In order to pay for excessive government spending, the United States and other countries around the world are busy printing money. This practice, known as "debt monetization", is the precursor for inflation. Sometimes, in fact, the act of paying sovereign debt by printing money can lead to hyperinflation and currency collapse; the Weimar Republic and Zimbabwe's recent experience being two noteworthy examples.
I was thinking to myself how a typical investor might be able to profit from a sudden burst of inflation. After all, the printing can only go on so long before a currency becomes a joke. We also know that America's most recent bout of severe inflation took place during the Carter administration.
Knowing that gold and silver are bellwether commodities that tend to march inversely against a devaluing currency, I decided to compare those metals against CPI to determine whether any obvious trends could be discerned.
History tells us that timing a peak is well nigh impossible. Perhaps once gold and silver go parabolic it will be time to sell. And given this administration's march to currency collapse, parabolic it will go.
Hat tips: Wikipedia: Consumer Price Index by Country and MacroTrends.
Showing posts with label Economy. Show all posts
Showing posts with label Economy. Show all posts
Friday, February 1, 2013
Friday, January 25, 2013
WHY DO THEY DESPISE THE BILL OF RIGHTS? Gun dealers report Intuit has stopped processing credit-card payments
Why does Intuit hate America? And it's not just Intuit: it seems there are several companies whose management teams hate America.
Is that assertion controversial?
I don't think so. These companies benefit from America's free-market system. Its respect for private property and the rule of law.
But they hate America's founding document, the Declaration of Independence. And they despise America's highest law, the Constitution.
How else to explain their animosity for the Bill of Rights and, most of all, the Second Amendment? Are they simply currying favor with the current administration? Are they fans of authoritarianism? Or are they just dimwits?
The usual suspects in this melee are two auto insurers, Geico and Progressive.
You can now add to the list -- at least based upon this news report -- Intuit, makers of Quicken and related offerings.
Of course not. It will take each of us, expressing our disgust with their actions, to reform these kinds of companies.
Hat tip: BB.
Is that assertion controversial?
I don't think so. These companies benefit from America's free-market system. Its respect for private property and the rule of law.
But they hate America's founding document, the Declaration of Independence. And they despise America's highest law, the Constitution.
How else to explain their animosity for the Bill of Rights and, most of all, the Second Amendment? Are they simply currying favor with the current administration? Are they fans of authoritarianism? Or are they just dimwits?
The usual suspects in this melee are two auto insurers, Geico and Progressive.
You can now add to the list -- at least based upon this news report -- Intuit, makers of Quicken and related offerings.
A Williamson County gun dealer recently learned a credit card processing company no longer wants to do business with him... McMillan is a has a federal firearms license and is heavily regulated by both the state and federal governments.
But McMillan received an email from Intuit Payment solutions informing him the company was no longer interested in processing his credit card sales.
"They either reviewed several accounts, or it was a company wide policy, because I wasn't the only federal firearms license dealer that got pushed out the other day," McMillan said.
In the email the company wrote "Intuit does not support the services you are providing" and then the reason stated was firearms, ammunition, gun parts and accessories sales not sold in a face-to-face environment with the credit card being swiped.
McMillan does not know the exact reason behind the policy change, but speculated the nationwide gun debate may be behind the move.
...NewsChannel 5 tried contacted Intuit to get a comment about the company's email to McMillan. No one from Intuit returned messages.
Of course not. It will take each of us, expressing our disgust with their actions, to reform these kinds of companies.
Hat tip: BB.
HEY, SMOKERS: Did the President forget to tell you about the 50% surcharge on your health insurance?
Why, I'll be damned: Nancy Pelosi was right. We really did have to pass it, like a kidney stone, to find out what was in it.
But don't worry: this has to be fair. Because all smokers are rich.
And we hate the rich.
Millions of smokers could be priced out of health insurance because of tobacco penalties in President Barack Obama's health care law, according to experts who are just now teasing out the potential impact of a little-noted provision in the massive legislation.
The Affordable Care Act — "Obamacare" to its detractors — allows health insurers to charge smokers buying individual policies up to 50 percent higher premiums starting next Jan. 1... For a 55-year-old smoker, the penalty could reach nearly $4,250 a year. A 60-year-old could wind up paying nearly $5,100 on top of premiums.
...the law [also] allows insurers to charge older adults up to three times as much as their youngest customers.
Second, the law allows insurers to levy the full 50 percent penalty on older smokers while charging less to younger ones.
And finally, government tax credits that will be available to help pay premiums cannot be used to offset the cost of penalties for smokers.
But don't worry: this has to be fair. Because all smokers are rich.
And we hate the rich.
Wednesday, January 23, 2013
The sad truth about Social Security
Please hide this particular article from any young hopenchangers who suffer from the delusion that Social Security will be around when they're ready to retire.
Unfortunately for the drones (i.e., the Obama Cultists), the math always defeats the political rhetoric. Always. And the fuse on the fiscal time-bomb is fizzling away, without any of our leaders making the slightest effort to douse it.
Hat tip: R.F.
Social security is not earned retirement income, an entitlement nor a benefit.
Many people believe that Social Security is an “earned right.” That is, they think that because they have paid Social Security taxes, they are entitled to receive Social Security benefits. The government encourages that belief by referring to Social Security taxes as “contributions,” as in the Federal Insurance Contribution Act...
...However, in the 1960 case of Fleming v. Nestor, the U.S. Supreme Court ruled that workers have no legally binding contractual rights to their Social Security benefits, and that those benefits can be cut or even eliminated at any time.
Nestor sued, claiming that because he had paid Social Security taxes, he had a right to Social Security benefits.
The Supreme Court disagreed, saying “To engraft upon the Social Security system a concept of ‘accrued property rights’ would deprive it of the flexibility and boldness in adjustment to ever changing conditions which it demands.” The Court went on to say, “It is apparent that the non-contractual interest of an employee covered by the [Social Security] Act cannot be soundly analogized to that of the holder of an annuity, whose right to benefits is bottomed on his contractual premium payments.”
The Court’s decision was not surprising. In an earlier case, Helvering v. Davis (1937), the Court had ruled that Social Security was not a contributory insurance program, saying, “The proceeds of both the employee and employer taxes are to be paid into the Treasury like any other internal revenue generally, and are not earmarked in any way.”
In other words, Social Security is not an insurance program at all. It is simply a payroll tax on one side and a welfare program on the other. Your Social Security benefits are always subject to the whim of 535 politicians in Washington. Congress has cut Social Security benefits in the past and is likely to do so in the future...
Unfortunately for the drones (i.e., the Obama Cultists), the math always defeats the political rhetoric. Always. And the fuse on the fiscal time-bomb is fizzling away, without any of our leaders making the slightest effort to douse it.
