If you are Barack Obama, your plans are working perfectly. You are driving the economy into the ground, fueling turmoil in the Middle East, weakening our nuclear defenses and supporting the enemies of civilization, while lining the pockets of your constituency and pushing us towards such great crises that a society already addicted to government may be forced to its knees wrongfully begging for an even greater paternal one. If you doubt my argument that the American people are still not awake enough to cause any meaningful change, consider that for all the talk of a backlash against this government, if you look at the Republicans that will take over Congress, almost none of them them would truly be willing to do the things necessary to make our government solvent, break the chains off of our private sector and defend us against our enemies and their abettors, starting with calling them by name, not a tactic like terrorism.
This brings us to Barack Obama’s stance on the Ground Zero mosque. Months ago I argued that Islam is not a religion in the traditional sense. I argued that as Islam is a theo-political system, it should not deserve the same Constitutional protections as other religions with a strictly spiritual component. In effect, to support Islam in this country would be to support a political system incompatible with ours, and intolerant of our pluralistic Judeo-Christian society. To promote Islamic institutions would be to weaken America’s freedom, not strengthen it. For Islam and America cannot coexist because America is a threat to the Ummah; us infidels would have to be converted by the sword or forced to live as second-class citizens under Islamic law, like Spaniards once did in Cordoba. Hence the Cordoba Initiative.
Yet Barack Obama consistently sides with Muslims; makes it a point to bow down to Muslims at every turn and has since the start of his Presidency and throughout his public life. He also studied in the madras as a child, has had the backing of major players in the Muslim community during his academic and political career and attended Reverend Wright’s church which parrots the same narrative as Imams worldwide. His true colors showed when he made the Ground Zero mosque a national issue by supporting it. Even Howard Dean has gone on record as questioning what Barack Obama could have been thinking politically. Of course he found it to be a political disaster, lest he should care about its destructiveness on principle.
But though Barack Obama knew the firestorm he would create, he did not care. He could not help himself when it came to something he truly believed in, jumping to say something unpopular to the American people but instinctive for him. Just like he did not care about creating fertile soil for economic growth, just like he does not care in my opinion about defending American lives as reflected by his policies. And when he says inflammatory things about white cops and business executives and mosques that make political pundits shake their heads in wonder, it is because he is showing who he is, and where his passions lie.
This President is a principled politician, but he supports principles that are crushing the American people. This is the most destructive President since FDR, and that it is intentionally so makes it all the more demoralizing. Until more people realize this, we won’t even have a fighting chance. We are going to be poorer, weaker and less likely to ever rekindle the flame of freedom in this nation, and I fear that our differences with our political opposition will prove irreconcilable
Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts
Wednesday, August 25, 2010
Wednesday, July 7, 2010
Now that borrowers are taking care and markets have calmed down, Washington is about to reopen the too-big-to-fail window
For 25 years, Washington has done everything in its power to subsidize Americans' profligate borrowing habits. Debt became the fuel for economic growth. Washington subsidized the financial industry's borrowing through implicit guarantees against loss.
The feds first started rescuing creditors to "too big to fail" banks in 1984. Since then, it's become clear to lenders -- Wall Street's global bondholders and trading counterparties -- that the government would save them anytime a large financial firm foundered.
Indemnified against losses, bondholders could lend nearly infinitely to Wall Street. Wall Street found creative ways to lend that money right back to the public, through mortgage brokers and credit card marketers.
Some exceptions exist. In September 2008, the feds refused to rescue Lehman Brothers' lenders. But the exceptions have only proven the rule. Today, conventional Washington wisdom is that letting Lehman fail was a catastrophe.
The Dodd-Frank bill is a monument to the status quo. Despite promises that the bill will end bailouts, it enshrines bailouts into law.
It provides for an "orderly liquidation authority," for example, which allows "systemically important" financial firms to escape bankruptcy and to escape, too, consistent losses for their creditors. It also sets up a fast-track procedure through which the White House can ask Congress for guarantees for Wall Street's lenders in a future crisis.
In effect, the government is saying to Wall Street's lenders: Carry on as you did before 2008.
Ordinary Americans, though, understand that they can't go on as before. Since 2008, they've started paying their debt back.
The process is painful. As Americans borrow less, they spend less and pay less for houses.
But as Americans pare back their debt, the economy will begin to heal permanently. As house prices fall, for example, because less borrowed money exists to send them higher, Americans will have more money left over after paying the mortgage.
They can invest that money in the stock market for retirement. Those funds, in turn, will go to entrepreneurs who create jobs outside of the financial industry.
The Dodd-Frank bill would pervert this healthy process. It would pit Washington's too-big-to-fail subsidies and Wall Street's creativity against Americans who are trying to do the right thing for themselves and the country
The feds first started rescuing creditors to "too big to fail" banks in 1984. Since then, it's become clear to lenders -- Wall Street's global bondholders and trading counterparties -- that the government would save them anytime a large financial firm foundered.
Indemnified against losses, bondholders could lend nearly infinitely to Wall Street. Wall Street found creative ways to lend that money right back to the public, through mortgage brokers and credit card marketers.
