Archive for the ‘Politics’ Category

WAR: The Fiscal Stimulus of Last Resort

Tuesday, September 13th, 2011

CommUnity of Minds — Ellen Brown writes:

“War!  Good God, ya’ll.  What is it good for?  Absolutely nothin’!”

So went the anti-Vietnam War protest song popularized by Edwin Starr in 1970 and revived by Bruce Springsteen in the 1980s.

The song echoed popular sentiment.  The Vietnam War ended.  Then the Cold War ended.  Yet military spending remains the government’s number one expenditure.  When veterans’ benefits and other past military costs are factored in, half the government’s budget now goes to the military/industrial complex.

After 9/11, the pop hit “War” was placed on the list of post-9/11 inappropriate titles distributed by Clear Channel. Protesters have been trying to stop the military juggernaut ever since the end of World War II, yet the war machine is more powerful and influential than ever.  Why?  The veiled powers pulling the strings no doubt have their own dark agenda, but why has our much-trumpeted system of political democracy not been able to stop them?

The answer may involve our individualistic, laissez-faire brand of capitalism, which forbids the government to compete with private business except in cases of “national emergency.” The problem is that private business needs the government to get money into people’s pockets and stimulate demand. The process has to start somewhere, and government has the tools to do it. But in our culture, any hint of “socialism” is anathema. The result has been a state of “national emergency” has had to be declared virtually all of the time, just to get the government’s money into the economy.

Other avenues being blocked, the productive civilian economy has been systematically sucked into the non-productive military sector, until war is now our number one export. War is where the money is and where the jobs are. The United States has been turned into a permanent war economy and military state.

The notion that war is good for the economy goes back at least to World War II. Critics of Keynesian-style deficit spending insisted that it was war, not deficit spending, that got the U.S. out of the Great Depression.

But while war may have triggered the surge in productivity that followed, the reason war worked was that it opened the deficit floodgates.  The war was a huge stimulus to economic growth, not because it was a cost-effective use of resources, but because nobody worries about deficits in wartime. (09/13/11)


The 545 People Responsible for all of America’s Woes?

Monday, September 5th, 2011

Charley Reese in 1985CommUnity of Minds — Charley Reese writing in 1985: Politicians are the only people in the world who create problems and then campaign against them.

Have you ever wondered why, if both the Democrats and the Republicans are against deficits, we have deficits? Have you ever wondered why, if all the politicians are against inflation and high taxes, we have inflation and high taxes?

You and I don’t propose a federal budget. The president does. You and I don’t have the Constitutional authority to vote on appropriations. The House of Representatives does. You and I don’t write the tax code. Congress does. You and I don’t set fiscal policy. Congress does. You and I don’t control monetary policy. The Federal Reserve Bank does.

One hundred senators, 435 congressmen, one president and nine Supreme Court justices – 545 human beings out of the 235 million – are directly, legally, morally and individually responsible for the domestic problems that plague this country.

I excluded the members of the Federal Reserve Board because that problem was created by the Congress. In 1913, Congress delegated its Constitutional duty to provide a sound currency to a federally chartered but private central bank.

I excluded all but the special interests and lobbyists for a sound reason. They have no legal authority. They have no ability to coerce a senator, a congressman or a president to do one cotton-picking thing. I don’t care if they offer a politician $1 million dollars in cash. The politician has the power to accept or reject it.

No matter what the lobbyist promises, it is the legislation’s responsibility to determine how he votes.

A Confidence Conspiracy

Don’t you see how the con game that is played on the people by the politicians? Those 545 human beings spend much of their energy convincing you that what they did is not their fault. They cooperate in this common con regardless of party.

What separates a politician from a normal human being is an excessive amount of gall. No normal human being would have the gall of Tip O’Neill, who stood up and criticized Ronald Reagan for creating deficits.

