Archive for the ‘Economics’ Category

2016: What’s the Point?

Thursday, October 2nd, 2014

I hear and read endless speculation about this one and that one, and who’s in and who’s out, always superseded by the next day’s news, and always bereft of any measurable facts.  All of this can be both entertaining and frustrating.  All of it may be altogether pointless.  You see, the country is dying now.  By the time a new president is inaugurated in January of 2017, on our present course, it may not make any difference.  The country may be closing in on that tipping point, if we haven’t passed it already, at which nothing will be done to save us, irrespective of party, principles, or propaganda.  Our nation is deathly ill, if not terminal, and yet the politicians continue to chatter on as though there’s no end in sight.  Ignoring the stock market, which is many thousands of points over-valued due to cheap money practices at the Federal Reserve, this economy is a wreck.  As always, I urge my readers exercise care in what they believe or are willing to consider plausible.  In this post, I intend to revisit a topic I haven’t covered in a long while, because I think you ought to consider it.  The subject is the very real possibility of a hyperinflationary great depression that will make the 1930s look like a day at the beach.

As a reference to what hyperinflation looks like, here’s a graph of the infamous hyperinflation in the German Weimar Republic:

German Hyperinflation 1918-1924 (Wikipedia)

Long-time readers will remember I have used John Williams’ ShadowStats website as a reference in the past.  The nature of Mr. Williams’ warning hasn’t change, except to become substantially more strident inasmuch as such a calamity now seems to be possible at any moment.  For those of you who don’t remember, here was his Hyperinflation forecast of 2012:

2012 Hyperinflation Special Report(pdf format)

In 2014, Mr. Williams has updated his report, once in January, with a second installment in April. Here are links to these two in PDF format as well:

Hyperinflation 2014 – The End Game Begins

2014 Hyperinflation Special Report, Second Installment

 In these reports, Mr. Williams goes to extraordinary lengths to describe to you what I’ve told you right along, since the birth of this website:  Any alleged “economic recovery” was a fraud, and the nation is in deepening financial and economic trouble. Naturally, it’s not as though you hadn’t suspected it on your own, the obvious signs being what they are, but with the drumbeat of media, many people are soothed into complacency over a long enough time such that they begin to doubt what their own eyes and wallets are telling them.  In these most recent installments, Williams goes into great detail, putting numbers to the assumptions, providing actual data to support his conclusions.  In this sense, it is time for another reality check, because while the bulk of the people you know may well be ignoring hard reporting, in favor of popular media garbage, somebody ought to be warning them.   Chances are that being the good citizens most readers here tend to be, and being the sort of people who are trying to save their nation from disaster, you’ve been warning them right along.  Now, when they dismiss your warnings, you can dare them to read these reports.

If you’re among that number of people who are desirous of dismissing all of this as “Chicken Little” talk, I’d dare you directly.  Read these reports and if you aren’t at least a bit concerned, concerned enough to learn more, there’s no reaching you anyway.  In 2011, Sarah Palin and others were sounding the alarm.  She was ridiculed and mocked,  but the hard data supported her warnings.  All along, I’ve been warning you of the dangers of the monetary policy of the Federal Reserve, and the grotesque expenditures of the Federal Government.  In the years since 2008, when this latest crisis began, the Fed has borrowed into existence a sum approaching(if not exceeding) fifty trillion dollars.

All of this money-printing or “digitizing” will necessarily lead to a calamity of unprecedented scale.  There can be no escape from the laws of economics, any more than there can be an escape from the law of gravity.  The only question is: When? As Mr. Williams points out in his report, the conditions are already in place.  It’s simply a matter of triggers.  With that in mind, I’d ask my readers to prepare to the extent they are able.

Some will argue that all of this is tantamount to alarmist fear-mongering.  but Williams does offer this, in his second installment for 2014:

“Conceivably, immediate massive and fiscally painful action by the federal government to restore and maintain long-range U.S. government solvency still could avoid the looming dollar collapse, but the related political issues appear now to have been pushed off until after the 2014 midterm election, again, as those controlling the government continue to push politically-difficult choices and actions as far into the future as possible. That has been explicitly demonstrated in actions by both the White House and Congress in the last several years. Nonetheless, despite political efforts to dodge the issues, the U.S. dollar and the deficit do matter, and the looming financial storm likely will break before the election.”

In other words, getting our financial and fiscal house in order could still serve to avoid this calamity, but as he notes, and as we are all too aware, the probability of that being done is low. The question isn’t “Will there be pain?” The real question is whether it will be pain we choose while we maintain the ability to moderate it, or an uncontrolled and apocalyptic pain from which there will be no recovery.  We’re very much like a stage four cancer patient in that only the most radical treatments have any chance of saving us, and the chemotherapy and radiation will be so severe and thorough as to inflict more pain than we might want to endure, but failing to choose this, the results are known and unavoidable.

I have significant doubts as to whether there exists the political will to induce pain via the radical treatments necessary.  The politicians in Washington DC are hoping to stave-off this calamity through the current election cycle.  I believe this is folly, but I also know they’re banking on the notion that they will be able to deal with this after the election, but you and I know the truth: There’s always another election.  The dust will still be settling from the 2014 election when the first real moves for 2016 begin.  They will already begin to make the political calculi about how to survive through the next election, or how to save the next election for their respective parties, but none of them will be thinking about any of this. The truth is that saving the nation will be furthest from their minds.

We have a president who is a functional economic illiterate, driven by dogma of a failed ideology.  We have a Congress driven by short-run notions of self-preservation of their power.  We have a people who possess a low tolerance for bad news in good times, and a complete intolerance for self-imposed discipline particularly where it implies any sort of pain.  It’s time to consider what all of this will combine to create in the coming years, if you haven’t done the math already. People are talking about 2016 like that represents some sort of panacea, but ladies and gentlemen, our nation may not make it until 2016.

 Editor’s note: I realize that the linked reports from John Williams’ site constitute a fair bit of reading, but like most issues, the devils lie in the details. Understanding the roots of our impending calamity, and the historical precedents as well as the actual manipulations of statistics by the current regime are critical in understanding what is afoot. While it’s a lot of reading, it’s entirely worthwhile.

Note 2: There was an error in the links to the two 2014 reports. These have been fixed.

Updated: Walmart Denies It Won’t Re-Stock Ammo

Monday, January 14th, 2013

Walmart Denies

Walmart has denied that it is changing its policy, even temporarily, on the re-stocking of ammunition.  This is according to a WND report.  From that article:

“That information is inaccurate,” said Ashley Hardie, a spokeswoman located at Walmart’s corporate headquarters in Bentonville, Ark.

WND then asked whether the retail chain is cutting back on orders of ammunition.

“No,” Hardie said. “We’re continuing to serve our customers as we have in the past.”

She said Walmart’s ammunition sales policy has not changed, even amid talk of gun-control legislation in Washington, D.C.

 

WND is also reporting that CNSNews, the source of yesterday’s viral story, has in fact pulled the article at this hour.  On the other hand, as WND further reports, they had the following information from people not connected with the original story on which Monday’s CNSNews article had been based:

Meanwhile, WND reader Sam Singleton said his local Walmart in Myrtle Beach, S.C., has a very short supply of ammunition. According to Singleton, the store claimed it had received a letter from corporate headquarters on the issue.

“The clerk said they only had what was left on the shelf and that there was a ‘hard lock’ on the reorders. She said they hadn’t been getting any replenishment and that just today the store had received a letter from the corporate office stating that they would not be able to order any replenishment of ammunition, other than some for shotguns.

“She said they were not stocking anything that could be used in an ‘assault-type rifle.’ I said, ‘This is ammunition I use for practice,’ and she said they were just told there was a ‘hard lock’ on ammo sales.”

Another WND reader, Patrick Clemons, reported a similar experience today after he visited the Walmart in Folsom, Calif.

This is all very curious.  If we are to believe Walmart’s denials, then it’s hard to square with the reports from various people independently reporting very similar things.  Either there is a massive conspiracy to “get Walmart” or there’s a cover-up under way.  At any rate, as of this update, Walmart says it’s not true.

 

Another Bite at the Apple: The Desperate Need for Welfare Reform

Sunday, December 2nd, 2012

Insensitive?

In the immediate aftermath of the election, I suggested to readers that the key driver in Barack Obama’s re-election was one particular sub-group of the electorate in which Romney got creamed.  I pointed to single mothers as the key group that killed any chance of a Romney victory, and the reason I suggested was simple enough to understand: “Free stuff.”  In short, this particular segment of the populace views big government as a “sugar daddy,” and by extension, it’s chief advocate, Barack Obama was the chief beneficiary of this view.  I had known that the number of programs and benefits available to women who fit that description was quite amazing, but I had no idea the extent to which this is true. The simple truth of the matter is that unless and until conservatives devise a method by which to change this formula, they are going to lose national elections.  The problem they will face in so doing is the screed of the left about a “war on women,” but apart from weak-kneed leadership, afraid of such attacks, if something doesn’t change, the country is already lost.

The following image is a chart put together by James Pethokoukis at the American Enterprise Institute, and it demonstrates how a single mother is subsidized by the state, or how Eve, once tempted from her pedestal, became a ward of the state:

The first thing that should strike you is that a single mother of two earning only $29K is subsidized to the extent that she has the same effective lifestyle as a similar woman, unsubsidized, earning $69K, because net, the two have around $57K in income and benefits.  Effectively doubling her meager gross by virtue of the welfare state’s programs, the woman earning $29K is in pretty good shape.  People have lamented to me over the years about people who use foodstamps, but who also load their groceries into awfully nice cars, and the question had been: How can this be? Here’s part of the answer, inasmuch as relieved of the costs of food, medical care, and a tax burden, among other welfare-state benefits, what income is present is freed-up for the purchase of that nicer car.  It’s no wonder she has an iPhone 5, because under this construct, she can afford it, since taxpayers are subsidizing to some degree virtually everything else.

Leftists and those of the moderate middle wonder why we conservatives claim that such programs are a disincentive to work, but the facts make it clear.  What is the point in bettering oneself if it actually can be a detriment to income, as the chart above makes perfectly clear.  At certain thresholds, by earning the next marginal amount, benefits available drop off to the extent that it’s punitive to earn more.  This explains well why in certain lines of work, we have the phenomenon of women roughly matching the description, who quit or get themselves fired once they’ve been there a certain period of time, and it’s because they need to keep earning, but they also need to prevent themselves from crossing these thresholds, or “welfare cliffs.”

The challenge to conservatives is to reverse this without being accused of waging a “war on women.”  The first thing we need to admit is that such a situation is a travesty, both to the women trapped by this process, and to those who are working outside the blanket of this lavish welfare state.  It should never be the case that our people are faced with the choice of placing reason in adversity to morality.  Let me try to explain it this way: If you’re that woman earning $29K, you’d be nuts to earn enough money to push you over the cliff.  It would diminish and damage your lifestyle, and the lives of your children.  At the same time, you would [hopefully] know that to continue to languish on these programs is wrong, but when you look around, you notice everybody around you is doing it, so how wrong can it really be?

This dichotomy is the difficulty we face.  We have provided this system, and it is entirely socialistic.  Viewed from a big-picture perspective, it’s constructed precisely to create a very socialistic outcome: The net wages and benefits are flat from wage or salary levels of $29K to nearly $70K. The woman who earns $29K is the economic equal of the woman who grosses $40K more.  This is an astonishing revelation to many people, who had no idea how thoroughly perverse with socialism this system had really become.  Is there any wonder that welfare-to-work initiatives have failed in recent years, to the largest extent?  Is there any wonder that job training programs seem to have been largely fruitless?

It’s easy enough to identify the problem once you have the facts before you, but then the question becomes: Whatever shall we do about it?  If Congress simply slashes these benefits, they fear they won’t be re-elected, but if they don’t do something soon, they won’t be re-elected anyway because this will have become the daily reality for far too many people to ever reverse it.  The problem is that if we don’t reverse it, it’s going to bankrupt us, and that day is coming all too soon. All of this subsidization is being accomplished with borrowed money, and it simply is not sustainable.  It’s always difficult to convince people that their best long-run interests are better served by giving up a little in the shorter run, and the evidence is quite obvious when one examines how few people ever put money away for retirement or savings in any form. Part of the reason they’re unable is because the money they’re earning today is being taxed to subsidize others, so that the total effect of this problem is much worse and much more widespread than the superficial conclusions one might draw.

We need a real, thorough examination of our welfare state, but under the current administration, we’ll be lucky if we can merely restrict its growth.  This administration knows where its bread is buttered, and it’s not going to yield any ground on this without a brutal fight.  The truth may be that this has already doomed us to a financial and monetary collapse of epic proportions.   When that happens, it won’t matter any longer because this will come to a screeching halt, and both the single mothers in this scenario will pay a terrible price along with every other American.  The left has worked very hard to dissociate any stigma previously attached to such subsidies, so we’re going to need to make more than a financial argument, because this is a problem in largest measure of desperate moral concern.  We need adults in the room, but right now, Congress is acting as the elves in Obama’s portrayal of Santa Claus, and the states have become the sleigh, Rudolph, and his eight four-legged friends. It must stop, but in truth, one way or the other, it will stop.  The question is whether it stops in a sudden crash, or instead because we decide wisely to apply the brakes. The choice is still yours.

For now.

Another Sign Atlas Is Shrugging

Wednesday, September 26th, 2012

Prophet?

Long time readers will know that I am a fan of Ayn Rand’s greatest work of fiction, Atlas Shrugged, first published in 1957.  The famed novel  has developed a following over the years because it describes a frighteningly similar world in which the global economy has collapsed, while America remains as the last enclave of a free market, also on its way to collapse under the dogmatic application of the statist doctrine of mass sacrifice.   Through the novel, readers are transported to a world in which the news media has become a lapdog for the statists, economic news is contrived and rigged to hide the onrushing collapse, while most people go about their lives with self-constructed blinders by which they are able to permit themselves not to know or even notice the facts of their increasingly dire situation.  Rand never intended the book to be prophetic, and yet with each passing day, the global economy and the financial markets provide daily reminders of her fictional work.  Economic conditions have grown steadily more awful, and yet we find the media is unwilling to show the American people more than a glimpse of the truth confronting them.  It’s as though Rand’s fifty-five year-old novel is being acted out in real life, in a modern setting wherein the technology has changed, but acts merely as another shady disguise behind which to conceal the operative laws of nature.  It now appears that Atlas is finally Shrugging.

