From the category archives:

Recession

‘Fear the Boom and Bust’

January 26, 2010

hayek 150x150 Fear the Boom and Bustkeynes john maynard 136x150 Fear the Boom and BustThe video “Fear the Boom and Bust – a Hayek vs. Keynes Rap Anthem” presents the ideas of 20th century economists Friedrick Hayek and John Maynard Keynes that are still shaping much of the debate on the current economic crisis and how to deal with it.

The video produced by Econstories.tv has gone viral – over 122,000 views on Youtube just three days after it was published. According to the website, Econstories.tv “is a place to learn about the economic way of thinking through the eyes of creative director John Papola and creative economist Russ Roberts.”

Based on the number of views, Papola and Roberts have found an innovative way of making economic ideas accessible to a wider audience. The video features the following quotes by Keynes and Hayek on the importance of economic ideas:

“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”

John Maynard Keynes
The General Theory of Employment, Interest and Money

“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

F A Hayek
The Fatal Conceit

{ 2 comments }

2010 Stories That Will Impact American Freedom, Strength and Security

January 1, 2010

While none of us can predict the future and unexpected events are bound to develop, the following stories will be significant in their impact on American freedom, strength and security during 2010. Please continue reading this blog during 2010 if any of these topics are of interest to you.

1. Iran: Nuclear Weapons, Resistance to the Regime and Revolution?

mousavi--124507979745817300Iran will be a pivotal place in the struggle between Jihadism and free societies. During 2010, Iran will likely become a nuclear power led by a president with the declared goal of destroying Israel. The Obama administration is unlikely to use force to stop this dangerous development. Israel may act, but it is not clear whether it will be able to neutralize the threat of a nuclear Iran by itself.

Since the fraudulent presidential election last June, the internal, democratic Iranian resistance has grown despite the regime’s brutal attempt to silence protests through intimidation, jailing of dissidents and outright murder. The opposition leader, Mir Hossein Mosavi, a member of the regime during the 1980s has become a more vocal opponent of the regime after the election and could become Iran’s equivalent to Russia’s Boris Yeltsin who started as a communist and ended up leading the breakup of the Soviet Union and its replacement with 15 nations including a Russia that attempted to achieve democracy.

ayatollah hossein ali montazeri 150x150 2010 Stories That Will Impact American Freedom, Strength and SecurityThe resistance movement has stepped up protests in the last weeks of December after the death Grand Ayatollah Montazeri, once the designated successor to Khomeini, the founder of the Iranian Islamic Republic and, more recently, the leading religious leader opposing the regime. Earlier this week, the Iranian dictators killed a nephew of Mousavi, further escalating tension.

Revolutions are hard to predict, but there is at least the possibility that the Iranian resistance could overthrow the 30-year-old repressive regime before fanatics who believe in provoking an apocalypse to hasten the arrival of the “hidden Iman” gain nuclear weapons.

2. Economic Recovery: Long-Term Prospects, Fear of Inflation and the Impact of Unsustainable Government Debt

obama 150x150 2010 Stories That Will Impact American Freedom, Strength and Securityr228531 909709 150x150 2010 Stories That Will Impact American Freedom, Strength and SecurityThe US economy appears to be headed toward a recovery despite unprecedented, heavy-handed control exerted by the Obama administration over more and more areas of economic activity.

Can the recovery be sustained despite new and continued threats of more government control and record taxation and spending? Will inflation become a serious issue given the lose money policies of the Federal Reserve under Time’s Person of the Year Ben Bernanke?

Will the private economy again be able to generate jobs for the tens of millions of Americans that lost their jobs during the recession?

The short-term news may be positive, but dark clouds hang over this recovery.

3. Security and Terrorism: Will Washington Get Serious Again Before It Is Too Late?

war on terror poster 224x300 2010 Stories That Will Impact American Freedom, Strength and SecurityThe Jihadist terrorist attacks at Ft. Hood and on a plane landing in Detroit on Christmas Day have shown how utterly clueless Obama and his advisors are. They treat these acts as isolated criminal incidents despite clear evidence that they are part of a continued international Jihadist movement.