The president can only propose a budget. He cannot force the Congress to accept it. The Constitution, which is the supreme law of the land, gives sole responsibility to the House of Representatives for originating appropriations and taxes. (09/05/11)


Alms for the Educated

Monday, September 5th, 2011

The Economist — MILLIONS of school-leavers in the rich world are about to bid a tearful goodbye to their parents and start a new life at university. Some are inspired by a pure love of learning. But most also believe that spending three or four years at university—and accumulating huge debts in the process—will boost their chances of landing a well-paid and secure job. Their elders have always told them that education is the best way to equip themselves to thrive in a globalised world. Blue-collar workers will see their jobs offshored and automated, the familiar argument goes. School dropouts will have to cope with a life of cash-strapped insecurity. But the graduate elite will have the world at its feet. …

But is the past a reliable guide to the future? Or are we at the beginning of a new phase in the relationship between jobs and education? There are good reasons for thinking that old patterns are about to change—and that the current recession-driven downturn in the demand for Western graduates will morph into something structural. The gale of creative destruction that has shaken so many blue-collar workers over the past few decades is beginning to shake the cognitive elite as well. …

Several economists, including Paul Krugman, have begun to argue that post-industrial societies will be characterised not by a relentless rise in demand for the educated but by a great “hollowing out”, as mid-level jobs are destroyed by smart machines and high-level job growth slows. David Autor, of the Massachusetts Institute of Technology (MIT), points out that the main effect of automation in the computer era is not that it destroys blue-collar jobs but that it destroys any job that can be reduced to a routine. Alan Blinder, of Princeton University, argues that the jobs graduates have traditionally performed are if anything more “offshorable” than low-wage ones. A plumber or lorry-driver’s job cannot be outsourced to India. A computer programmer’s can. (09/05/11)



Sunday, September 4th, 2011

Paul KrugmanWhat we need! New York Times — Opinion: Nobel Prize Winning Economist Paul Krugman writes: Friday brought two numbers that should have everyone in Washington saying, “My God, what have we done?”

One of these numbers was zero — the number of jobs created in August. The other was two — the interest rate on 10-year U.S. bonds, almost as low as this rate has ever gone. Taken together, these numbers almost scream that the inside-the-Beltway crowd has been worrying about the wrong things, and inflicting grievous harm as a result.

Ever since the acute phase of the financial crisis ended, policy discussion in Washington has been dominated not by unemployment, but by the alleged dangers posed by budget deficits. Pundits and media organizations insisted that the biggest risk facing America was the threat that investors would pull the plug on U.S. debt. For example, in May 2009 The Wall Street Journal declared that the “bond vigilantes” were “returning with a vengeance,” telling readers that the Obama administration’s “epic spending spree” would send interest rates soaring.

The interest rate when that editorial was published was 3.7 percent. As of Friday, as I’ve already mentioned, it was only 2 percent.

I don’t mean to dismiss concerns about the long-run U.S. budget picture. If you look at fiscal prospects over, say, the next 20 years, they are indeed deeply worrying, largely because of rising health-care costs. But the experience of the past two years has overwhelmingly confirmed what some of us tried to argue from the beginning: The deficits we’re running right now — deficits we should be running, because deficit spending helps support a depressed economy — are no threat at all.

And by obsessing over a nonexistent threat, Washington has been making the real problem — mass unemployment, which is eating away at the foundations of our nation — much worse.  …

I find it useful to think in terms of three questions: What should we be doing to create jobs? What will Republicans in Congress agree to? And given that political reality, what should the president propose?

The answer to the first question is that we should have a lot of job-creating spending on the part of the federal government, largely in the form of much-needed spending to repair and upgrade the nation’s infrastructure. Oh, and we need more aid to state and local governments, so that they can stop laying off schoolteachers. (o9/04/11)


The State of the US Economy

Tuesday, August 30th, 2011

CommUnity of Minds — Daan Joubert writes: It is no longer news that the US economy is in trouble. This essay reviews certain key features of the US economy and how these might influence the outlook for the US over the near to medium term. The conclusions, unfortunately, are gloomy.

The theme for the analysis is set by a quotation from the book, “This time is different: Eight centuries of Financial Folly”, by Ken Rogoff and Carmen Reinhart. Near the end of the book, the following appears:

“The lesson of history, then, is that even as institutions and policy makers improve, there will always be a temptation to stretch the limits. Just as an individual can go bankrupt no matter how rich she starts out, a financial system can collapse under the pressure of greed, politics, and profits no matter how well regulated it seems to be. [Much has changed . . .]

