Category Archives: Economy

Jobs: More Cover-Up Than Recovery

Although “The labor force participation rate, which measures workers and those looking for jobs … fell to a 32-year low of 63.5%, tied with where it stood in August 2012”—Mark Hanna at Euro Pacific gives out a “better than expected employment report”:

* The government reported a net 236,000 new jobs as the unemployment rate fell to 7.7%. Economists expected the 160,000 new jobs in February and the unemployment rate held steady at 7.9%.
* Service industries led the gains with 73,000 new jobs, while construction added 48,000 and health care provided 32,000. Retail also added 24,000.
* There was a downward revision in January’s data, from an initially reported 157,000 down to 119,000. December’s numbers, though, were revised up from 196,000 to 219,000.
* Average hourly earnings rose four cents to $23.82 an hour, while the average work week edged higher to 34.5 hours.

By Paul Craig Roberts’s assessment, this is “The Missing Recovery.” He pulls the curtain back on a declining “U.3 measure of unemployment rate”; declining “because it does not count discouraged job seekers who have given up looking for a job.”

AND:
• An “expansive monetary policy of bond purchases to maintain negative real interest rates continues 3.5 years into the recovery.” This comes “at the expense of interest income for retirees on their savings accounts, money market funds, and Treasury bonds.”

PBS admits too that, while unemployment dropped because people found work, “some 130,000 others stopped looking for work, so they were no longer counted.”

Robert Wenzel’s EPJ (Economic Policy Journal) has it right: This is a Ben Bernanke manipulated uptick.

We’re floating on a confetti of funny-money. How can we tell what’s real and what’s not real?

The Survivalist’s Guide to ‘Obammunism’ & Beyond

Classical Liberalism, Debt, Economy, Government, Healthcare, libertarianism, Political Economy, Regulation, Socialism, The State, Welfare

“The Survivalist’s Guide to ‘Obammunism’ & Beyond” is the current column.

“No statist lies are safe from his scrutiny,” writes Lew Rockwell about economist Thomas J. DiLorenzo’s latest book. What follows is an excerpt from my conversation with professor DiLorenzo about, ”Organized Crime: The Unvarnished Truth About Government,” and the timeless truths to which it speaks.

5. ILANA MERCER: You write: “At the heart of the U.S. government’s continued takeover of the health care sector of the economy was a law passed during the Obama administration that would eventually drive the private health insurance industry out of business and transform it into a de facto nationalized industry.” Elaborate. Since, as you repeatedly warn, the natural laws of economics cannot be repealed, what will these health care exchanges achieve? How will they invariably be funded? What will be the cost to business? To the millions who’re losing coverage? Who will ultimately fork out for the per-head fee imposed on medical plans?

THOMAS DILORENZO: The Obama version of health-care socialism forces insurance companies to cover people with expensive diseases without charging them higher rates to compensate for the additional risk. This effectively will force the insurance companies to pay out billions in health care costs, and then the Obammunists will impose price controls on the industry because that’s what socialists always do once they intervene in a market by forcing businesses to offer something for nothing, thereby driving demand through the roof. The price controls will cause massive bankruptcy, at which point the argument will be made that what is needed is “single-payer healthcare,” a euphemism for health-care socialism or government-run monopoly. In the meantime, they seem to be imposing hundreds of relatively small, hidden taxes to come up with the revenue to keep the scheme going.

6. MERCER: “The Obamacare Survival Guide” is a best-seller on Amazon. The market is producing survivalist literature to help Americans navigate the treacherous shoals of this law. What does it tell you? Like me, you must know plenty of Obama-heads (doctors too) who shrugged off the idea that further centralizing health care—a modest healthcare expansion totaling $2 trillion, I believe—would cost them anything at all. As The Lancet recently confirmed, in the UK’s National Health Service funding is inversely related to patient outcomes. You speak of “inputs” and “outputs.”

DILORENZO: I cited a study by the late Milton Friedman entitled “Inputs and Outputs in Medical Care,” published by the Hoover Institution some twenty years ago. In it the Nobel laureate economist showed that, historically, as government became more and more involved in health care by taking over hospitals and funding Medicare and Medicaid, inputs – in terms of money spent – skyrocketed while “output” in terms of patients served declined. He spoke of something called “Gammon’s Law,” named after a British physician named Max Gammon, who noticed that with healthcare socialism in England, increased “inputs” in the form of massive amounts of money spent always seemed to disappear “as though through a black hole” with little or nothing to show for it in terms of health care.

7. MERCER: You touch briefly on the “private component of GDP.” Free-market thinkers get that the private economy alone produces wealth. But no. GDP is a political construct, defined, tracked and manipulated by the D.C. political machine. Unpack the GDP gambit for us, down to its deceptive components.

