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Gov’t Spending Is a Waste

April 30, 2013 By Leave a Comment

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Today in President Obama’s press conference he asked “how are we going to make sure that we’re reducing our deficit sensibly?” How, he went on to say, is through basic research. The Heritage Foundation has done the research.

President Obama’s April 30th Press Conference Transcript

Top 10 Examples of Wasteful Federal Spending in 2012

Government Waste Is Just the Tip of Spending Iceberg

The Center for Data Analysis Research Fellow Dr. David Muhlhausen took a look at 21 social programs your federal dollars support, including: Early Head Start, Head Start, numerous job-training programs, and many other social programs. Even the Government Accountability Office has concluded that these programs are ineffective but Congress continues to spend our federal dollars on these social programs.

Spending on social programs has far outpaced population growth. In 1962, the total population of the United States was 186,537,737 and social program spending was $125.67 per capita in 2010 dollars. In 2011, the nation grew to 311,591,917 people—at an annual growth rate of 1.1 percent. Also in 2011, the social spending figure grew to $1,421.02 per capita—an annual growth rate of 5.1. While the total population of the US won’t double for 91 years, the annual growth of social program spending per capita doubles every 19 years.
Given the fiscal crises the federal government is facing its time for deep budget cuts to federal social programs. Dr. Muhlhausen explains why and how in his new book, “Do Federal Social Programs Work?” .

Filed Under: Economy, Editorials, United States Tagged With: , , ,

The Green Energy Loan Racket

April 27, 2013 By 2 Comments

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The green energy loan racket’s biggest loss since Solyndra may come from a company that was bent on selling $100,000 luxury cars to people like Justin Bieber, Leonardo DiCaprio, and Al Gore.

The fact that hardworking taxpayers were forced to subsidize the Fisker Karma, a hybrid electric sports car catering to the super-wealthy, is a scandal in its own right. But such an expenditure is even more outrageous when you consider the administration’s insistence this week that sequester cuts forced it to slow the nation’s airports and air traffic control system to a crawl.
The FAA claimed it needed about $600 million in funding restored to prevent disruptions in aviation. Although Republicans repeatedly offered the administration the authority to make up for this shortfall with wasteful programs outside the FAA, the President has so far showed little interest, continuing to claim they can’t come up with the money needed to prevent the delays.

Yet the Obama administration and Congressional Democrats are apparently unconcerned about the $529 million loan they made Fisker, which is expected to declare bankruptcy.

The President’s spokesman and House Democrats brushed off questions about Fisker earlier this week. The company had a CCC+ credit rating when the Department of Energy (DOE) chose to lend it more than half a billion dollars. Now, it is likely that decision will cost taxpayers $171 million. The ultra-luxury electric car company will be the largest loss by the DOE loan program since Solyndra, the recipient of a $528 million government guarantee, went bankrupt in 2011.

The green energy loan guarantee program was a centerpiece of President Obama’s first-term agenda. He told us in virtually every speech that these types of “investments” would create jobs and drive an economic recovery.

The stimulus included billions of dollars for dozens of “green” jobs projects.
Yet just a few years later, the administration contends it doesn’t have the money to keep the air traffic control system running smoothly. If only the FAA had thought to affix solar panels to the control towers, maybe it could have applied for a DOE loan to keep itself going.

The administration argues government “investments” to companies like Fisker are necessary to drive development of new and revolutionary technologies. But Fisker wasn’t doing basic research; it was a commercial venture producing luxury vehicles, which had already raised more than a billion dollars of private capital. The federal loan guarantees did not enable any fundamentally new technology, and they weren’t necessary for Fisker to produce cars. What’s almost as bad as subsidizing electric cars for the super-wealthy is that the loan program appears to have been so mismanaged that the government continued to shell out money to Fisker long after it missed important milestones which were supposed to be conditions for further funding. Evidence introduced at the hearing on Wednesday showed the Department of Energy continued to bankroll Fisker for a year after it was warned the company wasn’t meeting these benchmarks, costing an extra $32 million the company should never have received. It appears Fisker was never able to produce a car that was really suitable for sale. Bruce Simon, the CEO of Omaha Steaks, was quoted in the Wall Street Journal this week describing his $100,000 Karma: “Mr. Simon says his car broke down four times over the span of a few months. Each time, Fisker Automotive Inc. picked it up and sent it by trailer from his home in Omaha, Neb., to a dealer in Minneapolis. “The Karma was ‘so vulnerable to software errors, and the parts used were of such poor quality that eventually I insisted they take the car back and return my purchase price, which they did,’ he says. ‘It’s a real shame, the car itself was beautiful.’”
Perhaps it is expenses like this that caused Fisker apparently to lose $557,000 on every car sold.

President Obama often speaks of the need for a “balanced approach” to reducing the deficit. But when his administration defends air traffic control disruptions and half-million-dollar electric lemons in the same week, you have to wonder about his sense of “balance.” Please share this story. These truths need to be shared with an unsuspecting electorate.

Filed Under: Economy, Environment, United States Tagged With: ,

Gold is to Capitalism What Debt is to Bankruptcy

February 17, 2013 By Leave a Comment

The Price of Gold in the Cold-Gold War

Darryl Robert Schoon
Posted Feb 17, 2013

The collapse of the USSR in 1991 was seen as the triumph of capitalism over communism. The 40-year cold war was over and the West had won. That perception, however, was as premature as it was misleading. The struggle of world powers wasn’t over. Today, the struggle continues in a far more fundamental venue; on capitalism’s home court in the arena of paper money.

The West, as Mao Tse-Tung once claimed, is not a paper tiger; unless, of course, you’re referring to its paper money.

In 1991, communism was, in fact, collapsing. But capitalism, unbeknownst to itself and others, was bankrupt after its costly decades-long struggle with communism. Today, the former communist super-powers, Russia and China, have re-emerged and are playing the high-hand of gold against England, the US and the West and their now vulnerable paper currencies.

England’s debt-based paper banknotes were the reason for the West’s three hundred year global hegemony. Because of its ability to wage war on credit and pass off its debt-based paper banknotes as money, England in the 18th and 19th centuries and, later, the US in the 20th achieved a level of world power not seen since the Roman Empire.

In the 1900s, Russia and China escaped the West’s capitalist dominion by adopting communism, an alternate economic paradigm, based on the theories of Karl Marx, Friedrich Engels and Vladimir Lenin. Communism was, in fact, a potent and dysfunctional amalgam of untested theories, unfounded hopes and totalitarian state oppression.

Ostensibly offering a more equitable distribution of wealth than the banker’s paradigm of credit and debt, Marxism/Leninism was, in fact, a bloody and costly trap into which Russia and China would both fall in their attempts to escape the West’s economic and political domination.

The West’s attempts to subjugate Russia and China would, however, ultimately cost the West its foundation of economic and political power, i.e. the ability to pass off debt-based paper banknotes as money.