‘Yet the ability of governments and investors to delude themselves, giving rise to periodic bouts of euphoria that usually end in tears, seems to have remained constant. No careful reader of Friedman and Schwartz will be surprised by this lesson about the ability of governments to mismanage financial markets, a key theme of their analysis.

‘As for financial markets, we have come full circle to the concept of financial fragility in economies with massive indebtedness. All too often, periods of heavy borrowing can take place in a bubble and last for a surprisingly long time. But highly leveraged economies, particularly those in which continual rollover of short-term debt is sustained only by confidence in relatively illiquid underlying assets, seldom survive forever, particularly if leverage continues to grow unchecked.

‘This time may seem different, but all too often a deeper look shows it is not. Encouragingly, history does point to warning signs that policy makers can look at to assess risk—if only they do not become too drunk with their credit bubble-fueled success and say, as their predecessors have for centuries, “This time is different.”

One can argue long and hard about the causes of the ongoing financial crisis of the past 3-4 years, but it will be generally admitted a few factors played a key role in fomenting the crisis. Underlying it all is a change in social climate that took root in the US after WWII and subsequently found fertile soil in many other places, predominantly in the western world. There was a change from the old standard where society was rated more important than the individual; it would seem that with the increased rights of the individual came a “me first” attitude that meant one was entitled to break society’s rules and even laws when in pursuit of personal benefit.

Leaving this more philosophical factor aside, it is self evident that reduced or even lack of oversight in financial markets, a too free and easy monetary policy, new and free-flowing sources of credit, a free-spending Federal government, manipulation of official statistics and the free trade climate have all at various times and to different degrees contributed to the complex mess that erupted in 2007 when Bear Stearns announced that their mortgage funds were in deep trouble. Of course, it took the Lehman collapse to bring home the magnitude of the developing crisis.

Despite initial assurances that ‘the mortgage problem is contained’ and later that the ‘green shoots are sprouting all over’, then that ‘economic growth is slow but steady and the end is in sight’, it should be evident that the American economy is not well. The real question now is not so much whether we will see a double dip, but whether the ongoing recession will drag on until the economy can show new growth or if it will deepen into a more severe recession, even depression. If the latter, which is the anticipated future here, the question of how long and how deep becomes relevant. (08/30/11)


Is There A Solution?

Monday, August 22nd, 2011

RWWNL — Terry Wilken writes: We are started toward a solution we are told. We might believe it had we not been told that before. The problem that we had that they were going to solve was the debt crisis. The debt clock is still going up pretty fast, so I question their solution. Are they going to get us out of this situation, or just make it worse?

We were on our way to higher oil prices. H fixed that by opening the strategic oil preserve. This sent the price of oil down, but at what cost. I guess that H does not understand the definition of the word strategic either. It should be used only in times of “real” crisis. It was effective for a while, but it did not last long.

The price of oil went back up again.  Was this result a surprise? Sometimes decisions made have unintended consequences. I think that has been said here before. This was the wrong solution for a problem that did not exist. I think that the answer to that is YES! The price of oil and gasoline goes up and down based on demand. At least in a free economy.

Now the price of gasoline is going back down. Did we open the tap again? I have not heard any such news. Maybe it is caused by another reason. Maybe it is caused by the increase in unemployment. I have a question to ask you. How many gallons of gasoline would you buy if you did not have a job and did not have to go to work? If less gasoline were bought, do you think that gas prices would go up or down? It is not a trick question. Maybe if H let the economy do its natural thing, problems would cure themselves. I am not saying that unemployment is the answer to high oil and gasoline prices. I am saying that the government needs to get out of the way. They are not the solution. They have created the problem, and now it is time for them to let someone else try to fix it. They have not been able to fix the economic problem for a long time.

Here is someone who had a similar problem and how they have resolved the situation.

This is not a reason to mirror Canada’s policies, but it may be something to look at to see if we can do some of the things that are right. It appears they are heading in the right direction. Did you notice that they were concerned about the deficit first? If we concentrate on that issue and leave the debt to be resolved as another issue. Would we be making headway?  We could resolve the “debt” at some point in the future. Maybe if we resolved the deficit properly, the debt might resolve itself. The Federal government is currently spending more money than we are giving them. It is time that they quit spending or that we quit giving them money to spend. I do not care which we choose at this point. (08/22/08)


Is Capitalism Doomed?