Hat tip: R.F.
Tuesday, January 22, 2013
RUH ROH: please keep this chart hidden from any Chinese government officials you may know
I mean, would you loan money to someone with this kind of balance sheet?
But don't worry, folks: Paul Krugman -- who won a Nobel Prize for his work advising Enron, if memory serves -- says America's fiscal house is in perfect order--and, in fact, needs more debt.
This is the balance sheet from hell. And not a great fiscal legacy for Timothy Geithner. From the U.S. Treasury Department’s just-released Financial Report of the U.S. Government for Fiscal Year 2012 [PDF]...
...As of September 30, 2012, the Government’s total debt outstanding subject to the debt limit was $16.027 trillion, $367 billion below the current limit. As budget deficits continue to occur, the Government will have to borrow more from the public. Instances where the debt held by the public increases faster than the economy for extended periods can pose additional challenges.
I love that last bit: “Instances where the debt held by the public increases faster than the economy for extended periods can pose additional challenges.” Yup.
But don't worry, folks: Paul Krugman -- who won a Nobel Prize for his work advising Enron, if memory serves -- says America's fiscal house is in perfect order--and, in fact, needs more debt.
Monday, January 21, 2013
MARK LEVIN ON INAUGURATION DAY: Time to Fight
In an exclusive interview with Breitbart's Ben Shapiro, constitutional attorney and radio host Mark Levin had a message for regular Americans on Inauguration Day: Fight!
Pass the original article on to your friends. We need to continue to fight this political madness, now harder than ever.
Images: "Don't Cry for Me, America."
...“I don’t think Obama knows exactly what he’s going to go for in his second term,” Levin said, "as he will look for opportunities to exploit as events unfold. I am sure they've drawn up a partial a list, and we already know that it includes, but is not limited to, gun control; attacks on the First Amendment such as religious liberty; amnesty for illegal aliens; union expansion; institutionalizing Obamacare; institutionalizing voter corruption; de-industrialization via the EPA; destroying the capitalist-based economy via tax increases, smothering regulations, massive deficit spending, and endless borrowing; and hollowing out our military; etc....It will do extreme damage to the nation in many respects. I think Obama sees himself as correcting historic wrongs in this country, as delivering the fruits of the labor of other people to people who he believes have historically been put upon. I think there’s a lot of perverse thinking that goes on in his mind, radical left-wing thinking. He was indoctrinated with Marx and Alinksy propaganda. You not only see it in his agenda but in his words -- class warfare; degrading successful people unless, of course, they help finance his elections, causes, and organizations; pretending to speak for the so-called middle class when, in fact, he is destroying their jobs, savings, and future. Obama's war on our society is intended to be an onslaught in which the system is overwhelmed.”
How to fight that agenda? Levin said the answer certainly doesn’t lie in the current Republican Party leadership. “I think the Republican Party, its apparatus, its so-called leadership, the parasitic consultants, represent an institution that is tired, old, almost decrepit, full of cowardice and vision-less. It has abandoned the Declaration of Independence and any serious defense of constitutional republicanism.The Democrat Party is now a radical 1960s party; it’s the anti-Constitution, anti-capitalism, anti-individual party. It largely controls the federal government, including the massive bureaucracy and much of the judiciary -- what I call the permanent branches of the federal government. The Democrat Party represents the federal government, and the federal government expands the power of the Democrat Party. They're appendages of each other.
On the other hand, the GOP today stands for capitulation, timidity, delusion -- so mostly nothing. Republicans may speak of the Constitution, limited government, low taxes, etc., but what have they done about them? Next to nothing if not nothing.Even when Bush 43 was president and the Republicans controlled Congress. What did they do? They went on a spending binge. They expanded Medicare, the federal role in local education, drove up the debt, etc.
Meanwhile, we are lectured by putative Republicans like Colin Powell, Condoleezza Rice, Tom Ridge, and a conga line of others trashing often viciously NOT Obama and what the Democrats are doing to our nation, but conservatives, constitutionalists, and tea party activists who are the only people left standing for liberty against tyranny in this country."
...[T]he answer [however,] isn’t to start a third party – “The problem is a practical one. If we go third party, I can see the Democrats winning elections for a generation. Given the radicalized character of that party, that would seal our fate, and the fate of our children and grandchildren to, as Reagan put it, 1000 years of darkness.
The day may come, perhaps soon, when abandoning the GOP for a new party is the best way to deal with events and stop the rise of tyranny. I think the answer at this moment is for conservatives to retake the Republican Party. Reagan did it, and Reagan was opposed by the Republican establishment every step of the way, including the Bush family......After the Reagan presidency, Bush 41 and Bush 43, who'd opposed the Reagan Revolution, immediately dragged the nation back into the Republican mush. In fact, they sought to distance themselves from Reagan and his achievements, using such silly phrases as "a kinder and gentler" conservatism or "compassionate conservatism," as if all the opportunities, wealth, jobs, and enterprises Reagan's policies launched were neither kind nor compassionate.
There is an intransigence in the Republican Party that sabotages and obstructs those who have answers for this nation based on our founding principles. And so we had a brief eight-year period where Reagan showed us the way and created a foundation on which future Republican presidents could build, and they haven’t.
...the Tea Party grew out of the last months of Bush 43 and the early months of the Obama presidency. Yet Bush administration staffers are everywhere today: the media, advising candidates, leading fundraisers, etc. And they arrogantly and condescendingly lecture conservatives about responsible, moderate governance.
...They also cheerlead for more establishment candidates, like John McCain, Mitt Romney, and the like, who are not only sure losers, but have no grasp of the urgency of our times and the principled agenda necessary to address it. Meanwhile, the Reagan and traditional conservatives, the constitutionalists and the tea party leaders, are all but unheard and unseen on TV, even some of our favorite outlets.”...Sadly, when you look at some of the great outlets for conservative thought and activism of the past, it’s a crying shame, because many of them have abandoned their past role as serious and substantive breeding grounds for conservative strategies, policies, and new intellectuals. Instead, they spend an inordinate amount of time analyzing polling data and otherwise naval gazing -- when they're not taking shots at other conservatives or promoting their TV appearances. With respect to policy, you could see this when the Wall Street Journal editorial page and Bill Kristol attacked the tea party back in 2011, when the tea party opposed the disastrous debt-ceiling deal.