Government has become an enormous bully, not concerned with improving the economic conditions, but instead with concealing them, and companies across the nation have been forced to collaborate in the deceit. Consider the case of Comcast.  The company announced on Tuesday that it would be closing all of its California-based call centers, reducing their number nationwide from thirteen to ten.  The original announcement mentioned that the reason the California centers were being closed was due to the extraordinarily high cost of doing business in that state. According to the Mercury News, Comcast spokesman Andrew Johnson said:

“We have concluded that the cost of doing business makes operations in California expensive and very difficult”

Scott Anderson, the chief economist with Bank of the West is quoted in the same article:

“The cost of doing business in California is a well-known problem across the country and among business owners in the United States. With the fiscal problems in California, these expenses will likely get higher. Tax rates may rise in California.”

As bad as that may be on its surface, the truth is far worse.  After pressure from the state’s Senate President Pro Tempore, Darrell Steinberg(D-Sacramento,) Comcast withdrew its earlier announcement, backing away from a statement that made clear the cause of the decision for the California closures. From the Belleville News Democrat:

“Instead, it said the California closures were needed for cost efficiencies and to consolidate its Western call centers from 13 to 10, based on customer needs, “rather than geography.” It noted that many customers rely on self-help and online tools to handle their service questions, which meant it doesn’t need as many call centers as in the past.”

I would direct my readers to consider what follows in the same article:

That turnaround was greeted warmly by the Governor’s Office.

“It is unfortunate that Comcast’s announcement to eliminate jobs in California inaccurately placed blame on the state, but I am pleased to see the executives at Comcast taking responsibility and correcting the statement,” said Mike Rossi, the governor’s senior adviser for jobs and business development, in a statement.

The governor’s involvement came after Steinberg issued a personal invitation to Comcast executives to meet “to outline their issues and discuss what my office and the Legislature might do to resolve their concerns.” Pending a meeting, he urged Comcast executives “to reconsider their actions.”

Steinberg said he was “puzzled and extremely disappointed” that Comcast representatives had not contacted his office, which represents the Natomas area, until after making its public announcement.

This is what the beleaguered people of California have as a state government:  A Governor who is more concerned with appearances and blame than with the facts.  Notice that Comcast is still going to close the centers, and more than 1,000 California workers are still going to lose their jobs, but the company’s official statements now reflect a more politically acceptable cause for the closures.  This is the sort of crime-boss mentality that now pervades government, from the Federal Government all the way down to State and local institutions of government.  They are no longer concerned with stopping the bleeding, but instead merely concealing it from your eyes, or in this case, merely causing you to believe they hadn’t been the cause.

Ladies and gentlemen, this is precisely the sort of thing that Rand described in her famous novel, and indeed, she even described a breakdown particularly in California, but she was no prophet, much as some might by now be convinced to the contrary.  Rand unflinchingly described the world as it is, and what happens when a people come to believe they have no further need to adhere to the laws of Nature, and that the technologies invented and built by others somehow insulate them the necessity to know the truth, or to somehow evade the objective reality that has been established by the laws of Nature.

At all levels, our governments now join in the gruesome spectacle of pretending that what matters is not what has happened or that will happen, but instead who will be blamed.  The mad rush of politicians to twist corporate arms is another small sign that we are well on our way to a national demise, and I expect that these instances will become more frequent as politicians try to disclaim and evade responsibility for their respective roles in the looming disaster.  Even now, our financial markets are beginning to realize the truth of QE3 (Quantitative Easing, round 3,) and as they do, the market will begin to lose its luster as a concealment for the impending collapse, and the banking industry will no longer be able to hide the truth of the looming collapse by effectively counterfeiting the value of collateral. As real household median income has fallen by 8.2% under President Obama, and as the shrinking number of jobs have caused the number of low-wage workers to increase by more than 30%, it is going to become increasingly difficult to maintain the illusion that “all is well.”

As bad as the government and media collusion in this deception may be, what may be more frightening is that as economic conditions worsen, ordinary Americans will become more polarized, divided into two general groups on either side of the gulf described by the bold line of truth:  Those who see what is and are no longer willing to conceal it for any cause or contrivance, and those who will avert their eyes lest they be forced to grasp the nature of the horrors their continuing silence will have enabled. It is questionable whether disaster may be averted, but it is certain that if the American people fail to recognize the danger, there can be no avoiding it.  It is therefore fitting that as we approach the release date of the second installment of Atlas Shrugged, the movie, and as we watch politicians scramble to avoid blame all while continuing their unrepentant war against us, it’s more important than ever that we refuse to accept the comforting lies they tell.  Their attempt to conceal their responsibility in the impending collapse should not serve as our excuse to conceal our own as Rand’s unintended prophecy continues to manifest around us.
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Note: For those interested, here’s the trailer for the upcoming release of Part II of the movie Atlas Shrugged

 

Staring Down the Barrel of a Gun We Loaded

Saturday, September 15th, 2012

We Loaded It...

I’ve written and re-written this piece a number of times, in part because I don’t wish to cause undo angst, but also in part because I don’t wish to cause too little.  You can blame Barack Obama, George W. Bush, Congresses past and present, or Ben Bernanke and his predecessors for all it matters, because in the context and scope of your life, it won’t make much difference.  We are headed for a complete collapse, and the collapse is no longer some vague notion in some nebulous, faraway universe of remote possibilities.  At least one analyst has concluded that by 2014, at the latest, this country is going to enter a period of economic turmoil that will make the Great Depression of the 1930s look like a garden party.  The media won’t tell you this, whether CNN or the New York Times; neither FoxNews nor the Wall Street Journal.  We are staring directly at the muzzle of a colossal gun, and it’s aimed at the heads of every American, but neither the current President nor the current Congress will tell you how bad it has become.  For two generations or more, the hand-writing has been on the wall, but unlike ordinary ink that will fade with the passage of time, this bit of script has become bolder, heavier and finally, indelible.  There will be no avoiding it.  There will be no escape.  This time, we will go down, and we may well never stage a comeback. The gun is aimed at our heads, and we loaded it.

To understand this will take a little time, although regular readers of this site will know most if not all of the gory details.  For a brief primer on what will soon confront us, please take a look at this report on Hyperinflation at John Williams’ Shadow Government Statistics website.  It’s lengthy, but it is information every American should learn and know, because while it is a bit of a reading chore, particularly for those whose eyes glaze over at the first hint of economic and financial terminology, it is nevertheless important information, and Williams does a remarkable job of not allowing the material to become overly dry. His report really doesn’t need any dressing-up or embellishment to be terrifying.

If you’ve been paying attention to the news beyond the international developments of the last few days, you will not have missed the fact that today, the US credit rating was again down-graded again by Egan Jones.  You should expect this trend to continue for some time, but this downgrade, like the last round of them a little more than one year ago, really doesn’t tell us anything we should not have known: Our currency is on the verge of collapse, and our ability to repay debt is becoming more challenged, but the fools in Washington DC don’t tell you about it because they’re afraid if you knew how bad it really is, you might react badly.  In the movies Armageddon and Deep Impact, the governments portrayed did their best to keep their respective impending disasters secret for as long as possible.  The thinking was: If it’s inevitable, such that all we can do is make things worse between now and the impact(s) by disclosing it in advance, we should say nothing until the last possible moment.  Another way of looking at this is the question I once posited:

“The government is spending like there’s no tomorrow. What if there isn’t?”

The fact is that we don’t need Hollywood or the Mayans to provide apocalyptic scenarios to fulfill this role in our immediate future.  Our Federal Reserve(hereafter, simply “the Fed”) in concert with our Federal government have created something nearly as disastrous, and potentially, every bit as deadly.  As Ben Bernanke uses his powers as Chairman of the Fed to undertake another round of quantitative easing.  As you’ll remember from previous rounds of this same tactic, this amounts to money printing, a way to inject more cash into the market in the attempt to stimulate lending and business activity.  The problem is that each time this is done, what actually happens is that the value of the dollar falls versus commodities such as oil, or other energy sources, and the cost of everything increases.  When this happens, it makes it harder for business to operate, harder for consumers to spend such cash as they may have, and otherwise has precisely the exact opposite effect, all while driving us closer to the brink.  Bernanke is trying to drive us away from a deflationary cycle that could result if the economy stalls too steeply, but the problem is that he’s going to cause what will be infinitely worse.

At the same time, our Congress and our President have added to the problem, because each time they borrow money, the Fed is printing it into existence.  In short, both our fiscal and monetary policies are rigged in favor of inflation, and with all the money-printing, it is only a matter of time before the dollar becomes completely worthless in the world market.  Any small displacement in the market could lead to our economic demise.  Williams’ report for 2012 goes so far as to suggest that you concentrate on bare survival strategies, and defending yourself in the face of complete political and social disintegration.

I know that you’ve been reading about a “financial cliff” somewhere in the distant and murky future, but what I’m telling you to do at this point is that the veil of fog is beginning to lift because that future is no longer distant.  Williams’ report explains thoroughly the main causes of our impending doom, and this isn’t some conspiracy nut.  When he published this update earlier this year, his warnings sounded eerily like my own, and also those of a few other people who have been sounding the alarm, including some in talk radio, in conservative media, and notably, Governor Palin.  At the time of the announcement of QE2, Gov. Palin did a rather bold thing:  She announced to the world the dangers and the certain results.  Naturally, since her evaluation was based on sound economic understanding, her conclusions might well have seemed prophetic in light of all that has happened since.  The truth is that she was merely telling you what must be based on the immutable laws of the universe: There are no free lunches…or anything.

I believe this is one of the reasons the Republican leadership in Congress has done nothing to substantially obstruct President Obama’s agenda.  It is true that they would have faced some political consequences, but what’s more the case is that they are every bit as aware of the impending collapse as anybody in the executive branch.  One might view Congress cynically, and suppose they are “getting while the getting’s good,” and there’s no doubt that some of that goes on, but it’s also true that the problem is so gargantuan that they do not see how they can correct it without throwing the country into complete chaos, and since that’s what’s coming anyway, they see no point in hurrying the matter.

Some have concluded that Bernanke is taking this up now in order to try to help Obama’s re-election, and while there may be some truth to it, the fact is that the situation has been and remains much worse than you’re being told by the media.  We have been in a bottom-bouncing depression since at least 2009, and nothing has animated us very far from the floor.  As I have written many times, they stimulate via the printing press and the deficit, and we get a brief improvement, but then the increased costs in the market come home to roost, and we’re set back to a place no better than before as the costs, driven in large measure by the inflationary effects of the stimulus that quickly act as a brake upon the alleged “recovery” that never materializes.

Elsewhere on Williams’ site, you can find a detailed examination of his treatment of unemployment, and the numbers will shock you.  Add to this the tidbits about the deficit and inflation, and you will begin to understand how you’ve been misled, not only by the media and the administration, but also by decades of shoulder-shrugging politicians in both parties.  By Williams’ assessment, it may be impossible to rescue our nation any longer.

Ladies and gentlemen, I have been urging you since the inception of this blog to make preparations to the best of your abilities.  I hope you’ve been diligent.  Check out Williams’ Hyperinflation report, and think it through carefully.  The evidence of your own daily lives has been telling you all of the happy-talk about “economic recovery” had been a farce.  Like the approach of a colossal asteroid, the government’s ability to hide the impending disaster or disguise the seriousness of our worsening situation has begun to fail.  That is really the only significant meaning of the latest downgrade.  They can’t hide it much longer.  The Piper will be paid.

Some are choosing to ignore all of this in the hope that a change of administration might give us one last chance at a way out, but irrespective of the outcome in November, the chances that our currency survives three more years in its current form is probably fewer than one in ten.  The possibility that we will survive as a nation may be somewhat less.  Fixing this problem will require the institution of spending cuts on a scale that may cause complete social collapse.  Do we expect John Boehner to take on such a monumental chore?  Even if the Republicans take the Senate, Mitch McConnell isn’t exactly the picture of courageous and vigorous leadership.

Saving our nation is no longer simply a political problem in the sense of replacing certain politicians.  It’s a cultural and economic crisis as well, and with all that is going on abroad, it may come down to a matter of literal survival.  It’s time that we begin to face up to this, because our politicians aren’t going to address the  problem until it no longer matters, at which point, they’ll do nothing, but we’ll pay the price.  We always do.  People have asked me what we could do to remedy the problem, but when I tell them, they look away, because they don’t want to face the implications that attend the proposed actions.

At present, we have an annual published deficit of around $1.3 Trillion.  As Mr. Williams’ report makes plain, if the government were forced to use GAAP(Generally Accepted Accounting Principles) in their accounting, the actual annual deficit is in the neighborhood of $5 Trillion. The added $3.7 Trillion consists of new future obligations that the government does not pay, but has promised at some future date.  Many refer to these as the “unfunded liabilities” of our government, but they add up to a staggering amount, in the range of $80 to $120 Trillion dollars in promises.  When one makes promises on this scale, it is sure to affect one’s creditworthiness, never mind one’s credit rating.

Consider the fact that our government collects approximately $2.5 Trillion in taxes, fees, and the like throughout the year, but that this is still well short of the $3.8 Trillion it spends, and then propose cuts in response.  Here’s a dirty, ugly secret the DC crowd won’t point out to you: If you cut everything that is not an entitlement program or debt service, you would still have a deficit.  That’s right, if you eliminated every bureaucrat, soldier, judge, roads project, education expenditure, and all of the other things that government does apart from pay interest on its debt or send payments to individuals through entitlement programs, you could not balance the budget.

What this makes clear is that the problem exists not on the “discretionary” line of the ledger, but entirely on the “non-discretionary” lines in the book.  Leftists will argue that the problem is the lack of revenues, but that’s an absurd hoax. Anything done to increase revenues at this point will actually cause them to decline.  Increased tax rates?  People will earn less to avoid the taxes.  Even those who want to earn more won’t be able to because there will be insufficient demand in the marketplace to provide the commerce needed to generate the revenues we have now.

The only answer to this problem is sharp cuts in government spending, combined with a cessation of Quantitative Easing.  The entitlement programs have become such a massive anchor on our economy that it cannot recover, and they have squeezed out all other spending.  This is why people look away when you explain to them the problem.  They know what it implies about all of our sacred cows in the entitlement sector of government.  As with the old lament, everybody is in favor of massive government cuts until we arrive at their favorite Federal program.  At that point, you are given a stack of excuses, complaints, and ultimately: “Never mind.”

