This page has been archived and commenting is disabled.
Guest Post: Profiting From Policy
Submitted by David Galland from Casey Report
Profiting from Policy
These days, it’s hard to draw any conclusion other than that the train is gaining speed on wobbly tracks perched over a rickety bridge.
Most notably, unemployment has again risen – to 9.8% from 9.6% – very much not the direction things should be headed given the amount of money the government has pumped into the economy. The latest data shows that this nation of 310 million souls managed to add just 39,000 jobs in November. That, unfortunately, falls short of even keeping up with a population growth of about 1% – doing just that requires generating a net of about 250,000 jobs a month. As for eating away at the millions of unemployed and the many millions more who are underemployed… oh, well.
Of course, the mainstream financial media wastes no time in pointing to this latest dismalia as proof positive that the Fed’s recent decision to energetically restoke the money machine with upwards of $100 billion a month was the right decision. This despite the clear evidence that adding debt to debt is having no real effect, except begetting more debt.
This is a lesson that, so far, appears to be making no headway in the cognitions of Washington’s policy makers, even with the latest election results delivering a sharp rap across the knuckles to the power elite.
Evidence of that truth came to me during a recent drive to do sundry errands. After flipping through the stations, I ended up listening to a program on National Public Radio with a moderator quizzing a couple of congresspersons – one still in power and the other dismissed by voters in the midterm elections.
In conversing with the latter, the reporter asked if the Democrat congressman’s loss wasn’t a clear sign of voter frustration. To which the ex-official blathered on about the number of filibusters threatened by the Republicans over the last couple of years as a reason why the Obama Congress was unable to get its business done.
But, interjected the reporter, the Democrat-controlled Congress passed all manner of legislation – healthcare, financial reform, environmental bills, etc., etc – so isn’t it more a case of voters being upset about the quality and scale of the legislation passed, and not the dearth of it?
Whereupon the ex-Con began to illustrate his point by spouting off about some wastewater bill that was turned back by the Republicans, even though it would have unleashed another $15 billion in federal spending “so important to putting Americans back to work.”
But wait, again interjected the reporter, wouldn’t many people listening to this program say to themselves, this guy just doesn’t get it? That we don’t want the federal government to keep spending billions of taxpayer money on these make-work projects?
Without missing a beat, the ex-Con flipped like a freshly landed mackerel and argued against his position of just seconds before, saying, “This isn’t about the money! It’s about clean water for all Americans!”
At which point the reporter cleared his throat and ended the interview.
Next up was an angry Democrat of some influence. The congresswoman’s anger was directed first at the findings of the Deficit Reduction Commission that the spending cuts must be widespread if they are to be sufficient, and then at the administration for even thinking about extending the Bush tax cuts for people earning over $250K.
Oh, how I wish I was able to do proper justice to her diatribe here – I can’t, but I will do my best.
In her world view, the poor huddled masses of America – being defined as anyone with an income of under $250,000 a year – had nothing to do with the financial crisis, and so why should they be held even a little bit responsible for helping to foot the bill? No, no – it was the greedy fat cats that brought this fresh hell upon us, and so it is they, and they alone, who should be made to pay… and pay.
Of course, nowhere in the discussion was there mention of the role that the many-tentacled government played in all of this… of the loose money, the looser spending, the wars, the unbridled enthusiasm for a steady diet of pork, and… and...
If there were some mega-computer capable of fairly allocating the financial pain based on the contribution each of us has made to this mess, and then assess taxes accordingly, I suspect the end result would leave past and present members of the Fed living in cardboard boxes, and 97% of past and present members of Congress shuffling in gutters looking for cigarette stubs… at least when they weren’t fighting over discarded clothes with executives of the big financial institutions, NGOs, and the Treasury Department.
Having wiped all of those individuals out to the bone, the burden could then shift to the military-industrial complex that has so effectively pursued its symbiotic and very, very costly “Don’t Ask (where the money went), Don’t Tell (the truth)” policy for decades now.
