Those calling for taxing the richest more are not doing the same cost-benefit analysis I am doing that suggests that raising taxes won’t raise more revenue. But they’re not unfairly looking for a scapegoat, either. While probably the greatest culprits for the problems of recent are in government (Bush, Greenspan, Obama, Bernanke) Americans are right to be mad at the rich.
This isn’t about tax. This is about jobs, and growth. The rich, above and beyond any other group have the ability to ameliorate the economic malaise by spending and creating jobs, creating new products and new wealth. The top 1% control 42% of all financial wealth. But that money isn’t moving very much at all— the velocity of money is at historic lows. It should not be surprising that growth remains depressed and unemployment remains stubbornly high.
There are deepening concerns in Switzerland about the debasement of the Swiss franc. The SNB has pegged the franc to the euro and is engaged in the same ultra loose monetary policies as the Federal Reserve, BOE and the ECB. The SNB won't allow the franc to rise above an arbitrary “ceiling” against the euro Walter Meier himself said on April 5 that the SNB is ready to buy foreign currencies in "unlimited quantities." Meier’s comments regarding the vastly depleted Swiss gold reserves came after Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland, called on the SNB to disclose where its gold is stored, in a letter published in the respected Swiss publication Finanz und Wirtschaft. Meier said that the SNB holds its physical gold reserves “domestically and internationally, with provisions for a crisis scenario being a main factor in the decision for this decentralized storage”. “The criteria for the storage countries are: appropriate regional diversification, exceptionally stable economic and political environments, immunity for central bank investments, access to a gold market where stocks could be liquidated if necessary,” he continued. He concluded by saying that “such a decentralized storage is still preferable to an exclusive storage in Switzerland. The listed factors can change over time and that’s why the central bank is reviewing and adapting the storage locations periodically.” The SNB’s monetary policies have been imprudent in recent years and their gold sales have lost the Swiss people a lot of money.
Bernanke’s legacy is still to be made. But he has put the US economy in a position from which it can succeed. If Europe falls apart, it will be more difficult. If we fall of the fiscal cliff we will have our own Thelma and Louise moment. The Fed Chairman has already said he can’t save us from that shock. It’s really time for fiscal policy makers to step up. As long as they refuse it makes Bernanke’s job all the harder. And the pressure on him is intense.
Bernanke is under a lot of pressure and is given little credit for what have been remarkable achievements. Do risks remain? They sure do. But that result is yet to be decided. Meanwhile risks elsewhere are at least as pressing. Look at his successes...
While Krugman does not by any means endorse the level of centralism that Diocletian introduced, his defence of bailouts, his insistence on the planning of interest rates and inflation, and (most frighteningly) his insistence that war can be an economic stimulus (in reality, war is a capital destroyer) all put him firmly in Diocletian’s economic planning camp. So how did Diocletian’s economic program work out? Well, I think it is fair to say even without modern data that — just as Krugman desires — Diocletian’s measures boosted aggregate demand through public works and — just as Krugman desires — it introduced inflation. And certainly Rome lived for almost 150 years after Diocletian. However the long term effects of Diocletian’s economic program were dire. Have the 2008 bailouts done the same thing, cementing a new feudal aristocracy of bankers, financiers and too-big-to-fail zombies, alongside a serf class that exists to fund the excesses of the financial and corporate elite? Only time will tell.
By way of post-mortem of this afternoon's epic Paul vs Paul Bloomberg TV cage-match, we reflect on the various headlines the two gentlemen made during the event and in the context of the credibility with which one of the gentlemen discusses his ability to manage the world and the 'ease' with which he and his henchmen can control inflation (and yet an unmanaged economy is subject to 'extreme volatility'), we remind readers of the post-WWII years and the extreme swings in purchasing power that their so-called managed economy created. As ever it appears the mutually-assured-destruction fall-back premise of Keynesian Krugman is trumped by the fact-based method of the more Pragmatic Paul.
- *KRUGMAN SAYS UNMANAGED ECONOMY SUBJECT TO "EXTREME VOLATILITY"
- *PAUL SAYS FED IS LENDER OF LAST RESORT FOR POLITICIANS
- *KRUGMAN SAYS U.S. ECONOMY IS "PERSISTENTLY DEPRESSED"
- *RON PAUL: FED HAS DESTROYED 98% OF DOLLAR'S VALUE SINCE 1913
What Would Krugman Do? (obviously, that is rhetorical). Supreme Keynesian Voodoo acolyte Paul Krugman and Republican presidential candidate Ron Paul go head to head on fixing the U.S. economy at 4pm ET today on Bloomberg Television’s “Street Smart.” Watch the live webcast beginning at 3pm ET for Krugman, who will be guest-hosting “Street Smart” until 5pm ET. On the heels of the recent "controversial" NYT piece, where Krugman called on Federal Reserve Chairman Ben Bernanke to do more for the U.S. economy, Krugman will be asked to explain exactly how more stimulus will create jobs and put the economy back on the growth track. Also just what rug will the trillions in additional debt be swept under. Then at 4pm, Krugman will face the ultimate debate with Ron Paul, who has called for drastic cuts in spending. Grab your popcorn now.
Forget Competing Theories … What Do the Facts Say about Quantitative Easing?