I have news for you, and it’s not pleasant:  These programs will end.  Virtually all of them.  None of them will survive in their current form, if at all.  We are like Greece, only worse, and much larger.  The question our elected leaders have not faced is whether to break the news to us now, while there is some small hope of recovery, or whether they shall just “get while the getting’s good,” and make off in the dark of night after the collapse, leaving us to figure it out.  The fact is that I can’t blame them for opting toward the latter, because we will be worse than Greece in every dimension and measure, both in size, but also in degree, and I believe when a responsible politician ever tells this truth, he will be pilloried, at first in media, and then later by mobs.  Paul Ryan has had just the first taste of this.  Sarah Palin was mocked for such warnings to an extent I’ve never seen for simply stating the dangers of QE2 and all the money-printing.  She was right, naturally, as is Paul Ryan on the matter of entitlements.

The problem is now that it may be too late for any sort of remediation.  The problem has become too vast, and it is as late as that.  What we can do as individuals is to grasp the reality laid out before us.  We can prepare ourselves and our families.  We can vote accordingly.  We can make noise about it.  In the end, we may be forced to watch our nation slide back into the pre-industrial, pre-republican muck from which it emerged.  It’s been a long decline, and we’ve mostly done little but to urge it on as a people.  We’re peering down the loaded barrel, and it’s been our finger’s twitch upon which we are waiting.

One false move… A hiccough… One little lurch…

Oil Price Slippage Constitutes Warning

Sunday, May 6th, 2012

Producing Our Economic Life-blood

Over the life of this blog, one of the subjects that has arisen repeatedly is our energy problem, and the effects Obama’s policies are having on our nation’s economic condition.  I have offered you charts, graphs, economic theory, and an understanding of why we remain in the economic trouble we’re in, and much of our troubles originate with energy concerns.  Again validating what I’ve previously reported, global oil prices are now falling in response to the economic outlook in the US and in Europe.  The reason I again bring this to your attention is not to thump my chest, since there’s nothing revolutionary in what I’ve argued, but instead to reinforce the point, because in the broader media, there are too many sources interested in obfuscating and otherwise muddling the matter.  To have a growing, vital economy, the US has relied historically on inexpensive energy.

The American economy is a vehicle of vast capacity for growth, and the American people remain its vital engine, both as consumers and producers.  What the Obama policies have done is to choke down this engine, and the result is an economy that is bottom-bouncing at an idle, struggling for air that a reckless government policy forbids it to consume.  Every time the American people start to accelerate, the market effects of the regressive policies of our government govern the capacity of our economy like a vast engine choke. You could rightly call the policies of Barack Obama the “stuck choke” of American economics.

An engine makes a great analog for the state of our economy, because an engine must both consume energy, and convert it into motive power.  In a healthy state, that’s what the US economy does, and it’s why we must not ignore the grave costs of the current Obama policies.  Consider what happens when you step on the gas in your car:  The throttle opens up, allowing the engine to draw more of the air-fuel mixture, permitting the engine to accelerate, reciprocating more rapidly, and those converting the energy to the horsepower needed to make the vehicle go.  This is how our economy functions: It’s demand for consumption increases, and we have traditionally answered it by permitting more air-fuel mix(energy and capital) into the engine, and it accelerates(grows) providing output some of which is reintroduced back into the stream going in.  It’s a marvelous thing, and the prosperity of every American increases on average.

The situation we’ve been placed in by the Obama policies, combined with the inflationary policies of the Federal Reserve is that the air-fuel mix becomes prohibitively expensive.  Imagine driving down the road at 30mph in order to conserve fuel.  You could come up to speed, but because fuel is so expensive, you really can’t afford to put your foot in it, so instead, you patiently move along at a snail’s pace because you’re trying to do the minimum consumption you can manage and still get to your destination.  This is what happens each and every time the economic engine gets going these last several years:  The price of fuel begins to tick rapidly upward, we get a price spike, and everybody goes into conservation mode, and as a result, the economy slows down.  Naturally, as soon as the economy slows, the prices for fuel begin to fall again, and one can expect that at around the time they hit the bottom of the trough, people will begin to feel safe accelerating their cars back up to highway speeds, and the process begins once more.

The slippage in oil prices this week constitute a warning, because what it implies is that you’ve already hit that point of conservation.  Of course, it’s not merely consumers, but businesses and every form of productive endeavor that uses energy, which is of course all of them.  In that environment of rationing, what occurs is that people necessarily become more frugal, but so do businesses.  It’s unavoidable.  You can only afford to spend so much of your capital on energy, because you must still pay for all of the other necessities of living, and the United States has been operating very close to this line for several years.  A rational Federal policy would realize that this is a supply-side problem, and that to alleviate the problem, what we must do is increase the supply of energy available to the market, but our government has instead answered with tepid notions about conservation, and highly speculative and fanciful programs for “green energy” while it chokes off the supply of real energy to the market.

This is our situation, and the current drop in oil prices is a result of the fact that our economy is again on the downside, and that is further substantiated by the poor numbers of jobs being created.  At this point, it should be so obvious to every living person with two brain cells remaining to clack together that there ought to be a national movement to remove any politician who isn’t focused on this problem.  Instead, we have an administration that is dithering, and is actually making things substantially worse through its regulatory paradigm that insists America simply do more with less.  This insane, nearly maniacal policy is impossible to sustain, because it is driving us to the poor-house, and yet the radical left is fine with that outcome.  They want to make us poorer, and the reason is clear:  Poor people who must choose between groceries and gasoline are easily managed by a central authority, and they are only too willing to do the “managing.”

Let us place this in context:  Imagine that you have a home that is all electric.  Many Americans do.  Imagine that the power grid that supplies electricity to your home generates that power with coal, oil, and nuclear processes.  You might also have a little hydroelectric power, or a little wind and solar, but on average, those supply only a small fraction of our power generation.  Remembering that oil derivatives are one of the primary fuels used in power generation, what happens if we take away one of the others, like coal?  Coal currently provides half of our electric generation, nationwide.  What happens to the price of oil and all its derivatives, including the gasoline or diesel for your vehicle when coal is taken away from power generation?  The answer is obvious, and so is the result, because we’re living it.

Understanding the relationship between energy and our economic prospects is key to understanding our current economic malaise, and the impending disaster we face if our policy is not soon changed to promote more energy production, and to unshackle energy producers from the chains that prevent them from providing to the market the energy that a growing economy requires in order to sustain itself in that state.   This is why Newt Gingrich’s idea of $2.50/gallon gasoline was important, and it’s also one more reason so many of us had hoped that  we would see a Sarah Palin candidacy, because she understands, perhaps better than any other politician in the country, how thorough is our reliance upon energy, but also how to best develop the resources we already have at our disposal.  We desperately need an “energy President,” who understands that growth and prosperity are only possible with abundant and inexpensive energy, permitting the American people to do what they already know how to do, and want to do: Build, grow, and prosper.

The proof of this thesis is contained in our cycle of boom-spike-conserve-bottom. When energy prices fall, the economy (and the American people who drive it) respond with jobs, growth, and productivity.  The problem is that in our current environment of government regulation and governmentally-induced inflation, when the growth begins, the price of energy begins to immediately climb upward, eventually spiking to unsustainable costs.  This places the entire economy into conservation mode, and very rapidly, we slide to the bottom again.  It’s no longer a matter of proving the theory.  It’s proven, and the evidence is all around us, but until we make the conscious decision to end the misery, we’re stuck.

Viral Video: If I Wanted America to Fail

Monday, April 23rd, 2012

I had this video passed along to me, and I must say that it’s very much in line with what I’ve been saying on this blog since its inception. Those who want America to fail are indeed following this model, and while the Obama administration fiddles, America is burning.  This video was published by www.freemarketamerica.org, an organization that says it exists to fight for free markets and against the environmental extremists.  Take a look. It’s well done:

Running on Empty: Petrol Panic in UK

Monday, April 2nd, 2012

Could We Face the Same?

I recommend my readers check out this piece over the UK Telegraphon what is going on with our friends across the pond.  They’re experiencing a fuels shortage to the extent that the government is being urged to begin an emergency program of rationing.  The issue began when a union of truck drivers who deliver fuels threatened to go on strike, and a government official, Francis Maude, a Cabinet Officer advised people to fill up their tanks and store fuel in storage containers.  Quite naturally, the people responded by doing just that, emptying filling stations everywhere.  While telling the people not to panic, the British government incited a panic, and the resultant run on fuels, in a shortage so severe that first responders there are having difficulty finding fuel to run their ambulances.   What we should learn from all of this are at least two important lessons, and I hope my readers will take note:  Governments cause panics by their actions, but more importantly, our fuel supply is more vulnerable than most people think, because of the structure of the supply chain.

If you drive to your favorite filling station, most days there will be no problem.  You’ll simply dispense the fuel, pay and depart, and there’s no fuss about any of it.  What most people don’t realize is that the amount of fuel out at filling stations is based on the expected, ordinary quantity demanded, and while there may be some small amount in surplus, it’s really not much more than a day or two extra under ordinary conditions.  Fuels are dangerous to store in large quantities, and EPA regulations have made the job harder, but most important is the notion of just-in-time inventory management which means retailers don’t keep more on hand than they will immediately sell under normal conditions.

The reason this matters to consumers is that it means that any small fluctuation upward in quantity demanded can quickly lead to a shortage. As we should have learned in the aftermath of hurricanes Katrina and Rita, anything that causes a shortage at the margins in one locale can quickly spread to others.  If there’s a run on fuels in just a few key locations locally, it can spread like a wildfire as displaced customers shift their demand to other locations, driving those to shortage, and thus pushing the shortage around.  As the shortages spread, panic takes hold, so that people descend on every location for fuel they can find.

This tells us a little bit about the psychology of the market and why such shortages can materialize for no apparent good reason, looking at the matter on a macro scale:  Is there enough fuel for immediate demands? Had people simply gone on with their ordinary purchasing patterns, would there have been a serious market-wide shortage?  No.  The problem lies in the fact that people can be moved by fear and uncertainty regarding the immediate future.  The notion that some days in the future, tanker drivers in the UK might be on strike, and might cause a shortage, was enough to cause a government official to make remarks that started a panic.  Even if the strike never materializes, it will take days or even weeks for the UK to restore things to the normal flow.

What this also should remind us is that on-hand supplies at retail outlets is never nearly what the whole market might demand at once.  At any one time, the capacity of every filling station is just a small fraction of the total capacity of every vehicle’s tank.  When everybody goes to fill up at the same time, the situation is made evident, because the on-hand retail supply can in no way match the condensed time frame of such a move by consumers to tank-up.  In the UK, they’re openly talking about rationing now as a way to restore the normal flow.

The more interesting part about this problem is the human psychology implied: When faced with potential shortages, we tend to horde in response, and this can clearly add to the problems.In the US, where we are much more dependent on fuels to maintain the course of our daily lives, commute and travel distances being so much greater, we’re especially vulnerable to panics generated by short-run, geographically-limited marginal shortages. For this reason, the US can be subject to very small-scale shortages turning into regional or even nationwide problems.  It doesn’t take much.  If a few gas stations over a metropolitan area run short, it can ripple outward and spread like a virus. People begin panic-buying almost as soon as they hear that there is a shortage somewhere nearby.

This is why our current situation is actually so precarious.  It doesn’t take much but a day or two of delayed replenishing in distribution to cause a serious problem.  This is also another reason we should seek to increase not only the amount of oil we produce domestically, but also to increase our refining capacity. The situation underway in the UK  is small compared to the impact such a panic could cause here, primarily because the geographical expanse of our country means that public mass transit isn’t economically viable in most areas.  In short, we need our fuel, and our lives have evolved to depend upon it.  It’s bad enough when governments do idiotic things like start a panic, but what’s worse is when they’re so utterly unprepared when they happen without government prompting.

The American people should be made aware that panic hoarding only worsens the problem and increases the span of time before a situation driven by natural disasters is resolved.  The goal in such a situation should be to delay purchase as long as possible, but that’s so counter to our nature that I don’t expect many people to react in perfectly rational ways.  The other problem we face is political, in that too few Americans understand just how fragile this system has become, and with it, all the dependencies upon which it relies.  If more Americans understood just how reliant they really are on an energy supply to maintain their standard of living, they might bring more pressure on politicians to get out of the way.

Paying the Piper: Who Should Pay for Emergency Costs?

Saturday, March 31st, 2012

Who Pays?

This story is creating a bit of an uproar, and while I understand why, I think it outlines an important question in American culture:  If you have an accident, a fire, or other emergency requiring the assistance of first responders, should you get a bill?  In Passaic, NJ, they’re answering that question in the affirmative, but with a twist: Rather than going to the people who use the service directly, they’re going to “go after insurance companies” for payment. They say from the outset that they’re not going to go after people who don’t have insurance, leading me to wonder what kind of free-riding they are now encouraging. Mayor Alex Blanco seems to think this shouldn’t affect insurance policy rates, but I wonder if that’s very honest.  Asked about the effect on rates, and whether the measure would drive them up, Blanco said “I feel that it would be unethical on their part.” There are certainly ethical questions involved, but the worst of them are not with the insurance companies.

Blanco’s claim is that coverage for such fees is built into most insurances, and whether that’s true, I don’t think it’s unreasonable to expect people to pay when their activities result in a call to emergency services.  The bothersome part from my point of view is that it will not be uniformly applied. Leaving an exception for those without insurance seems to me to be an inducement to forgo coverage, but of course, how much is involved?  In this case, fees from $600 to $1000 are involved, and that’s a large expense to anybody who’s just suffered a loss of some sort.  The idea of exempting some people on the basis of a lack of coverage is the problem.

The fact that one person insures his or her assets, while another refuses to do so shouldn’t be a determining factor in whether to charge.  This puts the city in the position of acting as another re-distributor of wealth.  If the city determines that a charge of $600 to $1000 is appropriate, there should not be differentiation in this manner.  What the city is doing in this case is to go after the easy targets, and I think that’s fundamentally unfair. They’re going after insurance companies of those who are insured, because the insurance company is stuck, and the invoices will be paid, but it would not be so easy to collect from those without insurance, so they’re essentially saying they won’t even bother to attempt collection.

I understand that we can feel compassion in various situations for people who have had a run of bad luck, or had bad things happen to them, but the problem here is that the compassion is too selective, and looks like discrimination.  If they went after everybody, irrespective of insurance status,  perhaps the amount they charged per incident could be lower, meaning they would be hitting insurance companies for less, and therefore reducing the impact on policy owners via their rates.