Some exceptions exist. In September 2008, the feds refused to rescue Lehman Brothers' lenders. But the exceptions have only proven the rule. Today, conventional Washington wisdom is that letting Lehman fail was a catastrophe.
The Dodd-Frank bill is a monument to the status quo. Despite promises that the bill will end bailouts, it enshrines bailouts into law.
It provides for an "orderly liquidation authority," for example, which allows "systemically important" financial firms to escape bankruptcy and to escape, too, consistent losses for their creditors. It also sets up a fast-track procedure through which the White House can ask Congress for guarantees for Wall Street's lenders in a future crisis.
In effect, the government is saying to Wall Street's lenders: Carry on as you did before 2008.
Ordinary Americans, though, understand that they can't go on as before. Since 2008, they've started paying their debt back.
The process is painful. As Americans borrow less, they spend less and pay less for houses.
But as Americans pare back their debt, the economy will begin to heal permanently. As house prices fall, for example, because less borrowed money exists to send them higher, Americans will have more money left over after paying the mortgage.
They can invest that money in the stock market for retirement. Those funds, in turn, will go to entrepreneurs who create jobs outside of the financial industry.
The Dodd-Frank bill would pervert this healthy process. It would pit Washington's too-big-to-fail subsidies and Wall Street's creativity against Americans who are trying to do the right thing for themselves and the country
Thursday, October 29, 2009
The 3.5 percent upturn in GDP may not have actually happened; unseen events are at work
Here's a riddle: If a scientist or engineer is laid off, does it affect gross domestic product?
The third-quarter GDP figures, released on Oct. 29, showed the economy growing at a 3.5% annual pace, breaking a string of four consecutive negative quarters. The growth was driven mostly by a surge in the production of motor vehicles and other manufactured goods.
This number was greeted by many economists and journalists as confirmations that the recession is over. What's more, the rise in real GDP, combined with a sharp fall in employment in the third quarter, implies that productivity also soared during the period. Good news, right?
The trouble is that those GDP and productivity growth figures could be significantly overestimated—perhaps by one percentage point or even more.
That's because the official statistics are not designed to pick up cutbacks in "intangible investments" such as business spending on research and development, product design, and worker training. There's ample evidence to suggest that companies, to reduce costs and boost short-term profits, are slashing this kind of spending, which is essential for innovation. Without investment in intangibles, the U.S. can't compete in a knowledge-based global economy. Yet you won't see that plunge reflected in the GDP and productivity statistics, which are still too focused on more traditional sectors, such as motor vehicles and construction.
In effect, government statisticians are trying to track a 21st century bust with 20th century tools. Not only is that distorting the critical data that investors, policymakers, and corporate executives use to evaluate the economy, but it might also be creating a false sense of relief as Americans battle a brutal recession.
The third-quarter GDP figures, released on Oct. 29, showed the economy growing at a 3.5% annual pace, breaking a string of four consecutive negative quarters. The growth was driven mostly by a surge in the production of motor vehicles and other manufactured goods.
This number was greeted by many economists and journalists as confirmations that the recession is over. What's more, the rise in real GDP, combined with a sharp fall in employment in the third quarter, implies that productivity also soared during the period. Good news, right?
The trouble is that those GDP and productivity growth figures could be significantly overestimated—perhaps by one percentage point or even more.
That's because the official statistics are not designed to pick up cutbacks in "intangible investments" such as business spending on research and development, product design, and worker training. There's ample evidence to suggest that companies, to reduce costs and boost short-term profits, are slashing this kind of spending, which is essential for innovation. Without investment in intangibles, the U.S. can't compete in a knowledge-based global economy. Yet you won't see that plunge reflected in the GDP and productivity statistics, which are still too focused on more traditional sectors, such as motor vehicles and construction.
In effect, government statisticians are trying to track a 21st century bust with 20th century tools. Not only is that distorting the critical data that investors, policymakers, and corporate executives use to evaluate the economy, but it might also be creating a false sense of relief as Americans battle a brutal recession.
Saturday, October 24, 2009
Video of FT interview with George Soros
The big profits made by some of Wall Street’s leading banks are “hidden gifts” from the state, and taxpayer resentment of such companies is “justified”, George Soros, the fund manager, said in an interview with the Financial Times.
“Those earnings are not the achievement of risk-takers,” Mr Soros said. “These are gifts, hidden gifts, from the government, so I don’t think that those monies should be used to pay bonuses. There’s a resentment which I think is justified.”
To access video of this extraordinary Financial Times interview with George Soros, click on the headline of this post. While many of us recoil from his politics, Soros's grasp of the interplay between current events and economics is without peer. Here, he predicts that China will replace the United States as the engine of the world's economy, and this means the engine will be smaller and growth slower.
“Those earnings are not the achievement of risk-takers,” Mr Soros said. “These are gifts, hidden gifts, from the government, so I don’t think that those monies should be used to pay bonuses. There’s a resentment which I think is justified.”
To access video of this extraordinary Financial Times interview with George Soros, click on the headline of this post. While many of us recoil from his politics, Soros's grasp of the interplay between current events and economics is without peer. Here, he predicts that China will replace the United States as the engine of the world's economy, and this means the engine will be smaller and growth slower.
