GayPatriot

The Internet home for American gay conservatives.

OMG!

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On a fun note…Milo had a Coming Out Conservative event in New York.

[youtube]https://www.youtube.com/watch?v=O-l-imvfZwY[/youtube]

I’m sure GP readers can relate to idea that nowadays, it is MUCH harder to come out as conservative than as gay.

Shock: Big banker, up to no good, would rather not be audited

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Refresher: The Federal Reserve Bank is not a government agency. It is the world’s largest private bank. Government has given it special privileges to basically:

  • counterfeit money (i.e., create it from thin air);
  • fix key prices in the economy (interest rates);
  • tax Americans indirectly (by creating inflation/money and financing government with the proceeds);
  • goose the financial markets for the proverbial “one percent” – which includes government officials themselves;
  • bail out irresponsible/incompetent banks – and (via measures of “regulation”) prevent up-and-coming banks from challenging them;
  • generally plan the markets (create bubbles, followed of course by crises);
  • plan the number of crappy, part-time jobs that Obama’s economy can create for the little people;
  • and escape the Freedom of Information Act.

So, from The Hill’s coverage of Janet Yellen’s testimony to Congress on Wednesday:

The biggest challenge to the Fed’s structure is the growing movement to Audit the Fed via legislation from Sen. Rand Paul (R-Ky.)…

A GOP-controlled Congress has given the bill its best chances yet of passage, and that renewed interest led Yellen to deliver her most spirited opposition yet.

“I want to be completely clear,” she said. “I strongly oppose Audit the Fed.”

Surprise, surprise.

Hat tip, ZH.

This is who plans our economy

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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.)

You’re not spending enough!

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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.

This is who leads us

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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.

Why QE hurts the economy

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Most of us know the term “QE” as the central bank’s euphemism for creating lots of new money, but if you are not sure, I have an explanation here.

Recently, President Obama nominated Janet Yellen as the new Fed chairman. She is expected to continue or increase QE. At her confirmation hearing, she said:

I consider it imperative that we do what we can to promote a very strong recovery. It’s important not to remove support [QE], especially when the recovery is fragile and the tools available to monetary policy, should the economy falter, are limited given that short-term interest rates are at zero. A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases [QE]. Supporting the recovery today is the surest path to returning to a more normal approach to monetary policy.

Yellen’s comments are tragic because QE cannot and does not promote economic recovery. It does the opposite. Why is that?

Jobs come from something called the division of labor. It’s the fact that people can produce more when they specialize intelligently. A “job” is really a package of specialized tasks that an employer needs someone to do because the specialist can do more for less (or can help the whole organization to do more, etc.).

The superior productivity of specialized labor comes, in turn, from something called capital.

  • Productive capital is the accumulation of knowledge, tools, machines, organizations and infrastructure that enables human labor to be productively specialized.
  • And financial capital is the accumulation of money (cash, shareholders’ equity, savings, etc.) that will buy or develop productive capital and direct its motions.

It is crucial to understand that not all capital is created equal. It takes work, sacrifice, talent and vision to form productive capital. Capital can be invested badly (called malinvestment, which flourishes under QE and 0% interest rates). Thus, raw investment spending levels do not matter. Financially sustainable jobs come only from the capital which has been invested well, for productive success.

QE undermines productive capital. When Obama/Bernanke/Yellen print money, they devalue money; they make it buy less than it would otherwise. So the financial capital of successful business people doesn’t go as far. QE, and 0% interest rates, also kill the return on capital: the incentive to use it very carefully (productively). Thus, QE messes up the economy’s capital, making financial capital perversely less effective for good projects and more available for bad projects, a toxic mix that injures the division of labor (the creation of economically efficient, valuable jobs). It’s as if the economy is on a narcotic and gradually getting more stupid.

The way it looks to businesses is: They thought they had some good capital, but now their capital doesn’t go as far. Everywhere they look, costs are a little higher than projected (or much higher, in the final stages of QE). Simultaneously, at 0% interest their marginal (unproductive) projects look better than those projects are. For both reasons, businesses’ capital is wasted. It somehow doesn’t go as far on their good projects – at the same time they’re tending to either idle it, or blow it on bad projects.

Businesses then need to squeeze out greater financial profits just to maintain their capital base. They do it by hiring fewer people. Some businesses seem very healthy (high-profit) after their job cutbacks. But fewer new businesses are started, and the healthy ones tend to grow by merging with (or buying out) competitors, which lowers employment. The overall economy either stops growing, or grows in unhealthy directions. The unemployed survive on government aid (which is surprisingly plentiful), while stories abound of people who ‘score’ with speculative investments, which tend to rise.

Does all that sound like the world we live in? Yes! Remember: The price of gasoline, the stock market, and the welfare/disability rolls have all roughly doubled in Obama’s reign so far. While new jobs have been far harder to come by. QE enables (at least) those disparate effects.

To be clear, QE is not the only reason Obama’s recovery has been lame. Other Obama policies also increase the cost of employing people, and other costs that businesses face. But QE doesn’t help; it adds to the economy’s burdens.

If you can think of a country that has emerged into vibrant economic recovery because of their doing large-scale QE, please post it in the comments. I haven’t been able to think of an example. And Japan, which has been doing QE since the 1990s and now faces rising costs, clearly isn’t an example. Neither will we be one.