It could then lay the hooks into anyone who ever took a government-backed loan – big or small – without first taking the time to do a serious calculation as to their ability to repay it, or the unscrupulous lenders who knew that the loans they were originating were going to end up in default with the tab ultimately being dropped on the government.
In fact, were such a mega-computer able to do the calculation, I strongly suggest it would only be after many further layers that the pain, fairly allocated, would reach the rank and file business community, the sole real engine of growth in this economy.
I refer, of course, to the very same individuals so steadily derided by the vote-seeking politicos, despite the fact that it is these long-suffering entrepreneurs who wake up every new day to risk everything in their efforts to create new jobs, despite the heavy glop of bureaucracy on their backs every step of the way.
Yet it is the few that succeed, against all odds and a constant battering of taxes and regulations, that this particular congressperson sees as the villains. In other words, she has pretty much reversed the proper order of accountability – as one would expect in a system where all that matters is vote gaining.
When the talk turned to the administration’s apparent willingness to accept an across-the-board extension of the Bush tax reductions as part of a compromise to also extend unemployment benefits (at 42%, the situation of the long-term unemployed is becoming a serious problem), the congresswoman was almost apoplectic. In addition to the views just exposed, about the wealthy needing to pay for their many sins, she was astounded that anyone could hold up the unemployment extension, given the poor shape of the economy.
How can anyone argue against the direct benefits to our struggling economy of putting money in the pockets of people who most need it, she asked with dismay in her voice. Adding in support of her view that it should be obvious to all that the recipients of the money will turn right around and spend it on the necessities and that will give the economy just the boost it needs.
Hmm, I thought as I drove down the road. All we need to improve the economy is to give people money.
Why, it’s simplicity itself! And now that I get it, I think people should just quit their whining about fiscal probity and all of that, and just let ‘er rip. Don’t stop with small change, encourage the Treasury to start cranking out checks in princely sums to everyone!
Thousands, millions, even! In no time at all, America’s salad days will be back.
Of course I’m being cynical. But the point I’m trying to make is important, because while I am exaggerating, the economic concept so ardently championed by the congresswoman is accepted at face value by most of the government and all of the administration’s favorite economists.
More than that, because it is accepted, it is policy.
In this construct money is, at best, an abstraction: it has reached the point that the government, and most people, actually believe the stuff falls from the proverbial tree. Money is no longer a medium for saving or transacting with the fruits of one’s labor, but instead is a commodity – albeit unique in that it has unlimited supply.
It does not, however, enjoy unlimited demand. For now, the demand is certainly there. But as the supply increases, individuals and institutions are correctly wary of the effects of dilution… debasement… inflation, pick your term.
The alternative forms of money – the sound kind – are getting a lot of attention because more and more people actually “get it.” They are beginning to recognize the fictions that the politicians and bureaucrats believe in and are taking measures to protect themselves and to profit.
Before moving on, I would mention that I know someone who works as a manager in the Department of Motor Vehicles. A few days ago she told me that, other than a relatively brief flurry during the Cash for Clunkers program, the pace of car registrations has been slow ever since the crisis began and has shown absolutely no improvement since that program ended.
In fact, the only increase in the DMV’s workload has come from the processing of suspended driver’s licenses.
As the latest unemployment figures show and my friend’s first-hand observations confirm, this economy is not recovering. And, per the rise in license suspensions, the government is becoming increasingly aggressive in fine-generating enforcement actions.
In relationship to the second of those data points, if you’re going to imbibe this holiday season, don’t drive.
Finally, please don’t misunderstand my comments above as being insensitive to the plight of the unemployed. I personally know far too many people in that situation whose prospects of ever regaining their prior lifestyles is now almost non-existent to be cavalier about the topic.
The only realistic way I can help – because I can’t and won’t put my own family’s future at risk by trying to help everyone – is doing my part to build and maintain a business that, by offering a tangible value to clients, is able to keep a lot of people productively employed.
Therefore, it angers me to no end to listen as the morons maintained in power by the equally moronic masses make rude noises about the entrepreneurial class and otherwise meddle in matters about which they have no actual understanding and, as a consequence, continue doing great damage to the economy.