In capitalist economies, debt-based paper money possessed intrinsic value because it was convertible to gold upon demand. Gold, in fact, was capitalism’s ‘secret sauce’, the essential ingredient that transformed the bankers’ debt-based banknotes into something other than government-issued IOUs.

Since 1971, however, the West’s paper banknotes are no longer convertible to gold. This is because after WWII, the US, in its attempts to militarily subjugate Russia and China overspentits massive gold reserves, forcing it to end the gold-convertibility of the US dollar. As a result, all currencies in the world formerly tied to the US dollar and hence to gold became fiat, i.e. currencies who have value only because of government fiat, i.e. command.

After 1971, it was only a matter of time until the bankers’ debt-based paper banknotes – without the convertibility to gold – would become increasingly unstable and ultimately worthless; and, today, in 2013, the former has happened and the latter is underway.

The value of today’s paper money is determined solely by currency speculators placing leveraged bets in the hopes of achieving short-term gains. Once the gold-convertibility of paper money ended, modern currencies became paper coupons with expiration dates written in invisible ink.

Today, the West and its bankers are desperately hoping that no one will notice, hoping thereby to prevent a hyperinflationary collapse of paper money should confidence in fiat paper money evaporate.

Russia and China, however, are preparing for that very day. Russia and China are stockpiling gold as fast as they can in anticipation of a coming currency crisis triggered by the West’s increasingly suspect paper money.

For the former communist powers, Russia and China, it’s payback time; but for England and the US, it’s blowback time

Blowback, an unforeseen and unwanted effect, result, or set of repercussions Merriam-Webster dictionary

THE EAST IS GOLD WITH A RED TINGE

On February 6, 2013, in China Gold Imports from Hong Kong Climb to record on Wealth, Bloomberg New reported:

Exports of gold to Hong Kong from China more than tripled to 310,861 kilograms in 2012 from about 95,529 kilograms a year earlier, according to Bloomberg calculations. Shipments were 29,718 kilograms in December, up from 28,978 kilograms in November.

In the article, Bloomberg News also noted the growing relationship between China’s wealth and the ownership of gold:

China’s urban per capita disposable income rose 12.6 percent in nominal terms in 2012 to 24,565 yuan, the National Bureau of Statistics said on Jan. 18. Per capital rural net income increased 13.5 percent in nominal terms, and 10.7 percent in real terms.
Not only is China buying record amounts of gold, Russia is buying even more. On February 11th in Putin Turns Black Gold Into Bullion as Russia Outbuys World, Bloomberg News reported that Russia’s President Putin is investing Russian’s oil income in gold bullion at a record rate: When Vladimir Putin says the U.S. is endangering the global economy by abusing its dollar monopoly, he’s not just talking. He’s betting on it…. His central bank has added 570 metric tons of the metal in the past decade, a quarter more than runner-up China, according to IMF data compiled by Bloomberg. The added gold is also almost triple the weight of the Statue of Liberty.

China, the world’s number one producer of gold, and Russia, the world’s fourth largest producer, also no longer allow domestically-mined gold to be sold outside their countries. This means Russia and China are accumulating gold both by buying and mining it in record amounts.

GEOPOLITICS AND THE PRICE OF GOLD

Money and power are two sides of the same coin and both are at the center of today’s gold market. With growing demand for gold from both China and Russia, it would be assumed that prices should be rising as supplies of gold are becoming increasingly tight.

Sandeep Jaitly is the author of the Gold Basis Service, a subscription-only commentary on developments in the gold and silver bases and the ‘implications about future movements for prices’. In his February newsletter, Jaitly referred to an earlier statement from January 25th:

The bases/co-bases across all maturities for both gold and silver are falling/rising indicating substantial demand for physical bullion that is not being adequately accommodated. February gold has entered backwardation as of last week. As a consequence of the fall/rise in the bases/co-bases, volatility of bullion against fiat is likely to increase. The opportunity to exchange gold for silver should be taken if the gold/silver ratio rises substantially (above 55.)

Sandeep Jaitly’s observations about gold and silver have been remarkably consistent over the past year. Demand for both gold and silver have been constant while supplies of both metals have been pressured leading to indications that an upswing movement in prices can be expected and the accumulation of both metals is encouraged.

In the past year, however, gold and silver have not performed in accordance with such expectations. I believe this temporary anomaly is attributable to two factors: (1) the increasing determination of Western central and bullion banks to prevent another almost-vertical price movement in gold as happened in July/August of 2011 when gold rose 27% in only 60 days; and (2) the current Chinese strategy to purchase gold at the lowest price points possible.

On February 11th when gold collapsed to a low of $1642, Takoa de Silva of Bull Market Thinking asked a trader who runs a market-making desk in London’s gold market to explain the drop in gold.

Commenting on today’s collapse he said, “I’m not that worried about the sell-off today, it’s just the logical thing. I was surprised they waited so long [to take it down], because many opportunities to push it to that level existed before…and it finally happened, and that’s good for the market. This is actually a blessing. We are still not at the lows of January at $1625…but at the moment this is probably as far as it’s going to go [$1642]. There’s good support here.”

He further added that, “This is actually the typical reaction of the Chinese New Year, because the shorts, they know there will be no physical demand for a couple of days, there won’t be support there, and so they are smart. This is smart money just pushing it to the extremes. For me this is an opportunity to get something cheap in for the mid-term. But you can’t fight the trend at the moment in terms of what’s in the air for the Fed-speak etc., but the long-term money stays and sits.”

The statement, the opportunity to get something cheap describes China’s buying strategy perfectly. Both China and Russia want to buy the West’s gold at the lowest possible price and they will do so accordingly. All investors should do the same.

In my current youtube video, Bankers, England and Israel, I explain the role of England and bankers in the creation of the state of Israel. As stated previously, money and power are two sides of the same coin. The creation of the state of Israel is no exception.

Sandeep Jaitly’s observations about the gold and silver markets are correct. The accumulation of both metals is encouraged. Regarding the continuing struggle between gold and paper money, precious metal investors have already put their money where their beliefs are – and they should keep it there.

Buy gold, buy silver, have faith.

###

Darryl Robert Schoon
email: info@drschoon.com
website: www.drschoon.com
website: www.survivethecrisis.com
Schoon Archive

About Darryl Robert Schoon

In college, I majored in political science with a focus on East Asia (B.A. University of California at Davis, 1966). My in-depth study of economics did not occur until much later.

In the 1990s, I became curious about the Great Depression and in the course of my study, I realized that most of my preconceptions about money and the economy were just that – preconceptions. I, like most others, did not really understand the nature of money and the economy. Now, I have some insights and answers about these critical matters.

In October 2005, Marshall Thurber, a close friend from law school convened The Positive Deviant Network (the PDN), a group of individuals whom Marshall believed to be “out-of-the-box” thinkers and I was asked to join. The PDN became a major catalyst in my writings on economic issues.

When I discovered others in the PDN shared my concerns about the US economy, I began writing down my thoughts. In March 2007 I presented my findings to the Positive Deviant Network in the form of an in-depth 148-page analysis, “How to Survive the Crisis and Prosper In The Process.”