Will they see the light and let us move on from recognizing the obvious to seriously thinking about how a free society can survive given that technology today can give a handful of fanatics unprecedented power to cause mass murder and wholesale destruction?

In addition to “traditional” attacks using guns and explosives, chemical, biological and nuclear threats remain real and become more likely each year. Even more frightening scenarios that could be perpetrated by rogue regimes with a few nuclear weapons include an electromagnetic pulse attack on the US.

4. Continued Growth in Opposition to Obamaism and the November 2010 Election

dc tea party sept 12 2009 mega 01 300x225 2010 Stories That Will Impact American Freedom, Strength and SecurityThe Tea Party movement started early in 2009 in opposition to unprecedented spending in Washington and all the initiatives to control more of the American economy. The likely passage of Obamacare practically guarantees, that Democrats will sustain heavy losses in the November 2010 Congressional elections.

Will Republican leaders become more effective in explaining these issues and presenting the alternatives or will the Tea Party movement end up supporting third party candidates that will inevitably divide the opposition to Obama?

5. The Final Shape of Obamacare and Its Impact on Cost of and Access to Health Care

obamacare 235x300 2010 Stories That Will Impact American Freedom, Strength and SecurityWhile it is hard to see how passage of some form of Obamacare can be avoided, Democrats are sharply divided on issues like the public option and taxpayer funding of abortions. The left wing of the party opposes current legislation that has provisions required to keep the support of more “moderate” Democrats. Will this coalition between Democratic factions hold and how bad will the final legislation be?

6. The Global War on Terror: Iraq, Afghanistan and New Fronts

us military collage zus6 300x258 2010 Stories That Will Impact American Freedom, Strength and SecurityThe US involvement in Iraq is winding down. Will the Iraqi government be able to avoid a return to the violence of a couple of years ago?

In Afghanistan, Obama is supporting a moderate surge in US forces. Will this be enough to drive back the Taliban and al-Qaeda or will they just hunker down until the withdrawal of US forces starting in 2011 that Obama has already announced?

Finally, the Christmas Day underwear bomber has started drawing attention to the fact that there are other centers of Jihadist terrorism like Yemen. Will there be an attack originating in Yemen or another center of Islamic fanatics that will force the administration to act?

7. Global Warming Alarmism After Climategate and Copenhagen

Al GoreThe changes for drastic imposition of new regulations controlling carbon-based energy has fizzled after the Climategate scandal and the failed Copenhagen summit.

France’s supreme court struck down a new law on carbon emission just this week.

The chances of major cap and tax legislation passing the Senate are practically nil.

Despite these positive developments, the left has invested heavily in the global warming hysteria as a new way to impose national and international controls on human freedom. Stories about impending doom due to supposedly man-made global warming won’t go away in 2010. Expect more fear-based emotional appeals and other attempts to revive the global warming movement.

Just based on what we know about these stories, 2010 is bound to be an interesting year.

{ 3 comments }

Obama’s New Slush Fund

December 6, 2009

GR2009101700169.jpg 194x300 Obamas New Slush FundIs President Obama really serious about tackling the federal deficit and the national debt as he has recently stated? His plans for what to do with unspent and repaid TARP money show that he and his allies in Congress are unable to resist spending any funds that they get their hands on.

When Congress passed the $700 billion Troubled Asset Relief Program (TARP) last year to rescue banks and other financial institutions from potential collapse we were told that the true cost to American taxpayers would be much less since the recipients would pay back the money as they return to financial health.

So far $71 billion have been repaid This does not include $45 billion that Bank of America has announced last week it will repay. Another $226.5 billion of TARP money has never been spent.

So including the Bank of America repayment, almost half the TARP funds are available to reduce the debt we incurred last year.

stimulus vs unemployment october dots Obamas New Slush FundThat is not what the Obama administration and Nancy Pelosi’s Congressional Democrats plan to do. They now advocate spending $100 billion or more on a job creation package.

