Two More Weeks Of Dirty Politics
From the desk of Johnny Fincioen on Tue, 2010-10-19 08:40
Democrats are panicking. Obama hops around the country to fire up his Democratic base. He accused the Chamber of Commerce of unlawful practices in supporting Republican candidates: using foreign funds. He didn’t give any proof for his allegations. Nothing better than: “well, there is no proof of the contrary!” Aiming his smear campaign at the Chamber of Commerce is not such a smart move either. The members of the Chamber are the numerous small enterprises of the many American cities and communities. These companies pay the salary of most Americans.
Obama announced yesterday: he will distribute 15 billion dollars among the retirees. Each one of them will receive a $ 250 check in the mail. Buying votes is illegal. However, visible not if you are Obama. And, what the heck, 15 billion more debt is nothing to be upset about compared with the 1.4 trillion deficits in Obama’s 2011 budget.
The President accused the voters to be lazy and stupid, but, after some heavy headwind, he has refined his observation. Now he believes the voters are unable to think clearly, because they are afraid. The voters are not at fault, however. Because not being able to think straight, while being scared, is hardwired in our human DNA, he says. A loss for the Democrats is not Obama’s failing. The voters are unable to understand the genius of Obama’s policies, because the Republicans are scaring the voters.
Obama forgets a couple of things. First: since his inauguration he has never been off the news. Two years into his Presidency, he’s still in campaign mode. In all of the media, he praised and defended, when not on holiday, almost every week his ObamaCare, or one of his other projects: like, the enormous yearly budget deficits, his wasteful stimulus packages, his nationalizations, his CO2 taxes, his tax increases, in short, his stratagems. However the truth is: the better the citizen understands Obama’s plans, and what Obama is aiming for, the less the citizen likes what Obama and his Congress are doing.
More people reject ObamaCare now than at the time it was voted into law. The recently added exceptions for big companies in ObamaCare, shock the American sense of fairness. It is the time of the year the insurance companies send out their notice about next year’s rates for healthcare insurance. The record jump of these premiums makes people want to repeal ObamaCare right now.
Thanks to the Internet, people are much better informed now than in the past.
Second. The Republicans are not scaring the Americans, Obama’s policies are. The leaders of the Republican Party were as surprised by the spontaneous anger and frustration of the American people. The voters rejected several incumbent Republicans during the primaries. The Republican Party and its President are invisible during the campaign.
The resistance of the citizens is steered by the organically grown groups of the Tea Party. Instead of creating a new third party, people from within the Tea Party movement are taken over the Republican Party from the grassroots up. These new politicians were never active in politics before. They are mothers, business people and young professionals. They stick out their neck to save the US of A. For them, America is this very unique concept in the world: America as the place where people are free from government interference, where people can become the best they can be. The majority of Americans can’t stomach any longer the socialist policies of the Democrats, threatening the future of their kids.
Two and four years ago, the Americans gave the Democrats the chance to prove they could lead America forward. But, after the election of Obama it became clear very fast that the Democrats are still stuck in old solutions, which were proved wrong and destructive many decennia ago: unions in power, private industry as Big Evil, nationalizations, high taxes, inflation to flatten huge debt mountains, redistribution of wealth, maximum obstruction to slow economic growth, the aim to regulate and control everything up to the smallest detail, open borders, etc.
The Democrats proved to have learned nothing from history, or from the experiences and examples of other countries. The Democrats showed to have no clue of how the world really works. They will pay a high price coming November 2nd.
Inflation # 3
Submitted by marcfrans on Tue, 2010-10-26 17:55.
@ J F
1) Confidence in the Fed? Only in terms of their ability to prevent "inflation". Whether they will act in time, I don't know, and we both expressed concern about the lessening independence of the Fed from the Administration.
2) We agree on the (too) low interest rate policy as having played a role in the (past) housing bubble. However, I think that government interventions and associated housing market distortions played a much bigger role.