The reception to my presentation, though controversial, generated a significant amount of interest; and in May 2007, “How To Survive The Crisis And Prosper In The Process” was made available at www.survivethecrisis.com and I began writing articles on economic issues.

The interest in the book and my writings has been gratifying. During its first two months, www.survivethecrisis.com was accessed by over 10,000 viewers from 93 countries. Clearly, we had struck a chord and www.drschoon.com, has been created to address this interest.

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Filed Under: Economy, Points Of Interest, United States Tagged With: , ,

A Rally with Less Gusto

February 12, 2013 By 1 Comment

Just as I was beginning to notice the high stock market numbers. The Market loses some exuberance last week. News out of Europe weighed on U.S. investors. Despite some selling pressure however, the rally rolled on as the S&P 500 edged to a five-year high. thats right you heard it. A five years high but the week ended with mixed signals, with the S&P 500 gaining 0.31%, the Dow losing 0.12%, and the Nasdaq gaining 0.46%.

Friday 2/8/13 showed very low volume as snowstorm Nemo pounded the Northeast and traders watched the clock, waiting for the final bell to ring so they could hustle home. Even so, a batch of encouraging economic data was enough to push the S&P 500 to its highest level since November 2007.

Reports showed that international trade in China and Germany has improved, and that the U.S. trade deficit narrowed in December, indicating that global demand is improving. To the contrary, the December wholesale inventory report released earlier in the week showed a 0.1% decrease, which was significantly worse than expectations. This carries negative implications for the upcoming revised fourth quarter GDP growth report as the Bureau of Economic Analysis had estimated inventory growth of 0.7% in their preliminary estimates.

Troubles in Europe drove most of the market action last week as downbeat European equities prompted selloffs in the U.S. Scandals have rocked European markets as regulators investigate several banks for trading irregularities as well as one of Greece’s leading statisticians, who has been charged with falsifying fiscal data. According to European Central Bank President Mario Draghi, the Eurozone economy remained weak and contracted in the second and third quarters of 2012. Two quarters of negative growth meets the technical definition of a recession, and economists widely expect the malaise to continue into 2013. On the positive side, recent gains in European equities and a strong Euro show that investors have regained confidence in the Eurozone’s ability to clean up its mess. I wonder if economist can say the same about US markets.

Looking ahead, analysts will have a few January and February economic reports to chew on this week, which economists widely expect will show that the U.S. economy started off 2013 at a modest pace. January retail sales figures come out on Wednesday, and the preliminary February reading on consumer sentiment will be released Friday. Chinese markets will be closed all of this week in observance of the Chinese New Year, so attention will be focused on European and domestic headlines. While there is no way to know what will happen with the rally this winter we’ve been enjoying, my primary hope is that the fundamentals will continue to show improvement in the worldwide economy. Given the state of our US economy and how deficit spending doesn’t look like it will end anytime soon. I suspect the trillions of dollars keeping us in the red will wreak nothing but more bad news for Americans.

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Filed Under: Economy, United States Tagged With: , , , ,

Obama’s Job Killing Policies by the Numbers

January 20, 2013 By 4 Comments

 

obama failed

89,000:

 The Number Of Stimulus Checks Sent To Dead Or Incarcerated People. (The Wall Street Journal, 10/7/10)

72,000:

 Projected Shrinkage In Army Soldiers Due To Obama’s Budget. (McClatchy, 2/13/12)

67,000:

 Number Of Homeless Veterans. (Reuters, 7/26/12)

62,900:

 Shortage Of Doctors By 2015 Due To ObamaCare. (The New York Times, 7/28/12)

$53,224:

 Your Share Of The National Debt. (U.S. Treasury Department Accessed 1/17/13; U.S. Census Bureau, Accessed 1/17/13)

45,696:

 Pages Of New Rules Added To The Federal Register During Obama’s First Two Years In Office. (Competitive Enterprise Institute, 2011)

23,000:

 The Number Of Jobs Obama Knew His Drilling Moratorium Would Kill. ( The Wall Street Journal ,8/21/10)

20,000:

 Projected Shrinkage Of Marine Force Due To Obama’s Budget. (McClatchy, 2/13/12)

$18,804:

 Increase In Your Share Of The National Debt Since Obama Took Office. (U.S. Treasury Department Accessed 1/17/13; U.S. Census Bureau, Accessed 1/17/13)

$15,745:

 Average Cost Of Family Health Care Premiums, A $3,065 Increase Since Obama Took Office. (The Kaiser Family Foundation, 2012)

$15,500:

 Annual Cost Per Household From Federal Regulations. (Small Business Administration, September 2010)

$10,585:

 Cost Per Employee That Federal Regulations Place On Small Businesses. (Small Business Administration, September 2010)

$6,200:

 Projected Shrinkage In Navy Personnel Due To Obama’s Budget. (McClatchy, 2/13/12)

$4,520:

 Decline In Real Median Household Income Since Obama Took Office. (“Household Income Trends, August 2012,”Sentier Research , 9/25/12)

$4,200:

 Projected Shrinkage In Air Force Personnel Due To Obama’s Budget. (McClatchy, 2/13/12)

$4,153:

 Wind Turbines Awarded Stimulus Grants That Were Manufactured By Foreign Companies.(Analysis Of 1603 Award Information From TheU.S. Department Of Treasury; And Wind Market Reports By The American Wind Energy Association, Accessed 11/3/12)

$3,700:

 Number Of Tax Delinquents Who Received Stimulus Funds. (Government Accountability Office, April 2011)

2060:

 Year Federal Spending Will Reach 50 Percent Of GDP. (CBO, 6/22/11)

2037:

 Year That Federal Debt Will Reach 200 Percent Of GDP. (CBO, 6/22/11)

2036:

 Year That The Social Security Trust Fund Will Be Exhausted. (The Trustees Of Social Security & Medicare, 4/23/12)

2024:

 Year That Medicare’s Trust Fund Will Be Exhausted. (The Trustees Of Social Security & Medicare, 4/23/12)

1,722:

 Number Of Waivers Granted To Unions And Businesses So That ObamaCare Would Not Outlaw Their Health Care Plans. (HHS.gov, Accessed 1/17/13)

1,603:

 Number Of Regulations That Would Impact Small Businesses Proposed By Obama Administration In First Two Years In Office.(Competitive Enterprise Institute, 2011)

1,360:

 Days Since Harry Reid’s Senate Has Passed A Budget Resolution. (S. Con. Res. 13, Roll Call 173; 4/29/09)

$859.40:

 The Current Monthly Price Of A Moderate-Cost Food Plan For A Family Of Four With Young Children, Up From $819.40 Since Obama Became President. (USDA , 2/09; USDA, 11/12)

758:

 Number Of Bundlers Who Have Brought In At Least $180.1 Million Of Obama’s Total Haul.(Center For Responsive Politics, Accessed 1/17/13)

408:

 Number Of Regulations Proposed By Obama During First Two Years That Have An Economic Impact Of Over $100 Million. (Competitive Enterprise Institute, 2011)

