’t have, today.

It’s no coincidence that pro-inflation policies are pro-debt, anti-freedom policies. What we have today is the debt-bloated, gasping economy that you get after decades of such policies. An economy where the TV commentators tell you with a straight face that fast-rising prices (which make YOUR life harder) are required and, if we don’t keep inflation up at 2% a year or more, the world will collapse.

They’re partly right; their world (built on decades of bad policies) might collapse. But yours wouldn’t. Always remember the difference between their interests, and yours. Or who gains from inflation – and who loses.

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.

How Bad Is the Economy in the Blue States? This bad.

Posted by V the K at 12:50 pm - September 30, 2014.
Filed under: Economy

Texas Governor Rick Perry can boast about luring the headquarters of Toyota, Occidental Petroleum, and some sixty other companies from the overtaxed, over-regulated, business hell hole of California to his state. And he can brag about. Apple, HP, Visa, and eBay all expanding their operations in the Lone Star State at the expense of California and other deep blue states.

Meanwhile, the governor of the corrupt, one-party, Democrat cesspool of Illinois is reduced to bragging about… the opening of a single Olive Garden restaurant.

“Illinois’ restaurant industry is thriving and establishments like Olive Garden are helping drive our economic comeback,” Governor Quinn said. “While we have more work to do, more people are working today than at any time in the past six years. This is good news for people across the state and it is thanks in part to companies like Olive Garden who are employing hardworking residents and growing our workforce.”

The new Chicago restaurant brings 170 new jobs to the community.

Under Pat Quinn, the state of Illinois massively increased personal and corporate income taxes (while carving out a few exemptions to keep businesses like Caterpillar from fleeing). Republicans stopped the Democrats from extending the tax increase, but businesses know it’s on the post-election agenda. The state’s pension system in shambles. Forbes ranks Illinois 38th out of 50 states for business.  Others rank it a lot lower.

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.

Aw, Jeez, They’re at it Again

Posted by V the K at 1:11 pm - September 2, 2014.
Filed under: Economy

A group of people who could be easily replaced by machines, accompanied by paid labor union goons, are planning a nationwide strike on Thursday in an effort to unionize fast food employees and demand $15.00 an hour for the hard work of asking if a customer would like a combo meal.

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Progressivism in action. You want more money? Forget about developing more valuable skills or a better work ethic. Just throw a tantrum until some politician forces other people to pay you more.

It’s a Democrat Thing, You Wouldn’t Understand

Posted by V the K at 9:22 pm - August 27, 2014.
Filed under: Economy

So, the left is completely freaking out over Burger King re-imagining itself as a Canadian company. Among the Democrats freaking out because their anti-business policies are driving US companies to other countries is Democrat congressional candidate Sean Eldridge. Eldridge is running for Congress from New York state after building a personal fortune by starting a successful business that created thousands of jobs marrying a dude who was friends with Mark Zuckerberg at Harvard and cashed in when Facebook went public.

Echoing Democratic talking points on tax policy, Eldridge called Burger King’s attempts to reduce its tax burden “unpatriotic.”

The company announced this week that it will acquire Canadian fast food chain Tim Horton’s and shift its corporate headquarters north of the border. The move, commonly known as a tax inversion, will allow Burger King to pay Canadian corporate tax rates, which are substantially lower than American ones.

Eldridge did not say whether investors in the deal are also unpatriotic. They include his husband, Facebook co-founder Chris Hughes, who owns between $50,000 and $100,000 in Tim Horton’s stock, according to Eldridge’s financial disclosure forms.

Eldridge rejected the suggestion that America’s corporate tax rate, the highest in the developed world, is pushing companies abroad.

“We have the highest tax rate in the world, thirty-five percent, but the average is companies pay in the teens,” he told the Daily Mail, a newspaper in Hudson, N.Y. “Some pay almost nothing.”

So, hold on a minute:

1. BK is “unpatriotic” for setting up shop in Canada in order to pay lower taxes than they would in the USA.

2. The US tax code doesn’t need to be reformed, because companies like BK really don’t pay higher taxes  in the USA.

Come on, which is it?

It Has Come to This

Posted by V the K at 11:55 am - August 26, 2014.
Filed under: Economy

Burger King is buying out Canada’s Tim Horton chain (I am told their coffee is most good) and moving its headquarters to Canada in order to escape the USA’s highest in the industrialized world corporate tax rate of 35%. (Canada’s corporate tax rate is 15%)

Obama economic advisor Warren Buffett is financing the deal .

The Obama Regime and their hard-left base are cursing corporations for acting on their best economic interests. Rather than reform the American tax code to make the USA more business friendly, they actually want to make it even more hostile to business in the policymaking equivalent of “the beatings will continue until morale improves.”

Leftists claim it doesn’t matter that the USA has the highest corporate tax rate in the industrialized world because most companies don’t pay it.  That’s actually a bug, not a feature. The reason many companies avoid that rate is because they have bribed Congress into carving out exemptions for them; which gives big businesses tax advantages that discourage competition and make life harder for smaller, entrpreneurial companies that lack the political connections to have the tax code (and immigration laws, for that matter) written to their liking.