Friday, May 8, 2009
Obama's auto bailouts subsidize foreign economies at the expense of U.S. workers and manufacturers
"The U.S. government is pouring billions into General Motors in hopes of reviving the domestic economy, but when the automaker completes its restructuring plan, many of the company's new jobs will be filled by workers overseas.
According to an outline the company has been sharing privately with Washington legislators, the number of cars that GM sells in the United States and builds in Mexico, China and South Korea will roughly double.
The proportion of GM cars sold domestically and manufactured in those low-wage countries will rise from 15 percent to 23 percent over the next five years, according to the figures contained in a 12-page presentation offered to lawmakers in response to their questions about overseas production.
As a result, the long-simmering argument over U.S. manufacturers expanding production overseas -- normally arising between unions and private companies -- is about to engage the Obama administration."
http://www.washingtonpost.com/wp-dyn/content/article/
2009/05/07/AR2009050704336.html
According to an outline the company has been sharing privately with Washington legislators, the number of cars that GM sells in the United States and builds in Mexico, China and South Korea will roughly double.
The proportion of GM cars sold domestically and manufactured in those low-wage countries will rise from 15 percent to 23 percent over the next five years, according to the figures contained in a 12-page presentation offered to lawmakers in response to their questions about overseas production.
As a result, the long-simmering argument over U.S. manufacturers expanding production overseas -- normally arising between unions and private companies -- is about to engage the Obama administration."
http://www.washingtonpost.com/wp-dyn/content/article/
2009/05/07/AR2009050704336.html
Thursday, May 7, 2009
Dems never waste time on favorable facts when there's a good doomsday crisis to exploit
"Contrary to popular perception, even though America is at the epicenter of the financial crisis, it has suffered less than its industrialized peers in terms of economic growth. According to the latest International Monetary Fund figures two weeks ago, the U.S. economy actually grew 1.1 percent last year even as Japan's shrank by 0.6 percent. France and England's both grew 0.7 percent, and Canada's only 0.5 percent—or less than half of America's. Only Germany did slightly better at 1.3 percent.
What's more, despite all the gloom and doom about the American economy, IMF expects its gross domestic product to shrink 2.8 percent this year compared to anywhere between 3 percent (France) to 6.2 percent (Japan) for these other economies. (Figures from the U.S. since the IMF projections suggest that the U.S. economy contracted more than expected in the first quarter of this year but it is not yet clear how the other countries performed.)
Not only is America hurting relatively less now, its economic performance in the prior 18 years—from 1990 to 2007—has also been visibly better than everybody else's. Calculations based on Department of Agriculture data show that America's GDP grew at an average annual rate of 3 percent during this period. By contrast, Canada's grew 2.88 percent; England's 2.3 percent; France's 1.92 percent; Japan's 1.74 percent and Germany's 1.59 percent."
http://www.reason.com/news/show/133344.html
What's more, despite all the gloom and doom about the American economy, IMF expects its gross domestic product to shrink 2.8 percent this year compared to anywhere between 3 percent (France) to 6.2 percent (Japan) for these other economies. (Figures from the U.S. since the IMF projections suggest that the U.S. economy contracted more than expected in the first quarter of this year but it is not yet clear how the other countries performed.)
Not only is America hurting relatively less now, its economic performance in the prior 18 years—from 1990 to 2007—has also been visibly better than everybody else's. Calculations based on Department of Agriculture data show that America's GDP grew at an average annual rate of 3 percent during this period. By contrast, Canada's grew 2.88 percent; England's 2.3 percent; France's 1.92 percent; Japan's 1.74 percent and Germany's 1.59 percent."
http://www.reason.com/news/show/133344.html
Thursday, April 9, 2009
Was subprime mortgage collapse a result, not a cause, of the global recession?
"In 1983, economist James Hamilton of the University of California at San Diego showed that "all but one of the US recessions since World War Two have been preceded, typically with a lag of around three-fourths of a year, by a dramatic increase in the price of crude petroleum." The years 1946 to 2007 saw 10 dramatic spikes in the price of oil -- each of which was soon followed by recession.
In The Financial Times on Jan. 3, 2008, I therefore suggested, "The US economy is likely to slip into recession because of higher energy costs alone, regardless of what the Fed does."
In a new paper at cato.org, "Financial Crisis and Public Policy," Jagadeesh Gokhale notes that the prolonged decline in exurban housing construction that began in early 2006 was a logical response to rising prices of oil and gasoline at that time. So was the equally prolonged decline in sales of gas-guzzling vehicles. And the US/UK financial crises in the fall of 2008 were likewise as much a consequence of recession as the cause: Recessions turn good loans into bad.
The recession began in late 2007 or early 2008 in many countries, with the United States one of the least affected. Countries with the deepest recessions have no believable connection to US housing or banking problems."
http://www.nypost.com/seven/04092009/postopinion/
opedcolumnists/it_didnt_start_here_163630.htm?page=2
In The Financial Times on Jan. 3, 2008, I therefore suggested, "The US economy is likely to slip into recession because of higher energy costs alone, regardless of what the Fed does."