Something has got to change… and will, before this is over.
»
- 5881 reads
- Printer-friendly version
- Send to friend
- advertisements -
who is john galt
You are. Now get off your butt!
So am I. But our business is in Peru, while I live here in the USA.
Its not the entrepreneurs that should be taxed heavily, but what about the rise in executive pay in the last 30 years. You know, the last 30 years that has seen the large scale de-industrialization of America... Shouldn't that be taxed heavily, hell, its worthy of criminal or civil action, if you ask me.
And what about the corporations that pay NO TAX? Sure, the corporate tax rate is 35% but only small business actually pay it! Exxon, with 30 some BILLION in profit, how much tax do you think they paid? The truth is g*ddamn terrifying.
http://psychonews.site90.net
PsychoNews
I read somewhere that the effictive corp tax rate was something like 12.5%
With the economic collapse happening in Ireland, lets see if Google and co. will be able to keep their Double Irish.
well said dr.
to which one could add to the poster david: what fresh hell the financial elite has brought on us? hardly fresh (and dorothy parker hates you) but still, who held and holds the reins? who made the hideous choices? apologist for the insatiable!
"but still, who held and holds the reins? who made the hideous choices?"
Indeed.
Maybe this will clear it up...I humbly submit the richest counties in America according to the 2010 census.
Three guesses where the majority of these counties are...and the first two guesses don't count ;-)
http://www.huffingtonpost.com/2010/12/21/2010-census-richest-count_n_799525.html#s212815
i watch thomas the tank engine and they always make it across the rickety bridges
as long as enough people start falling off unemployment rolls each month, we should be below 5% unemployment figures in 2011
+1 for a Thomas tank engine reference! Actually though, Thomas and some of his friends do get in a lot of sticky situations and don't always make it to their destination.
These so called "experts" who rely on macro themes have pretty much been bulldozed by this huge bull market.
For anyone trying to trade for a living, or trade for a fund, I can't imagine how or why they would pay for all this expensive research.
When all that is necessary is to study the market's health and overall direction to determine if you should be long or short.
Really, it's not that complicated.
"...doing my part to build and maintain a business that, by offering a tangible value to clients, is able to keep a lot of people productively employed."
...like making buckets of money for himself and his boss, Mr. Smirky ... (Doug Casey)... while his many 'newsletters' are peddled to the newbies to mining and oil.
The only thing learned, after subscribing for a while, will be how to spell...
"...Pump and Dump..."
Health as in nominal price or health as in underlying fundamentals? Underlying fundamentals say the health is poor.
When all that is necessary is to study the market's health and overall direction to determine if you should be long or short.
Really, it's not that complicated.
Agreed. I've been saying this all fall and winter. It's pretty easy when the Fed guarantees you money.
Also, the so called "expert" has his figures wrong regarding unemployment. We really need to add net 150k jobs, not 250k jobs to start to see a turnaround. Not that it'll happen near term but by mid 2011 we should be easily hitting that number monthly.
That's right Harry - 150k just to maintain current % of employment...need significantly more than this (say 250k mo) to start lowering unemployment rate.
How far can the Fed go supporting the economy seems the central question? Is there any limit? What could cause a hold on the Fed's ability to continue buying debt at artificially low rates? Will the realigned Congress allow state bailouts? Muni bailouts? Fed blank check? I guess I see more uncertainty than you and more real potential for reality to hit?
Fed can go on as long as they desire until there is some job growth. And there will be. You can't throw that much into the economy without creating jobs. It'll happen in late 2011. Again, why fight the Fed, they can go on indefinitely.
"They can go on indefinitely"
I hope you have the balls to post when the entire house of cards starts to come down. All it takes for the Fed to fail is for foreign nations to no longer use the US Dollar as a reserve currency.
Specifically for oil transactions. The Fed has NO CONTROL over that. If anything, their actions are speeding up the process of the US dollar losing reserve currency status.
The Fed can't force foreign countries to accept the US dollar as the world reserve currency. What happens when people realize that dollars are backed by promises, and that the banksters and politicians are KINGS of broken promises.
http://psychonews.site90.net
PsychoNews
Exactly. The ponzi scheme ends when enough nations no longer use USD as reserve currency.