...Our society is deteriorating as the federal government devours more and more of it, we are on an unsustainable course that threatens our liberty and all we have built and earned, and these people act as if it's just another day of wheeling and dealing. At a bare minimum, at least make the case to the American people, and if the people decide they want to live in chains, then there's not much we can do about it. But make the damn case and fight like hell!"...But Levin said that the country rests on the blade of a knife right now, and that every effort is necessary to preserve its liberty. “Right now we have a government with so much power, a government so ubiquitous, a government so cancerous in its growth and so exponential in its expanse, that I cannot conceal my great fear for the future of this country...
...But it’s not just about winning the next election. That’s the minimum we need to do. We need to roll back the size of the federal Leviathan or it will surely be our undoing. Republicans have been allergic to this. We need to roll back the debt, even though the last Republican administration contributed mightily to it. The way to start is by cleaning out the old guard in the GOP and installing fresh, bold, articulate, knowledgeable, confident, courageous conservatives. We must find a way to depose the old, decrepit, tired so-called leaders who've used the system to climb to the top, but once at the top demonstrate they don't belong there. We also must find ways to devolve political and economic power back to the states and the individual. It is a fool's errand to believe that the same people who've brought us to the brink are the people who can solve the dire problems they've contributed to. This is a puzzle that must be solved."
Will the country be able to come back from Obamaism? Levin said that the road would be an uphill one: “To be perfectly honest, many countries haven’t come back from this. It’s happening from within. When an individual like Obama uses the instrumentalities of government against us, when he uses the power that the Constitution grants to a president to evade the Constitution and abuse power, when he uses liberty to exploit opportunities to promote the tyranny of centralized government, it’s extremely difficult for people who are not paying attention or who are not engaged in the political process to help us stop what's taking place......Only when things get so bad do many of them realize what's happening, and that's usually too late. Reestablishing the civil society will be extremely difficult. I have hope, but I’m not going to delude myself or others that this is just another election cycle or just another president or just another agenda we can easily overcome if we win the White House back in 2016. The President is making institutional, structural changes to our country.
...Do I think the country can survive? I think America will certainly exist. But what kind of America? The question is whether we will be a free and prosperous people or just another miserable place where rights are denied and needs are scarce and distributed by the government. I believe knowing the perilous state of the nation, and not pretending otherwise, and knowing that only we conservatives have any hope of stemming this tide and gradually reversing course, we will fight this in every legitimate way we can. And hopefully our already significant ranks will grow. We have no choice but to stand and fight. Everything is at stake," said Levin.
...But there is a bright spot: the American public still cares about the Constitution. In fact, they care more than they did even a decade or two ago. “The one positive aspect I see today,” Levin continued. “There are more people in America now who have at least a general concept of how the Constitution is supposed to work, including the Bill of Rights, and a general concept of what the Declaration of Independence means, including the emphasis on the value of every individual. This was not so 10 or 20 years ago. That’s not to say that such an understanding can easily transfer into modern politics. But I think, in part, that’s why you see so many millions of people frustrated, because they know our government shouldn’t be operating this way... The choice is in our hands right now.”
Pass the original article on to your friends. We need to continue to fight this political madness, now harder than ever.
Images: "Don't Cry for Me, America."
Sunday, January 20, 2013
Saturday, January 19, 2013
SOUNDS SUSTAINABLE: Using GAAP accounting principles, annual federal deficit increased 30 percent in 2012
The term Generally Accepted Accounting Principles (or GAAP) refers to the standard framework for financial reporting that most U.S. corporations employ. The act of intentionally producing false GAAP statements is a crime.
John Williams, writing at ShadowStats.com (subscription required), used the Treasury Department's latest financial statements and calculates the true 2012 federal deficit, which includes the net present value of unfunded liabilities like Social Security and Medicare) at:
$6.9 trillion
In 2011, using GAAP accounting, the federal deficit was:
$5.0 trillion
Which means the annual deficit grew at a rate of nearly:
30 percent in one year
Anyone who thinks this level of fiscal irresponsibility can last much longer, raise your hand.
As for you Democrats: history will not treat kindly your support of the people who are quite literally stealing our children's futures.
And why the feckless, cowardly, and pathetic Republican "leaders" aren't shouting these numbers from the rooftops at every opportunity remains a mystery for the ages.
John Williams, writing at ShadowStats.com (subscription required), used the Treasury Department's latest financial statements and calculates the true 2012 federal deficit, which includes the net present value of unfunded liabilities like Social Security and Medicare) at:
$6.9 trillion
In 2011, using GAAP accounting, the federal deficit was:
$5.0 trillion
Which means the annual deficit grew at a rate of nearly:
30 percent in one year
Anyone who thinks this level of fiscal irresponsibility can last much longer, raise your hand.
As for you Democrats: history will not treat kindly your support of the people who are quite literally stealing our children's futures.
And why the feckless, cowardly, and pathetic Republican "leaders" aren't shouting these numbers from the rooftops at every opportunity remains a mystery for the ages.
Friday, January 18, 2013
The 10 Stats You Should Never Show a Baby Boomer
ECB has 35 stats you may want to hide from any baby boomers you know. You may ask: Doug, of those 35, which are... the... 10... most... terrifying entertaining?
10. Right now, there are somewhere around 40 million senior citizens in the United States. By 2050 that number is projected to skyrocket to 89 million.
9. 25 percent of all Americans in the 46 to 64-year-old age bracket have no retirement savings at all.
8. 46 percent of them have less than $10,000 saved for retirement.
7. Elderly Americans tend to carry much higher balances on their credit cards than younger Americans do.
6. Americans that are 55 years of age or older now account for 20 percent of all bankruptcies in the United States.
5. In 1945, there were 42 workers for every retiree receiving Social Security benefits. Today, that number has fallen to 2.5 workers, and if you eliminate all government workers, that leaves only 1.6 private sector workers for every retiree receiving Social Security benefits.
4. Overall, the Social Security system is facing a 134 trillion dollar shortfall over the next 75 years.
3. Medicare is facing unfunded liabilities of more than 38 trillion dollars over the next 75 years. That comes to approximately $328,404 for each and every household in the United States.
2. State and local government bodies in the state of California have 325 billion dollars in combined unfunded pension liabilities.
1. The total amount of unfunded pension and healthcare obligations for retirees that state and local governments across the United States have accumulated is 4.4 trillion dollars.
Bottoms up!
10. Right now, there are somewhere around 40 million senior citizens in the United States. By 2050 that number is projected to skyrocket to 89 million.
9. 25 percent of all Americans in the 46 to 64-year-old age bracket have no retirement savings at all.
8. 46 percent of them have less than $10,000 saved for retirement.
7. Elderly Americans tend to carry much higher balances on their credit cards than younger Americans do.
6. Americans that are 55 years of age or older now account for 20 percent of all bankruptcies in the United States.
5. In 1945, there were 42 workers for every retiree receiving Social Security benefits. Today, that number has fallen to 2.5 workers, and if you eliminate all government workers, that leaves only 1.6 private sector workers for every retiree receiving Social Security benefits.