3) There is a direct conflict between the competing goals of "creating jobs" and "taming inflation", but the politicians keep on insisting that the monetary authority (the Fed) needs to seek both, even though it does not have the tools to "create jobs". The latter is chiefly a matter of labor market policy (degree of flexibility on labor markets) and also somewhat of fiscal policy, i.e. job creation will primarily depend on government fiscal and 'structural' policies and not on monetary policy.
4) Bernanke must have said that "a little more" inflation is a good thing when deflation is threatening, not inflation per se. The current trillion dollar deficits of Obama+Pelosi+Reid are not based on the Fed's policy. If Obama wants to borrow more, he does not need the Fed to do so. But, it is true that the Fed's policy of "quantitative easing" allows the Federal Government to borrow at a much lower cost than it otherwise would have to face on capital markets. In that sense the Fed's policy is actually helping to contain the (future) damage from Obama's current fiscal policy, because it allows him to borrow cheaper. It is also creating increased risks for foreign bondholders and helping to lower the dollar exchange rate. Obama/Geithner obviously want a lower dolllar to help boost exports, restrain imports, and thus boost 'employment'.
5) Like you, I do not like these policies of low interest rates and a low dollar exchange rate. They are policies that are intended to boost short term cyclical employment, but that are pretty ineffective for that purpose and they entail major costs in the long term for economic growth and wealth creation, because they undermine savings and investment. Where we differ is the likely impact of these policies on inflation. You think it is inevitably coming, whereas I think that it is likely coming but certainly not inevitably so. Inflation is the one variable that the Fed actually could seriously influence. Whether it will do so, or be allowed to do so (the way, for instance, Paul Volker under Reagan stopped the Carter-induced inflation from continuing), remains the be seen, and will surely depend on further political developments.
In any case, it's probably a good idea to keep some of your financial assets in TIPS (Treasury Inflation-Protected Securities), just in case...sanity does not return to the federal Government in a timely fashion. Much of the damage of Obama (in terms of loss of future output and thus income) to the economy has already been done, and cannot be undone. The key now is to prevent any further damage to be done over the next two years, by creating gridlock in Congress until a different President and new Congressional Leaders can be elected.
the future.
Submitted by Johnny Fincioen on Wed, 2010-10-27 14:39.
Absolutely. First step is November 2.
Inflation # 2
Submitted by marcfrans on Fri, 2010-10-22 22:30.
@ Johnny Fincioen
1) I fully agree with you that "unchecked PUBLIC SPENDING and huge (public) DEFICITS are very scary developments. They are scary because they ensure that the foreseeable future will be one of low economic growth (in terms of GDP per head). High public spending means that the relative size of government in the economy is growing, which leads to lower average productivity growth and the latter is the mainstay of 'becoming richer' for an economy as a whole. Large public deficits in themselves, also, will have a similar negative effect on economic growth, because they lead to displacement of public expenditures from productive ones to 'unproductive' ones. While the 'value' of government output (i.e. of government spending) raises philosophical issues and is higly debateable, there can be no doubt that (for example) additional government spending on a highspeed rail system would be more 'productive' or useful to the economy than additional public interest payments (say to Chinese holders of US government debt). In other words, the growing interest burden will replace more productive government spending in the coming years.
2) The impact of recent developments (i.e. massive public spending and massive public deficits) on future inflation is much less certain. The fundamental reason why the large rise in the MONEY SUPPLY in recent years has NOT led to significant general inflation is because there has been a very large decrease in average MONEY VELOCITY (of circulation), while nominal output (= total spending = total income) has not changed much. We all know that many banks, private companies, and even individuals today are 'sitting on their money' (so to speak). The basic reason for that is a general lack of confidence (which has much to do with a variety of 'bad' government policies).
3) Whether the unusually bloated money supply will lead to future inflation will depend a lot on how well the Federal Reserve will be able to anticipate future changes in average money velocity, i.e. whether it will counteract in time a renewed rise in velocity with measures that will reduce the money supply (so as to keep nominal spending growth in line with output growth. We cannot prejudge that now, but we will be able to judge that ex post, i.e. after - and IF - inflation will accelerate significantly in the coming years.