Stared at the debt clock today - thought about the implications of CBO's projection (BTW - for anyone interested in the CBO's accuracy, please just go look at their 2000, 2005, 2008, 2010 reports...annual deficits off by Trillions...w/ an s) and debt at current pace. The numbers of the current pace by '15 are so large that I can't believe we'll accomplish it or be allowed to accomplish it. A near quintupling of debt in '15 years against less than a doubling of GDP!!! Astounding?!?
Then again, who (of significance) would it serve to stop it? Who wants to upset the apple cart and open themselves up to destabilization? OPEC? China? American citizens? I think not. So for all the wrong reasons I more and more believe we will hit those 2015 debt numbers. Inflation be damned, economic slowdown be damned, borrowing costs cut off at the knee by buying all our own debt for next to free.
When I can't find anyone that is served by rocking the boat, seems likely the boat won't be rocked.
Agreed to a couple of points: (1) we will not repay our debt; and (2) there aren't many people that will actually want the train to stop.
But it will happen. It's hard to imagine growing austerity in Europe, frothiness in China, and rampant spending and borrowing and printing lasting for five years in the US. There's a black swan out there before then...
But think about this problem of austerity in portions of Europe while US Fed prints the global reserve currency without restraint. Isn't this in effect allowing those given the new currency (PD banks of the world) at .10% or 1% rights to buy up firesale assets in far off places? Isn't this a global takeover? More effective than war and all proceeds go direct to banking class rather than pretending to share with nations.
I guess if I was Irish (I'm actually of Scotish descent) I might be a little pissed that not only am I going to tough it out but money from abroad can scoop up the assets w/ money from nothing and then lease them back to the Irish, et al?
And people think the cold war was only against the soviet union...
Further, this is why ALL OF THE WORLD'S CENTRAL BANKS ARE IN ON THE SCHEME. When we all go to meet, they know damn good and well we're out to fuck them. As a result, we all agree to have a sinking of the world's currencies in unison... obviously it's an imperfect process, but that's largely what we're experiencing. We all know what happens with collusion on a long enough time line, but it's full speed ahead for now.
Needless to say, other countries are very well aware of the possibilities to which you speak... and will not take kindly to our desire to pursue them.
I agree, I don't think we will ever repay the debt, at least not any time soon. We pay down debt, we extinguish money and with the reputed 9 trillion of value disappearing from the RE market the FED doesn't want less money anytime soon.
"the train is gaining speed on wobbly tracks perched over a rickety bridge."
Apt metaphor. I'd say though that, while I might be wrong, the train is highly likely to continue gaining speed and not crash until 2012 or 2013. Most bubbles last for years, and seems to me we're a long way from peak exuberance.
And by the way, the economy only needs to create about 110k jobs per month to keep up with population growth and keep the employment/population ratio stable. It hasn't been doing that this year - the ratio is still shrinking - but chances seem good it will stabilize in 2011, maybe even slightly improve, thanks to the growing malinvestment.
Therefore, it angers me to no end to listen as the morons maintained in power by the equally moronic masses make rude noises about the entrepreneurial class and otherwise meddle in matters about which they have no actual understanding and, as a consequence, continue doing great damage to the economy.
well stated!
Off topic, but who has bought the remaining gold?
http://uk.news.yahoo.com/18/20101221/tbs-imf-completes-sale-of-403-tonne...
Check this out for funny.
http://www.youtube.com/watch?v=tTRxN73Iu5M&feature=player_embedded
I'm going to pretend to give a crap about a pre-Lehmmings S&P and have a drink!
Oh yeah, it's also happy times for the holidays - almost forgot until I turned on the boober.
Feel like giving everyone an assortment of seeds and a bag of manure for christmas.
Well, if you were the FED what would you do? Create as much Money as possible, because the more Money you create the more you get paid in Interst from the American Tax Payers.
More Debt, More Money for Bankers and the FED. Just so easy to understand.
