Tag Archives: economics
“For were the impulses of conscience clear, uniform, and irresistibly obeyed, man would need no other lawgiver; but that not being the case, he finds it necessary to surrender up a part of his property to furnish means for the protection of the rest…”
- Thomas Paine, Common Sense (1776)
There were not many surprises in President Obama’s 2012 state of the union addresson Tuesday. He touted what he claims are the accomplishments of his administration and pushed his left-leaning economic agenda. For the president, all economic growth has its roots in some sort of government intervention, including “help financing a new plant, equipment, or training for new workers,” giving “community colleges the resources they need to become community career centers,” or trying to “spur energy innovation with new incentives.” Of course, further expanding a government that already spends about 50% more than it collects in taxes can only be accomplished one way – by collecting a lot more taxes.
To this end, the president resorted to the perennial liberal/progressive mantra that everyone “pay their fair share.” Obama used this term three times during the speech in regard to taxes. As even many of the Republican presidential candidates seem to buy into it, the president was also unable to resist the urge to promote the latest left-wing myth that millionaires like Mitt Romney pay less in taxes than their secretaries. This is complete nonsense, of course, but it is effective in eliciting the appropriate outrage from people who don’t stop to do either some simple math or even a little critical thinking.
For the president, there doesn’t seem to be a ceiling on what anyone’s fair share might be. However, he does have a clearly defined floor. “If you make more than $1 million a year, you should not pay less than 30 percent in taxes.” Exactly why that number is “fair” or even the millionaire’s “share” is somewhat difficult to determine. Neither does Obama answer the question that should logically follow. If you make under $1 million per year, what is your fair share in taxes?
Andrew Napolitano recently showed a clip in which Rick Santorum explained his views on libertarianism. His comments are also instructive in understanding his animosity (politically) towards Ron Paul. Santorum said:
“One of the criticisms I make is to what I refer to as more of a Libertarianish right. They have this idea that people should be left alone, be able to do whatever they want to do, government should keep our taxes down and keep our regulations low, that we shouldn’t get involved in the bedroom, we shouldn’t get involved in cultural issues. That is not how traditional conservatives view the world. There is no such society that I am aware of, where we’ve had radical individualism and that it succeeds as a culture.”
As David Boaz pointed out in the interview with Napolitano, Santorum seems to oppose a basic American principle- the right to the pursuit of happiness. I agree with him on this, but there is something even more fundamental here than that. It has to do with the conservative philosophy itself. One of the statements that Santorum makes is true. “That is not how traditional conservatives view the world.”
There is a great disconnect between average Americans who refer to themselves as “conservatives” and the small group of politicians and politically-connected businessman who likewise refer to themselves. The members of the former group believe in the founding principles of the United States, including the inalienable rights to life, liberty, and the pursuit of happiness. They believe that these rights are endowed by their Creator. In other words, they preexist the government. They are not created by the government. It is the government’s one and only job to protect those rights and when the government fails to protect them and instead violates them, it is the duty of the people to alter or abolish the government.
Over the past month we have been closely documenting a major funding squeeze in the all important shadow economy – the “synthetic liquidity” conduit which far more than traditional sources of cash, has become all important for proper bank functioning over the past decade. Courtesy of adverse development in Europe, one by one various components of this unregulated funding scheme have become frozen necessitating the first of many central bank interventions on November 30 to provide liquidity to global banks, primarily to offset such shadow conduits as locked up commercial paper, repo and money markets. Logically, as noted over a week ago, European banks scrambled to obtain cheap dollars by borrowing over $50 billion from the Fed, and plug dollar shortfalls. Yet as all band aid measures designed to offset a broken liquidity equilibrium fail eventually, it was only a matter of time before we saw a direct bail out by the Fed of one or more banks in the aftermath of the November 30 global “bail out.” Sure enough, we have our first clue that “something” happened in the week ending Wednesday December 14 that involved an upgrade of the Fed’s indirect (and thus untargeted) bailout of global banks, to a focused, and very much targeted rescue of one (or more) banks. And with some additional diligence, it may be possible to narrow down the date of an actual bank bailout: Tuesday, December 13.
Exhibit A – Reserve Bank Credit
Two years ago, when discussing the transition of the world to one coordinated, centrally-planned regime we said that the only financial statement of any importance, updated weekly, is the Fed’s H.4.1, or the “Factors Affecting Reserve Balances” which traces that flow of “last resort” cash from the Fed to the various organization that make up the reserve bank, primary dealer, and various other financial entities under the Fed’s Lender of Last Resort umbrella. Simply said, anything abnormal in this weekly report of “flow and stock” (a simplistic distinction where the Fed is far more focused on what the absolute level of reserve numbers is, whereas Zero Hedge and the market believe it is the “flow”, or marginal change, that determines, artificially, asset prices) would confirm our speculations that the Fed has stepped into into its now traditional role of bailing out the world.
