Category Archives: Inflation

Updated: Memo To Ditto Heads: Obama Didn’t Do It

Barack Obama, Bush, Conservatism, Economy, Individualism Vs. Collectivism, Inflation, libertarianism

Just in case ditto heads are still blaming Obama for the economic depression we’re in, here’s a reality check, and an excerpt from the CNN documentary, “I.O.U.S.A.”:

January 1, 2000, Federal Debt: $5.6 Trillion Dollars.

George W. Bush is declared the winner of the 2000 election.

One of his first priorities is pushing a large tax cut.

September 11, the attacks put the U.S. on war footing.

Wars in Afghanistan and Iraq cost hundreds of billions.

May 1, 2003, Federal debt: $6.5 trillion.

Through Bush’s first term, the Fed cuts interest rates 12 times. [Creating the glut of malinvestment and spending]

The dollar begins a long, steep decline against other currencies.

Cheap credit floods the housing market.

Many home buyers grab risky, non-fixed mortgages. [Helped along by existing federal laws, to which Bush added,mandating loans to risky minorities]

The war drags on.

Bush signs into law Medicare-D, an expensive drug benefit program.

Bush wins re-election on November 3, 2004.

Federal debt: About $10.7 trillion and 75 percent of GDP.

Federal deficit: $455 billion … and now we’re talking trillions for several years going forward.

[Snip]

As we’ve pointed, the totality of US government liabilities exceeds the worth of its citizens.

Also pointed out in this space, years back, is that with an extremely high debt-to-GDP ratio, the US would not be admitted to the company of socialists: the EU. The US’s debt is about 75 percent of its GDP.

I’m often asked what is to be expected under these dire circumstances.

Assets will continue to devalue. Saving will be difficult; retirement near impossible, because, with the continuing devaluation of the dollar, savings depreciate. Hyperinflation is a very real threat, as the amount of goods in the economy decreases, and the supply of worthless paper increases.

Now Obama’s thinking is wrongheaded: he is as clueless as Republicans about the economy and will only prolong the agony. Nevertheless, “I didn’t do it” (Bart Simpson’s famous phrase) is an appropriate defense of Barack.

Update: In response to comments. I do hope the Addiction to that Rush is not on display.

So it’s Obama’s deficit as it is Bush’s??? ‘Cmon; don’t be a ditto head. As bad as he is, Obama is probably one of the least influential politicians to date, given his short tenure in office. (He is destined to change that, of course.) Didn’t ditto heads make that very point in arguing against his candidacy?

This is not about giving anyone a pass. However, spreading irresponsibility is just what ditto heads and democrats like. This allows their respective point men and women to continue to commit legalized crimes, because responsibility in government is always socialized. “Don’t play the blame game” is the political parasite’s favored term.

No, Obama was a relatively obscure politician until now. Bush and Cheney—they ought to have been impeached. Blame for the depression belongs to their administration and to its foreign, fiscal and monetary policy.

To collectivize responsibility and spread it around equally is to oblige the political operatives, and reward them for their crimes. That’s precisely what they want. You’ve fallen into their trap. I’m afraid responsibility must be assigned with laser-like precision.

While on the issue of history, not revisionism, one more thing: The only commentators deserving credit for warning of the financial crisis are my fractious political tribe—not all, but certain libertarians and assorted paleos. And Ron Paul always. Of course, because, other than Paul, we are relatively unknown, the likes of Stephen Moore, who wrote odes to Bush’s “ownership society,” can remake themselves into all-knowing gurus, without crediting their betters.

No one in the age of the idiot will be the wiser.

America Will Soon Owe More Than Its Citizens Are Worth

Economy, Federal Reserve Bank, Inflation, Political Economy

I’ve frequently warned about America’s overall debt: “Government debt is $70 trillion: $9 trillion plus the unfunded liabilities of ‘Medicare, pension, and Social Security programs.‘”

David M. Walker, former Comptroller General of the United States, is one of the few power brokers who’s been sounding the same alarm. The Peter G. Peterson Foundation, with which Walker is now affiliated, reported:

“NEW YORK (Dec. 15, 2008) – The sum of America’s liabilities and other financial commitments now exceeds the collective net worth of its citizens, the Peter G. Peterson Foundation has calculated using the latest official data. Growth in the government’s unfunded promises for social insurance programs such as Medicare, combined with a drop in Americans’ net worth due in part by lower home equity values, is causing this unprecedented milestone.”

“The Foundation’s calculations are based primarily on the new consolidated federal financial statements as of September 30, 2008 which do not reflect the additional toll taken by more recent market declines, bailout packages, and record October and November deficits. The financial statements show approximately $56.4 trillion in debts, liabilities, and unfunded promises for Medicare and Social Security versus the Federal Reserve’s estimate a total household net worth of $56.5 trillion, both as of September 30, 2008.”