4. Overall, the Social Security system is facing a 134 trillion dollar shortfall over the next 75 years.
3. Medicare is facing unfunded liabilities of more than 38 trillion dollars over the next 75 years. That comes to approximately $328,404 for each and every household in the United States.
2. State and local government bodies in the state of California have 325 billion dollars in combined unfunded pension liabilities.
1. The total amount of unfunded pension and healthcare obligations for retirees that state and local governments across the United States have accumulated is 4.4 trillion dollars.
Bottoms up!
Labels:
Crime,
Democrats,
Economy,
Obama,
Social Security
BOOM TIMES: Obama Perma-Campaign Releases Motivational Poster to Strike Fear Into Running-Dog Capitalistic Lackeys
Did I say the Messina campaign? Because I meant The People's Cube.
Which reminds me: it's been an entire year since the president's "Jobs Council" last met. But he did find time for dozens of rounds of golf, numerous pickup basketball games, scores of appearances on comedy and women's shows, and demonizing the Bill of Rights.
So much for his "laser focus" on America's lingering, worst-since-World War II unemployment problem.
Which reminds me: it's been an entire year since the president's "Jobs Council" last met. But he did find time for dozens of rounds of golf, numerous pickup basketball games, scores of appearances on comedy and women's shows, and demonizing the Bill of Rights.
So much for his "laser focus" on America's lingering, worst-since-World War II unemployment problem.
Thursday, January 17, 2013
Counsel for the Surrender Monkeys in the GOP
As Erick Erickson wrote earlier today, the feckless RINO leadership appears prepared to throw in the towel before the debt ceiling fight has even begun.
Idiocy. Sheer, unvarnished idiocy. Speaker Boehner and Skippy Cantor, here are the facts:
a) You'll get blamed by the media no matter what
b) Your last series of surrenders, in the kindest words possible, eh... failed to inspire the electorate
c) The country faces an existential finacial crisis
d) There are great ideas for dealing with Obama (see below)
e) So how about doing what's right, for a change?
Stanford's Keith Hennessey offers the weak-willed RINO leadership a simple strategy for dealing with Barack Obama on the debt ceiling. President Subprime McDowngrade wants a five-year increase on the debt ceiling or, by my calculations, enough to get us to a Grecian-style financial implosion.
To neatly handle the problem, offer the Foodstamp President two choices:
Choice 1: A long-term debt-limit increase along with significant present and future spending cuts
Choice 2: A short-term debt-limit increase if he refuses to cut spending, continued ad infinitum to highlight his fiscal irresponsibility
In other words, act as a responsible creditor. Act in the country's best interest, for a change.
Or should I send this via fax to John Boehner's favorite lobbyist, so I can be sure he gets the message?
...I can only assume that because House Republican leaders and those close to them have been whispering about [wanting] to move on.
They want the next fight. So desperate are they to move on, in January of 2013, House Republicans want their base to know they think they’ll lose the House in November of 2014 unless they cave now so please let them cave.
Idiocy. Sheer, unvarnished idiocy. Speaker Boehner and Skippy Cantor, here are the facts:
a) You'll get blamed by the media no matter what
b) Your last series of surrenders, in the kindest words possible, eh... failed to inspire the electorate
c) The country faces an existential finacial crisis
d) There are great ideas for dealing with Obama (see below)
e) So how about doing what's right, for a change?
Stanford's Keith Hennessey offers the weak-willed RINO leadership a simple strategy for dealing with Barack Obama on the debt ceiling. President Subprime McDowngrade wants a five-year increase on the debt ceiling or, by my calculations, enough to get us to a Grecian-style financial implosion.
To neatly handle the problem, offer the Foodstamp President two choices:
Choice 1: A long-term debt-limit increase along with significant present and future spending cuts
Choice 2: A short-term debt-limit increase if he refuses to cut spending, continued ad infinitum to highlight his fiscal irresponsibility
In other words, act as a responsible creditor. Act in the country's best interest, for a change.
Or should I send this via fax to John Boehner's favorite lobbyist, so I can be sure he gets the message?
Labels:
Boehner,
Economy,
Obama,
Protecting America
Tuesday, January 15, 2013
QOTD: Obama Declares Nothing Is Ever His Fault, Especially the Debt Since 2009
Jim Geraghty, writing at the peerless Morning Jolt:
Asking for statesmanship from a charismatic demagogue is somewhat akin to asking for diet tips from Rosie O'Donnell.
Image hat tip: Moonbattery.
Breaking: Obama Declares Nothing Is Ever His Fault, Especially the Debt Since 2009
Obama's press conferences, rare as they are, are going to be even more unbearable in the second term.
It's not like his rhetorical sleight-of-hand is all that complicated, and at this point, it feels like watching a magician perform very predictable and boring tricks. He insists that whatever he wants at that moment is "sensible" and insists that any cuts, of any program, be they discretionary spending or entitlement programs, fail to represent a "balanced approach" and "balancing the budget on the backs of the most vulnerable." The spending he wants is always characterized as "investments we need to make."
He says he's open to "making modest adjustments to programs like Medicare to protect them for future generations" without going into much detail about what they are; usually they amount to declaring the federal government will pay doctors less and hoping those doctors don't stop seeing Medicare patients, the way the Mayo Clinic did. Less than a month after getting the income-tax increases he started demanding the moment the GOP took over the House of Representatives, he's at it again, declaring, "We need more revenue, through tax reform, by closing loopholes in our tax code for the wealthiest Americans." He still complains that "a multimillionaire investor can pay less in tax rates than a secretary" and "tax breaks for the wealthiest Americans" as if nothing had changed on January 1.
Four years into his presidency, the problem is not of his making; he spoke about "spending that Congress has already committed to" and "debate with this Congress about whether or not they should pay the bills they've already racked up" as if he had nothing to do with the rate of federal spending since January 20, 2009.
Asking for statesmanship from a charismatic demagogue is somewhat akin to asking for diet tips from Rosie O'Donnell.
Image hat tip: Moonbattery.
RATING AGENCY WARNS OBAMA: U.S. downgrade likely "even if another debt ceiling crisis is averted"
For the rating agency Fitch, the debt ceiling debate doesn't represent the major financial hurdle facing the United States. As anyone with a third grade education in arithmetic knows, America's real issue is its unsustainable debt. The federal government's deficits have surpassed one trillion dollars a year, every year since Barack Obama took office.
Fitch's warning highlights the urgency of the moment: Republicans must refuse to raise the debt ceiling without immense spending cuts and entitlement reforms.