Unemployment is certainly a serious problem for the millions of Americans who have lost their jobs during this recession.

However, Obama’s $800 billion stimulus program has demonstrated the futility of the federal government spending money to “create jobs.” The Obama administration’s claims on the number of jobs “created or saved” have been shown to be fraudulent. The government web site that reports on jobs “created or saved” by Congressional district reported jobs in Congressional districts that don’t exist and double-counted numerous jobs. Measuring “jobs saved” has been a meaningless statistic.

What the American economy needs for private enterprise to create jobs is a return to fiscal responsibility, lower taxes and an end to the uncertainty created by the numerous activities to expand government and union power that are being pursued by our hyperactive government.

{ 2 comments }

Obama Administration Differs from Democrat and Republican Predecessors

November 25, 2009

What makes the Obama administration different from its predecessors. Why is it pursuing policies far outside the political mainstream on healthcare, carbon emissions, taxes, stimulus spending, etc.? Are there ideological differences? Yes, but can we identify measurable ways in which Obama’s advisors differ from the advisors of previous presidents?

Michael Cembalest, chief investment officer for JPMorgan Private Bank has done just that. He has found an interesting difference between the Obama administration and its predecessors from 1900 – 2009. He looked at every president’s cabinet starting with Teddy Roosevelt and ending with Barack Obama. Cembalest looked at the “prior private-sector experience of all 432 cabinet members, focusing on those positions one would expect to participate in this discussion [on the economy].”

The underlying assumption, of course, is that prior experience in the private sector of the economy would give cabinet members a better understanding of how the private sector works. It is also reasonable to assume that people with private sector experience are more likely to formulate policies that will help the private economy and, therefore, are ultimately more successful at leading the economy out of a recession.

Here are Cembalest’s startling findings:

priorprivateexperience Obama Administration Differs from Democrat and Republican Predecessors

Note that from Teddy Roosevelt to Harry Truman, Democrat presidents (Wilson, FDR, Truman) tended to have cabinets with more private sector experience than Republicans (T. Roosevelt, Taft, Harding, Coolidge and Hoover) although the difference is generally small.

Starting with the Eisenhower, however, there is a much larger difference between the parties and, this time Republicans have more private economy experience than Democrats. The Republican presidents (with the single exception of Ford who basically ties LBJ) have more private economy experience in their cabinets than Democrats. The difference has also grown from about 15 percent (T. Roosevelt vs. Wilson) to over 25% in the opposite direction (Kennedy vs. Reagan).

Now we get to Barack Obama. Less than 10 percent of his cabinet has prior private sector experience. Only one president before him (Kennedy) had less than 30 percent of his cabinet with private sector experience. Even Jimmy Carter managed to stay above 30 percent.

Members of the Obama administration have less experience in the private sector than members of any administration in over 100 years.

Here is another look at the Obama administration. The comparison here is with Ronald Reagan in 1982. The emphasis is on substantive, relevant experience:

In 1982, Ronald Reagan was President (two consecutive terms as Governor of California), Don Regan was Treasury Secretary (35 years of financial sector experience), Martin Feldstein as the Chief Economic Advisor to President Reagan (the dean of business cycle determination), and Paul Volcker was Fed Chairman (9 years of prior financial sector experience). Compare and contrast to Barrack Obama (junior senator from Illinois for 3 years); Timothy Geithner (21 years experience in government, three years as a lobbyist); Larry Summers (no private sector experience; 27 years of academia and government) and Ben Bernanke (no private sector experience; 30 years of academia and government).

With differences like this, is it any wonder that the Obama administration pursues radical leftist policies widely supported in academia and causing unprecedented growth of government power instead of getting the basics right and launching our economy on a firm road to recovery?