In a new paper at cato.org, "Financial Crisis and Public Policy," Jagadeesh Gokhale notes that the prolonged decline in exurban housing construction that began in early 2006 was a logical response to rising prices of oil and gasoline at that time. So was the equally prolonged decline in sales of gas-guzzling vehicles. And the US/UK financial crises in the fall of 2008 were likewise as much a consequence of recession as the cause: Recessions turn good loans into bad.
The recession began in late 2007 or early 2008 in many countries, with the United States one of the least affected. Countries with the deepest recessions have no believable connection to US housing or banking problems."
http://www.nypost.com/seven/04092009/postopinion/
opedcolumnists/it_didnt_start_here_163630.htm?page=2
Monday, April 6, 2009
China's bid to supplant U.S. dollar is real
WASHINGTON -- We are in a race between economic recovery and economic nationalism. At last week's G-20 summit, leading nations agreed to roughly $1 trillion of additional lending, mostly through the International Monetary Fund, to help end the worldwide slump. But beneath the veil of consensus, countries are maneuvering to protect their economies and blame someone else for the crisis. Will the world economic order overcome these stresses or give way to a global free-for-all, characterized by rampant protectionism, nationalistic subsidies and preferences?
Emblematic of the tension is a recent proposal by Zhou Xiaochuan, governor of the People's Bank of China (PBOC), to replace the dollar as the world's major international currency. In a paper, Zhou argued that today's crisis reflects "the inherent vulnerabilities and systemic risks" of the dollar-based global economy. The PBOC is China's Federal Reserve; Zhou is no obscure bureaucrat.
http://www.realclearpolitics.com/articles/2009/04/a_global_freeforall.html
Emblematic of the tension is a recent proposal by Zhou Xiaochuan, governor of the People's Bank of China (PBOC), to replace the dollar as the world's major international currency. In a paper, Zhou argued that today's crisis reflects "the inherent vulnerabilities and systemic risks" of the dollar-based global economy. The PBOC is China's Federal Reserve; Zhou is no obscure bureaucrat.
http://www.realclearpolitics.com/articles/2009/04/a_global_freeforall.html
Thursday, April 2, 2009
Obama and his colleagues grope for villain
The bloated egos attending the G20 conference in London congratulated themselves on a historic accomplishment Thursday, having pledged $1.1 trillion they don't have to combat a problem they continue to misdiagnose.
The new demon they are going to slay is secret international banking that allows high-rollers to move money anonymously.
What did secret banking have to do with the oollapse of the U.S. housing market and the resulting recession?
Probably nothing.
What about hedge funds, which also had a target pinned to their backs? Probably nothing.
If the G20 dandies really wanted to deal with the basic problem, they would have called for the immediate abolition of Freddie Mac and Fannie Mae. Had those two government-sponsored enterprises not existed, millions of bad credit risks would not have gotten mortgages, the housing bubble would not have happened, and international dandies would not now be pretending to pick up the pieces of a wrecked world economy.
Why do the dandies ignore Fannie and Freddie? Because any suggestion that Fannie and Freddie were central to the debacle would rankle Barack (Alexander the Great) Obama, whose Democrat Party used both Bannie and Freddie as a hiring hall for out-of-work politicians and a source of big-time campaign contributions.
What Fannie and Freddie did was to separate home mortgages from the traditional constraint of risk. Under the previous system, a local lender would assess the credit-worthiness of applicants. Those who had a long record of paying their bills on time, as well as adequate incomes, received mortgages at modest interest rates. Those who didn't have good records had to pay higher interest rates, and sometimes were refused any mortgage.
All that changed when Fannie and Freddie came on the scene. Now, local lenders cared little, or not at all, about credit-worthiness because they held the morgage for only a day or two before selling it to Fannie or Freddie.
Fannie and Freddie didn't have any big worries either becaue they quickly bundled mortgages as securities and sold them to investment banks, which bundled them again. The concepts of risk and credit-worthiness vanished, only to reappear suddenly and ominously when the American economy flattened out and the bad risks began defaulting on mortgages.
Government policy and public pressure groups such as ACORN, with whom Obama had a long relationship, were major contibutors to the debacle. Head fakes, like the ones so absurdly on display in London, won't change that history.
The new demon they are going to slay is secret international banking that allows high-rollers to move money anonymously.
What did secret banking have to do with the oollapse of the U.S. housing market and the resulting recession?
Probably nothing.
What about hedge funds, which also had a target pinned to their backs? Probably nothing.
If the G20 dandies really wanted to deal with the basic problem, they would have called for the immediate abolition of Freddie Mac and Fannie Mae. Had those two government-sponsored enterprises not existed, millions of bad credit risks would not have gotten mortgages, the housing bubble would not have happened, and international dandies would not now be pretending to pick up the pieces of a wrecked world economy.
Why do the dandies ignore Fannie and Freddie? Because any suggestion that Fannie and Freddie were central to the debacle would rankle Barack (Alexander the Great) Obama, whose Democrat Party used both Bannie and Freddie as a hiring hall for out-of-work politicians and a source of big-time campaign contributions.