The first thing that caught our attention was the all important total reserve bank credit – the most important big picture metric announced by the Fed on a weekly basis. As the chart below shows, after having plateaued with the End of QE2, and remaining stable during the duration of the “sterilized” Operation Twist (as it should), in the week ended December 14, total reserve credit soared by a whopping $81 billion or the most since May 27, 2009 when the Fed was actively undergoing the early stages of QE1 damage control.
So what was the reason for this huge jump in reserve credit? Two things – on one hand we had the already long-ago telegraphed increase in Fed liquidity swap lines by over $50 billion, or from $2.3 to $54.3 billion to be exact. However that does not explain the remainder. So where did the other $30 billion in credit expansion come from?
Even though most Americans have become very frustrated with this economy, the reality is that the vast majority of them still have no idea just how bad our economic decline has been or how much trouble we are going to be in if we don’t make dramatic changes immediately. If we do not educate the American people about how deathly ill the U.S. economy has become, then they will just keep falling for the same old lies that our politicians keep telling them. Just “tweaking” things here and there is not going to fix this economy. We truly do need a fundamental change in direction. America is consuming far more wealth than it is producing and our debt is absolutely exploding. If we stay on this current path, an economic collapse is inevitable. Hopefully the crazy economic numbers from 2011 that I have included in this article will be shocking enough to wake some people up.
At this time of the year, a lot of families get together, and in most homes the conversation usually gets around to politics at some point. Hopefully many of you will use the list below as a tool to help you share the reality of the U.S. economic crisis with your family and friends. If we all work together, hopefully we can get millions of people to wake up and realize that “business as usual” will result in a national economic apocalypse.
The following are 50 economic numbers from 2011 that are almost too crazy to believe….
#1 A staggering 48 percent of all Americans are either considered to be “low income” or are living in poverty.
#2 Approximately 57 percent of all children in the United States are living in homes that are either considered to be “low income” or impoverished.
#3 If the number of Americans that “wanted jobs” was the same today as it was back in 2007, the “official” unemployment rate put out by the U.S. government would be up to 11 percent.
#4 The average amount of time that a worker stays unemployed in the United States is now over 40 weeks.
#5 One recent survey found that 77 percent of all U.S. small businesses do not plan to hire any more workers.
#6 There are fewer payroll jobs in the United States today than there were back in 2000 even though we have added 30 million extra people to the population since then.
#7 Since December 2007, median household income in the United States has declined by a total of 6.8% once you account for inflation.
#8 According to the Bureau of Labor Statistics, 16.6 million Americans were self-employed back in December 2006. Today, that number has shrunk to 14.5 million.
#9 A Gallup poll from earlier this year found that approximately one out of every five Americans that do have a job consider themselves to be underemployed.
#10 According to author Paul Osterman, about 20 percent of all U.S. adults are currently working jobs that pay poverty-level wages.
Many Greeks are draining their savings accounts because they are out of work, face rising taxes or are afraid the country will be forced to leave the euro zone. By withdrawing money, they are forcing banks to scale back their lending – and are inadvertently making the recession even worse.
Government spending drives taxes, deficits, debt and inflation, so it’s at the core of our economic problems. What to do about runaway spending? The tendency is to imagine that it might be controlled by electing the right politicians, enacting a law like a balanced budget amendment, passing a spending limitation ballot initiative, establishing a super committee or coming up with some kind of “grand bargain.”
These and other well-intended strategies have failed, primarily because they were attempts to have politicians act against their self-interest. Politicians generally want more power which means more money, more laws, regulations and bureaucrats. Historical experience suggests that rulers – whether kings, dictators or elected politicians — have a visceral urge to spend money they don’t have. They can’t control themselves. They’ll weasel their way around any efforts to put a lid on the cookie jar. This is why rich nations like Japan, Saudi Arabia and the United States are spending money they don’t have and incurring chronic budget deficits.
All of this has been has been going on for a very long time, a reminder that we’re dealing with one of the most potent forces in politics. Runaway spending repeatedly has contributed to the downfall of the high and mighty.
For example, spending problems began to be evident in the early years of the Roman Empire, and they became huge in the third century C.E. Perhaps as early as the third century B.C.E., Rome began minting a gold coin that came to be known as the aureus. Originally the face value of the coin equaled the market value of gold in it. ……