Krugmann fails to address even a single one of the arguments forwarded by Spitznagel. This is no surprise, as he has often demonstrated he does not even understand the arguments of the Austrians and moreover has frequently shown that his style of debate consists largely of attempts to knock down straw men. After appraising us of his economic ignorance (see the idea that time preferences can actually 'go negative' implied by his argument on the natural interest rate above), he finally closes a truly Orwellian screed by claiming that everybody who is critical of the Fed and the financial elite is guilty of being 'Orwellian'. As we often say, you really couldn't make this up.
9 Torture Myths DeBUNKED
It is three and a half years since the Great Recession hit in 2008 with the collapse of our financial system caused by the Wall Street banks and their captured politician cronies in Washington D.C. Their mouthpieces in the mainstream media have been telling the American sheeple that we have been out of recession and in recovery since the 4th quarter of 2009. It truly has been a recovery for the Wall Street bankers and the mega-corporations that have laid off millions and opened new factories in the Far East while generating record profits and rewarding their executives with millions in bonuses. The stock market has doubled from its 2009 lows. All is well on Wall Street – not so much on Main Street. The compliant non-questioning MSM reported that GDP in the 1st quarter rose 2.2%, less than expected. This pitiful government manipulated result confirms that we are back in recession. The first quarter had the huge benefit of fantastic weather, an extra day, and a supposed surge in jobs. And this is all we got? Take a good long hard look at this chart.
As if our recent discussion of Austerity were not enough, Citi's Steve Englander invokes 'String theory' to open the door to multiple universes, and in one of them Paul Krugman is undoubtedly Fed Chairman. Start with the assumption that a Paul Krugman Fed would advocate strong fiscal and monetary measures and tolerate a significant run-up in inflation. The question is how the USD would respond in this world. The presumption is that the Krugman Fed would cooperate by financing the fiscal expansion, allowing government spending or (or in a very strange Republican Krugman parallel universe) tax cuts to have a real impact without affecting government debt, making a strong distinction between pumping liquidity into the banking system and directly into the real economy. In conventional terms, this is Financial Repression 101, but inflation is desired, achieved and beneficial. As Krugman points out there is a cost to an extended period of long-term unemployment. The bottom line is that unless you make low inflation a canonical virtue, you have to compare the long-term losses from lower credibility (if they exist) against the long-term gains from moving to full employment quicker (if they exist).
Suddenly, everywhere you look, “austerity” has become a 4 letter word. Clearly it wasn’t excessive spending that caused too much debt. Surely we didn’t hit a financial crisis in spite of excessive spending, nope, it is all the fault of austerity. In the rush to avoid supporting anything that could be viewed as “austerity” we have lost sight of what austerity is, and how it can impact the economy. Let’s not let politicians get away with claiming everything that is “austerity” is bad. We too often confused “conjecture” with “fact”. Lately I have seen a lot written about how much better the job situation is today than it would have been without all the policies of Obama, Geithner, and Bernanke. It is treated as fact, yet it is merely conjecture.
H.L. Mencken was a renowned newspaper columnist for the Baltimore Sun from 1906 until 1948. His biting sarcasm seems to fit perfectly in today’s world. His acerbic satirical writings on government, democracy, politicians and the ignorant masses are as true today as they were then. I believe the reason his words hit home is because he was writing during the last Unraveling and Crisis periods in America. The similarities cannot be denied. There are no journalists of his stature working in the mainstream media today. His acerbic wit is nowhere to be found among the lightweight shills that parrot their corporate masters’ propaganda on a daily basis and unquestioningly report the fabrications spewed by our government. Mencken’s skepticism of all institutions is an unknown quality in the vapid world of present day journalism.
H.L. Mencken understood the false promises of democracy 80 years ago:
“Democracy is also a form of worship. It is the worship of Jackals by Jackasses. It is the theory that the common people know what they want, and deserve to get it good and hard.”
We deserve to get it good and hard, and we will.
No wonder one third of Americans are obese. The crap we are shoveling into our bodies is on par with the misinformation, propaganda and lies that are being programmed into our minds by government bureaucrats, corrupt politicians, corporate media gurus, and central banker puppets. Chief Clinton propaganda mouthpiece, James Carville, famously remarked during the 1992 presidential campaign that, “It’s the economy, stupid”. Clinton was able to successfully convince the American voters that George Bush’s handling of the economy caused the 1991 recession. In retrospect, it was revealed the economy had been recovering for months prior to the election. No one could ever accuse the American people of being perceptive, realistic or critical thinking when it comes to economics, math, history or distinguishing between truth or lies. Our government controlled public school system has successfully dumbed down the populace to a level where they enjoy their slavery and prefer conscious ignorance to critical thought.
Throughout the postwar period, banks have almost always lent out all the way up to the reserve requirement. So, does the accumulation of excess reserves lead to inflation? Only so much as the frequentation of brothels leads to chlamydia and syphilis. Excess reserves are only non-inflationary so long as the banks — the people holding the reserves — play along with the Fed-Treasury game of monetising debt and trying to hide the inflation . The banks don’t have to lend these reserves out, just as having sex with hookers doesn’t have to lead to an infection. But eventually — so long as you do it enough — the condom will break. As soon as banks start to lend beyond the economy’s inherent productivity (which lest we forget is around the same level as ten years ago) there will be inflation.