From all appearances, President Obama wants the country to default. He has layered on so much debt, so fast, that the U.S. simply can't honor its obligations. In fact, it's questionable whether the current debt can be repaid, never mind adding in the next four years of budget-free operations.
Worse still, the administration's cascade of new regulations (like "Boiler MACT") are explicitly designed to prevent the economy from growing fast enough to help make up the difference.
The real question we should be asking is whether tough cuts now are preferential to a true default later.
It is clear that the House of Representatives should deal with an intransigent president by refusing to raise the debt ceiling without large, immediate cuts to discretionary spending combined with sensible entitlement reforms (e.g., raising the eligibility age for Social Security benefits).
It is provably better to cut now than to suffer a complete economic collapse later.
And we know that President Obama has set the country on a course for a total collapse.
That much is clear based upon the accompanying chart, which comes to us directly from the White House.
President Obama needs a collapse to occur in order to -- in his words -- "fundamentally transform" America.
So let's stop this madness now, before things get immeasurably worse.
In the absence of an agreed and credible medium-term deficit reduction plan that would be consistent with sustaining the economic recovery and restoring confidence in the long-run sustainability of U.S. public finances, the current Negative Outlook on the 'AAA' rating is likely to be resolved with a downgrade later this year even if another debt ceiling crisis is averted.
Fitch's warning highlights the urgency of the moment: Republicans must refuse to raise the debt ceiling without immense spending cuts and entitlement reforms.

Worse still, the administration's cascade of new regulations (like "Boiler MACT") are explicitly designed to prevent the economy from growing fast enough to help make up the difference.
The real question we should be asking is whether tough cuts now are preferential to a true default later.
It is clear that the House of Representatives should deal with an intransigent president by refusing to raise the debt ceiling without large, immediate cuts to discretionary spending combined with sensible entitlement reforms (e.g., raising the eligibility age for Social Security benefits).
It is provably better to cut now than to suffer a complete economic collapse later.
And we know that President Obama has set the country on a course for a total collapse.
That much is clear based upon the accompanying chart, which comes to us directly from the White House.
President Obama needs a collapse to occur in order to -- in his words -- "fundamentally transform" America.
So let's stop this madness now, before things get immeasurably worse.
Monday, January 14, 2013
Sotomayor's Gold Star
So I'm driving home this evening and happened to flip on National Pubic Radio (consider it gathering OSINT on enemy activities). And they're doing a feature on activist Supreme Court justice Sonia Sotomayor, the self-described "wise Latina woman".
Sotomayor is hawking an autobiographical book and she briefly describes the incident that led to her becoming an academic overachiever. Until the fifth grade, Sotomayor says she was a C-student. But the nun in her fifth grade class began awarding gold stars for excellent work. And Sotomayor wanted those gold stars. She wanted them desperately.
So she went to the top student in her class and asked for help. How to study, how to do homework, how to excel. Sure enough, with dedication, focus and practice, she became a top-notch student, winning countless gold stars and eventually becoming a valedictorian at Cardinal Spellman High School.
Now I found this story apocryphal. Consider that Sotomayor is a hard-core Leftist who has, throughout her career, supported the redistribution of wealth and the tenets of socialism. In other words, she endorses -- in every way -- taking gold stars from society's achievers and giving them to the undeserving.
In fact, Sotomayor's entire philosophy revolves around master planners -- wise Latina women and other masterminds -- divvying up society's spoils and slathering them around in an ostensible effort to do good.
Decades of these progressive programs -- the New Deal, the Fair Deal, the Square Deal, Great Society, Fannie Mae, Freddie Mac, you name the program -- have failed over and over and over again.
In fact, they have created a massive, corrupt, leviathan of a welfare state that is headed straight for bankruptcy like a 747 that's run out of fuel. The federal government itself estimates fraud for these programs at $125 billion a year; other reliable analysts put the figure closer to a third of a trillion.
Instead of improving society, Sotomayor's intellectual ilk have crushed the will to work, built a permanent underclass unaccustomed to individual responsibility, encouraged corruption in government, and nearly eradicated the two-parent family in the inner city.
If Sotomayor had an ounce of intellectual integrity, she would have penned a more fitting autobiography in which she demanded gold stars from others in order to redistribute them "fairly".
Or red stars, if you know what I mean. But I'm sure the irony escapes her and the other leftists bent on destroying this society.
Sotomayor is hawking an autobiographical book and she briefly describes the incident that led to her becoming an academic overachiever. Until the fifth grade, Sotomayor says she was a C-student. But the nun in her fifth grade class began awarding gold stars for excellent work. And Sotomayor wanted those gold stars. She wanted them desperately.
So she went to the top student in her class and asked for help. How to study, how to do homework, how to excel. Sure enough, with dedication, focus and practice, she became a top-notch student, winning countless gold stars and eventually becoming a valedictorian at Cardinal Spellman High School.
Now I found this story apocryphal. Consider that Sotomayor is a hard-core Leftist who has, throughout her career, supported the redistribution of wealth and the tenets of socialism. In other words, she endorses -- in every way -- taking gold stars from society's achievers and giving them to the undeserving.
In fact, Sotomayor's entire philosophy revolves around master planners -- wise Latina women and other masterminds -- divvying up society's spoils and slathering them around in an ostensible effort to do good.
Decades of these progressive programs -- the New Deal, the Fair Deal, the Square Deal, Great Society, Fannie Mae, Freddie Mac, you name the program -- have failed over and over and over again.
In fact, they have created a massive, corrupt, leviathan of a welfare state that is headed straight for bankruptcy like a 747 that's run out of fuel. The federal government itself estimates fraud for these programs at $125 billion a year; other reliable analysts put the figure closer to a third of a trillion.
Instead of improving society, Sotomayor's intellectual ilk have crushed the will to work, built a permanent underclass unaccustomed to individual responsibility, encouraged corruption in government, and nearly eradicated the two-parent family in the inner city.
If Sotomayor had an ounce of intellectual integrity, she would have penned a more fitting autobiography in which she demanded gold stars from others in order to redistribute them "fairly".
Or red stars, if you know what I mean. But I'm sure the irony escapes her and the other leftists bent on destroying this society.
Sunday, January 13, 2013
THE OBAMA ECONOMIC RECOVERY: In One Chart
Did I say "recovery"? Because I meant to say "The Obama Depression".
Americans voted to reelect Barack Obama because of the malfeasance of the progressive media machine. Had the media reported the truth, this failed president would have lost in a landslide.
Therefore, Americans would do well to anticipate more pain. Much more pain.