{ 2 comments }

It’s Not as Bad as You Think: Why Capitalism Trumps Fear and the Economy Will Thrive

November 17, 2009

It has been over a year since the financial collapse that has triggered unprecedented gloom about the long-term prospects of the American economy. These fears have been reinforced by the initiatives of a radical administration’s attempt to increase the reach of government. At a time like this, it is refreshing to remind ourselves of the resilience of people in a still largely free economy. Brian Wesbury, Chief Economist at First Trust Advisors, is arguing that the creativity of Capitalism will trump pessimism in his just published book “It’s Not as Bad as You Think: Why Capitalism Trumps Fear and the Economy Will Thrive”

Wesbury is no fan of the Obama administration’s policies or of the Bush TARP plan that was initiated a year ago. He recognizes the severity of the recession and how it has affected millions of people.

However, he argues that the financial collapse does not represent a failure of capitalism, but rather a failure of government policies.

The Federal Reserve’s policies kept interest rates at record lows earlier this decade. At the same time, policies promoted by government-sponsored mortgage giants Fannie Mae and Freddy Mac encouraged lenders to lower qualifications for mortgages. Home prices posted record increases. Mortgages were bundled into securities that were bought by investors and financial institutions around the world. When the bubble burst, the investment banking firm Lehman Brothers, the insurance giant AIG and the two government-sponsored mortgage companies Fannie Mae and Freddy Mac failed and (with the exception of Lehman Brothers) were taken over by the federal government. Panic set in and a lot of financial transactions required to support economic activity dramatically slowed or ground to a halt.

Wesbury argues that mark-to-market accounting rules that required banks to mark down the value of their assets to current market prices destroyed balance sheets overnight and made the crisis worse. In spring of this year, the Financial Accounting Standards Board (FASB) eased this rule allowing companies to value the assets on their books as if they were unloaded in an “orderly” sale rather than dumped in a forced or “distressed” sale. The economy has been improving since then and has returned to growth in the third quarter of 2009. Franklin D. Roosevelt made a similar change in 1938 during the Great Depression when the rule unnecessarily destroyed banks.

Wesbury believes that the current increases in the stock market are largely driven by the Federal Reserve’s easy money policy. He compares the current stock market rally to a similar episode in the mid 1970s right before inflation increased and sent the economy into another recession. He is concerned that unless the Federal Reserves gets the timing right in reversing current easy money policies, the recovery could end in a year or two.

Despite these concerns, Wesbury argues from economic history that capitalism is resilient and will ultimately triumph. Conservatives share his confidence in capitalism and freedom. To some extent, our economy can weather adverse policies and adjust around them.

There are two important lessons from Wesbury’s book. First, government policies, not capitalism are the root causes of the current economic crisis. Second, the Obama administration’s policies of expanding government power are NOT the solution to economic problems, but rather will make things worse. Conservative and libertarian supporters of freedom and limited government need to continue to oppose current legislation on health care, cap and trade and increased regulations and ultimately defeat the proponents of these policies in the elections of 2010 and 2012.

{ 1 comment }

How Obama Could Have Helped the Economy without Spending a Dollar

November 11, 2009

Rand Simberg at Pajamasmedia offers some insights into what Obama could have done differently that would have helped our economy climb out of the recession that would not have cost a dollar.

something he could have done — that would have cost nothing at all — would have been to not scare the bejesus out of business in the first place during his campaign.

Obama talked of increasing capital gains taxes for reasons of “fairness,” even if it actually hurt government revenue. He talked of “spreading the wealth around.” He gave soaring speeches exalting the glory of the state and public service, while the contributions of business and capitalism were ignored. He treated “profit” like a four-letter word and promised to “raise taxes on the rich.” He made economically insane and historically ignorant arguments blaming the meltdown of the financial system on “capitalists” and “deregulation.”

Obama persuaded many small business people to pull in their horns and make plans to keep a low profile (including laying people off) in order to avoid the wealth confiscation of the populist, socialist, economic storm they saw coming with his election.

Could he have actually done all these things? Well, with regard to his poisonous campaign, does anyone think that such rhetoric was necessary for him to win? Were Democrats not going to vote for him just because he wasn’t spouting enough egalitarian rhetoric? The public was so fed up with Republicans, and McCain ran such a terrible campaign, that Obama was going to win no matter what.