75%:

 Increase In The Average Price Per Gallon Of Gas Since Obama Took Office. (U.S. Energy And Information Administration, Accessed 1/17/13)

80%:

 Small Businesses That Could Be Forced To Change Health Care Plans As A Result Of ObamaCare. (NFIB, 7/11)

73.5%:

 Federal Debt Held By The Public As Share Of GDP By End Of FY2012. (OMB, 7/27/12)

61%:

 The Amount By Which New Offshore Leases For Oil And Natural Gas Drilling Has Declined Under Obama. (FactCheck.org, 10/19/12)

54.3%:

 The Share Of Young Adults 18-24 Currently Employed, The “Lowest Since The Government Began Collecting These Data In 1948.” (Pew Research Center, 2/9/12)

49.1%:

 “Percent Of The Population That Lives In A Household Where At Least One Member Received Some Type Of Government Benefit In The First Quarter Of 2011.” (The Wall Street Journal, 5/26/12)

38.1:

 Average Number Of Weeks That It Takes To Find A Job. (Bureau of Labor Statistics, Accessed 1/17/13)

27.6%:

 Unemployed Workers Out Of Work For Over A Year. (Bureau of Labor Statistics, Accessed 1/17/13)

27%:

 Student Loan Borrowers That Have Past Due Balances. (Federal Reserve Bank Of New York, 3/5/12)

25%:

 Increase In The Average Cost Of In-State Tuition At A Four Year College Since President Obama Took Office. (College Board, 2011)

24.2%:

 Increase In The Average Cost Of Family Health Care Premiums Under Obama. (The Kaiser Family Foundation, 2012)

17%:

 Cut To Medicare Benefits When Trust Fund Is Exhausted. (House Ways & Means Committee Hearing, 6/22/11)

14.4%:

 Real (U-6) Unemployment Rate. (Bureau of Labor Statistics, Accessed 1/17/13)

14%:

 African American Unemployment Rate. (Bureau of Labor Statistics, Accessed 1/17/13)

14%:

 Seniors That Believe They Can Retire Comfortably. (Reuters, 5/15/12)

7.8%:

 Unemployment Rate, Same As When Obama Took Office. (Bureau of Labor Statistics, Accessed 1/17/13)

4:

 Record Number Of Years Of +$1 Trillion Deficits On Obama’s Watch. (The Hill, 9/10/12)

0:

 Number Of Democrats In The House And Senate, Including Obama, Who Voted To Increase The Debt Ceiling In 2005-2006, When The Debt Was Half What It Is Now. (H. Con. Res. 95; Roll Call Vote 88; Passed 218-214; R 218-12; D 0-201; I 0-1, 3/17/05; H.J. Res 47: Adopted 52-48: R 52-3; D 0-44; I 0-1, 3/16/06, Obama Voted Nay)
Filed Under: Economy, Featured Tagged With: , , , ,

Obama’s Failures

January 20, 2013 By 13 Comments

Obama's Failures

Four More Years of Epic Failures?

$46.2 Trillion:

 Total Federal Spending Proposed By Obama’s FY2013 Budget Through 2022. (OMB, 7/27/12)

$25. 4 Trillion:

 Projected Federal Debt In 2022 Due To Obama’s Binge Spending. (OMB, 7/27/12)

$16.4 Trillion:

 Current National Debt ($ 16,432,632,102,288.69 ).(U.S. Treasury Department, Accessed 1/17/13)

$9.2 Trillion:

 Amount Obama’s FY2013 Budget Would Add To The Debt Through FY2022. (OMB, 7/27/12)

$6.4 Trillion:

 Cumulative Deficits Over FY2013-2022. (OMB, 7/27/12)

$5.8 Trillion:

 Added To The National Debt Since Obama Took Office. (U.S. Treasury Department, Accessed 1/17/13)

$5.3 Trillion:

 Total Interest Payments On The National Debt Due To Obama’s Proposed Budget, FY2013-2022.(OMB, 7/27/12)

$2.6 Trillion:

 True Cost Of ObamaCare Once Fully Implemented. (Office Of The Speaker Of The U.S. House Of Representatives, Report, 1/6/11)

$1.9 Trillion:

 Higher Taxes In Obama’s Budget. (OMB, 7/27/12)

$1.75 Trillion:

 Annual Cost Of Federal Regulations. (Small Business Administration, September 2010)

$1.416 Trillion:

 Federal Budget Deficit For FY2009 – Highest In U.S. History. (CBO, 10/7/10)

$1.298 Trillion:

 Federal Budget Deficit For FY2011 – Second Highest In U.S. History. (CBO, 10/7/11)

$1.294 Trillion:

 Federal Budget Deficit For FY2010 – Third Highest In U.S. History. (CBO, 10/7/10)

$1.18 Trillion:

 Total Cost Of Obama’s First Stimulus With Interest. (CBO, 1/31/12, CBO, 1/27/09)

$1.17 Trillion:

 American Debt Held By China. (U.S. Treasury Department, Accessed 1/17/13)

$1.090 Trillion:

 Federal Budget Deficit For FY2012 – Fourth Highest In U.S. History. (CBO, 10/5/12)

$833 Billion:

 Price Tag Of Obama’s First Failed Stimulus.(CBO, 8/23/12)

$820 Billion:

 Amount Of Taxes In ObamaCare. (CBO, 3/13/12;JCT, 6/15/12; CBO, 9/19/12)

$716 Billion:

 Amount Of Medicare Cuts In ObamaCare. (Letter From Congressional Budget Office To Speaker John Boehner, 7/24/12)

$518 Billion:

 Amount Of Regulatory Burden Since Obama Took Office. (American Action Forum, 1/14/13)

$487 Billion:

 The Amount By Which Obama’s FY2013 Budget Cuts Defense Over The Next Ten Years. ( USA Today, 2/13/12)

$447 Billion:

 Price Tag Of Obama’s Second Stimulus. (The White House, 9/8/11)

$347.1 Billion:

 Debt Service Costs For Borrowing To Pay For Obama’s First Stimulus. (CBO, 1/27/09)

$290 Billion:

 U.S. Trade Deficit With China In 2012. (U.S. Census Bureau, Accessed 1/17/13)

$236.7 Billion:

 Amount Of Regulatory Burden In 2012. (American Action Forum, 1/14/13)

$188 Billion:

 Taxpayer Funds For Fannie Mae And Freddie Mac. (ProPublica, Accessed 10/10/12)

1.65 Million:

 Jobs Forecasted To Be Lost Due To New And Pending EPA Regulations. (NERA Economic Consulting, September 2011)

1.1 Million:

 Jobless Seniors Who Have Been Unemployed For More Than Six Months. (Charles A. Jeszeck Testimony, 5/15/12)

1,068,000:

 Discouraged Workers That Have Stopped Looking For Work. (Bureau of Labor Statistics, Accessed 1/17/13)

994,000:

 Construction Jobs Lost Since Obama Took Office. (Bureau of Labor Statistics, Accessed 1/17/13)

