Category Archives: Debt

Happy Meal Time for US Students

Debt, Democracy, Economy, Education, Elections, Republicans, Socialism, Welfare

“Happy Meal Time for US Students” is my new column. Here is an excerpt:

“Barack Obama has promised America’s miseducated Millenials to keep the student-loan bubble from bursting. Campaigning in Iowa, the president vowed to keep college affordable, because, like every other welfare and warfare program, it “is at the heart of who we are.”

Interest rates for Federal Stafford Loans are set to double from 3.4 percent to 6.8 percent, on July 1. You just know how bad things are when a socialized financial market like student loans attempts to correct itself. Nevertheless, if the glut of miseducation is to be curbed, higher interest rates are healthy.

Why the president’s promise? The Twenty-Sixth Amendment, smuggled into the Constitution by statute, artificially swelled the ranks of Democratic voters by millions of eighteen-, nineteen-, and twenty-year-olds. While they don’t work for a living, youngsters get to vote for dibs on the livelihood of those who do.

It’s Happy Meal time for the nation’s students….”

Read the complete column, “Happy Meal Time for US Students.”

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Till Debt Do the US Apart

Debt, Economy, EU, Europe, Foreign Aid, Foreign Policy

In “One Nation Under Inflation,” I noted that “America’s debt-to-GDP ratio is larger than the European Union’s.” I was unaware that US debt “is greater than the combined debt of the entire Eurozone and the U.K.”

America’s debt is currently $15.1 trillion, while the Eurozone (which includes France, Germany, Greece, Italy, Spain, the U.K., and others) has a combined debt of $12.7 trillion. (All dollar amounts are in U.S. dollars, and the data refers to closing 2011 numbers.)
The Eurozone is larger than the United States, so America’s debt per capita also exceeds the Eurozone’s. According to the Census Bureau, the U.S. has a population of 313 million, whereas the Eurozone has a population in excess of 331 million.

(Weekly Standard)

Nary a mentioned was made of this apparently minor fact on Fox Business, while the Fox Business anchors discussed Christine Lagarde’s demands for more billions in bailouts from the US to the EU. “More firepower” is how the managing director of the International Monetary Fund described her agency’s requirements.

It’s Lagarde’s prerogative to ask for money to increase her bureaucracy’s sphere of influence. It’s the obligation of the ass with ears who leads the USA to turn her down.

So, it’s not Lagarde’s asking that ought to worry; it’s the fact that, according to Fox News, she expressed confidence that the US would do the “right” thing by her.

Crude’s Cheap; Government Is Expensive

Debt, Energy, Inflation

In “THE GOODS ON GAS,” it was explained that the deliberate and destructive policies of deficit spending are responsible for the steady rise in the prices of all commodities, crude included. This is so because deficit spending is “accompanied by an enormous increase in the stock of money,” as economist Henry Hazlitt explained in Economics in One Lesson.

Prices are rising due to the sustained policies of credit expansion pursued by a profligate government. More fiat currency in the system means that every unit is worth less. The coin is debased.

All correct, except for one thing, says Forbes’ Louis Woodhill.

Oil prices aren’t high right now. In fact, they are unusually low. Gasoline prices would have to rise by another $0.65 to $0.75 per gallon from where they are now just to be “normal”. And, because gasoline prices are low right now, it is very likely that they are going to go up more—perhaps a lot more. What the politicians, analysts, and pundits are missing is that prices are ratios. Gasoline prices reflect crude oil prices, so let’s use West Texas Intermediate (WTI) crude oil to illustrate this crucial point.
As this is written, West Texas Intermediate crude oil (WTI) is trading at $105.88/bbl. All this means is that the market value of a barrel of WTI is 105.88 times the market value of “the dollar”. It is also true that WTI is trading at €79.95/bbl, ¥8,439.69/barrel, and £67.13/bbl. In all of these cases, the market value of WTI is the same. What is different in each case is the value of the monetary unit (euros, yen, and British pounds, respectively) being used to calculate the ratio that expresses the price.
In terms of judging whether the price of WTI is high or low, here is the price that truly matters: 0.0602 ounces of gold per barrel (which can be written as Au0.0602/bbl). What this number means is that, right now, a barrel of WTI has the same market value as 0.0602 ounces of gold. …

MORE.

Austrian Analysis Seeping In To Mainstream

Debt, Economy, Federal Reserve Bank, Media, Reason

You know the country’s commentariat has traveled some distance when PBS’s Paul Solman concedes that, given the role of the Federal Reserve (and, presumably, Fractional Reserve Banking) in the economy, it is “not a zero probability event here in America” that “the US could go the hyperinflation route of a Zimbabwe or Germany, freeze, face increasingly punitive interest rates and eventually require drastic overhauls.”

Solman, who still invests in Treasury, and is optimistic against all odds, also admits that “Since the Federal Reserve was created and got into the act in 1913, the U.S. dollar has lost somewhere between 94 percent and 99.7 percent of its value. (See MeasuringWorth.com for a range of conversion options: constant basket of goods, unskilled wage, etc.)”

But because Solman thinks that the debasing of the coin by the Fed also coincided with America’s becoming “the world’s dominant global economy,” he is not that concerned. That’s what happens when correlation is confused with causation.

The Republic has managed to thrive despite the Fed, not because of it.