What Fannie and Freddie did was to separate home mortgages from the traditional constraint of risk. Under the previous system, a local lender would assess the credit-worthiness of applicants. Those who had a long record of paying their bills on time, as well as adequate incomes, received mortgages at modest interest rates. Those who didn't have good records had to pay higher interest rates, and sometimes were refused any mortgage.
All that changed when Fannie and Freddie came on the scene. Now, local lenders cared little, or not at all, about credit-worthiness because they held the morgage for only a day or two before selling it to Fannie or Freddie.
Fannie and Freddie didn't have any big worries either becaue they quickly bundled mortgages as securities and sold them to investment banks, which bundled them again. The concepts of risk and credit-worthiness vanished, only to reappear suddenly and ominously when the American economy flattened out and the bad risks began defaulting on mortgages.
Government policy and public pressure groups such as ACORN, with whom Obama had a long relationship, were major contibutors to the debacle. Head fakes, like the ones so absurdly on display in London, won't change that history.
Wednesday, March 25, 2009
Voters: grow economy or we'll find someone else
"While the current focus on Timothy Geithner, the Treasury, and the financial markets is understandable - this will probably not be the script of the broader political battle over the next 20 months. Assuming that the financial system is brought under control, the political debate will focus relentlessly on recession and recovery. Though the Administration, the CBO and the Blue Chip forecasters project modest growth in 2010 (ranging from 1.9% to 3.0%), all of them expect high unemployment (7.9% to 9.1%) and an economy performing below peak capacity. If these predictions are true - the corresponding public dissatisfaction will define the campaign of 2010, and the legislative battles that precede it.
Both sides will struggle to pin blame for the weak economy on the other. Republicans will indict President Obama, arguing that his policies failed to improve things. President Obama will remind voters of the previous administration, arguing that congressional Republicans advocate the same policies that brought about the recession. The public lacks the technical expertise to arbitrate based on the merits - so the outcome will depend in part on how bad the economy actually is (the worse it is, the worse for President Obama), and which side shows the greatest political acumen.
If you find this to be a dispiriting commentary on democratic accountability, think of it this way. Electoral justice might be rough, but it's also consistent: bad economies mean electoral defeat for somebody. Thus, those who are still in office when the dust settles learn a valuable lesson: grow the economy, or next time it could be you. In the long run, the public gets what it wants - a government dedicated first and foremost to growth."
http://www.realclearpolitics.com/horseraceblog/2009/03/the_fight_over_the_economy_is.html
Both sides will struggle to pin blame for the weak economy on the other. Republicans will indict President Obama, arguing that his policies failed to improve things. President Obama will remind voters of the previous administration, arguing that congressional Republicans advocate the same policies that brought about the recession. The public lacks the technical expertise to arbitrate based on the merits - so the outcome will depend in part on how bad the economy actually is (the worse it is, the worse for President Obama), and which side shows the greatest political acumen.
If you find this to be a dispiriting commentary on democratic accountability, think of it this way. Electoral justice might be rough, but it's also consistent: bad economies mean electoral defeat for somebody. Thus, those who are still in office when the dust settles learn a valuable lesson: grow the economy, or next time it could be you. In the long run, the public gets what it wants - a government dedicated first and foremost to growth."
http://www.realclearpolitics.com/horseraceblog/2009/03/the_fight_over_the_economy_is.html
Wednesday, March 4, 2009
Wisdom from an earlier time of turbulence
"You cannot legislate the poor into freedom by legislating the wealthy out of freedom. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else.
When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that my dear friend, is about the end of any nation. You cannot multiply wealth by dividing it."
Dr. Adrian Rogers, 1931
When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that my dear friend, is about the end of any nation. You cannot multiply wealth by dividing it."
Dr. Adrian Rogers, 1931
Saturday, February 7, 2009
Republicans will help pass Democrat bailout bill
Republican Senators are about to explore a level of fecklessness not seen since Sen. Larry Craig went fishing in a men's bathroom at the Minneapolis airport.
By so doing, they will help President Obama rescue the Democrat Party from the likely consequences of its own disastrous social engineering. Their votes will provide the majority Democrats the 60 votes they need to close debate on what is deceptively called an economic stimulus bill.
The defectors are Sens. Susan Collins and Olympia Snowe, of Maine, and Arlen Specter of Pennsylvania, none of them strangers to liberal sirens.
In the absense of the Democrat "stimulus" program, a steroid shot for government growth, one of two things would happen:
* The economy would fix itself over a period of a year or two, with little or no inflation, and government would continue its usually modest role.
* The economy would, for one reason or another, stagnate or make a fitful recovery.
Neither of those outcomes is acceptable to the Democrat regime of President Obama. A passive role for government is not what he has in mind. A stagnant economy might doom his party to defeat in 2010, when all 435 House members and one-third of the 100 senators must stand for election.
Worse, from Obama's standpoint, his own chances of reelection in 2012 might fade as well.
Few things are more lethal to an incumbent party than a prolonged recession. That's why, when one occurs, the incumbent party tends to overstimulate, resulting in a spike in inflation. That is a tradeoff that incumbents accept because inflation, while troublesome, is rarely lethal on election day. The last time inflation played a big role in the defeat of an incumbent president was in 1980, when Democrat Jimmy Carter went down under the twin blows of stagflation, a blend of inflation and recession.