$900,000:

 Bonus That White House Treasury Secretary Nominee Jack Lew Received From Citigroup After The Company Got A Taxpayer-Funded Bailout. (Salon, 1/10/12)

757,000:

 Unemployed Veterans. (Bureau of Labor Statistics, Accessed 1/17/13)

564,000:

 Manufacturing Jobs Lost Since Obama Took Office. (Bureau of Labor Statistics, Accessed 1/17/13)

226,000:

 Unemployed Post-9/11 Era Veterans. (Bureau of Labor Statistics, Accessed 1/17/13)

$100,000:

 Amount Obama Senior Adviser David Plouffe Was Paid By A Firm Doing Business With Iran. (The Washington Post , 8/5/12)

$28.5 Billion:

 Outstanding Government Investment In Bailouts Of Auto Industry. (Treasury Department, 1/10/13)

$24.3 Billion:

 Amount Government Expects To Lose On Bailouts Of Auto Industry. (Treasury Department, 1/10/13)

$24 Billion:

 Stimulus Funds Sent To Tax Cheats.(Government Accountability Office, April 2011)

$1.3 Billion:

 Amount Taxpayers Will Not Recover From Bailout Of Chrysler. (FactCheck.org, 6/6/11)

$535 Million:

 Stimulus Loan To The Failed Solar Company Solyndra. (The Oakland Tribune, 11/4/10)

$86.8 Million:

 Amount Of Paperwork Burden Hours Imposed By Federal Government Regulations In 2012.(American Action Forum, 1/14/13)

$46.2 Million:

 Number Of Americans Receiving Food Stamps.(Department Of Agriculture, 1/4/13)

$22.7 Million:

 Americans Unemployed, Underemployed Or Have Given Up Looking For Work. (Bureau of Labor Statistics, Accessed 1/17/13)

$18 Million:

 Cost Of The Stimulus Website Recovery.org.(ABC News’ The Note, 7/8/09)

15.8 Million:

 Adult Children Who Lived With Their Parents In 2010. (U.S. Census Bureau, 6/12)

15.5 Million:

 Adults Aged 25-34 That Lived With Their Parents In 2010. (U.S. Census Bureau, 6/12)

12.2 Million:

 Unemployed Americans. (Bureau of Labor Statistics, Accessed 1/17/13)

7.9 Million:

 Americans Working Part-Time For Economic Reasons. (Bureau of Labor Statistics, Accessed 1/17/13)

$6.7 Million:

 Cost Per A Job From Obama’s 1705 Stimulus Green Energy Loan Program. (Testimony Of Veronique De Rugy, 6/19/12)

$5.4 Million:

 As Of November 2012, Number Of Mortgages Either 30 Days Delinquent Or In Foreclosure.(Lender Processing Services, 12/21/12)

2.6 Million:

 Unemployed Workers That Have Given Up Looking For Work. (Bureau of Labor Statistics, Accessed 1/17/13)

2.1 Million:

 Increase In The Amount Of Workers Unemployed For 27 Weeks Or Longer Under Obama. (Bureau of Labor Statistics, Accessed 1/17/13)
Filed Under: Economy, Featured, Politics Tagged With: ,

Once Upon A Time Obama was Right; then He Changed His Mind

November 23, 2012 By Leave a Comment

Once upon a time Obama was right. He was right when he said this “The last thing you want to do is raise taxes in the middle of a recession because that would just suck up, and take more demand out of the economy and put business in a further hole.” That was Obama in August of 2009.

Today, in a still weak economy, raising taxes has moved from being the “last thing” to do to being Mr. Obama’s top priority. The First thing he will do.  On the Obama administration’s to-do list are

higher taxes on dividends, capital gains taxes, and taxes on high-earners,  taxing interest income, taxing overseas profits, and of course last but not least inheritance taxes. As a result of all these taxes I predict the economy does not get better but gets worse. Ask yourselves have you ever been hired by a poor person?

These are the effects of higher taxes:

1.    LOST JOBS: Many businesses go bankrupt, because they can’t afford to operate after government takes it s cut. Other businesses flee the country, to escape the high taxes. And still other businesses must cut their payrolls to stay within their incomes. The result in each case is the loss of jobs those businesses provided in the economy.

2.   SHODDY PRODUCTS: Multiple governments levy so many taxes on businesses that “taxes” is the highest budget items on the ledger sheets of most businesses. These taxes take away money otherwise used to improve quality. Instead, businesses must cut corners to make the products and pay the high taxes. Many recalls are the results of businesses cutting too many corners, to save money so they can pay the high taxes.

3.    LOWER WAGES: Multiple governments levy so many taxes on businesses that “taxes” is the highest budget items on the ledger sheets of most businesses. These taxes take away some of the money otherwise used to pay wages. So employers can’t pay good wages.

4.   HIGHER PRICES: Multiple governments levy so many taxes on businesses that “taxes” is the highest budget items on the ledger sheets of most businesses. Businesses have to raise prices to get money to pay these taxes. So product prices go up. This leads to inflation.

5.   CHRONIC RECESSION: The high taxation takes so much away from the economy that it enters a permanent form of recession. If government tries to boost the economy with increased government spending, the result is stagflation (simultaneous high inflation and unemployment) instead of prosperity. The only cure for stagflation is to cut both taxes and government spending. But this takes time to happen, keeping the effects of overtaxation in place for a time after the overtaxation ends.

Stop asking for more from government. You will regret getting what you asked for.

The people who say that taxes must be raised to help the economy are out of their minds.

Their desire to “help the economy” instead causes inadequate incomes, low wages, high prices, shoddy merchandise, product unavailability, product discontinuation, lost jobs, mortgage foreclosures, rental evictions, sheriff sales, homelessness, poverty, crime, chronic recessions, and a loss of purchasing power for all governments. It’s time to end the power of government to create such A mess with a tax ceiling. A TAX CEILING is a constitutional amendment that prevents government from taking more than 10 percent of the income of any person, family, or business.

WHO ACTUALLY PAYS FOR TAXES?

WHAT IS A FLAT TAX?

HOW INTELLIGENT IS GOVT?

 

 

 

Filed Under: Economy, United States Tagged With: , ,

President Obama’s Blacklash

March 5, 2012 By 1 Comment

 

This November we can either nosedive into a cycle of dependency that is turning America into a welfare nation; a “government plantation” where the underclass are doomed to 21st-century servitude. Now, FreedomWorks Fellow Deneen Borelli, one of the most visible and outspoken black conservatives in the country, is fighting back. She is taking action, not just talking, and speaking up for those who can’t or are too afraid to do so. She has written a book called Blacklash.