Instead, what the city of Passaic has done is cause a cost-shifting to occur, and I believe that’s fundamentally wrong.  It happens in two ways: First, they will likely bill insurance companies more than an incident actually costs in many cases, and this means the insured are paying for the uninsured.  Second, even if the fees here are representative of the actual costs, and there’s no padding in them to cover the uninsured calls for service, then the residents who pay taxes are basically gifting the amount to the uninsured. Either way, and it’s probably a little of both, what is happening is to shift the burden in what becomes a redistributive scheme.

I don’t mind the idea of charging, because in point of fact, to do otherwise is to impose the whole cost of every instance on tax-payers.  Some will argue they pay for that already through their taxes, but that’s not always the case. Very often, what revenues come in through the taxes is enough to cover the expense of maintaining a fire department’s existence, but not nearly enough to cover the costs of all the calls to which they respond.  As more cities around the country find themselves in budgetary difficulties, I expect this to spread, and I’m not opposed to it, but I would argue that there should be no free-riders, and that those who have insurance or pay taxes shouldn’t be forced to eat the costs for the uninsured.

I think we do far too much of that sort of redistribution as it is.  Let’s not add another layer to this problem. One would think we’d learn something from our health-care funding problems, but it appears we have not. Redistribution of costs from the irresponsible to the responsible doesn’t improve the situation because it merely encourages more irresponsibility. Isn’t it high time were learned that lesson?

The Change We Need Looks Nothing Like the Change We’ve Gotten

Tuesday, March 20th, 2012

Change in Which Leftists Believe

Our Republic is suffering a slow death at the hands of statists of the left, but also the moderate Republicans.  We have a fiscal situation that most would label a crisis by any definition, in which the Federal government expends money fifty percent faster than it collects it, and it collects plenty.  Three years of Barack Obama’s reckless spending, and the willingness of Republican leadership to make deals has left us in a situation in which we are accruing debt faster than at any time in history.  Even if Barack Obama is defeated and sent packing in 2012, as he surely should be, we may not make it that far before the consequences explode in our faces.  The House of Representatives should not pass another bill that appropriates one dollar.   Yes, we need a government shutdown, but Barack Obama has other plans.  He intends to take over, and to ignore the Congress, and he intends to do so well in advance of the elections.  Obama is a man who has planned all his life for overthrowing the United States Constitution, and now, armed with the power of the executive branch, and with a supporting Senate, he is likely to make his play now while he still can.

Barack Obama isn’t a garden variety socialist.  He’s steeped in the tactics of Saul Alinsky, but more, he has an abiding desire to see the United States become a slave state.  People have wondered why he’s doing the things he is, but for many, the answer is clear: We may be on the verge of a second bloody revolution, and the proponents of this one are already in charge, and already using the levers of power to make ready for their moment.  I know this sounds so thoroughly outlandish to some people, that it’s difficult to say it seriously, except for the fact that it’s happening.

Consider Occupy Wall Street.  Here is an organization that exists to create unrest and violence in the streets, and in typical leftist fashion, it will be used to give government and excuse to step in.  Of course, it’s being directed by Obama friends and co-conspirators, including a healthy dose of funding from George Soros and his various affiliate pass-through organizations, but what make it more stunning than this is that Obama is putting in place the foundations for declaring vast new emergencies and taking on new Federal powers under the aegis of just such an emergency.  On Thursday, he signed a new executive order, that while updating older statutes, effectively gives the government the power to seize whatever it wants under whatever conditions it wants in response to a vague national emergency.  The Executive Order, titled: NATIONAL DEFENSE RESOURCES PREPAREDNESS, provides for adjustments to procedures to be carried out under 50 USC.

This order provides for the organization of the executive branch under such an emergency, and likewise provides directions on what may be delegated, to whom, and for what purposes.  It references a number of other executives orders, along with various sections of 50 USC.  The Obama administration will claim it is merely updating policies, but this is a bit more than that. We mustn’t be fooled into thinking this is all business-as-usual.  Nothing about the Obama administration is business-as-usual except for the outward appearance they wish to project.

Consider the implications of a President being tied to a civil unrest movement the likes of OWS, and then also setting up the legal basis for a government response to the sort of crisis OWS could be expected to generate, particularly if there is substantial financial difficulty arising out of the reckless policies of this administration.  On the one hand, he has OWS to terrorize you, and on the other, he is preparing to deal with them in response to your demands.  The truly stunning part is that the Occupiers don’t quite seem to grasp the danger, or that they’re being set up to take a mighty fall.

Now comes news that Obama has been groomed for this role for a long time, perhaps as far back as the mid-1980s, when it seems that Bill Ayers’ parents may have sponsored Obama or otherwise helped him through school, as WND reports.  A former mail carrier explained his contacts with the Ayers family and young black man he met who he now believes was Barack Obama.  WND interviewed him, and here is that video:


Whatever you may make of this, what’s certain is that Obama certainly had ties to some very radical people, and the problem with this man’s testimony is that he remembers Mrs. Ayers(Bill Ayers’ mother) saying that this was a foreign student.  What is certain is that the postal carrier remembers Obama’s features, his voice and manner of speaking.  He also had an interesting discussion with Ayers’ father, Tom, who seems to have been an ardent Marxist too.

I bring this to your attention because it’s an interesting aside to the general conversation about who Barack Obama really is, and what his intentions for this country really are.   I don’t believe he’s anything but a radical leftist, and as many now contend, he is not undertaking these policies lightly.  As Mark Levin mentioned on Monday evening, the Executive Order issued by Obama last week is bad in any president’s hands, but in the hands of this President particularly, that offers a potential prescription for the end of America as we have known it.

It reminds me of a famous piece of literature, Atlas Shrugged, wherein Ayn Rand constructs the devolution of the  United States, and one of the instruments the statists use is an analog to this latest executive order, called “Directive 10-289.”  It basically offered a takeover under the guise of an emergency in much the same form as this latest executive order would do:  Take over the means of production,distribution, transportation, and any and every other critical part of the American economy.  The longer the Obama administration goes on, the more I get the impression that we are living out the last chapters of Atlas Shrugged.

I think Obama is a good deal more malevolent than the shrinking coward who was the head of the country in that book.  I don’t believe any of this is or can be accidental.  He’s clearly intent upon changing America to his vision, whether or not Americans consent.   Any president who can so easily disregard the opinion of more than sixty percent of Americans in enacting a health-care reform bill isn’t acting in the best interests of the country.  Slowly but surely, he’s picking our constitution apart, and if he gets his way, it will be altogether meaningless as a restraint upon government.  2012 may be our last chance to stop the overthrow of our Republic by peaceful means. The fox is in the hen-house, and establishment Republicans still look at him expectantly, as though he ought to lay an egg.  If we do oust him, our next job will be to clean out that sorry gaggle of spur-less roosters who have been so ineffective at keeping the fox in check, in part because they golf with him and see him as one of their own.  He’s not, and the sooner our Republican leadership learns that, the sooner we can take back this country.

Mark Levin Searches for a Word

Friday, March 16th, 2012

The Word The Left Already Knows

Listening to Mark Levin on the radio on Thursday, he was discussing the Obama administration’s predations upon our country, and all of the policies Obama has established that intentionally undermine the United States.  He wanted a new word to describe what Obama is doing, but he settled on an old one, and it’s close, but it isn’t quite right:  De-Industrialization.  Far be it from me to quibble over terminology with the brilliant and accomplished  Mark Levin, who has an audience that spans the nation, and with the Internet, really the entire English-speaking world.  He’s so frequently right, and so unfailingly prescient that I hesitate to offer him a ‘correction,’ but in this case, it’s so important that I believe I must, because as Sarah Palin pointed out Thursday in a Facebook note, Dr. Levin has done more to enlighten more people on the roots of our national disorder than any other person in our culture at present.

I feel it is important enough to risk his ire, and those of his many fans, and followers, some of whom also read this blog.  What Barack Obama is doing is much more fundamental to our national survival than  “de-Industrialization” might indicate.  If it were that, we could recover in a generation, but what Obama is doing threatens to undermine our nation for all times, and as Dr. Levin suspected, the word he seeks already exists, and it’s much more dire than you might imagine: Barack Obama is De-Capitalizing the United States.  It’s been the solitary goal of the left for a long time, and it’s Barack Obama’s method of culturally, financially, and materially destroying America.

How important is capital to a capitalist country?   It is everything we need, not merely to recover our economy, but to fuel it for generations, perhaps in perpetuity.  Capital helps establish even our moral basis, and undermining that basis leaves us to lie in supine servitude to whatever demagogue happens along.  Stealing America’s capital will crush the country, and remove from it the ability to recover, not only in the next decade or generation, but possibly ever.  Most people think of capital as money, and money is capital, but it’s not the only form, and not all money is capital in the most important sense.  Depending on how money is used, it can be capital, and that is surely an important part of the story you must understand to see not only why my term is the correct one, but also in order to see why Barack Obama is far worse, and far more dangerous than any of you may have imagined.

While others have been focused almost solely on the Republican horse-race, I have been covering the twists and turns of our dire national financial circumstances, and I have done so for a reason:  You must know what is being done, and how, if you’re to understand the threat we now face.  Our capital is being strip-mined from this nation in systematic fashion, and that which remains is being systematically devalued.  Let me explain how this is being done, starting with how our cash is being devalued.

First, you must understand our monetary system, and you must know that in order to devalue our money, all you need to do is create more of it than growth in our Gross Domestic Product(GDP) justifies.  Ben Bernanke has been complying with that plan, by creating more money out of nothing in order to lend it to many institutions, including primarily the US Treasury, but also to all of those banks that were “too big to fail” as well as Europe’s ailing financial sector in order to temporarily prop them up.  Governor Palin warned us about this in late 2010, as the Federal Reserve instituted QE2(Quantitative Easing round 2) that is really just a fancy title for more old-fashioned money-printing, now carried out primarily in digital form.

The more the Federal Reserve lends out of thin air, the less all previous dollars are worth, provided there’s no corresponding growth in production and wealth in the total system.  If production and wealth grows by some minor amount, but the printing(or digitizing) of money exceeds that amount, each additional dollar devalues all the rest.  Put another way, if you imagine the wealth of the nation as a giant pie, each time we print more money without growing the pie, what happens is the same as re-dividing the pie by the additional number of dollars.  What this means is that each slice shrinks, but since we’re talking about money, the medium by which we exchange goods and services, what it means is that each slice – each dollar – falls in value versus those goods and services.  You can buy less with the same number of dollars, or put another way, it takes more of your dollars to buy the same goods.  As Sarah Palin predicted nearly eighteen months ago, we have seen the prices of energy and food skyrocket.

You might say that this is all well and good, but Ben Bernanke – not Barack Obama – runs the Federal Reserve.  I agree, but let me tell you that Obama’s fiscal policies are the impetus for much of the money-printing.  Put another way, Barack Obama’s outrageous spending has accounted for four trillion dollars or more of all this money-printing madness.  This is because money isn’t printed and set on a shelf.  Instead, it is loaned into existence.  Once you realize this, you understand that without corresponding economic growth, this is merely funny money that is tantamount to counterfeiting.  Each time they devalue our currency by this procedure, your existing wealth is being stolen by some incremental amount.  That’s the real picture, but sadly, it doesn’t stop there.

Are you paying more for fuel?  To quote my favorite politician, “You betcha!”  Food? “Ditto!”  In fact, prices of almost everything is creeping  slowly upward.  Part of this is due to the re-division of the pie, as described above, but it’s also a result of something else:  The United States Federal government is spending more on redistributive programs than ever in history, and it now spends monies equivalent to 25% of the GDP.  Those dollars, poured into these redistributive programs, are now competing with your hard-earned dollars in the marketplace for goods and services.  When more people arrive in the market with dollars with which to demand more of a thing, but you’re not producing substantially more of it, either the prices will rise in response to the quantity demanded, or somebody else will need to supply the goods from some other place.

This results in an out-flow of cash.  It’s devalued cash, but it’s still landing in China and India, and anywhere else with which we do substantial commerce.  Some of that cash comes back in trade, but some of it does not.  While in ordinary times, I am not so concerned about the balance of trade, under this system at present, we are bleeding wealth and redistributing it globally.  For what?  The latest cellphone?  Produced where?  The latest television?  Produced where?  The simple fact is that while I support free trade, what I don’t support is free trade augmented by redistributive domestic programs.  What this means is that when you go to work, you’re going to produce wealth, some of which will be stolen in the next round of money-printing, and redistributed to some who do not work, to be spent on merchandise you would not buy, and without which the purchasers could easily live, all while pouring your wealth in a chain from your pocket to government to your government-supported neighbor to some state venture in the Republic of China, mostly for transient, non-durable merchandise that only detracts from available capital.

At the same time all of this goes on, productive enterprises have less money from which to draw.  Are you thinking of putting an addition on your home?  First, you might have to borrow the money, and if you do, you’ll find you’re in tougher competition for those dollars, and since fewer contractors are now in existence, you’ll pay a premium for any work you hire out.  Your money won’t go as far, because in construction, fuel is an important component from the production and transportation of raw materials, to the paychecks of workers who will now need more cash to make it to the job-site.  As all of this happens, you may have found that you needed a home equity loan to pay for the new construction, but alas, this too will be more difficult, since the value of your home and property has likely fallen.

Add to this the insane policy of permitting JP Morgan Chase and Bank of America, among others, to move risky European derivatives into coverage by the FDIC.  When the Euro-zone goes belly up, and don’t kid yourself, it will, you will be stuck with that bill too, and it may even collapse your currency altogether.  You might have heard that Wall Street is doing well, but that’s an illusion too.  Much of the growth on Wall Street has been financed with more loans from the Federal Reserve.  Meanwhile, you’re struggling to fill your fuel-tank, and while you do, the foreign powers who control much of the globe’s oil supply are getting wealthy while Barack Obama denies pipelines and drilling all over the United States.  He’s closing down coal-fired plants.  He’s using the EPA to regulate energy producers out of existence.  Slowly, we are being starved of the capital equipment with which we might hope to someday extract ourselves from this condition.   When he closed down Gulf drilling in the wake of the Deepwater Horizon incident, and refused to reopen it despite a federal court ruling, those drilling rigs and platforms left American waters on their way to places they can drill, like Brazil, where he sent billions of dollars to fund their oil industry, including Petrobras, in which his pal George Soros was a big investor.  Those platforms and rigs won’t be back.  You’ll need to raise the capital to build new ones.