DILORENZO: Including government spending in the definition of GDP was a creation of John Maynard Keynes, who defined it as C (Private Consumption) + I (Private Investment) + G (Government Purchases) + X-M (Net Exports). In so doing, Keynesians concluded that the most prosperous year in American economic history – 1946 – was actually a year of revival of the Great Depression with a precipitous drop in economic activity because of the huge decline in federal government spending after World War II. Of course, this was NOT a year of depression but an explosion of private investment, consumption, and job creation.

8. MERCER: About that elusive economic recovery: My colleague Vox Day (who sadly called it a day on WND) argued that, “The Great Depression 2.0 will be worse than its predecessor.” Day chalked that up to today’s unprecedented levels of debt, consumption and credit, private and public. It’s a hunch. But I think you’ll disagree.

DILORENZO: No one can predict something like this, especially since today’s economy is vastly different from the 1930s. Capital markets are much more sophisticated, for one thing, although government regulators by the thousands do their best to destroy them – and with them what’s left of American capitalism. Predictions like this always ignore the resilience of entrepreneurs. As the Austrian Business Cycle theory of Mises and Hayek contends, it is the boom period where all the damage is done in the form of “malinvestment” – in the latest bust this was mostly in real estate. During the recession or depression is when entrepreneurs are forced to become more efficient, more inventive, more creative – or else. This is how the Japanese recovered from something much worse than a depression – long years of war and the dropping of atomic bombs on their country – in a little over a decade.

More on “sequesteria,” tax loopholes and Obamacare, at www.ilanamercer.com, where the conversation with professor DiLorenzo continues.

Read the complete column, “The Survivalist’s Guide to ‘Obammunism’ & Beyond.”

UPDATED: GOP ‘Sequesteria’ & The GDP Gambit (When Debt = Growth)

Debt, Democrats, Economy, Federal Reserve Bank, Government, Republicans

Are you able to tease apart Republican “sequesteria” from the Democratic position on the effects of a miniscule decrease in the increase in US government spending, for this year?

I can’t.

The Democrats are adamant that a cut in oink-sector spending will destroy the chances of an economic recovery and will lower GDP.

It didn’t have to happen this way, lament the Republicans. Negotiations could have produced a better honed cutting instrument.

Note that the Republicans have never made relevant points such as that, “Government spending increases unemployment because it crowds out so much private sector job creation” (Thomas J. DiLorenzo, Organized Crime: The Unvarnished Truth About Government, p. 202).

Or, as Larry Kudlow put it, “When the government spending share of GDP declines, so does the true tax burden on the economy. As a result, more resources are left in the free-market private sector, which will promote real growth.”

Ask yourself why GDP would shrink if the burden of government is reduced slightly. Why would Gross Domestic Product be affected by a threat of a reduction in the parasitical sector–the sector (government) that doesn’t produce wealth, but only consumes it?

Could this paradox be a result of the way in which GDP numbers are crunched?

Indeed.

Gross domestic product (GDP) gauges economic activity based on spending, or “consumption,” which is not what creates wealth. Production creates wealth. (Gross domestic income (GDI) is a lesser-known calculation used by the Federal Reserve to gauge economic activity based on income.)

Official GDP numbers also chart—and include—the growth of government debt. As Vox Day has explained, “GDP counts spending but doesn’t subtract debt, so it’s like saying that you’re rich because you maxed out your platinum Mastercard. Until the debt is paid back, you can’t properly count it as economic growth. And almost all of the GDP growth over the last 20 years has been nothing but debt growth.”

The GDP is a political construct, defined, tracked and manipulated by the D.C. political machine.

GDP statistically conflates the growth of debt with economic growth.

When our economic definitional building blocks are thus perverted, it becomes easy to peddle the GDP hoax. And that hoax is that a reduction in state spending and debt is also a reduction in economic growth, and that reducing debt must be avoided at all costs.

As Ayn Rand would have advised, “Check your premises.”

UPDATE (3/3): “THE SEQUESTER ISN’T REALLY THERE.” Via the fabulous EPJ: Ron Paul on the Sequester:

The Fed is minting $85 billion a month in funny-money!

A Budget Cut In D.C. Doublespeak (I.E., Bowel-Speak)

Barack Obama, Debt, Economy, Government, Taxation, The State

Tom DiLorenzo (he’s a friend) on D.C. bowel-speak:

In Washingtonese, if one proposes a $100 billion spending increase, and actual spending increases by “only” $90 billion, they call it a $10 billion budget cut.

And on the Washington Monument Syndrome game, via LRC.com:

The game is this: Whenever a politician is “threatened” with a minor slowdown in spending, the first thing to do is to eliminate police, firefighters, ambulance services, school buses, etc. — everything that inflicts the maximum discomfort on the victims of the government monopoly (a.k.a., taxpayers). The booboisie then wake up from their American Idol stupor for a moment to raise a fuss, and the proposals to slow down spending growth disappear. (It’s called the “Washington Monument Syndrome” because the head of the National Park Service shut down the Washington Monument in the ’60s in response to Congress’s temporary refusal to fund his complete spending wish list. Tourists from every state complained to their congressmen, and the Park Service wish list was fully funded).