4) So, I think it is important to make a clear distinction between fiscal policy and monetary policy. The former concerns government spending, taxes, and corresponding deficits. That policy has been pretty much disastrous in recent years and the responsibility for that lies first and foremost with the current President and Congress (and to a lesser extent with the previous President and Congress). By contrast, as measured by the broad goal of low inflation, it cannot be said that monetary policy has failed so far, although it could be said to have done so in a number of lesser and more technical respects. But, it is quite possible that it will be judged a failure in future years if - and that remains a big IF for the moment - inflation will get out of hand (as it did in the Carter years). In my view, that outcome will depend a lot on what will happen to the 'independence' of the Fed. The composition of the relevant Committee in the Fed is changing over time and raises legitimate concerns in the 'age of Obama'.
@marcfrans
Submitted by Johnny Fincioen on Mon, 2010-10-25 17:39.
You seem to have a lot of confidence the Fed will do the right thing at the right time. I hope you are correct. However, their track-record is not that good, having played an important role in creating the housing bubble by leaving the US interest rates so low for such a long time.
We also doubt their independence from the Obama administration, as they cite 'creating jobs' as their main goal. Bernanke said less than a week ago: more inflation is good, 2% is acceptable. What about the defense of the value of the dollar? Not so important anymore? The quantitative easing by the Fed (adding liquidity to the dollar = 'printing' more dollars) gives Obama the tool to keep spending over 1 trillion deficits every year.
We do not need to have actual inflation now, to know that inflation is coming very soon if this spending goes on. The G20 meeting of last weekend is not very promising on the defense of the value of the dollar. So concludes the Wall Street Journal today.
Inflation?
Submitted by Johnny Fincioen on Thu, 2010-10-21 16:38.
US Treasury Secretary Geithner said recently: “We will not devalue the dollar”. Really? Who wants to believe this tax-cheat? It reminds me of the Dutch proverb about the fox talking pacification, and the need of the farmer to protect his hens. When politicians insist with great intonation they will not do something, …
Over the last month, the interest rate on 30-year Treasury Bonds moved up from under 3.6% to close to 4%. Anybody seen the rise in the cost of commodities and minerals lately? The price of an ounce of gold rose from about $ 600 when the Democrats took Congress in 2006 to over $ 1300 now. The price of gold almost doubled since Obama was elected, and spent money as a drunken sailor, creating the largest deficits in history. At least the sailor spent his own money, not ours. Do you really think the deficit spending since 2001, the doubling of the deficits since 2006, and the tripling again of said deficits since 2009, has nothing to do with the rise in the cost of gold? Do you believe the massive ‘printing’ of extra dollars by the Federal authority isn’t or will not create huge inflation?
I urge everybody to watch the video of Prof. Frank Byrd’s, Columbia Business School, lesson on inflation in the past, present and the possible future. It is over 30 minutes long but well worth your time.
https://vimeo.com/11763098
The unchecked public spending and huge deficits is what scares large parts of the American public.
Two corrections
Submitted by marcfrans on Wed, 2010-10-20 02:50.
A good summary. And politics certainly has gotten very dirty and often dishonest.
1) ..."The Republican Party and its President "...
The Republican Party has no "President". The Republican National Committee has a "Chairman". But, he is a relatively unimportant 'functionary', and the current one is not presently an elected politician.
2) ..."inflation to flatten huge debt mountains"...
Currently there is more concern about deflation than inflation. The huge debt mountain is real enough, and the prospect for future inflation is quite high, but this remains speculative conjecture and not fact nor factual policy.
Dirty Toronto Politics
Submitted by graecus on Tue, 2010-10-19 09:41.
Hey, you think the USA left-libbies have a monopoly of dirty politics?
Come up to Toronto, where Canadian libs have achieved a new nadir in gutter tactics against Mayoral candidate Rob Ford.
Look at Ross's Right Angle http://rossrightangle.info
this past few days and read how the pinko platoon has defamed his physical appearance as well as his policies.