Though he might have caused trouble with his own party, Obama could have certainly forged a coalition of Republicans and moderate Democrats were he really the post-partisan, reach-across-the-aisle lightworker that we were promised in the campaign — a promise belied by his actual record in the Senate. It’s called triangulation, and Bill Clinton learned post-1994 that one could not only succeed politically with it, but that it could deliver good results for the country as well (at least until the bubble popped in 2000).

Obama though is ideologically incapable of supporting policies that stimulate growth and lessen people’s dependence on government.

{ 0 comments }

Obama Insanity: Unemployment and Healthcare

November 6, 2009

Unemployment jumped to 10.2% in October according to the Bureau of Labor Statistics. Here is a comparison of actual unemployment statistics with what was predicted by the Obama administration with and without the stimulus (from Innocent Bystanders via Ace of Spades and Hugh Hewitt):

stimulus vs unemployment october dots Obama Insanity: Unemployment and Healthcare

Actual unemployment is higher, maybe 16 or 17 percent, because the government doesn’t count people that are no longer looking for jobs. Look at how many jobs have actually disappeared:

jobs lost october 09 Obama Insanity: Unemployment and Healthcare

What a track record of predicting the success of the impact of Obama’s policies! Let’s have the same people quickly pass a radical revamping of healthcare to increase coverage and decrease cost. We’ll cover more people and pay doctors less. Wow! There will be less doctors and more people will be “covered” by insurance but unable to see a doctor. Without medical care, some people will die. Dead people don’t need medical treatment, so maybe we’ll even reduce how much we spent on healthcare. Let’s have the House of Representatives vote on the Pelosi bill this weekend. The public is not paying attention because of the Fort Hood attack and Blue Dog Democrats haven’t had a chance to talk to their constituents after last Tuesday’s election defeat for Democrats.

Don’t worry about increasing private insurance competition across state lines or tort reform to reduce costs. Pelosi and Obama have figured out a simpler way to “cover” more people and “reduce cost” by eliminating life saving medical care! And don’t worry about the $1 trillion plus cost of the bill. What’s a trillion or so given the trillions we are spending on the stimulus, on the bailout and on cap-and-tax, if it passes? If you are dead you don’t need to worry about paying off of the debt. Awesome!

{ 1 comment }

Who Pays for Government Spending?

October 26, 2009

Ross Perot has an interesting site on federal government spending and borrowing. The following chart illustrates that the top income earners pay the vast majority of income taxes. The bottom 50 percent contribute only 2.2 percent of income taxes. This makes it easy for the Left to portray any income tax cut as benefiting the “rich”. What they fail to mention is that the top earners provide the investments that create jobs and opportunities for everyone who wants to succeed. Diverting more and more of this income to government spending robs us of the creativity that has made America great and makes more Americans dependent on government. More and more voters pay no income tax yet get to impose more tax burdens on the top 50 percent by voting for Democrats. This is the goal of the current administration.

taxation10 640 Who Pays for Government Spending?

{ 0 comments }

Obama Policies Hurting Job Growth in Small Businesses

October 26, 2009

From the Wall Street Journal:

The economy remains unsteady 22 months after the recession began, with banks restricting credit and consumers hunkering down. For these small businesses, and many others across the country, there’s an additional dark cloud: uncertainty created by Washington’s bid to reorganize a wide swath of the U.S. economy.
…
a health-care overhaul grinding through Congress could bring unknown new obligations to insure employees. Bush-era tax cuts are set to end next year, and their fate is unclear. Legislation aimed at tackling climate change might raise businesses’ energy costs.
…
Many companies say they have responded by freezing hiring, cutting benefits and delaying expansion plans. With at least 60% of job growth historically coming out of the small-business sector, according to the government’s Small Business Administration, that kind of inertia could impede an economic recovery.

Already, 7.2 million jobs have been lost during the recession, and forecasts show little or no job growth expected for the rest of the year.

{ 0 comments }