Borelli’s argument is a solid one: the problem begins with President Barack Obama, whose policy overreach has frozen racial tensions in this country when he should have been thawing them. The Left, having introduced the race card to defend Obama from the massive unpopularity of his policies,. They  have turned a blind eye to the leadership failures that have spread down through black career politicians who are traitors to minority success.  They are causing a cycle of oppression in America: specifically Charles Rangel, Al Sharpton, and Jesse Jackson, each of whom has enriched himself at the expense of his community. Borelli also challenges the ninety-five percent of the black Americans who voted for Obama without caring about or vetting his dangerous politics. She is my hero today because she is saying what many in the minority (Hispanics and Blacks) think but won’t say. I applaud her efforts and endorse her book. I highly recommend it. Please read it and arm yourselves with the truth. She speaks out against the elites and crony capitalists who drive expensive government policies such as needless green initiatives and ObamaCare. She exposes government regulation and the NAACP as nothing more than a liberal front group. She points out each grave flaw in the current administration, big government, unions, and special-interest groups. She demands that new black leaders abandon the false rhetoric and inexcusable lies of so-called progressive politics. She asks the questions that people of all colors are afraid to ask, and delivers the honest, unyielding, and controversial answers that have made her the favorite of the left-wing firing squad.

Today, with taking a stand against Obama, comes the fear of being called a racist. There is no fear in Deneen Borelli. Her outspoken voice gives everyone the courage and ammunition needed to stand up against destructive progressive tyrants. She is a brave critic, bold and proactive—not reactive. Hers is a story a lot of people don’t want to hear no matter how firmly they believe it to be true. Deneen Borelli is here to ignite a fire in independent-minded Americans. Blacklash is the fuse.

Statistically speaking most of those who voted for President Obama are the ones suffering the worst. The administration argues the Bush policies are to blame but if President Bush was a spender, then President Obama is Bush on steroids 1000 times over. All you need do is look at his policies and look at the facts. Look at the numbers to see how much worse this president has made things.

 

 

Filed Under: Economy, Editorials, Politics

50 Things you Should Know About Our Economy.

February 1, 2012 By 13 Comments

The U.S. economy was once the greatest economic machine in modern history.  It was truly a wonder to behold. It worked so well that entire generations of Americans came to believe that America would enjoy boundless prosperity indefinitely. It was that optimism which I believe is a hindrance to Americans today. Many are not paying attention or think that somehow it will all turn around in the end. I know this because I speak to family and friends about the economic problems our country is facing, but all I get is worried expressions that last about a minute, then it’s back to the mundane routines of life.

Facts speak for themselves. It is a fact that none of the systemic problems that contributed to the 2008 collapse have been fixed. Mark Mobius, the head of the emerging markets desk at Templeton Asset Management, was recently was quoted in Forbes Magazine as saying the following: “There is definitely going to be another financial crisis around the corner because we haven’t solved any of the things that caused the previous crisis.”  He makes that statement because the financial reforms  law that President Barack Obama and the Democrat Congress passed a while back was a complete and total joke. Laws to make us feel good that SOMETHING was getting done on our behalf but do nothing to fix the problems.

Meanwhile on Mainstreet economic woes continue, job losses continue but STILL the people slumber. Continued prosperity is not guaranteed for any nation, and yet the people continue to believe everything will be ok.  In past several decades, some very alarming long-term economic trends have developed that are absolutely destroying the economy.  If dramatic changes are not made soon, a complete and total economic collapse will be unavoidable. Unfortunately, American people will never agree to the changes needed to our economic and financial systems without fully understanding what is causing the problems we are in.  We have turned our backs on the economic principles which work. Ignored the warning signs, and rejected wisdom handed down to us by the founding fathers of our nation..

You’ve heard it before ‘those who sow to the wind, shall reap the whirlwind.’ We are going deeper into an economic whirlwind brought upon us by people who we trusted in political office to act on our behalf. It didn’t start with this President but I think the continued spending by this administration is the catalyst which will take us over the edge.  Here are some things to know:

 

#1 Do you remember how much was made of the “Misery Index” during the presidency of Jimmy Carter?  At that time, the “Misery Index” was constantly making headlines in newspapers all across the country.  Well, according to John Williams of Shadow Government Statistics, if we calculated unemployment and inflation the same way that we did during the Carter administration, then the Misery Index today would actually be higher than at any point during the presidency of Jimmy Carter.

#2 According to the U.S. Bureau of Labor Statistics, an average of about 5 million Americans were being hired every single month during 2006.  Today, an average of about 3.5 million Americans are being hired every single month.

#3 According to the Wall Street Journal, there are 5.5 million Americans that are currently unemployed and yet are not receiving unemployment benefits.

#4 All over America, state and local governments are selling off buildings just to pay the bills.  Investors can now buy up government-owned power plants, prisons and municipal buildings from coast to coast. For example, the mayor of Newark, New Jersey recently sold off 16 government buildings (including the police and fire headquarters) just to pay some bills.

#5 When Americans think of “government debt”, most of them only think of the federal government, but it is not just the federal government that has a massive debt problem.  State and local government debt has reached an all-time high of22 percent of U.S. GDP.

#6 If you can believe it, one out of every seven Americans  has at least 10 credit cards.

#7 Credit card usage in the United States is on the increase once again.  During the month of March, revolving consumer credit jumped 2.9%.  Sadly, it looks like Americans have not learned their lessons about the dangers of credit card debt.

#8 Last year, Social Security ran a deficit for the first time since 1983, and the “Social Security deficits” in future years are projected to be absolutely horrific.

#9 The U.S. government now says that the Medicare trust fund will run out five years faster than they were projecting just last year.

#10 Right now we are watching what could potentially be the worst Mississippi River flood ever recorded play out right in front of our eyes.  One agricultural economist at Mississippi State University believes that this disaster could do 2 billion dollars of damage just to farms alone.

#11 The “tornadoes of 2011” that we just saw in the southeast United States are being called the worst natural disaster that the U.S. has seen since Hurricane Katrina.  It has been estimated that up to 25 percent of all of the poultry houses in Alabama were either significantly damaged or destroyed.  It is also believed that millions of birds were killed.

#12 The economic effects of the BP oil spill just seem to go on and on and on.  The number of very sick fish in the Gulf of Mexico is really starting to alarm scientists.  The following is how one local newspaper recently described the situation….

Scientists are alarmed by the discovery of unusual numbers of fish in the Gulf of Mexico and inland waterways with skin lesions, fin rot, spots, liver blood clots and other health problems.

#13 The number of “low income jobs” in the U.S. has risen steadily over the past 30 years and they now account for 41 percent of all jobs in the United States.

#14 All over America, hospitals that care for the poor and needy are so overwhelmed and are so broke that they are being forced to shut down.  Recently a local newspaper in Florida ran an article about two prominent charity hospitals in Illinois that have served the poor for more than 100 years but are now asking for permission to shut down….

Two charity hospitals in Illinois are facing a life-or-death decision. There’s not much left of either of them – one in Chicago’s south suburbs, the other in impoverished East St. Louis – aside from emergency rooms crowded with patients seeking free care. Now they would like the state’s permission to shut down.

#15 The U.S. dollar is in such bad shape that now even Steve Forbes is predicting that the U.S. is “likely” to go back to a gold standard within the next five years.