Another consideration also may be coming into play. In recent years, Democrats have been getting more and more of their financial support from the rich and very rich, who don't suffer from inflation because the returns on their investments tend to keep pace with inflation.
If the recession were to endure into the next campaign season, it undoubtedly would damage the Democrats' chances, perhaps severely. If the recession recedes before the next campaign, inflation might hurt the Democrats, but not much.
By so doing, they will help President Obama rescue the Democrat Party from the likely consequences of its own disastrous social engineering. Their votes will provide the majority Democrats the 60 votes they need to close debate on what is deceptively called an economic stimulus bill.
The defectors are Sens. Susan Collins and Olympia Snowe, of Maine, and Arlen Specter of Pennsylvania, none of them strangers to liberal sirens.
In the absense of the Democrat "stimulus" program, a steroid shot for government growth, one of two things would happen:
* The economy would fix itself over a period of a year or two, with little or no inflation, and government would continue its usually modest role.
* The economy would, for one reason or another, stagnate or make a fitful recovery.
Neither of those outcomes is acceptable to the Democrat regime of President Obama. A passive role for government is not what he has in mind. A stagnant economy might doom his party to defeat in 2010, when all 435 House members and one-third of the 100 senators must stand for election.
Worse, from Obama's standpoint, his own chances of reelection in 2012 might fade as well.
Few things are more lethal to an incumbent party than a prolonged recession. That's why, when one occurs, the incumbent party tends to overstimulate, resulting in a spike in inflation. That is a tradeoff that incumbents accept because inflation, while troublesome, is rarely lethal on election day. The last time inflation played a big role in the defeat of an incumbent president was in 1980, when Democrat Jimmy Carter went down under the twin blows of stagflation, a blend of inflation and recession.
Another consideration also may be coming into play. In recent years, Democrats have been getting more and more of their financial support from the rich and very rich, who don't suffer from inflation because the returns on their investments tend to keep pace with inflation.
If the recession were to endure into the next campaign season, it undoubtedly would damage the Democrats' chances, perhaps severely. If the recession recedes before the next campaign, inflation might hurt the Democrats, but not much.
Thursday, January 29, 2009
Consequences of stupid governance
"Dear Mr. President:
What if government spending can’t turn things around? What if the banks continue hoarding TARP funds, and deny loans to deserving companies and individuals? Now think: what would happen if after years of monstrous fiscal deficits the U.S. is still mired in unemployment and slow growth?
The last time that happened—in the 1930s – the outcome was…. Well, you know how that played out. But even without Smoot-Hawley and beggar–thy-neighbor policy mistakes, the U.S. could face a similar fate today.
Consider this: Two to three percent GDP growth is needed just to absorb new entrants to the labor force.
In times of buoyant demand, this is no problem. In times of collapsing private spending, as now—it is a huge one. Even unbelievably large fiscal deficits — 10 percent of GDP or more – will not stimulate enough growth to prevent unemployment from continuing to rise through the next two years. [Choices made in 2009 will shape the globe’s destiny, By Martin Wolf, Financial Times, January 7, 2009.]
One reason for our predicament: immigration is swelling the U.S. labor force beyond the ability of fiscal policy to generate jobs."
http://www.vdare.com/rubenstein/090127_nd.htm
What if government spending can’t turn things around? What if the banks continue hoarding TARP funds, and deny loans to deserving companies and individuals? Now think: what would happen if after years of monstrous fiscal deficits the U.S. is still mired in unemployment and slow growth?
The last time that happened—in the 1930s – the outcome was…. Well, you know how that played out. But even without Smoot-Hawley and beggar–thy-neighbor policy mistakes, the U.S. could face a similar fate today.
Consider this: Two to three percent GDP growth is needed just to absorb new entrants to the labor force.
In times of buoyant demand, this is no problem. In times of collapsing private spending, as now—it is a huge one. Even unbelievably large fiscal deficits — 10 percent of GDP or more – will not stimulate enough growth to prevent unemployment from continuing to rise through the next two years. [Choices made in 2009 will shape the globe’s destiny, By Martin Wolf, Financial Times, January 7, 2009.]
One reason for our predicament: immigration is swelling the U.S. labor force beyond the ability of fiscal policy to generate jobs."
http://www.vdare.com/rubenstein/090127_nd.htm
Wednesday, January 28, 2009
Larry Kudlow sees upturn
"Meanwhile, important forward-looking economic indicators suggest we have seen the bottom — believe it or not.
First and foremost, stocks bottomed in late November and are about 15 percent higher today. Raw commodity indexes have bottomed. 10-year Treasury rates have bottomed and yields today are about 50 basis points higher. Oil prices have bottomed. And the dollar bottomed many months ago. Plus, the Fed’s monetary-base expansion has produced about a $550 billion increase in the M2 money supply, which could start raising the economy as early as this spring.
If the turnover rate of money — that is, velocity — moves back to its 10-year average, then we could all be surprised by a substantial economic rebound starting this spring or summer.