Monday, August 22nd, 2011

Nouriel RoubiniBusinessWorld — Nouriel Roubini writes: The massive volatility and sharp equity-price correction now hitting global financial markets signal that most advanced economies are on the brink of a double-dip recession. A financial and economic crisis caused by too much private-sector debt and leverage led to a massive re-leveraging of the public sector in order to prevent Great Depression 2.0. But the subsequent recovery has been anemic and subpar in most advanced economies given painful deleveraging.

Now a combination of high oil and commodity prices, turmoil in the Middle East, Japan’s earthquake and tsunami, euro zone debt crises, and America’s fiscal problems (and now its rating downgrade) have led to a massive increase in risk aversion. Economically, the United States, the euro zone, the United Kingdom, and Japan are all idling. Even fast-growing emerging markets (China, emerging Asia, and Latin America), and export-oriented economies that rely on these markets (Germany and resource-rich Australia), are experiencing sharp slowdowns. …

Recent popular demonstrations, from the Middle East to Israel to the UK, and rising popular anger in China — and soon enough in other advanced economies and emerging markets — are all driven by the same issues and tensions: growing inequality, poverty, unemployment, and hopelessness. Even the world’s middle classes are feeling the squeeze of falling incomes and opportunities.

To enable market-oriented economies to operate as they should and can, we need to return to the right balance between markets and provision of public goods. That means moving away from both the Anglo-Saxon model of laissez-faire and voodoo economics and the continental European model of deficit-driven welfare states. Both are broken.

The right balance today requires creating jobs partly through additional fiscal stimulus aimed at productive infrastructure investment. It also requires more progressive taxation; more short-term fiscal stimulus with medium- and long-term fiscal discipline; lender-of-last-resort support by monetary authorities to prevent ruinous runs on banks; reduction of the debt burden for insolvent households and other distressed economic agents; and stricter supervision and regulation of a financial system run amok; breaking up too-big-to-fail banks and oligopolistic trusts.

Over time, advanced economies will need to invest in human capital, skills and social safety nets to increase productivity and enable workers to compete, be flexible and thrive in a globalized economy. The alternative is — like in the 1930s — unending stagnation, depression, currency and trade wars, capital controls, financial crisis, sovereign insolvencies, and massive social and political instability. (08/22/11)


The One World Company

Monday, August 22nd, 2011

truthout— Ellen Brown writes: Daniel Estulin, noted expert on the Bilderbergers, describes that secretive globalist group as “a medium of bringing together financial institutions which are the world’s most powerful and most predatory financial interests.” Writing in June 2011, he said:

Bilderberg isn’t a secret society….  It’s a meeting of people who represent a certain ideology….  Not OWG [One World Government] or NWO [New World Order] as too many people mistakenly believe. Rather, the ideology is of a ONE WORLD COMPANY LIMITED.

It seems the Bilderbergers are less interested in governing the world than in owning the world. The “world company” was a term first used at a Bilderberger meeting in Canada in 1968 by George Ball, US undersecretary of state for economic affairs and a managing director of banking giants Lehman Brothers and Kuhn Loeb. The world company was to be a new form of colonialism, in which global assets would be acquired by economic rather than military coercion. The company would extend across national boundaries, aggressively engaging in mergers and acquisitions until the assets of the world were subsumed under one privately owned corporation, with nation-states subservient to a private international central banking system. Estulin continues:

The idea behind each and every Bilderberg meeting is to create what they themselves call THE ARISTOCRACY OF PURPOSE between European and North American elites on the best way to manage the planet. In other words, the creation of a global network of giant cartels, more powerful than any nation on Earth, destined to control the necessities of life of the rest of humanity.

… This explains what George Ball … said back in 1968, at a Bilderberg meeting in Canada: “Where does one find a legitimate base for the power of corporate management to make decisions that can profoundly affect the economic life of nations to whose governments they have only limited responsibility?”