Is your paycheck growing? A few may be, but most are not.  In fact, with skyrocketing costs as your money is devalued, even those who’ve managed to scratch out minimal raises are finding their increases are in no way covering their expenses.  With all this newly digitized and printed money, you’re not seeing anything but diminished value in your purchasing power.   You have little money to save or invest, because it’s all going up in smoke to support your basic energy and food expenses.  Any margin of error you may have had is now gone, and to do anything constructive, you’re having to borrow in some form.  You might sooth yourself with the idea that at least you’re contributing to a 401K, or other retirement program at work, but how much of the value of those investments is based on the bubble-building all on the back of these borrowed bucks.  They have the use of your slim capital at present, all on the promise that it’s a shelter.  It could also be a trap.

What all of this does, taken together as a vast picture of our national despair, is to deprive the country of capital from the most fundamental level to the top of the financial food-chain.  When, I repeat, when the Euro crashes, your dollar will follow along behind in short order.  Your financial institutions will be wrecked, and you will find out that there is no such thing as “too big to fail.”  When we are naked, starving, and unable to raise enough capital to fund the production of a pack of bubble-gum, you will see why this is more than mere de-industrialization.  Barack Obama is hard about the chore of de-capitalizing America, undercutting its wealth, and its ability to produce more wealth, on which our lives all depend.  The old saying is that “it takes money to make money,” and Barack Obama and his band of anti-capitalists know that this is true.  To destroy America, and to destroy the capitalism that has powered it through generations of ever-growing government, one must take away that seed that lays its foundations anew in each successive generation: Capital.

Of course, not all capital is about money.  Some economists count “human capital,” and here too, Obama is squandering a generation.  Our schools have become mosh-pits of leftist indoctrination, and our colleges and universities are populated by students many of whom believe it is proper to lobby for free contraception.  You see, capitalism requires a respect for what capital is in its naked essence:  It is the motive power of all new wealth, but what they now teach the nation’s children is that “stuff” is just material that is owned as a matter of legalized oppression of those with less money.  This undercuts the moral basis too, so that your human capital, your financial capital, and your moral capital are all being destroyed.

Barack Obama is literally an anti-capitalist, all the way to his core, and what he and his friends like George Soros do and have done in previous instances is to de-capitalize nations, and reduce them to stagnant, increasingly destitute corpses.  America had been the greatest and freest nation on the planet, because for a long time, it came closest to the capitalist ideal.  Slowly, for a century or more, we have been bleeding it dry.  Republicans and Democrats have participated, and all of them under the label of  “progressivism.”  Mitt Romney would do little different, except perhaps to better manage the collapse.  That won’t save us, and it can’t restore our country to its exceptional promise of years past.  We now stand on a societal precipice and Barack Obama has arrived at just the right time in our history to oversee the commencement of the final de-capitalization of America, shoving us over into an abyss from which the nation may not emerge.

Dr. Levin, respectfully, that is the word you were seeking.  The Left has known it and is practicing it with ardent fervor.

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Bill O’Reilly’s Economic Idiocy Almost as Bad as Obama’s

Friday, March 9th, 2012

Bloviator-in-Chief

I seldom watch Bill O’Reilly, because if I want to listen to somebody pontificate on subjects about which s/he knows little, I can simply re-run Joe Biden’s most recent speech…in any time-frame.  Thursday evening, O’Reilly was on when I came through the door, but since he seemed to be talking sensibly about the Fluke Fiasco, I listened briefly with interest, but in the very next segment, he went on to discuss the price of oil, demonstrating he’s at least as ignorant as Barack Obama pretends to be on the subject. Part of it is driven by the fact that O’Reilly is a panderer who tries to placate ‘the folks’ while serving his masters in the establishment.  His oft-mentioned Harvard degree clearly isn’t in economics.  As usual, O’Reilly failed to identify the actual causes of the high energy prices accurately.

Naturally, being a  panderer, he talked about “speculators,” but he failed to mention even one valid reason that makes up the bulk of the increased prices we’re experiencing at the pumps.  Since O’Reilly did such a masterfully incompetent job of explaining the issue, I feel duty-bound to correct the record, or at least explain it.  There are really five major factors controlling the prices you pay at the pump, and while speculation might be a distant sixth in importance, it really has little to do with what you pay most of the time. Rather than lead you in circles of pompous pandering, let me try to make it a good deal more clear.

By far, the biggest factor in the price of the fuel you buy at the pumps is the price of crude oil itself.  As the amount of oil being supplied to the market contracts, or the quantity of oil being demanded increases, you can expect a corresponding movement in the price you pay.  When producers get together as a cartel(OPEC) in an attempt to restrict production, this will necessarily constrain the supply, and you will generally see higher prices, unless you have some manner by which to throw a significant monkey-wrench in the mechanism, for instance being able to increase your own domestic production, or by augmenting the supply to the market from a reserve.  This should seem simple enough to most people who studied basic economics in High School, never mind earning a degree from that institution of fame we might call “Hahvaad.” The available supply versus the quantity demanded will always dominate the basic calculation.

Another factor that is nearly as important to consumers in a given country is the relative value of their currency in the world oil markets.  The US has enjoyed the distinction of possessing what had been (and still remains, barely) the world’s reserve currency and the currency in which oil trades are made.  Unfortunately, as our Federal Reserve has printed more dollars out of thin air in order to bail out the banks, and Europe, but also loan to our Federal Government to feed it’s insatiable hunger for dollars, we have seen the value of our dollar fall dramatically in the last few years.  This means that no matter what commodity you buy, it will take more dollars to buy one unit as compared to before.  In late 2010, when the Federal Reserve announced QE2(Quantitative Easing, Round2 – a.k.a printing vast sums of cash,)  Sarah Palin, the former Alaska Governor, took to the podium to warn Americans that all of this money-printing by the Fed would result in higher food and energy prices.

Some people, mostly jerks like Paul Krugman of the New York Times actually mocked the Governor for that prediction, and even Fed Chairman Ben Bernanke got in on the act.  After all, what would a former governor of Alaska know about it?  As you probably know by now, she was right on every count.  Everything she said came to pass with respect to the inflationary effects of “Quantitative Easing.”  Score another one for the lady who knows how to take down an elk, but also a pompous commentator.  She understands the energy markets, meaning she knew how the monetary policy of the Federal Reserve and the unrestrained borrowing of the Federal government would wind up effecting the general economy, but particularly the energy sector.

The next thing that affects the price of oil is the availability of substitutes.  For instance, a fair amount of the electricity generated in the US comes from petroleum distillates and residual products from the refining process.  There are just a few commercial alternatives, and apart from nuclear power, the vast bulk are fossil fuels, including oil, but also natural gas and coal.  The grand total of wind and solar energy production nationwide doesn’t provide what one nuclear plant does, so let’s call that source negligible in any commercial sense.  Coal accounted for more than half of all electric generation in the US prior to Obama’s arrival in Washington, but due to regulations being slapped on the energy producers, coal-fired plants are rapidly going extinct.  As this happens, plants that use other fuels are necessarily being forced to pick up the slack, running at closer to 100% capability, and some of those plants use…oil and its byproducts.  So you see, as you reduce the use of substitutes, it necessarily will cause an increase in the price of oil.  Like in any market where substitutes are available, the reduction of the availability(or use) of one will cause a corresponding increase in reliance upon another.  If beef prices go up, before long, people will shift to pork and chicken, and then the prices of these substitutes will move up also.

The fourth big factor affecting the price of fuel at the pumps is government taxation.  If you live in a state like mine, where we pay a federal and state excise tax by the gallon, it’s bad enough when the Feds increase the taxes, but if you live in a state where the tax is a percentage, you really get blistered by any upward movement in fuel prices, because not only do you pay more in fuel, but you also pay a good deal more in taxes on it.

There is another factor that comes to mind, and it has to do with the distribution of the product, and how temporary displacements and shortages like we saw in 2005 with Hurricans Katrina and Rita caused trouble depending upon where you were and what the distribution chain that feeds it looks like, but those sorts of problems are a result of what happens when Just In Time inventory management tries to contend with the unexpected that Mother Nature throws our way.

We currently do not find ourselves under that sort of instability in the distribution chain, and this only goes somewhat further in explaining why the fuel price spikes we saw under George W. Bush bear little resemblance to the structural causes of the high prices we face today.  Four dollars for a gallon of gasoline may not be entirely new, but resulting from something other than an ongoing distribution chain problem as a result of natural disaster, it is most certainly unprecedented in the 21st century. Today’s  closest analog occurred under the administration of Jimmy Carter, if that tells you anything.

Together, these five factors have much more to do with the price of fuels than anything Bill O’Reilly mentioned. Speculators play a role, but by the time you add up the five factors I’ve mentioned, what you discover is that while speculators can drive things a little in one direction or the other, most who trade in commodity futures wind up losing, at least according to the statistics.  Besides, they are an important part of the market too, and to pretend they have no other function but to somehow cheat consumers is a laughable bit of Marxist theory often pushed by panderers in both parties. Realize that listening to economic analysis from Bill O’Reilly is roughly analogous to getting investment advice from a fortune cookie:  It contains only meaningless platitudes that will gain you little more than a moment’s amusement, but will reveal no cosmic truths.

Now, think of Joe Biden speaking.  See my point?

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Obama Says Energy Costs Beyond His Control; Not So Fast

Thursday, March 8th, 2012

Something Stinks

Barack  Obama has been on the campaign trail mocking Republicans, particularly Newt Gingrich and Sarah Palin(although not by name,) who advocate an energy policy of increasing domestic energy production.  This is a bit odd, because while Obama mocks “Drill Baby, Drill,” he has already undertaken policies with the same effect in mind.  If increasing the supply can have no effect on prices, as the President claims, why did he order a release from the Strategic Petroleum Reserve late last summer?  It’s now rumored that he will soon do so again in response to rising pump prices.  Does Barack Obama think we’re idiots?  Releasing oil from the SPR merely accomplishes the same thing as producing more oil domestically:  It provides more crude oil to the market, and that bump in supply tends to bring prices down over time.

Either Barack Obama doesn’t understand basic economics, or he thinks we’re too stupid to notice the contradiction implicit in the difference between his words and his actions.  Here’s what he’s saying:

 

 

Notice that he continues the lie about the so-called “hand-outs” to “Big Oil.”  You may hear his thesis that “there’s no silver bullet,” but what you must understand is that he fully understands that the silver bullet is supply, and when he has order releases from the SPR, it’s an acknowledgement of the fact that an increase in the supply available to the market is a downward pressure on prices.  This is pretty basic, and I assume even President Obama understands that concept, despite frequently demonstrating a a general ignorance of economics.  If he knows better, then there must be a reason he’s misstating the facts in this case, and there is:  He’s in political hot water over the issue, and he knows it.

This is his attempt to stave off criticisms over escalating fuel prices, but it’s not going to work when the electorate realizes that in other ways, Obama is working to constrict the supply of oil available to the United States.  On Thursday, even Mitch McConnell seemed to get it, and from the well of the Senate, he pointed out that Barack Obama is still obstructing the Keystone XL pipeline, and all of the jobs it would create, and the effect it would have on pump prices domestically:

 

 

Unloading On The Campaign Trail

This is a plain debunking of Barack Obama’s thesis, and Obama knows it.  You can’t expect fuel prices to come down so long as you’re restricting the growth of exploration and development of new productive fields.  Why does Saudi Arabia, in particular, but OPEC in particular regulate its production?  The answer is obvious: To prop up the prices oil brings in the market.  They intentionally restrict supply, and what increased production of domestic oil resources will do is to take away the ability of Saudi Arabia and other OPEC nations to effectively dominate the question of global supply delivered to the market.   Doing so will begin to have an immediate effect, as the oil market, like any other sees dramatic moves on the basis of even small marginal changes in the quantity supplied relative to demand.

Obama can’t talk his way out of this one, and worse, he’s been caught lying. You can’t legitimately claim that to increase  supply won’t effect prices while having undertaken measures to artificially prop up supply in order to drive down prices.  This is the nature of Barack Obama’s dishonesty, and it’s all political. I leave you with this:

Update: I just received this link via email. It’s a story on RightScoop, same basic subject.

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GM Temporarily Halts Volt Production – Blames Politics

Monday, March 5th, 2012

Cutting the Cord

The Hill is reporting that GM is putting a temporary halt to its production of its Chevy Volt, an electric car promising wonders, but failing to convince customers.  Volt sales are already heavily subsidized by the Federal government, but the problem with the car isn’t merely its price.  It has a short range, it’s impractical, and its design can lead to fires stemming from its batteries even after relatively minor collision damage.  Of course GM and the Obama administration promise this will help reduce our dependence on foreign oil, but I don’t see how that’s possible.  GM complains that the Volt has gotten a black eye from the politics, but the truth is that the Volt suffers another problem:  Consumers don’t want it.  For most Americans, the prospect of buying an expensive Volt with all the associated hassles is roughly as inviting as a root canal.  They have good reason to balk.

The electric current to re-charge the volt comes from power plants using a variety of sources including coal, natural gas, petroleum products, and nuclear energy. Transmitting power over a network of lines to your charging station is inefficient, because the longer the lines, the more energy is wasted along the way.  I blame much of the hype surrounding the Chevy Volt on people who understand only buzzwords, but do not understand science, or engineering.  One of the other concerns is what happens when one experiences a power outage at home.  You’re stuck if your car is not fully charged prior to the outage.  More, having to leave the car plugged in means time.  Filling a gasoline tank takes a few minutes.  Charging a Volt?  Plan on hours. Up to ten.  That means that when I leave for work at 6am, if I had arrived home at 9pm the evening before(and that’s not uncommon,) the silly thing may not be fully charged.  Most Americans can’t afford that kind of inflexibility.

In total “carbon footprint,” including its manufacture, its batteries, and its use of electrical energy from some source, an electric car is no more friendly to the environment.  The simple truth behind all of these green schemes is that until we come up with an entirely different energy source, you still have all the same basic problems.  Sure, you can burn residual fuel oils at electric generating stations, and therefore centralize the pollution, but by the time you calculate all the inefficiencies of generating electricity in one location, transmitting it many miles to another location, losing some energy every inch of the way, only to be placed in a storage cell where some is lost both charging and discharging, never mind the cost of providing outlets all over the place, and the reduced range of most of these vehicles compared to fossil-fuel powered vehicles, what you may find out is that the total impact on the environment is even greater with electric vehicles.