#16 Most Americans don’t realize how much the U.S. dollar has been devalued over the years.  An item that cost $20.00 in 1970 would cost you $115.93 today.  An item that cost $20.00 in 1913 would cost you $454.36 today.

#17 Over the past 12 months the average price of gasoline in the United States has gone up by about 30%.

#18 U.S. oil companies will bring in about $200 billion in pre-tax profits this year.  They will also receive about $4.4 billion in specialized tax breaks from the U.S. government.

#19 It is being projected that for the first time ever, the OPEC nations are going to bring in over a trillion dollars from exporting oil this year.  Their biggest customer is the United States.

#20 According to the Pentagon, there are minerals worth over a trillion dollars under the ground in Afghanistan.  Now, J.P. Morgan is starting to tap those riches with the help of the U.S. military.

#21 Speaking of J.P. Morgan, most Americans don’t realize that they are actually the largest processor of food stamp benefits in the United States.  In fact, the more Americans that go on food stamps the more money that J.P. Morgan makes.

#22 When 2007 began, there were about 26 million Americans on food stamps.  Today, there are over 44 million on food stamps, and one out of every four American children is on food stamps.

#23 Back in 1965, only one out of every 50 Americans was on Medicaid.  Today, one out of every 6 Americans is on Medicaid.

#24 Only 66.8% of American men had a job last year.  That was the lowest level that has ever been recorded in all of U.S. history.

#25 The financial system is more vulnerable today than it was back in 2008 before the financial panic. Today, the world financial system has been turned into a giant financial casino where bets are made on just about anything you can possibly imagine, and the major Wall Street banks make a ton of money from this betting system.  The system is largely unregulated (the new “Wall Street reform” law has only changed this slightly) and it is totally dominated by the big international banks. The danger from derivatives is so great that Warren Buffet once called them “financial weapons of mass destruction”. It is estimated that the “derivatives bubble” is somewhere in the neighborhood of a quadrillion dollars, and once it pops there isn’t going to be enough money in the entire world to bail everyone out.

#26 Between December 2000 and December 2010, the United States ran a total trade deficit of 6.1 trillion dollars with the rest of the world, and the U.S. has had a negative trade balance every single year since 1976.

#27 The United States has lost an average of 50,000 manufacturing jobs per month since China joined the World Trade Organization in 2001, and the U.S. trade deficit with China is now 27 times larger than it was back in 1990.

#28 In 2010, the number one U.S. export to China was “scrap and trash”.

#29 All over the United States, many of our once great manufacturing cities are being transformed into hellholes.  In the city of Detroit today, there are over 33,000 abandoned houses, 70 schools are being permanently closed down, the mayor wants to bulldoze one-fourth of the city and you can literally buy a house for one dollar in the worst areas.

#30 During the first three months of this year, less new homes were sold in the U.S. than in any three month period ever recorded.

#31 New home sales in the United States are now down 80% from the peak in July 2005.

#32 America’s real estate crisis just seems to get worse and worse.  U.S. home prices have now fallen a whopping 33% from where they were at during the peak of the housing bubble.

#33 According to a new report from the AFL-CIO, the average CEO made 343 times more money than the average American did last year.

#34 The European debt crisis could cause a global financial collapse like the one that we saw in 2008 at any time.  The world economy is incredibly interconnected today, and the United States would not be immune.  A recent IMF report stated the following about the growing sovereign debt crisis in Europe….

Strong policy responses have successfully contained the sovereign debt and financial-sector troubles in the euro area periphery so far. But contagion to the core euro area and then onward to emerging Europe remains a tangible risk.

#35 According to one study, the 50 U.S. state governments are collectively 3.2 trillion dollars short of what they need to meet their pension obligations.

#36 A different study has shown that individual Americans are $6.6 trillion short of what they need to retire comfortably.

#37 The cost of college tuition in the United States has gone up by over 900 percent since 1978.

#38 According to the Bureau of Economic Analysis, health care costs accounted for just 9.5% of all personal consumption back in 1980.  Today they account for approximately 16.3%.

#39 One study found that approximately 41 percent of working age Americans either have medical bill problems or are currently paying off medical debt.

#40 The combined debt of the major GSEs (Fannie Mae, Freddie Mac and Sallie Mae) has increased from 3.2 trillion in 2008 to 6.4 trillion in 2011.  Thanks to our politicians, U.S. taxpayers are standing behind that debt.

#41 The U.S. government is over 14 trillion dollars in debt and the budget deficit for this year is projected to be about 1.5 trillion dollars.  However, if the U.S. government was forced to use GAAP accounting principles (like all publicly-traded corporations must), the U.S. government budget deficit would be somewhere in the neighborhood of $4 trillion to $5 trillion each and every year.

#42 Most Americans don’t understand that the Federal Reserve and the debt-based monetary system that it runs are at the very heart of our economic problems.  All of this debt is absolutely crushing us.  The U.S. government spentover 413 billion dollars on interest on the national debt during fiscal 2010, and it is being projected that the U.S. government will be shelling out 900 billion dollars just in interest on the national debt by the year 2019.

#43 Standard & Poor has altered its outlook on U.S. government debt from “stable” to “negative” and has lowered the U.S credit rating from AAA to AA

#44 In 1980, government transfer payments accounted for just 11.7% of all income.  Today, government transfer payments account for 18.4% of all income.

#45 U.S. households are now receiving more income from the U.S. governmentthan they are paying to the government in taxes.

#46 59 percent of all Americans now receive money from the federal government in one form or another.

#47 According to Gallup, 41 percent of Americans believed that the economy was “getting better” at this time last year.  Today, that number is at just 27 percent.

#48 The wealthiest 1% of all Americans now own more than a third of all the wealth in the United States.

#49 The poorest 50% of all Americans collectively own just 2.5% of all the wealth in the United States.

#50 The percentage of millionaires in Congress is more than 50 times higher than the percentage of millionaires in the general population.

You can help make A difference By sharing these articles On Facebook, Twitter. It’s time for Americans  not to just stand up and take notice but to become involved in their government. We must hold our leaders accountable. The thing they fear most is not YOU losing your jobs or they would have worked night and day to fix this economy.  The thing our politicians fear most is losing their jobs. It has become increasingly clear to me the Teaparty movement is powerful.  Join a local chapter today.  You have the power, now use it.

 

Filed Under: Economy, Featured, United States Tagged With: , ,

Why Is our Economy Failing?

October 12, 2011 By 7 Comments

When Rahm Emmanuel said “never let a good crisis go to waste?” last August, I wondered ”  ”What if Keynesian stimulus works, but no one can ever actually afford to do it, short of something like World War II, where the government can tap into a patriotic outpouring of national savings by issuing bonds with negative real yields.” To properly explain what I am talking about I am going to have to explain the Keynesian economic theory. This is the wikipedia defenition:

 

Keynesianism and Keynesian theory is a school of macroeconomic thought based on the ideas of 20th-century English economist John Maynard Keynes.

Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and, therefore, advocates active policy responses by the public sector, including monetary policy actions by the central bank and fiscal policy actions by the government to stabilize output over the business cycle.[1] The theories forming the basis of Keynesian economics were first presented in The General Theory of Employment, Interest and Money, published in 1936. The interpretations of Keynes are contentious and several schools of thought claim his legacy.

Keynesian economics advocates a mixed economy” predominantly private sector, but with a significant role of government and public sector ” and served as the economic model during the later part of the Great Depression, World War II, and the post-war economic expansion (1945-1973), though it lost some influence following the stagflation of the 1970s. The advent of the global financial crisis in 2007 has caused a resurgence in Keynesian thought.[2]

 

Here it is in a nutshell:

John Maynard Keynes known as "the father of modern economics." 
believed the classical economic policies of non-intervention
would not work. The economy would need prodding if it was to head in the right direction, and this meant active intervention by the government to
manage the level of demand. He didn't have the same confidence in the labor market as Classical economists. He argued that workers would not be happy about taking wage cuts and would resist this. This would mean that wages would not necessarily fall enough to clear the market and unemployment would linger.
Keynes explanations of slumps ran something like this: in a normal economy, there is a high level of employment, and everyone is spending their earnings as usual. This means there is a circular flow of money in the economy, as my spending becomes part of your earnings, and your spending becomes part of my earnings. But suppose something happens to shake consumer confidence in the economy. Worried consumers may then try to weather the coming economic hardship by saving their money. But because my spending is part of your earnings, my decision to hoard money makes things worse for you. And you, responding to your own difficult times, will start hoarding money too, making things even worse for me. So there's a vicious circle at work here: people hoard money in difficult times, but times become more difficult when people hoard money. 

The cure for this, Keynes said, was for the central bank to expand the money supply. By putting more bills in people's hands, consumer confidence would return, people would spend, and the circular flow of money would be reestablished. Just that simple! Too simple, in fact, for the policy-makers of that time.
If this is the proposed definition and cure for recessions, then what about depressions? Keynes believed that depressions were recessions that had fallen into a "liquidity trap." A liquidity trap is when people hoard money and refuse to spend no matter how much the government tries to expand the money supply. In these dire circumstances, Keynes believed that the government should do what individuals were not, namely, spend. In his memorable phrase, Keynes called this "priming the pump" of the economy, a final government effort to reestablish the circular flow of money. 

Let's return now to the reasons why people start hoarding money in the first place. There are many possible explanations, all of which are open to argument. It may be a consumer loss of confidence in the economy, perhaps triggered by a visible event like a stock market crash. It may be a natural disaster, such as a drought, earthquake or hurricane. It may be a sudden loss of jobs, or a weak sector of the economy. It may be inequality of wealth, which results in the rich producing a surplus of goods, but leaving the poor too poor to buy them. It may be something intrinsic within the economy which causes it to go through a natural cycle of recessions and recoveries. Or the Federal Reserve may tighten the money supply too much, compelling people to hang on to their disappearing dollars. This last point is especially important, since many critics of activist government believe that is how the Great Depression started.

As mentioned above, Keynes' advice on ending the Great Depression was rejected. President Roosevelt tried countless other approaches, all of which failed. Almost all economists agree that World War II cured the Great Depression; Keynesians believe this was so because the U.S. finally began massive public spending on defense. This is a large part of the reason why "wars are good for the economy." Although no one knows the full secret to economic growth (the world's top economists are still working on this mystery), wars are an economic boon in part because governments always resort to Keynesian spending during them. Of course, such spending need not be directed only towards war -- social programs are much more preferable. If it sound as if I am a Keynesian please continue to read. I am not. I happen to believe in the free markets but wait there's more to tell, One of the first major critics was Milton Friedman. Although he accepted Keynes' definition of recessions, he rejected the cure. Government should butt out of the business of expanding or contracting the money supply, he argued. It should keep the money supply steady, expanding it slightly each year only to allow for the growth of the economy and a few other basic factors. Inflation, unemployment and output would adjust themselves according to market demands. This policy he named monetarism.
Friedman is also famous for a second theory, this one containing more merit. It's called the natural rate of unemployment, and it goes something like this: 

Imagine an economy where the cost of everything doubles. You have to pay twice as much for your groceries, but you don't mind, because your paycheck is also twice as large. Economists call this theneutrality of money. If inflation worked this way, then it would be harmless. Indeed, most presidents after World War II decided to accept high inflation if it meant low unemployment, and therefore urged the Federal Reserve to conduct an expansionary monetary policy. But why is it that when the Fed expands money by, say, 5 percent, that all prices and wages everywhere do not go up by 5 percent as well? Why is it that the neutrality of money does not make this expansion meaningless? Friedman argued that it was because the public was unaware of the expansion, or what it meant, or by how much if it did. In other words, they didn't know that they should raise their prices by 5 percent. When the extra money was pumped into the economy, therefore, it was unwittingly translated into more economic activity, not higher prices.

Of course, if businessmen knew that a 5 percent increase was coming, it would be in their best interest to just raise their prices 5 percent. That way, they would make the same increased profits without having to work for them. If everyone did this, then the Fed's monetary increases would become meaningless -- instead of resulting in more jobs, it would just create higher inflation. Friedman and others argued that as businessmen became savvier and learned to follow the Fed's actions, they would build their inflationary expectations into their prices. Not only would this make inflation worse, but the nation would be left with no tool to fight unemployment, which would eventually rise as well. The twin dragons of inflation and unemployment would therefore grow together, forming "stagflation." 

Friedman showed that monetary policy could not be used to wipe out unemployment, one of the optimistic goals of the Keynesians shortly after World War II. Instead, the most monetary policy could do was keep unemployment at about 6 percent, which is the rate normally achieved when the inflation rate is what the market expects it to be. Friedman called this the "natural rate of unemployment," and it secured his fame. But Keynesian policies are still useful in keeping the unemployment
rate as close to 6 percent as possible.

 

NY TIMES writer, Paul Krugman says that almost $900 billion in stimulus didn’t work because it wasn’t big enough, you have to wonder if an adequate Keynesian stimulus is even possible.  Could any government anywhere borrow 15% of GDP or more to spend on temporary measures with the blessing of their citizens?  For that matter, would the markets lend the money without ratcheting up interest rates?  Can an extra 15% of GDP be spent without showing sharply diminishing returns; meaning that you’d need even more spending to generate the effects you want?
Today Alex Tabarrok looks at the history and concludes that even if Keynesian economics works in theory, Keynesian politics fails in practice at least in a Republic such as ours run as a democracy.
I conclude with this:
If in the past these economic stimulus projects worked it was in part because the public was unaware of the puppet masters pulling the strings. The public and the markets behaved according to plan, but today with media awareness and information super highway driving the economy as fast as it can there is no ability for the Fed to manipulate thoughts and behaviors as it had in the past. The public is running for the hills. That coupled with the fact that .40 cents of every dollar spent by the US Government is borrowed from China; makes it an impossible situation for our Keynesian President Obama to survive.
sources for this article were found here  and at
Filed Under: Economy, Featured Tagged With: , , , ,
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