If I was the FED I would make sure that every American would be indedited to me for their entire lifetime. I would also not forgive their debt on their death but would take a large portion of their Estate to pay back their Debt. I would also make sure that all of their Children would work their entire lifetimes to pay me back. Altough, it would never be enough to satisify my Debt as even their Children and their Childrens Children would owe me into eternity.
I would guarantee my survival with generation paying their debt and interest to me that would never go down. Every year I would pile on more Debt just to make sure they remained my Debt slaves.
I would get the Government to allow me to set up an institution called the IRS. That way if they did not pay their Debt I could attach and sell all of their proptery to satisify my Debt. I could put them in Jail for their lifetime if they failed to pay me their Debt.
How could any one person perfect the above to create and collect debt on American Citizens forever?
i will top that by selling not only the assets of the country, but the entire country.
Hello China. whooha. I will toss in a few politicians for free. After all, they were cheap
If you are referring to the kind of entrepreneur who created "financial innovations" such as CDO squareds and off-balance SIVs, then I have to side with the congresswoman. However, if you are referring to the founders of something useful such as Google, I completely agree with you. There is a difference.
Thought this was interesting
Bill Still being shown at Market Ticker.
http://market-ticker.org/akcs-www?post=175538
The way he puts it, you cannot be sovereign if you are in debt. He is campaigning for an end to all government debt. 8 minutes
so on and on .. the government givers of truth ,, say 9.8 unemployment ,, and the copy writers are all to happy to spout the party line
unemployment is closer to 22%.. say it you purveyors of ink
Great article David. Really found an audience for that piece. However I missed the section where you detail 'how to profit' from the situation we're all well aware of? Oh wait, was it the implied 'buy gold' line at the end? Wow, where have I heard that one before? I'm waiting for Mr. T to put in an appearance to officially mark the top.
<sarc> Maybe we should buy the dip?
BAC breaking higher all is well
http://finviz.com/quote.ashx?t=bac
Unemployment WILL fall to about 8.8% U3 in the next 16-18 months. HOWEVER, all of the jobs created will pay under $10/hour, they will all be retail and service jobs for the fed-subsidized wealthy, and low-and-behold, the number of people on food stamp subsidies will actually RISE in that same period from the current 42 million to 60 million. There's your recovery:
http://www.youtube.com/watch?v=SZk0EkJ2ukY
Doubled up. sorry.
When money goes through the government less comes out the other end.
Government spending doesn't work. It only works for those that control policy.
In the coming decades, Keynesians will be burned at the stake for suggesting more government spending.
Who cares? Really. With any luck, our children will find for themselves a crappier jerk than Ben Bernanke to run the Federal Reserve Bank...so that they can pass the debt bomb to their kids.
In the meantime, don't bogart that rally man....pass it over already.
Oh, and screw those income collecting seniors, too. Die already. We have Chinese made crap we want.
Good grief, why doesn't everyone both before and after me just piss off so that things can be even more about me...even if things are crappy Chinese things.
LOL @ CDad!
Yes, that captures it perfectly I think?
It never ceases to amaze me how many people are fooled by the false distinction between "government" interests and spending and "big corporate" interests and spending. Federal Government representatives are by and large big corp representatives. True enough behind the "big Corp" label are elites who run things but most of the money goes to these interests in one way or another. The idea that the underclass is getting something for nothing can be debunked in a matter of minutes.
At these POMO levels there will be no "growth" in the economy.
The US.Gov bonds are just (in a poor fashion) trying to make up for dropping private spending (and not doing a very good job of it). So outright purchases of new gov.bonds do not really goose the economy, just shovel some cash flow to those that get the .gov tit.
POMO purchase of existing .gov bonds just relieve the holder of net negative real interest return. And .gov already spent the money so those POMOS just give money to fin.firms to gamble with.
MBS purchases relieve the holder of trash, stanching bleeding, give money for more gambling.
None of this re-ignites the real economy.
Sticking feathers up your butt does not make you a chicken.
I loved this post to be perfectly honest and understood your tone and everything you were trying to get across.
Thanks to a job well done!