The only way electric vehicles become substantially better is for their source of energy to become substantially better.  At present, the best hope of so doing is to perfect nuclear fusion.  No worries about radiation or waste(or only a tiny, tiny fraction.) No worry about meltdowns.  No worries about finding new sources of radioactive materials.  Nuclear fusion promises the power of the sun, but the real obstacles are in how to technically do it.  Many programs, mostly funded by government, are carrying out designs studies and experiments.  If ever the technical difficulties are overcome, cheap and abundant electricity will be a reality, making electric cars much more practical.

Meanwhile, as GM spins its wheels chasing a technology that is not much more than a nifty science fair project in terms of its practical application in the lives of most Americans, we’re missing the big picture.  The answer lies not in how to move cars electrically, but instead how to create electric energy more cheaply.  That is what our economy fundamentally needs, and it’s a goal that may be achievable if we want it.  The problem is that at the end of the day, the environmentalists don’t want it.  What they want is a contraction in the amount of energy available to humanity, so as to suppress humanity. What that means for you is what you have seen under Barack Obama: A reduction in your standard of living and an escalating cost for every form of energy.

If you wish to make the Volt or its successors a reality, the best answer is to find the way to make electricity more cheaply.  We’ll always need the highly portable energy source that are fossil fuels, because electrics really aren’t feasible in some applications, but if we can convert most of our energy uses to electric in a environment of inexpensive electric generation, we can make that supply of fossil fuels stretch many millennia. Chasing electric cars in the near term is as frivolous as opening a baseball factory when there are no bats or ball-players.  That’s why the Volt is so heavily subsidized.  That’s why it will remain No Sale with the  American people.

 

So Now Bernanke Is Worried?

Thursday, March 1st, 2012

He Warns Congress?

In the immortal words of officer John McClane, played by Bruce Willis in Die Hard, all I can say to Federal Reserve chairman Ben Bernanke is “Welcome to the party, Pal.”  Bernanke is now warning legislators about the fiscal cliff over which Washington  is shoving the United States.  I must say that I have a few problems with this primarily because Bernanke has been leading us over a monetary cliff all his own.  At the same time, I have a few other pointed question for Chairman Ben as he chides Congress on its lack of budgetary restraint.  Why, at this late date, when we’ve all known this has been coming, is it only now that the Federal Reserve Chairman feels the need to show concern?

He certainly didn’t say any of this, or not loudly, when Nancy Pelosi was running the House.  I also notice that he didn’t chide the President, who hasn’t taken any substantive steps to curtail the problem, and could be said to have arguably multiplied them with his stimulus bill(a.k.a. Porkulus) that unlike previous stimulus programs, wasn’t a single budget year project, but has been copied in each successive year.  Bernanke can complain to Congress all he wants, but when this whole mess got started, he was nowhere in sight.  For the first three years of Obama’s administration, he said nothing much to the executive branch on the matter, at least not publicly, and he said nothing of the sort to Nancy Pelosi and Harry Reid when they controlled Congress in one-party dictatorial fashion.

Worse than that, however, he has administered the greatest printing of money in Federal Reserve history, and it has all been largely inflationary as I have reported.  Mr. “Fiscal Cliff” should have thought about all of this as he was digitizing more currency into existence, through QE1 and QE2, and more recently, a quiet QE3(by another name.)  All of this quantitative easing really amounts to is printing more money, (or digitizing it.) That policy leads to the same cliff, because it is by his printing of it that it exists for the government to borrow and spend in the first place.

For Bernanke to come along now, conveniently after the House is in Republican control and to then waggle his finger is a bit of a sideshow act.  Some will take him seriously, and the markets may react badly, but the truth is that he has been leading us into an even greater danger, and I think he knows it.  This may be his way of making a preemptive strike for later this year, if the dollar crashes.  He can point at Congress and claim: “See, I told you so.”  The problem is that if tries that, I will be right here waggling a finger at him, to assure him that others, like Sarah Palin, have told him so.  I have made this clear repeatedly, and yet Bernanke now comes along to warn Congress?  Congress?  He had better heed some warnings over at the Federal Reserve himself.

Don’t get me wrong:  Congress is being as irresponsible as ever, but some in the majority party are at least trying to do something about it. For Ben Bernanke to come along and say this now suggests that he’s either seeking political favor with President Obama, who re-nominated him for his current second term, that ends in Janurary 2014, or he’s setting us up because he knows something bad is coming, and he now wants to disassociate himself from any blame.  It may well be both.  The sharp fall in gold prices on Wednesday may signal the beginning of a deflationary cycle.  That could lead to a complete economic collapse, and Bernanke’s actions over the past four years have done nothing to remove the possibility.  He can point a finger at Congress if he likes, but that means there are at least three pointing back at him.

 

Romney: “I Want to Maintain the Progressivity”

Tuesday, February 28th, 2012

Progressivity Advocate

Mitt Romney doesn’t seem able to help himself.  Every time he’s given an opportunity to distance himself from his progressive politics, he sidesteps it and goes on to reinforce the view of him as a liberal Republican.  Let’s stop kidding ourselves about all of these claims that he’s really a conservative.  He’s not.  He wasn’t a conservative when he ran to the left of Teddy Kennedy in his attempt to capture the US Senate seat in 1994, and he wasn’t a conservative when he ran center-left in his gubernatorial campaign in Massachusetts in 2002, and he wasn’t a conservative in his governance there.  There is no evidence by which to conclude this cat has changed his stripes, and I have lost patience with all of the excuse-makers who pretend that Mitt Romney is a conservative.

Watch the video here(Note-the recording volume was very low):

Whether it’s Romneycare, or his willingness to pander to leftists on the question of the “progressivity” of the income tax, Mitt Romney is no conservative, and he isn’t fit to serve as a Republican president.  Perhaps he should reconsider and run on the Democrat side, and challenge Obama for that party’s nomination, because he certainly seems better suited to it.  I don’t think we should send another big-government liberal to replace the one we have.  Rather than just changing teams, it’s as though it’s the same old team:  The party of Big Government.

It’s true that he wants to cut taxes, but his plan entails all the usual gimmicks that phase in entitlement reforms long after it will matter.  Talk about cutting the rate of growth in benefits, or delaying benefit eligibility by raising the Social Security retirement age is simply more pie-in-the-sky nonsense to which we will never be witness, because by the time it will go into effect, even if Romney won and served eight years, few of those changes will have been implemented, and in the mean time, we will see our country continue to slide into the pit of indebtedness.

We can’t afford any more big-government liberals, whether they have a “D” or an “R” next to their names, and what Romney is offering here is more tinkering around the edges that will do just a little to stimulate economic growth, but will continue to borrow at an unabridged rate, and what we will get as a result is another lost decade, and perhaps the death of the Republic.  At best, Romney promises to undertake actions and implement policies that will act to slow our decline, but that’s all he’s really offering.  I remain unimpressed, and the fact that he’s neck-and-neck with Santorum in his home state of Michigan demonstrates that many conservatives agree.  Mitt Romney is no conservative, and his unwillingness to make even the moral argument for eliminating progressivity in the income tax system says all  I need to know about what sort of president he will be.

Romney’s good for only one thing, and that’s “minding the store,” but what he won’t do is to improve its efficiency, or do anything to stave off bankruptcy.  He’ll keep things going because that’s all he knows how to do, but he lacks the passion and vision, and frankly, the philosophical clarity to lead the country away from the brink of disaster.

Will Inexpensive Gasoline Ever Return?

Friday, February 24th, 2012

Can Gingrich Deliver?

This is a question leftists are now asking in response to the fact that Barack Obama’s policies have resulted in the most expensive February gasoline prices we’ve ever known. Rather than treating it as an economic question, they tend to discuss it as a matter of politics, and mostly as a matter of damage control. Newt Gingrich is promising that if he is elected, he will work to reduce the price of gasoline to less than $2.50 per gallon, but what the liberals contend is that such a reduction isn’t possible, but more importantly, even if it were feasible, it’s not desirable. Let me make it perfectly clear for those of you who have questions about this issue, because it’s something we should examine in looking at the potential nominees: Newt Gingrich’s intention to reduce fuel prices to sustainably lower levels is an important national initiative in which government can play a role, and it offers a chance to boost the US economy in a way that nothing Obama has done will ever accomplish.

In previous articles, I’ve discussed with readers the important relationship between economic growth and the price of energy. By taking note of this fact, and addressing the issue in his campaign, Gingrich has signaled that he’s more in touch with the economic problem with which our nation is now confronted. Over the last dozen years, nothing has had a greater influence on economic prospects than the cost of fuels. Not financial market collapses. Not terrorist attacks. Not government spending. If you want to view the track of economic growth, all of those things have had short-run effects, but nothing undermines the economy more thoroughly than increases in the cost of energy. The reasons should be obvious under even superficial examination.

Everything humans do requires energy. Recognizing this fact is critical to economics, because as energy costs increase, there is a direct effect on the cost of all other commodities, and all other services.  There are no exceptions to this fundamental, structural fact of life.  More, since some items require much more energy to produce, and consume more energy along the entire chain from raw material to distribution, any increase in energy costs quickly ripples through the market.  As such, this creates a drag on production, but also consumption, since energy needs tend to come first in one’s priorities. If you’re an employee, you must travel to and from work.  This is something most employees share as an expense from which there are few option in relief.

For that employee, his or her pay is not likely to react to his or her costs.  This fact means that at energy prices increase, the people who will feel it hardest are those who must engage in commerce, but whose compensation is least elastic with respect to the costs they must absorb.  Most businesses can react by adjusting prices, although the competition they face places pressure on them to  delay passing along costs to customers as long as possible.  This was evident in the trucking industry and more broadly throughout the transportation sector when fuel prices first exceeded the three dollar mark a few years ago.  This gave rise to a new phenomenon called the “fuel surcharge,” and it was intended to show that they weren’t simply jacking up prices without justification, but instead that their costs had dramatically increased. The point of all this is that there is no way to avoid the fact that for most people, and most businesses, you can’t easily augment your income simply because your costs have risen.

This being the case, there will be choices to be made, and all of those involved will need to decide which of their ordinary expenditures may have to be curtailed.  New projects and investments are delayed, and necessary repairs or upgrades are put off indefinitely.  What this means is that economic activity is curtailed, and therefore, fewer jobs are created, and thus unemployment rises.  As this happens, it feeds back on itself because  when unemployment is high, the average employee’s negotiating power on wages diminishes, and this makes the average person even less able to spend money on all of those things that create increased economic growth.

After a time, if this continues, the quantity of fuels demanded will begin to contract, and this will lead to the prices falling again, but there is a lag until economic activity recovers.  Clearly, if this is the cycle, then what we should see is precisely what we have seen over the last few years: An economy that fails to launch because just as it begins to heat up, the corresponding increase in energy prices causes a clear diminution of the economic growth.  The only way to combat this is to increase our energy resources, and to make safe such resources as we already enjoy.

Back in the 1990s, one of the things from which the American economy benefited was the reliability of OPEC members to undercut one another on production quotas.  The quotas were intended to maintain a higher price point, but as prices went upward, one or more member nations would get greedy and cheat on the quotas.  This increased the supply in the market, and the prices would inevitably fall.  This was in an era when China’s demand in the market was relatively negligible, but since then, their bite out of the production pie has done nothing but increase proportionally to all others.  It was also an era when OPEC was more fractious, and most of their members couldn’t coordinate on much of anything for long.

What Gingrich recognizes is that our economy cannot function properly, and in a healthy way without the energy we need at a price we can afford while still building economic activity, buttressing the points made by former Alaska Governor Sarah Palin.  His stated goal of seeing a reduction in gasoline prices is the right thing to do, and he recognizes that it’s not just a matter of reducing the price to that point for a day or a week, but in making that the effective ceiling even as the economy roars back to health.  That will require that we develop new sources of energy, and not just empty promises of “green energy.”  President Obama can mock “Drill baby, drill” if he likes, but the truth is that developing domestic oil resources is critical to getting this economy moving in a sustained way.  In short, we can’t merely increase the temporary supply on a short term basis, but must increase it in a structural sense: We need more wells, we need more oil-fields in production, and we need to develop other alternatives simultaneously.

This flies in the face of what leftists want and believe.  They believe the ultimate goal should be to reduce consumption, but the only way to do this without eliminating people is to substantially reduce their standard of living.  In short, their plans demand we return to a pre-industrial state where most people do not consume much energy.  Wave goodbye to your electronics, your hobbies, and your lifestyles if these lunatics get their way.  There’s no way to have what they seem to promise, and they know it. There is no rational way to grow or even sustain an economy while cutting the use of energy in any dramatic fashion.  Can efficiencies be found?  Absolutely!  Can they be created by dictate or order?  Absolutely not!

This is the difference in the position between Barack Obama and somebody like Newt Gingrich who actually recognizes that wishes are not the same as facts, and that nature is not to be cheated.  You cannot build a modern, technologically advanced culture with prosperous people and a growth-based ethos when governmental policies are mandating a reduction of energy consumption.  Nature doesn’t respond to arbitrary wishes, and yet that is the stance of the leftist, who thinks a government mandate can overwhelm the forces of nature and the rules of physics.  The disparity in the two positions demonstrates their relative fitness to the presidency, and by no measure is Obama suitable to his office.  Whether Gingrich is qualified remains a question to be answered, but on the matter of his understanding of the critical importance of energy, it’s clear he passes the test. We can have inexpensive fuel again, but it will require a comprehensive effort by the President and Congress to remove obstructions to the growth of the energy sector that is so vital to our future.

Obama’s October Surprise Courtesy of John Boehner

Friday, February 17th, 2012

Will He Have the Last Laugh?

We’ve been set up again.  Mark my words:  The debt ceiling issue will come again, this time, as Democrats’ October Surprise.  Senator Rob Portman(R-OH) has completed a new study, and has discovered that the Debt Ceiling will be reached just in time for the election.  Obama will use this issue to bludgeon Republicans on the eve of the election.  You can bet there will be no short-term deals, and no negotiations, and these big government liars are going to drive their base to the polls, and not only to re-elect Obama, or stave off the loss of the Senate, but also to re-take the House.  Granny will again be pushed off the cliff by “Paul Ryan,” with an impersonator of the Republican nominee may be, nodding approvingly in the background.  Not only did Boehner manage to get nothing for his debt ceiling sell-out, but he also walked his entire party into Obama’s trap.