“Given more recent developments, it’s clear that America now owes more than its citizens are worth,” said Foundation President and CEO David M. Walker. ‘Passing this shocking milestone highlights the need for President-elect Obama and the next Congress not only to turn the economy around and boost consumer confidence, but to put a process in place that will lead to tough choices getting made to strengthen the government’s financial condition once the economy begins growing again.'”

[SNIP]

Rome is burning. But nobody is stopping the arsonists.

Courtesy of the same source comes the Real National Debt:

Total Federal Burden
$56,400,000,000,000

Your Share
$184,000

Government Works Don’t Work

Economy, Government, Inflation, The State

The bailout bonanza, based as it is on borrowed and counterfeited money, continues unabated.

Huge ‘public’ works are in the offing—every bit as big as Bush’s welfare and warfare programs.

I’m wasting my breath in the increasingly socialist and statist America. But let me try once again:

No government can create jobs; only economic growth in the private sector can create employment opportunities.

Basic understanding of economics is necessary to grasp that there is no free lunch. For every job “created” by government, an unidentifiable job will, tit-for-tat, be destroyed in the private sector.
The images of earnest men and women put to work by the Obama and Bush bailouts will flood the propagandist news networks.

The multitudes thrown out of work because private economic activity has been crowded out by taxing or borrowing to finance job programs will remain invisible. Also invisible will be the destruction of jobs and reduction in investments, purchasing and overall wealth that ensues when money is taxed away from Americans and funneled to the politicians’ patronage playground.

Investors will suffer the same fate and will be much less likely to take employment-generating risks with their capital. Government borrowing simply serves to reduce capital available to the private sector. A further diminution of assets occurs when government expands the money supply and causes inflation in order to finance job creation schemes.

Creating good long-lasting employment lies in producing goods or services for which there is a legitimate consumer demand. Hence jobs in the private sector are real jobs because they are sustained by consumer preferences. Unsustainable government make-work schemes merely usurp the wishes and needs of consumers, and substitute them with the wishes of bureaucrats who are beholden to their political masters.

There is an ethical dimension to job creation in the private sector — it is a voluntary agreement into which both parties enter with a view to mutual benefit. Government job creation, however, involves bureaucrats and job recipients—The Big Three, the Financial Sector, and all other bailout bandits—in a beneficial and voluntary exchange but leaves out of the loop those who pay for the programs through taxes or through unemployment in their neck of the woods.

A multi-billion-dollar government job-creation program is never a good thing, especially during a recession. For one, government-created work schemes and the kinds of jobs government will be creating are well paid, irrespective of productivity.

For another, government workers are covered by rigid, “prevailing wage” legislation. This precludes the necessary flexibility in wage structure, so essential during an economic downturn.

Is Germany's Finance Minister An Austrian?

Capitalism, Federal Reserve Bank, Inflation, Political Economy

Is Germany’s finance minister really an Austrian … economist, that is?

I don’t know if Peer Steinbrück is with von Mises, but Chancellor Angela Merkel is fortunate to have him in her cabinet. He has been vetoing the assorted Pan-European economic rescue responses, which would fall on Germany’s back.

The Social Democratic finance minister is talking a little like a free market Austrian economist—advocating what this column, Ron Paul, Peter Schiff, and other libertarians advocate: suck it up.

Read the entire interview, “‘It Doesn’t Exist!: Germany’s outspoken finance minister on the hopeless search for ‘the Great Rescue Plan.'”

Newsweek being Newsweek, Steinbrück’s assessment of the a “crass Keynesianism” undertaken by the US, UK, and EU will be like pearls before swine. Here are some particularly poignant excerpts (the kind you’ve heard before here):

• No matter how much any government does, the recession we are in now is unavoidable.
• The speed at which proposals are put together under pressure that don’t even pass an economic test is breathtaking and depressing.
• The switch from decades of supply-side politics all the way to a crass Keynesianism is breathtaking. When I ask about the origins of the crisis, economists I respect tell me it is the credit-financed growth of recent years and decades. Isn’t this the same mistake everyone is suddenly making again, under all the public pressure? [The Mercer version: “A crisis that was created by cheap credit must be corrected by less of the same.”]
• The risk is greater of burning money without significant effects and in the end having a budget weighed down with even more debt. [Remember, Germany is not bankrupt like the USA is.]
• I’m ambivalent about leadership. [Mercer’s version: “’Leadership’ is a euphemism for overriding the will of the people. No sooner does the pesky popular will intrude into the debate than the top Republican contenders begin to yammer about their obligation to demonstrate ‘leadership.'”]

Here we have a European “Social Democratic” who’s more free market than the American centrists (which is what Republicans pride themselves on being).