I’m not even gonna mention the goofy stimulus package in Congress, because it’s not gonna stimulate much of anything except a zillion Democratic political-interest groups. This package is completely porked up with massive social spending and other political targets — none of which will create any jobs or growth. It’s just a massive resource transfer."
http://corner.nationalreview.com/
First and foremost, stocks bottomed in late November and are about 15 percent higher today. Raw commodity indexes have bottomed. 10-year Treasury rates have bottomed and yields today are about 50 basis points higher. Oil prices have bottomed. And the dollar bottomed many months ago. Plus, the Fed’s monetary-base expansion has produced about a $550 billion increase in the M2 money supply, which could start raising the economy as early as this spring.
If the turnover rate of money — that is, velocity — moves back to its 10-year average, then we could all be surprised by a substantial economic rebound starting this spring or summer.
I’m not even gonna mention the goofy stimulus package in Congress, because it’s not gonna stimulate much of anything except a zillion Democratic political-interest groups. This package is completely porked up with massive social spending and other political targets — none of which will create any jobs or growth. It’s just a massive resource transfer."
http://corner.nationalreview.com/
Wednesday, January 21, 2009
Effectiveness can be a slippery standard
There were some things to like about President Obama's even-handed inaugural speech. He paid homage to the founders. He tipped his hat to the importance of markets in the American scheme. He passed up the chance to build oratorical monuments to the momentousness of the moment.
But then, as I was feeling a sense of relief, President Obama let loose this stunning invitation to head-banging:
"The question we ask today is not whether our government is too big or too small, but whether it works — whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified. Where the answer is yes, we intend to move forward. Where the answer is no, programs will end."
If effectiveness is the standard, the 30-year social engineering project to destroy market mechanisms that determined who could get a mortgage, and who couldn't, was effective beyond the dreams of its authors. In recent years, people without incomes and people with bad credit histories got mortgages.
Even politicians, especially those who maintained and promoted the system, got mortgages, at unusually favorable interest rates.
Yes, the system was corrupt, but it was, without doubt, effective in its social engineering purpose, which was to destroy the role of markets in the mortgage industry.
It worked, for a while, but does anybody still believe that it was a good idea? The unintended consequences, bundled mortgages sold as securities all over the world, turned out to be time bombs that blew up when the layoffs and defaults began.
The proper test of a government policy is not whether it works. Instead, Congress and the White House should ask:
Does the government have any business interfering in a particular market?
What's the down side to government interference?
Assuming the worst of the unintended consequences happens, what does the government do then?
But then, as I was feeling a sense of relief, President Obama let loose this stunning invitation to head-banging:
"The question we ask today is not whether our government is too big or too small, but whether it works — whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified. Where the answer is yes, we intend to move forward. Where the answer is no, programs will end."
If effectiveness is the standard, the 30-year social engineering project to destroy market mechanisms that determined who could get a mortgage, and who couldn't, was effective beyond the dreams of its authors. In recent years, people without incomes and people with bad credit histories got mortgages.
Even politicians, especially those who maintained and promoted the system, got mortgages, at unusually favorable interest rates.
Yes, the system was corrupt, but it was, without doubt, effective in its social engineering purpose, which was to destroy the role of markets in the mortgage industry.
It worked, for a while, but does anybody still believe that it was a good idea? The unintended consequences, bundled mortgages sold as securities all over the world, turned out to be time bombs that blew up when the layoffs and defaults began.
The proper test of a government policy is not whether it works. Instead, Congress and the White House should ask:
Does the government have any business interfering in a particular market?
What's the down side to government interference?
Assuming the worst of the unintended consequences happens, what does the government do then?
Monday, October 13, 2008
Against Obamanomics
From Taxprof:
Hundreds of Economists Sign Letter Opposing Obama's Tax Plan
Hundreds of economists (including Nobel Prize winners Gary Becker, James Buchanan, Robert Mundell, Edward Prescott, and Vernon Smith) have signed letters opposing Barack Obama's economic and tax plans.
http://taxprof.typepad.com/taxprof_blog/2008/10/hundres-of-econ.html
My observation: I don't see what their problem is with Obamanomics. The legislature raised taxes here in Michigan during a recession, and that has worked out so, so well.
Hundreds of Economists Sign Letter Opposing Obama's Tax Plan
Hundreds of economists (including Nobel Prize winners Gary Becker, James Buchanan, Robert Mundell, Edward Prescott, and Vernon Smith) have signed letters opposing Barack Obama's economic and tax plans.
http://taxprof.typepad.com/taxprof_blog/2008/10/hundres-of-econ.html
My observation: I don't see what their problem is with Obamanomics. The legislature raised taxes here in Michigan during a recession, and that has worked out so, so well.
Sunday, October 12, 2008
Muslim economics?
Enemies of capitalism, including muslim clerics, are now describing America's financial debacle as a failure of the free market system.
It is no such thing.
Instead of capitalism's failure, the debacle is a huge success for capitalism's home-grown enemies.
For 30 years leftist Democrats, recently including Barack Obama, have rained blow after blow against the free market in home mortgages. They subverted the market in the service of social engineering. They made it possible for more and more bad credit risks to get mortgages.