Those of you will remember how John Boehner poked and prodded and cajoled Republican freshmen to forsake their voters’ strong opposition to any increases of the debt ceiling, but what you may not remember is how Whiner of the House undermined his own party’s bill by seeking a deal with Harry Reid to undercut Cut, Cap and Balance before it could even be considered in the Senate.  To say that this situation is dangerous is an understatement.  While Boehner succeeded in making a deal, what he really did was to set us up.  Just days short of the election, Barack Obama will rail against Republicans, and in this situation, it will be nearly impossible for him to lose.  He will demonize House Republicans, and he will associate them with the GOP nominee.

In that situation, if the GOP makes a deal, they will lose.  Obama will be seen as the winner, an their own district electorates will throw them out, or sit out the election in disgust.  Their only chance is to stand, but if they don’t learn a new message and learn it fast, they’ll be painted as uncaring monsters who want to stop Granny’s Social Security check, starve children, and lay off teachers.  You might wonder how I could assert all of this, but the answer is simple: We’ve seen it all before.  This is one more ignominious result of the glaring failure of John Boehner and Republican leadership in Congress to make politically smart decisions.  They should have had this fight last summer, but they’re so fearful of bad public relations that they were willing to make a deal that may well doom them.

If the Republican leadership doesn’t go on the offensive now, and stay there, we will lose big in November, and our country will be ruined.  When it is, you can thank [then] Minority Leader John Boehner, who will undoubtedly cry in response.

The Economy and the Price of Gas

Thursday, February 16th, 2012

The Costs of Bad Policy

Most have noted with disgust the rising price of fuel.  In most places around the country, the price per gallon of regular unleaded is creeping up on $4.00.  There has been some talk about an improving economy, but that’s mostly fluff.  The truth is that our economy is in miserable condition, and as I’ve previously reported, the price of energy has the most immediate deleterious effect on our growth.  As you look at the numbers for housing starts, as fuel ratchets up over $3.50, it begins to retard growth and investment.  This happens because it affects every stop along the production chain, from the raw materials to final distribution, delivery or retail sales.  Now that the price of fuels is driving markedly upward again, it is important to note the causes.  The first is the inflationary policies of our government, and the second is a whole host of worries over the world supply of oil, now threatened by an increasingly hostile and vociferous Iran.  These two factors threaten to drive prices over six dollars by summer’s end.

This would collapse our economy completely, and the only thing leveraging against it is that as prices soar, more projects will be canceled, and new construction will not commence, leading to a balancing reduction in demand.  This natural signaling would not be so bad if it weren’t for the fact that our economy is already flat-lined.  Anything that would cause a serious price spike at this juncture would likely ruin our economy for the immediate future, and might even push us off the economic cliff.

At present, the Obama administration is claiming unemployment numbers that are plainly rigged.  What they have done is to discount people who have expended their unemployment benefits, but who still have no job, and they consider them to have disappeared from the job market.  More, they’re started lop off people who have attained a certain age, and now consider them retired, thus removing them from the work force.  In short, they’re rigging the outcome of the quotient by reducing the number of people in the job market in statistics only, as many of the people they have excluded are still actively seeking work.

If the current rise in energy prices continues, it will put a downward pressure on economic activity.  As we’ve seen in each previous instance when this administration has claimed the economy was in recovery, the rise in fuel prices will tend to knock down the recovery.  An economy cannot grow with a shrinking pool of energy resources, and this president knows it, or should.  This is why such actions as the denial of the construction of the Keystone XL Pipeline was so astonishing.  The construction alone would have provided tens of thousands of jobs with decent wages, and it wouldn’t have been very long before we would be receiving the Canadian oil at the distant end, proposed to have terminated in Texas, in the refining centers along the Gulf Coast.

The presumably short-sighted thinking of this administration is so baffling that many have begun to conclude this is all by design.  What is clear is that we will not truly begin a recovery until energy prices are brought down by the government standing aside as the primary obstacle to energy development.  The federal government under this president has been pushing various “green jobs” initiatives that promise much, but have delivered very little, either in the way of job, or in the production of energy.  The scale of the problem is gargantuan, and no collection of windmills or solar panels is going to do much about it, but worse, since these are still not economically viable models, they actually waste money.

The immediate future of American energy production is weak, because we have a president hostile to the various forms of energy most Americans for the near-term future will employ, in the forms of coal, gas, and oil.   The problem is that these still represent the bulk of American energy production, with coal-fired power plants still accounting for at least half of all electric generation in the country.  Worst of all, Obama’s EPA is shutting down coal-fired plants, as three more plants are scheduled to be shut down this year in Texas.  Texas may see a summer of rolling black-outs that will have been the product of these mandates, and there is no way to build an economic recovery in that environment.

Be prepared to see fuels to continue their uphill climb through the spring, and as they do, you will see a repeat of the pattern we have seen numerous times over the last four years.  As energy prices increase, any alleged recovery will falter. It’s the unavoidable result of a policy that has set us up for repeated failure.  With the monetary problems in Europe, however, it threatens to be much worse.

 

Obama’s OMB Director Jeff Zients Caught Hiding the Truth – Video

Wednesday, February 15th, 2012

President's New Budget Liar

Barack Obama’s Office of Management and Budget Director Jeffrey Zients testified before Congress on Barack Obama’s proposed budget.  House Republicans spent a good deal of time and effort trying to get a straight answer on when our budget would balance by grilling Zients on Wednesday.  Unfortunately, Zients is another Obama liar.  He has no intention of telling you when, under Barack Obama’s budget proposals, the budget would balance, because under Obama’s ludicrous budget offering, it never does.  Let me say this again.  Under Barack Obama’s budget proposals, they merely slow down the rate at which debt is accumulating, in theory, but in practice, it will not slow down since they are assuming rosy interest rates on new and existing debt, and his administration is rigging the numbers.

Here are two videos of Congressmen trying to get a straight answer from this newly-appointed Presidential Budget Liar, who will not admit on camera that the budget will never balance under these proposals.  Never.

You can take what you want from all of this, but what is clear is that Obama is not interested in upholding his oath, but instead merely running our nation into the ground in opposition to his oath.

The Business of Government Differs From Private Sector

Sunday, February 5th, 2012

I am certain that we have all heard at least one-dozen times or more how Mitt Romney’s private sector experience will pay off in cleaning up government.  It’s the thing he stresses relentlessly, and his campaign generally can’t wait to get to that subject.  Naturally, any candidate will seek to push his virtues, and downplay his weaknesses, and so it is with Romney or any of the other candidates in this race for the GOP nomination.  As discerning voters, however, it is incumbent upon us to examine their complete records, and not simply cherry-pick which parts we like or dislike.  We must consider the bad with the good, and part of this process includes deciding what parts of their records are relevant.  The Romney campaign loves to talk about his business experience, but during this primary, they’re mostly avoiding his record as Governor of Massachusetts, and this is an important sleight-of-hand we ought not overlook, because it is the relevant part of his record that will be most important in this election.

We all like to imagine that if we could somehow bring the work ethic of the private sector to government, we could some how improve its efficiency.  This stems in large measure from our natural observations of how wasteful our government is with abundant resources we provide it, that still never seem to be enough.  Who among us wouldn’t like to see government become more efficient in this regard?  Four-hundred dollar hammers and six-hundred dollar toilet seats are just two of the historical examples we can identify in an endless sea of waste.  Unfortunately, however, businesses waste money too, and in many of the same ways.  Walmart wastes tens of millions in accepted returns they ought not to have permitted, because it’s easier than making a scene.  Taking back six-months used shoes on the basis that “they don’t fit quite right” is probably a sure way to eventually hurt your business. Of course, businesses do things far more wasteful than this, but my point to you is merely that business is only presumed to be less wasteful in most respects, but in the facts, it isn’t always this way.

Another problem is that government really doesn’t function like business, and you wouldn’t want it to do so.  In business, there is a profit and pay-seeking motive that militates in the direction of preserving capital, and that motive generally works to make the company stronger.  In contrast, government turns no profit, and you wouldn’t want it to seek one.  If so, it would stop making medicare payments and simply cut off social security.  After all, there’s no profit in those programs.  “Death Panels,” anyone?

Consider your own local government, and how often its policing seems more thoroughly motivated by writing traffic tickets in the name of revenue than in apprehending criminals who are rampaging through your streets, committing theft and burglary and other property crimes.  They would expend a good deal of money investigating such crimes but they wouldn’t generate any revenue.  On the other hand, writing speeding tickets is relatively easier work, and it brings in revenues to cash-strapped municipalities and their courts.   Do you really want your police motivated by the profitability of their particular crime-fighting?

Realizing that government doesn’t and shouldn’t seek profits, it is therefore much more important to consider Governor Romney’s experiences in that capacity.  When he ran a state, what was his record, and how did he perform in that office?  Did he cut spending, or expand it?  By any measure of which I am aware, it must be the latter, as his health-care program alone is costing the state of Massachusetts a fortune it does not have.  In business, it would be normal to expand operations to provide new products or services, but is that what government should do?  At least 65% of Americans don’t want their federal government taking over health insurance, but we’re well on our way to having done so with Obamacare.  Yet this is precisely what Romney did in his own state.

Another important difference between government and business is that business is forbidden a captive clientele. If it doesn’t serve you to  your satisfaction, you need only find one of its competitors.  This competitive nature in free markets tends toward keeping businesses more honest.  Obviously, government has no such restrictions or competition.  The closest we get to that is the differences between the local, state and federal levels, but in recent decades, the federal government has all but erased the differences.  What had once been the best check against overpowering government authority is mostly gone, and in its place, a network of co-dependent and cooperating layer-cake of government that simply acts without reference to any constitutional restraints.  There is no longer any healthy competition, but instead mere delegation among the levels.  In this sense, government has taken on a corporate structure.

So where does Mitt Romney’s private sector experience fit into this picture?  At Bain, or any other company, the CEO effectively acts day to day as a dictator of sorts.  Of course, that’s natural enough, much as in your own castle, you are King. The problem comes in when you take this theory over to government, and find that you are not and must not be a dictator in that office.  You have a Congress to contend with, and courts that will countermand your dictates from time to time, and the response we’ve seen from Obama is probably not unlike that which Romney would offer: “How can I circumvent these constitutional checks on my directives?”

When he was governor of Massachusetts, he implemented programs without input from that state’s legislative branch, for instance in the area of environmental concerns and regulation.  This hints strongly that in the most important ways, he is likely to make the same sort of power-plays as Obama.  Do you want who is merely another anti-constitutional politician with an “R” next to his name rather than a “D?”

When we view Romney’s records, it isn’t his alleged “job creation” we should examine, because that has very few applications in government, except as Obama has practiced them, whereby he merely created new departments and staffed them, calling this “job creation” while you and I are now left to pay for these too.  Remembering that the growth of a business is constrained only by its revenues in many cases, what sort of business would it be that had revenues as large as it could dictate at gunpoint?

I don’t think we need a businessman for President, but instead a statesman who understands the real nature of government, and what its limits ought to be.  I don’t think anything in Mitt Romney’s resume demonstrates that sort of suitability, and obscuring this fact won’t make our government any better, and threatens only to make it worse.

 

 

 

Mitt Romney Is Anti-Capitalist

Friday, February 3rd, 2012

Another "Mastermind"

Something is wrong with Mitt Romney, and it’s fundamental to his understanding of capitalism.  Here we have a man who governed what is arguably the most liberal state in the union, and he surely didn’t do so as a conservative, but now he’s demonstrating why liberal Republicans like him cannot win, and it comes down to the simplest of economics.  Thursday, Mitt Romney explained how he would index the minimum wage to automatically keep pace with inflation, proving that he has no Main street experience, but worse, that his alleged business sense is more about making deals than understanding economics.  Mitt Romney is no conservative, and by this pronouncement, we now know that neither is he a capitalist.

While it may appeal to some of the more ignorant in the electorate, and to the leftist intelligentsia, the simple truth is that a conservative who understands capitalism would be talking about eliminating the minimum wage laws.  Proving his expressions of Wednesday were statements of his true beliefs – that he is “not concerned about the very poor” – Romney advocates a system of wage controls that is economically inefficient, and immoral, but most importantly, in the context of his remarks Wednesday, actually disadvantages the poor, condemning them to perpetual poverty. Before you break out the torches and pitchforks to occupy my front porch in anger, let me explain to you the truth of the matter, and why it is that a minimum wage actually punishes the poor, but setting up a system to perpetually raise it guarantees increased unemployment and corresponding poverty.

In a free market unhampered by government mandates, wages are determined by negotiations between employers and employees.  That which sets the price is their mutual agreement to mutual advantage: Each believes he is getting the better of the deal.  In fact, in a free market, this is how all exchange is characterized, and it is the best determining factor available, because everybody walks away happy provided that the conditions on both sides of the deal are satisfied.  This requires no government involvement, and it requires no government coercion.  More, it is morally correct because it permits each party choice.

You might argue that the employer always wins, since he controls the purse strings.  I contend that this is not so, and cannot be, so long as men are free to choose.  If an employer makes unreasonable offers in payment for labor, he will be refused, and refused again, and this acts as the market’s signal to him.  If he does not respond, the labor will go undone, and he will lose the profit he might have made.  Since he is doubtless working for a customer, the impetus will be to complete the job to satisfy the deal he’s made with somebody else, and eventually, he will raise the wage he’s offering to get sufficient labor to fulfill his customer’s demand.

You might say “but he will only raise it enough to get a warm body,” and this could happen, but if it does, it may cost him more in the long run, because the labor will be poorly done, and perhaps have need to be re-done, or it might not be completed on time, or some variation on this general theme.  This too will act as a signal that higher wages are needed, and the under-performing employee will be dismissed and a higher wage paid to his replacement.  Notice that in this whole process, nobody has been coerced.  This is the moral superiority of the free market.

What Mitt Romney and the statist, anti-capitalist phalanx demands is a short-circuiting of this natural process.  What he contends more than anything is that you should not have the right to negotiate your own contracts in labor at a price you are willing to pay, or a wage you are willing to accept.  Imagine Newt Gingrich’s example of the kids who are paid a trivial wage for trivial chores at a school rather than to a full-time janitor at a much-inflated union wage.  That sort of thing mustn’t be ignored, because the janitor who is likely over-paid by the education bureaucracy in many jurisdictions probably produces less actual labor than the aggregate labor of the squad of wage-seeking children would accomplish in the same period.