Long Term Unemployment at Highest Level Since WWII
When America reelected Barack Obama they voted for higher unemployment, lower incomes, record government spending, and a stagnant under-performing economy. Barack Obama promises to bring even more pain his second term.
In the US today:
• 12 million Americans remain unemployed.
• In December 22.6 million Americans were unemployed or underemployed.
• The average unemployed American is out of work for nearly 40 weeks.
To understand just how bad things are, and just what a failure Obama’s first term has been, you have to see it graphically.
Americans voted to reelect Barack Obama because of the malfeasance of the progressive media machine. Had the media reported the truth, this failed president would have lost in a landslide.
Therefore, Americans would do well to anticipate more pain. Much more pain.
FRIGHTENINGLY UP-TO-DATE NEWS: For Regular Americans Only
Washington, DC - Citing a growing need for accurate news sources, spokesman Biff Spackle announced the addition of several channels to the BadBlue family of news sites.
"Regular Americans deserve better sources for timely and accurate news," Spackle said in a prepared statement, "And BadBlue's unique technology monitors social networks 24 hours a day, every day, to find out what's really happening, without the spin and bias that the alphabet channels promote."
In that vein, Spackle and a scantily clad spokes-model unveiled a new automotive channel (BadBlue.com/cars) as well as an entertainment channel (BadBlue.com/cars). The complete BadBlue lineup includes:
Check 'em out. If you have any complaints, feel free to call Spackle on his direct line: 1-800-555-1212.
"Regular Americans deserve better sources for timely and accurate news," Spackle said in a prepared statement, "And BadBlue's unique technology monitors social networks 24 hours a day, every day, to find out what's really happening, without the spin and bias that the alphabet channels promote."
In that vein, Spackle and a scantily clad spokes-model unveiled a new automotive channel (BadBlue.com/cars) as well as an entertainment channel (BadBlue.com/cars). The complete BadBlue lineup includes:
Check 'em out. If you have any complaints, feel free to call Spackle on his direct line: 1-800-555-1212.
Saturday, January 12, 2013
The Brewing Storm [Lee Cary]
Guest post by Lee Cary
America's urban centers are powder kegs waiting to explode during some especially hot summer during the next few years.
Ironically, most of the people there, who wholeheartedly embraced the promises of both the 2008 and 2012 Obama campaigns, are the very ones most negatively impacted by economic policies that are moving the nation closer, daily, toward defaulting on the government’s ability to just service the mounting debt (pay the interest on the principal) - paying it off is virtually impossible. Their expectations were manipulated to an unrealistic level and cannot, and will not, be met. In short, their ignorance was used and abused to advance the progressive agenda.
Inflation (currency devaluation) is the only option in the short run to enable government spending to continue at its insane pace. It’s a trend that cannot continue indefinitely, and is only making the inevitable reckoning worse.
Meanwhile, as the old media pushes the myth that an economic recovery is underway, the plight of those in America’s inner cities worsens. Once the entitlement monies begin to taper off (just as Social Security checks are gradually shrinking as many of you know), there will be reactions more violent than just angry crowds. It will, sooner or later, spill over into more affluent, adjoining neighborhoods and communities when the true-believers in Obamanomics realize they've bought a lie. Sadly, people on all sides will suffer.
And the ruling elite in D.C. see this coming.
Section 8 housing voucher distribution canceled after thousands waiting in line get out of control
WXYZ - A chaotic scene erupted at the Taylor Human Services Center when the crowd waiting for a Section 8 housing voucher distribution got out of control... Police say thousands of people from all over the area were at the center. Many were homeless, single moms, or disabled. They were hoping to get help paying for their housing from the government.
7 Action News is being told there were 1,000 vouchers available and 5,000 people showed up trying to get one. The crowd had grown overnight as more and more people arrived. Witnesses say the line stretched for a mile down Lange Road.
Police say, when the time came for the vouchers to be distributed, there was a mad rush for the door. Officers tried to control the crowd, but couldn't. Officers had to shut down several lanes of Eureka Road until the situation could be brought under control...
America's urban centers are powder kegs waiting to explode during some especially hot summer during the next few years.
Ironically, most of the people there, who wholeheartedly embraced the promises of both the 2008 and 2012 Obama campaigns, are the very ones most negatively impacted by economic policies that are moving the nation closer, daily, toward defaulting on the government’s ability to just service the mounting debt (pay the interest on the principal) - paying it off is virtually impossible. Their expectations were manipulated to an unrealistic level and cannot, and will not, be met. In short, their ignorance was used and abused to advance the progressive agenda.
Inflation (currency devaluation) is the only option in the short run to enable government spending to continue at its insane pace. It’s a trend that cannot continue indefinitely, and is only making the inevitable reckoning worse.
Meanwhile, as the old media pushes the myth that an economic recovery is underway, the plight of those in America’s inner cities worsens. Once the entitlement monies begin to taper off (just as Social Security checks are gradually shrinking as many of you know), there will be reactions more violent than just angry crowds. It will, sooner or later, spill over into more affluent, adjoining neighborhoods and communities when the true-believers in Obamanomics realize they've bought a lie. Sadly, people on all sides will suffer.
And the ruling elite in D.C. see this coming.
Thursday, January 10, 2013
GUN-GRABBER ANDREW CUOMO: Architect of Ruin
Andrew Cuomo, governor of the bankrupt state of New York, has been in the news of late. Among his many bizarre proclamations are assertions that he could "confiscate" firearms and enact other unconstitutional, anti-gun statutes.
But who is Andrew Cuomo? What you may not know about him is that he was one of key architects of the 2008 housing crisis.
Curiously, not only is this man not a laughingstock (or, better yet, serving in federal lockup), he's ostensibly a front-runner for the Democrat presidential nomination in 2016.
Flashback to 1997, when President Bill Clinton named Andrew Cuomo, a man without any significant real estate or financial experience, the youngest head of Housing and Urban Development (HUD) in history.
...Read more...
But who is Andrew Cuomo? What you may not know about him is that he was one of key architects of the 2008 housing crisis.


...Read more...
Inflation Propaganda Exposed [Peter Schiff]
Guest post by Peter Schiff of Euro Pacific Capital:
Economists who hold the popular view that expanding the money supply will provide the best medicine for our ailing economy dismiss the inflationary concerns of monetary hawks, like me, by pointing to the supposedly low inflation that has occurred during the current period of rampant Fed activism. In a recent blog post aimed specifically at me, Paul Krugman noted that the sub 2.5% increases in the Consumer Price Index (CPI) over the past few years are all that is needed to prove me wrong. In fact, Krugman and others have even suggested that the CPI itself overstates inflation and that the Fed would be better able to help the economy if less strict methodologies were used. However, there is plenty of evidence to suggest that the CPI is essentially meaningless as it woefully under reports rising prices.