When the badness of those mortgages became manifest, the financial system collapsed under the strain.
If the free market had been allowed to work, thsoe bad mortgages would not have happened.
It is especially rich that muslims are now suggesting that America should try the muslim economic system as a replacement. We already have. Al Capone invented it. Muslims stole it from Al Capone, and probably didn't even pay royalties.
It is no such thing.
Instead of capitalism's failure, the debacle is a huge success for capitalism's home-grown enemies.
For 30 years leftist Democrats, recently including Barack Obama, have rained blow after blow against the free market in home mortgages. They subverted the market in the service of social engineering. They made it possible for more and more bad credit risks to get mortgages.
When the badness of those mortgages became manifest, the financial system collapsed under the strain.
If the free market had been allowed to work, thsoe bad mortgages would not have happened.
It is especially rich that muslims are now suggesting that America should try the muslim economic system as a replacement. We already have. Al Capone invented it. Muslims stole it from Al Capone, and probably didn't even pay royalties.
Friday, October 10, 2008
The oil price line looks like a waterfall
Crude Oil Drops Below $80 as Equities Slump on Credit Freeze
By Mark Shenk
Oct. 10 (Bloomberg) -- Crude oil fell below $80 for the first time in a year and copper headed for its biggest weekly drop in more than 20 years on concern that the deepening financial crisis will push the global economy into a recession.
Oil in New York is approaching its biggest weekly decline since 2003 amid plunging share prices in Asia and Europe. The S&P 500 fell 5 percent to the lowest level since the start of the Iraq War in 2003. All commodities with the exception of coffee are down on signs that demand for raw materials will drop as the global economy falters.
My observation:
We have a securities market calamity and an incredible drop in oil prices occurring at the same time. Do these forces offset each other? Or will the dramatic drop in oil prices overcompensate for the stock market decline?
For the first time in my life I want to hear from a master of the universe on an important question, and none is to be found. Step up please.
By Mark Shenk
Oct. 10 (Bloomberg) -- Crude oil fell below $80 for the first time in a year and copper headed for its biggest weekly drop in more than 20 years on concern that the deepening financial crisis will push the global economy into a recession.
Oil in New York is approaching its biggest weekly decline since 2003 amid plunging share prices in Asia and Europe. The S&P 500 fell 5 percent to the lowest level since the start of the Iraq War in 2003. All commodities with the exception of coffee are down on signs that demand for raw materials will drop as the global economy falters.
My observation:
We have a securities market calamity and an incredible drop in oil prices occurring at the same time. Do these forces offset each other? Or will the dramatic drop in oil prices overcompensate for the stock market decline?
For the first time in my life I want to hear from a master of the universe on an important question, and none is to be found. Step up please.
Panics come and go
From the Wall Street Journal, a perspective on panics, of which we have had many:
We are now in the midst of a major financial panic. This is not a unique occurrence in American history. Indeed, we've had one roughly every 20 years: in 1819, 1836, 1857, 1873, 1893, 1907, 1929, 1987 and now 2008. Many of these marked the beginning of an extended period of economic depression.
http://online.wsj.com/article/SB122360636585322023.html
My question: Does this mean that we will have to contend with an unpopular depression as well as an unpopular war? Or, should we end the war and spend all of our efforts on being depressed?
We are now in the midst of a major financial panic. This is not a unique occurrence in American history. Indeed, we've had one roughly every 20 years: in 1819, 1836, 1857, 1873, 1893, 1907, 1929, 1987 and now 2008. Many of these marked the beginning of an extended period of economic depression.
http://online.wsj.com/article/SB122360636585322023.html
My question: Does this mean that we will have to contend with an unpopular depression as well as an unpopular war? Or, should we end the war and spend all of our efforts on being depressed?
Thursday, October 2, 2008
An alternative to a bailout
Tired of seeing Congress bidding up the rewards to financial institutions for failure? Here's an alternative approach proposed by Mort Zuckerman. Writing in the New York Daily News, Zuckerman argues:
"There's an alternative to buying the bad loans and investments. This would be to invest public funds in these financial institutions through the purchase of prior preferred stock by the government, which would put them senior to all shareholders. Preferred shareholders, namely the public, would be the last to realize losses and the first to receive gains. This would still recapitalize the banking system and give them time to dispose of their bad assets in an orderly fashion.
It's this same approach that Warren Buffett adopted when he invested $5 billion in Goldman Sachs. So why should the public get a worse deal when they are asked to use their dollars to be invested in lesser quality financial institutions, which have a higher risk?"
"There's an alternative to buying the bad loans and investments. This would be to invest public funds in these financial institutions through the purchase of prior preferred stock by the government, which would put them senior to all shareholders. Preferred shareholders, namely the public, would be the last to realize losses and the first to receive gains. This would still recapitalize the banking system and give them time to dispose of their bad assets in an orderly fashion.
It's this same approach that Warren Buffett adopted when he invested $5 billion in Goldman Sachs. So why should the public get a worse deal when they are asked to use their dollars to be invested in lesser quality financial institutions, which have a higher risk?"
Subscribe to:
Posts (Atom)