Once upon a time, in a universe far away, as a young teenager, I got my father to co-sign with me on a contract.  It was my first crack at entrepreneurship, and it was with the local home-owners’ association to mow grass around the facilities made available to the residents by annual subscription fee.  Basketball courts, tennis courts, a baseball diamond, and a swimming pool, along with a fishing pond were all surrounded by acres of grass.  The bids were solicited on a per-cutting basis, with the President of the association to monitor and decide the frequency of the cuttings.  I came in at a bid that was a gold-mine to me, but far below any competitors.

Doing the math on how many hours it took me to complete a cutting, it was clear I was beneath the minimum wage even in that day.  Had they been forced to pay the minimum wage on an hourly basis, I would not have been able to compete, but because it was a per-job basis, I was able to bid what I thought was the minimum I could accept for my time.  I won the bidding, and that year I cut grass as my legs and arms and back muscles grew stronger under the beating sun. Mitt Romney wouldn’t understand this by any measure, but applying the minimum wage to that situation would have driven me out, because if you have to pay a minimum wage, who’s going to hire a fourteen year old rather than an adult?  One of the few virtues I had to offer apart from my eagerness had been that my low price allowed them to take a risk that at a higher price they could not have taken.

Under a minimum wage, the employee isn’t permitted to accept a lower wage so that the employer will take a risk on an inexperience though perhaps eager worker. This is the flip-side of the argument Frederic Bastiat would have called “that which is not seen.”  I don’t believe it is any government’s right to prescribe the upper limit of what I may earn, or the lower limit of what I will accept in payment for my labor.  That’s none of government’s business, and they ought to get out of it.

It has been shown repeatedly that a minimum wage increases unemployment by the process of making it too expensive for employers to try out new employees with little or no experience, or to take them on in a capacity to effectively serve as apprentices or trainees, but this is the leg up millions of Americans had used to obtain skills, prove workplace diligence and reliability, and otherwise promote themselves in an act of economic self-efficacy that fueled the growth of our nation.

These facts are well-known to economists, and well-known to all students of capitalism, and yet somewhere along the way, Mitt Romney has managed never to learn them, and I will tell you that it springs from the same place as his desire to “reform and strengthen the safety net:” A sense of collectivized charity rather than the honest desire to promote dignity of people in lifting themselves out of poverty.  The Club for Growth has taken on Romney’s suggested auto-indexing of the minimum wage on much the same basis.

The idea that Romney claims to be a capitalist has now been proven false. A capitalist would know that the minimum wage does more damage than good, and that the longterm result is inflationary pressure combined with increased unemployment among the young and the disadvantaged. Frankly, Romney should be ashamed of this pandering, but he needn’t fear because so many people suffer in economic ignorance that his tyrannical, big government idea will be seen as “compassionate” as it sentences more people to perpetual reliance upon the safety net he’s much too willing to strengthen.  Romney isn’t a capitalist, or a conservative, and he’s actually no better than Obama, and in some ways worse, because while I expect this sort of thing from a man who is not so ashamed to be tagged as a socialist, it is unforgivable from a man who claims he is not.

On Health-Care Rationing

Friday, January 27th, 2012

Including Death Panels

As a fellow who is a student of economics, one  of my pet peeves is the confusion that often arises when economic concepts are misused out of context to justify political ends.  In the discussion and debate leading up to the passage of Obama-care, it was famously noted by Sarah Palin that “death panels” are a feature of that plan.  In short, the death panels would make “ethical decisions” based not on what was ethical with respect to individuals, but with respect to what was ethical in choosing on behalf of society at large, i.e, the government. The supporters of the Obama-care program maintained that “there were already death panels” imposed by insurers, and that in any event, rationing would always take place as a matter of economics.  In this last point, they were correct in the strictest terms, but they were wrong to compare government actions to the actions of individuals and private businesses in the free market.  This is one example of the abuse of economics by politicians, so let us examine it more closely.

In economics, everything is rationed, because it is assumed that there is a basic unlimited demand for all goods and services.  Since there exists no infinite supply of anything, it is necessarily true that all things are rationed in some fashion.  Gasoline is rationed.  It’s happening right this moment.  Food is rationed.  Housing is rationed.  There is no good or service that isn’t rationed, and the primary instrument for determining the allocation of the limited supply in a free market is money.  The smaller the supply of a thing, relative to the quantity demanded by the market, the greater will be the price.  This is the manner in which everything is rationed:  There is a only so much money, and he who possesses enough of it can tap into the limited supply.  This form of rationing is natural, or free market-based, meaning that this happens organically with or without formal rules, and always has, even before the notion of money as a medium of exchange had occurred to primitive cultures and barter systems still dominated commerce and trade.  Strictly speaking, in economic terms, it is true to say that all things are rationed somehow. This is how we reconcile the basic premise underlying modern economics as the study of an unlimited wishes in pursuit of finite supplies.

The question then arises whether natural allocation(or rationing) is “fair.”  Since fairness is a wholly subjective term, it cannot be answered in the realm of economics, but instead becomes a matter of politics.  This is where the trouble begins, because what politicians most frequently do is to apply their own subjective notions of what is fair in place of the much more objective standard of a natural market.   They concoct these notions to satisfy political constituencies, but the twist and turn in order to define the question as a matter of economics.  Inevitably, they do so by reducing the question to the subjective grounds of a particular individual, or group, and ask whether it is “fair” that so-and-so cannot afford such-and-such.  In this sense, the economics they are discussing are applicable to small groups, but not to the whole market.

What government schemers for socialized medicine have done is to insert government coercion into the place of the natural market allocation.  If you say to me, “It is sad that Johnny cannot get his surgery because he has not the money,” if my answer is based on the free market, I must say “it may be sad, but it is fair because he could have obtained the money by previous work, insurance, charity, or even credit.”  The fact that Johnny hadn’t the money for the surgery is not a justification to disclaim the objective fairness of the free market system, but sadly, that is how it is used by politicians.  Enter the statist, and he will proclaim that he can reintroduce “human fairness” or “social justice” or some such enfeebling concept by virtue of government coercion.  If Johnny hasn’t the money, the politician will take it from somebody else at gunpoint to pay for Johnny’s surgery, provided Johnny meets any requirements they may have enacted.

Perhaps the surgery Johnny needs is a kidney transplant, but rather than expend the resources, since Johnny is also a wheelchair-bound, elderly man, the government may say “You’re not worth saving.”  Worse, if the government denies Johnny the ability to obtain his own health-care by his own means outside the government system, what the government is doing is to pronounce a sentence of death on Johnny.  If Johnny happens to be a recent college graduate in his twenties, in otherwise good health, the government will view it as a good investment in many cases since he will pay much more in taxes over his expected lifetime than the surgery may cost.  Notice that the decision criteria is entirely social, and based on the economics of government expenditures, which actually means: Political considerations.  It is also the reason that every system of socialized medicine ultimately leads to many more people dying prematurely as they are denied treatments of which they would have availed themselves in an open market. If this were not true, we would not see so many from around the socialized world flocking here to pay cash for treatments they cannot obtain by any means in their home countries.

You might contend, as the leftists do, that this is done by private insurers routinely.  There is some truth to this, but it is also substantially dishonest.  As a participant in a free market system, you are free to choose an insurer and pay such premiums as you are willing and able, to cover everything to some gargantuan limit, or you may choose a policy less expensive, but also less thorough.  In this manner, the rationing occurs because you have enough money, or you don’t, but that is up to your own resourcefulness and diligence and all the factors that frequently make the difference between relative poverty and relative affluence.  You might decide at this point to take me back to the argument of the “unfairness of money,” but as I’ve already explained, in a free market, fairness is measured differently than in your subjective wishes.

If it was my choice as to which system I would endure, I would prefer to take my chances in the free market system, because I believe I can manage to afford the coverage I might need, but in a government system, no matter how diligent and efficacious had been my own labors, I might be told “sorry, you’re outside the limits established for this procedure,” and be denied treatment irrespective of my ability to pay.  I would always choose this latter option, because it affords me the greater measure of freedom, and if it winds up that I was unable to provide the coverage I actually wound up needing, at least I will have nobody else to blame. That’s where the politicians come in, again.

What The Media Talks About When You’re Not Looking

Saturday, January 21st, 2012

Dr. David Samadi - Regulating Life

Just a short while ago, I was retrieving a fresh cup of coffee, and I happened to hear something on the television that caused me to do a double-take.  FoxNews was on and America’s New Headquarters had a contributor on to talk about obesity in America, and the fact that obesity and even the classification “overweight” seem to have plateaued in the country.  The doctor, from Mt. Sinai in New York, a David Samadi, was discussing the implications of the new study showing this plateau.  The thing that caught my attention was not so much the discussion of obesity, but what this idiotic doctor was prescribing:  He wants new taxes, for instance, a “soda tax,” and he wants to reduce the number of fast-food outlets in the country. Excuse me?  Physician, heal thyself! This is the nature of the stories even allegedly “conservative” news outlets like FoxNews cover when most of us aren’t watching, and it almost always leans in the direction of socialism.

Let me say from the outset that like many Americans, I could stand to eat Five Guys burgers somewhat less frequently, but let me also suggest that it is none of this doctor’s business what I eat or drink, where I eat it or drink it, and most of all whether I am taxed for so doing.  Samadi’s view seems to be that he can issue prescriptions for three-hundred-million people, never having examined more than a few hands-full of them.  More, since he has no such authority or power or the ability to control, he exhorts government to do so on behalf of his preferred prescription for people the vast majority of whom he has never met, never mind examined or treated.  What sort of collectivized thinking permits this arrogant [expletive deleted] to sit there in a television studio and proclaim to all that he has the answers for your life, but that he needs government’s power to coerce and to tax in order to implement them?

There is something wicked about the minds of those who view their fellow men as cattle, to be poked and prodded and driven in a direction that they may not themselves wish to go.  It is born of a mindset that does not respect first and foremost the lives and rights of individual people. These people are those who I term “regulators,” who wish to regulate all persons in a given society of which they are members to conform to their view of what is right for all people.  Mayor Bloomberg’s various bans on salt or saturated fats in cooking oils are just two examples, but it is the mindset of a tyrant that is troubling in all of this.  I don’t need Mayor Bloomberg, Michelle Obama, or Dr. Samadi telling me what to eat, when to eat it, or whether I ought to have access to it at all.  It’s simply not their concern.  Or is it?

Now we arrive at the meat of this issue, because there is much more than burgers at stake here.  What is under examination is not whether they have the authority to control us, but how they derive such authority in the first place.  The answer is simple: They rely upon the faulty claims of the notion of “the public health.”  You may have noticed that they always portray this as a “public health crisis,” and as an “epidemic,” but this is a lie, and their authority in the matter only arises because of health-care, and the fact that government is the biggest player in that segment of the market.  They have routinely positioned the matter in such a way that they can make the claim that by virtue of governmental expenditures in this field, it therefore becomes an issue of public imperative.  Worse, by allowing their colossal medical expenditures and controls to grow out of all bounds, you have permitted them to enter this field, and thereby exert control over your breakfast, lunch, dinner, and evening snack besides.  More damaging still is the fact that the government is now the largest food provider on the planet. Again, I remind you: We have permitted this.

Here’s a basic rule of nature, and of civilization that the statists know and are now turning in their favor: If you are the provider of a thing, you can decide when to provide it, how to provide, how much of it to provide, and under what conditions you’ll provide it.  For instance, if I invite you to my home for a meal, since I am providing it, it is my natural right to determine all the particulars.  If you provide me a service without compensation, it is clear that I have no ethical or moral claim with respect to the manner in which you provide it. Only paying customers have any say-so in the matter.  The old adage “beggars can’t be choosers” should immediately leap into one’s mind.  That simple old adage merely paid homage to that which is self-evident, and yet it is this same concept that has been bent and twisted into the service of the state’s aggressive aggregation of power.  The strategy has been to blur the lines. Let’s see if we can reconstruct the approach.

First, we create simultaneously programs to:

  • Provide food to the poor
  • Provide health-care to the poor
  • Provide “health insurance” to the elderly

Do you see how this has mutated?  The idle poor are fed, but they are fed rations excessive for a person at hard labor, and we wonder why there is obesity? We then provide these same people health-care, and we wonder why there is a “public health crisis?”  Add to this that we simultaneous have a system of health “insurance” for our elderly that further obscures the difference between paying and non-paying, and at the other end of the spectrum, we now have federal food programs in schools, as the manner by which federal funds are dispersed and control exercised.

By exercising control over the disbursement of these commodities and services, the government is essentially putting itself in the position of the provider, and therefore has become the “chooser,” with all the beneficiaries effectively having been rendered “beggars.”  Those of us who are paying for this are the real providers, and yet we are now told it is a matter of “human rights” that we do this provisioning. Obamacare is simply the latest in this chain, but it’s hardly the only “improvement” to the system that has been foisted upon us in recent years, with the Bush Medicare Prescription Drugs program added to the mix.

With the government now being the largest payer in the health-care market, you can expect that it will naturally displace market imperatives in the delivery of health-care goods and services, and it will necessarily prioritize that delivery(death panels, for instance,) while reaching into unrelated markets to regulate those things that it will make the case as having some influence over the costs to government.

This then leads to the grotesque spectacle of Dr. Samadi appearing on FoxNews telling us what we can eat, where we can procure it, and what taxes we ought to pay along the way, as the whole miserable assembly comes lurching into plain sight.  You can be told what you can eat because you will [eventually] rely upon government to pay for your health-care.  The market can be told what it may provide, and how, because the government has an interest in reducing its costs.  The tax-payer can be told to shut up about it, since it’s virtually established as some sort of irreducible premise that every person ought to be somehow entitled to that which does not pour from the heavens, but must be obtained by human effort.  As you can therefore see, it is inevitable that government has now used this to become a dictator in every important facet of our lives, and all because somewhere along the march from our founding to present, we permitted them to make our needs the means to its ends.

When you consider that this is the sort of thing that is discussed on allegedly conservative media when most of the country isn’t watching, it ought to alert you to the underlying premises of the discussions in media many more of us witness.  What we should note is that in most every media outlet, there is a sort of inherent reverence for the state, and for the under-girding foundational constructs of collectivism, and we ought to be very careful not to ignore that these media outlets are fundamentally in favor of it, almost all of them, and widely across the board. It’s easy to dismiss this sort of news story as simple time-fillers on a weekend with no ongoing crisis-bound event on which to report, but I think we should be careful to see that is also a sign of what lies behind the blaring headlines, and it is key to understanding why the country continues to be dragged ceaselessly leftward.