Magazines and newspapers provide a good case in point. The truth has not been exposed through the economic reporting that these outlets provide, but in the prices that are permanently fixed to their covers. For instance, from 1999 to 2002 the Bureau of Labor Statistic's (BLS) "Newspaper and Magazine Index" (a component of the CPI) increased by 37.1%. But a perusal of the cover prices of the 10 most popular newspapers and magazines (WSJ, Washington Post, Time, Sports Illustrated, U.S. News & World Report, Newsweek, People, NY Times, USA Today, and the LA Times) over the same time frame showed an average cover price increase of 131.5% (3.5 times faster than the BLS' stats). This is not even in the same ballpark.
Some defenders of the BLS may conclude that prices were held down by the availability of free online news content or the convenience of digital delivery. But that is beside the point. Prior to the digital age, the BLS could have claimed that newspaper costs were held down by public libraries that provided free access. It's also true that online publications deliver less value on some fronts. Not only do many people enjoy the tactile process of reading physical newspapers or magazines, but they offer the secondary value in helping to kindle fires, housebreak puppies, pack dishes, and line birdcages.
Another stunning example is found in health insurance costs, which is a major line item for most families. According to the BLS we can all breathe easy on that front because their "Health Insurance Index" increased a mere 4.3% (total) in the four years between 2008 and 2012. Interestingly, over the same time, the Kaiser Survey of Employer Sponsored Health Insurance showed that the cost of family health insurance rose 24.2% (5.5 times faster). But even if the BLS had reported higher costs, it wouldn't have made much of a difference in the CPI itself. Believe it or not, health insurance costs are assigned a weighting of less than one percent of the overall CPI. In contrast, the Kaiser Survey revealed that in 2012 the average total cost for family health insurance coverage was $15,745, or almost one third of the median family income.
If the BLS could be so blatantly wrong in reporting the prices of newspapers and health insurance, should we believe that they are more accurate on all other sectors? If the inaccuracy of these two components were consistent with the rest of the CPI's components, inflation could now be reported in double-digits!
Even more egregious than the manner in which prices are currently reported is the way that CPI methods have been changed over the years to insure that most increases are factored out. Since the 1970's, the CPI formula has changed so thoroughly that it bears scant resemblance to the one used during the "malaise days" of the Carter years. Main stream economists dismiss criticism of the changes as tin hat conspiracy theories. But given the huge stakes involved, it's hard to believe that institutional bias plays no role. Government statisticians are responsible for coming up with the formulas, and their bosses catch huge breaks if the inflation numbers come in low. Human behavior is always influenced by such incentives.
The newer CPI methodologies are designed to report not just on price movements, but on spending patterns, consumer choices, substitution bias, and product changes. In other words, the metrics have been altered to track not so much the cost of things, but the cost of living (or more accurately, the cost of surviving). But if you simply focus on price, especially on those staple commodity goods and services that haven't radically changed in quality over the years, the under reporting of inflation becomes more apparent.
As reported in our Global Investor Newsletter, we selected BLS price changes for twenty everyday goods and services over two separate ten-year periods, and then compared those changes to the reported changes in the Consumer Price Index (CPI) over the same period. (The twenty items we selected are: eggs, new cars, milk, gasoline, bread, rent of primary residence, coffee, dental services, potatoes, electricity, sugar, airline tickets, butter, store bought beer, apples, public transportation, cereal, tires, beef, and prescription drugs.)
We know that people do not spend equal amounts on the above items, and we know their share of income devoted to them has changed over the decades. But as we are only interested in how these prices have changed relative to the CPI, those issues don't really matter. We chose to look at the period between 1970 and 1980 and then again between 2002 and 2012, because these time frames both had big deficits and loose monetary policy, and they straddle the time in which the most significant changes to the CPI methodology took effect. And while the CPI rose much faster in the 1970's, the degree to which the prices of our 20 items outpaced the CPI was much higher more recently.
Between 1970 and 1980 the officially reported CPI rose a whopping 112%, and prices of our basket of goods and services rose by 117%, just 5% faster. In contrast between 2002 and 2012 the CPI rose just 27.5%, but our basket increased by 44.3%, a rate that was 61% faster. And remember, this is using the BLS' own price data, which we have already shown can grossly under-estimate the true rate of increase. The difference can be explained by how CPI is weighted and mixed. The formula used in the 1970's effectively captured the price movements of our twenty everyday products. But in the last ten years it has been quite a different story.
If these price changes in our experiments had been fully captured, CPI could currently be high enough to severely restrict Fed action to stimulate the economy. Instead, the Fed is operating as if inflation is extremely low. As a result, they are making a huge policy mistake that will come back to haunt us. During the last decade the Fed spent many years denying the existence of a housing bubble, even as a mountain of evidence piled up to the contrary. That error caused the Fed to hold interest rates too low for too long, blowing more air into the bubble and imposing enormous negative consequences on the economy. The Fed, now similarly blind to the inflation threat, is repeating its mistake, only this time the negative consequences will be even more dire.
Apart from the statistical problems that hide inflation, there are also macroeconomic factors that have helped keep prices down despite the quantitative easing. Massive U.S. trade deficits and foreign central bank dollar accumulation mean that much of the printed money winds up in foreign bank vaults, not U.S. shopping centers. As foreign consumer goods flow in, and dollars flow out, a lid is kept on domestic prices. In effect, our inflation is exported as foreign central banks monetize our deficits and recycle their surpluses into U.S. Treasuries. The demand has pushed down bond yields which has allowed the U.S. government to borrow inexpensively. Of course, when the flows reverse, bond prices will fall, yields will climb, and a tidal wave of dollars will wash up on American shores, drowning consumers in a sea of inflation.
Unlike Krugman and the Keynesians, I would argue that it is impossible to create something from nothing. I believe that printing a dollar diminishes the value of all existing dollars by an aggregate amount equal to the purchasing power of the new dollar. The other side takes the position that the new money creates tangible economic growth and that real economic value can therefore be created by putting zeroes onto a piece of paper. I think that those making such absurd claims should bear the burden of proof. For more on the interesting topic of hidden inflation, see my video that I just posted.
Peter Schiff is the CEO and Chief Global Strategist of Euro Pacific Capital, best-selling author and host of syndicated Peter Schiff Show.