That base of power was found in the private, global banking system. Estulin goes on:

The problem with today’s system is that the world is run by monetary systems, not by national credit systems….  [Y]ou don’t want a monetary system to run the world. You want sovereign nation-states to have their own credit systems, which is the system of their currency….  [T]he possibility of productive, non-inflationary credit creation by the state, which is firmly stated in the US Constitution, was excluded by Maastricht [the Treaty of the European Union] as a method of determining economic and financial policy.

The world company acquires assets by preventing governments from issuing their own currencies and credit. Money is created instead by banks as loans at interest. The debts inexorably grow, since more money is always owed back than was created in the original loans. (For more on this, see here.) If currencies are not allowed to expand to meet increased costs and growth, the inevitable result is a wave of bankruptcies, foreclosures and sales of assets at fire sale prices. Sales to whom? To the “world company.” (08-22-11)


The Bigger Picture

Monday, August 15th, 2011

Nicole Fosse (Stoneleigh)The Automatic Earth — Stoneleigh writes: It is time to undertake the yearly review and update of our primer guide, with a view to making it easier for our readers to see the entirety of our TAE worldview in one place. Primers are continuously added in order to flesh out the biggest possible big picture. This will continue as we move over to our new site later this year. These essays are not tied to the events of a specific day, week or month, but are the ones that take a step back and look at the world through a wide angle lens.

We have covered a wide variety of topics in the three and a half years of our existence. The point is to tackle complexity and make it comprehensible, rather than assuming away the context as most analyses do. All the strands of our century of challenges are interwoven, with each affecting the others. It is vital to understand those interactions, as well as to understand each separate topic and their relative timelines. Different factors will act as primary drivers at different times.

We retain our primary focus on Ponzi finance and the nature of markets, since the consequences of a major bubble implosion will have the greatest impact in the shortest time. Exploring those consequences, both within and beyond the financial realm is of immediate importance, given the scale of the impacts and how quickly they can manifest as a contraction picks up momentum to the downside.

As always, we cover energy as the master resource, and this year the major focus of new energy primers has been the catastrophe at Fukushima. We have also begun to cover the natural gas situation in North America in some detail, returning to the familiar theme of Ponzi dynamics.  (08/15/11)


GAE4 On Its Way!

Monday, August 15th, 2011

RRWNL — Terry Wilken writes: And just what does GAE stand for? It stands for God Awful Economics. That is what the FED has come up with to replace QE (1, 2 & 3). It is a new way to manipulate the money supply so that they do not have to increase interest rates or buy more treasury bonds. They say they can guarantee low interest rates until at least 2013. Maybe one of the BIG banks told them that if they kept buying Treasuries, they could actually lose money. They may have to actually increase interest rates. This would put the Federal Government in a real pickle, but it would not make the BIG banks happy either.  A Congressman once asked a person from the Fed, who was he and where was he from, and he replied, “I am from the FED and I am here to help you”. I just made that up in case you question my hearing.

If anyone can explain the new Fed policy to me, I for one am anxious to listen.  I think it means that they intend to target specific Treasury bonds in an attempt to keep the interest rates under control. I cannot tell you how this would work or what it would accomplish. I think they are calling for a Hail Mary pass to put it in football speak. I really think they are in desperation mode.

The FED has been enabling the Federal Government so long that they have lost all control of their ability to think and express their intentions in a rational manner. They seem to be learning from the ones that they are enabling. It may have even been part of the agreement that got them in charge of our money supply in the first place. I do not know anything except that secrecy has been a part of their modus operandi. They have the perfect job. They can make as much money as anyone would ever need. They can do anything with the money supply they want. They can do this all in complete secrecy.

The Federal Government has literally kicked the can down the road once again. They knew that they could not agree to a proper resolution to this matter, so they decided to come up with a committee to solve it for them.  Each side picked members that they thought were intransigent in their opinions. This guarantees that it will end up in a tie on most issues.  What a way to govern. This sure seems like a path to failure, but it offers us two more breaths of air.  We can now ‘HOPE’ that someone will ride in on their white horse and save us. It is all that is being held out. We all need that olive branch. We have nothing else to hold on to. (08/15/11)