Economists who hold the popular view that expanding the money supply will provide the best medicine for our ailing economy dismiss the inflationary concerns of monetary hawks, like me, by pointing to the supposedly low inflation that has occurred during the current period of rampant Fed activism. In a recent blog post aimed specifically at me, Paul Krugman noted that the sub 2.5% increases in the Consumer Price Index (CPI) over the past few years are all that is needed to prove me wrong. In fact, Krugman and others have even suggested that the CPI itself overstates inflation and that the Fed would be better able to help the economy if less strict methodologies were used. However, there is plenty of evidence to suggest that the CPI is essentially meaningless as it woefully under reports rising prices.
Magazines and newspapers provide a good case in point. The truth has not been exposed through the economic reporting that these outlets provide, but in the prices that are permanently fixed to their covers. For instance, from 1999 to 2002 the Bureau of Labor Statistic's (BLS) "Newspaper and Magazine Index" (a component of the CPI) increased by 37.1%. But a perusal of the cover prices of the 10 most popular newspapers and magazines (WSJ, Washington Post, Time, Sports Illustrated, U.S. News & World Report, Newsweek, People, NY Times, USA Today, and the LA Times) over the same time frame showed an average cover price increase of 131.5% (3.5 times faster than the BLS' stats). This is not even in the same ballpark.
Some defenders of the BLS may conclude that prices were held down by the availability of free online news content or the convenience of digital delivery. But that is beside the point. Prior to the digital age, the BLS could have claimed that newspaper costs were held down by public libraries that provided free access. It's also true that online publications deliver less value on some fronts. Not only do many people enjoy the tactile process of reading physical newspapers or magazines, but they offer the secondary value in helping to kindle fires, housebreak puppies, pack dishes, and line birdcages.
Another stunning example is found in health insurance costs, which is a major line item for most families. According to the BLS we can all breathe easy on that front because their "Health Insurance Index" increased a mere 4.3% (total) in the four years between 2008 and 2012. Interestingly, over the same time, the Kaiser Survey of Employer Sponsored Health Insurance showed that the cost of family health insurance rose 24.2% (5.5 times faster). But even if the BLS had reported higher costs, it wouldn't have made much of a difference in the CPI itself. Believe it or not, health insurance costs are assigned a weighting of less than one percent of the overall CPI. In contrast, the Kaiser Survey revealed that in 2012 the average total cost for family health insurance coverage was $15,745, or almost one third of the median family income.
If the BLS could be so blatantly wrong in reporting the prices of newspapers and health insurance, should we believe that they are more accurate on all other sectors? If the inaccuracy of these two components were consistent with the rest of the CPI's components, inflation could now be reported in double-digits!
Even more egregious than the manner in which prices are currently reported is the way that CPI methods have been changed over the years to insure that most increases are factored out. Since the 1970's, the CPI formula has changed so thoroughly that it bears scant resemblance to the one used during the "malaise days" of the Carter years. Main stream economists dismiss criticism of the changes as tin hat conspiracy theories. But given the huge stakes involved, it's hard to believe that institutional bias plays no role. Government statisticians are responsible for coming up with the formulas, and their bosses catch huge breaks if the inflation numbers come in low. Human behavior is always influenced by such incentives.
The newer CPI methodologies are designed to report not just on price movements, but on spending patterns, consumer choices, substitution bias, and product changes. In other words, the metrics have been altered to track not so much the cost of things, but the cost of living (or more accurately, the cost of surviving). But if you simply focus on price, especially on those staple commodity goods and services that haven't radically changed in quality over the years, the under reporting of inflation becomes more apparent.
As reported in our Global Investor Newsletter, we selected BLS price changes for twenty everyday goods and services over two separate ten-year periods, and then compared those changes to the reported changes in the Consumer Price Index (CPI) over the same period. (The twenty items we selected are: eggs, new cars, milk, gasoline, bread, rent of primary residence, coffee, dental services, potatoes, electricity, sugar, airline tickets, butter, store bought beer, apples, public transportation, cereal, tires, beef, and prescription drugs.)
We know that people do not spend equal amounts on the above items, and we know their share of income devoted to them has changed over the decades. But as we are only interested in how these prices have changed relative to the CPI, those issues don't really matter. We chose to look at the period between 1970 and 1980 and then again between 2002 and 2012, because these time frames both had big deficits and loose monetary policy, and they straddle the time in which the most significant changes to the CPI methodology took effect. And while the CPI rose much faster in the 1970's, the degree to which the prices of our 20 items outpaced the CPI was much higher more recently.
Between 1970 and 1980 the officially reported CPI rose a whopping 112%, and prices of our basket of goods and services rose by 117%, just 5% faster. In contrast between 2002 and 2012 the CPI rose just 27.5%, but our basket increased by 44.3%, a rate that was 61% faster. And remember, this is using the BLS' own price data, which we have already shown can grossly under-estimate the true rate of increase. The difference can be explained by how CPI is weighted and mixed. The formula used in the 1970's effectively captured the price movements of our twenty everyday products. But in the last ten years it has been quite a different story.
If these price changes in our experiments had been fully captured, CPI could currently be high enough to severely restrict Fed action to stimulate the economy. Instead, the Fed is operating as if inflation is extremely low. As a result, they are making a huge policy mistake that will come back to haunt us. During the last decade the Fed spent many years denying the existence of a housing bubble, even as a mountain of evidence piled up to the contrary. That error caused the Fed to hold interest rates too low for too long, blowing more air into the bubble and imposing enormous negative consequences on the economy. The Fed, now similarly blind to the inflation threat, is repeating its mistake, only this time the negative consequences will be even more dire.
Apart from the statistical problems that hide inflation, there are also macroeconomic factors that have helped keep prices down despite the quantitative easing. Massive U.S. trade deficits and foreign central bank dollar accumulation mean that much of the printed money winds up in foreign bank vaults, not U.S. shopping centers. As foreign consumer goods flow in, and dollars flow out, a lid is kept on domestic prices. In effect, our inflation is exported as foreign central banks monetize our deficits and recycle their surpluses into U.S. Treasuries. The demand has pushed down bond yields which has allowed the U.S. government to borrow inexpensively. Of course, when the flows reverse, bond prices will fall, yields will climb, and a tidal wave of dollars will wash up on American shores, drowning consumers in a sea of inflation.
Unlike Krugman and the Keynesians, I would argue that it is impossible to create something from nothing. I believe that printing a dollar diminishes the value of all existing dollars by an aggregate amount equal to the purchasing power of the new dollar. The other side takes the position that the new money creates tangible economic growth and that real economic value can therefore be created by putting zeroes onto a piece of paper. I think that those making such absurd claims should bear the burden of proof. For more on the interesting topic of hidden inflation, see my video that I just posted.
Peter Schiff is the CEO and Chief Global Strategist of Euro Pacific Capital, best-selling author and host of syndicated Peter Schiff Show.
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