"Restore(s) a little sanity into current political debate" - Kenneth Minogue, TLS "Projects a more expansive and optimistic future for Americans than (the analysis of) Huntington" - James R. Kurth, National Interest "One of (the) most important books I have read in recent years" - Lexington Green
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There are opportunities, but they require a deep understanding of risk and security. A livelihood with day-to-day low-level insecurity and volatility is actually far more stable and secure than the cartel-state one that claims to be guaranteed.
The burdens of Fed manipulation and the cartel-state rentier arrangements will come home to roost between 2015-2017. Those who are willing to seek livelihoods in the non-cartel economy will likely have more security and satisfaction than those who believed that joining a rentier arrangement was a secure career.
There is a price to joining a parasitic rentier arrangement, a loss of integrity, agency and independence. Complicity in an unsustainable neofeudal society has a cost.
This week Europe blew up. The media haven’t caught up yet, because they are what they are. But the markets are catching up fast.
This is a huge event for the United States, because our political elite is bound and determined to turn us into Europe. Hasn’t the EU found the answer to war and peace and prosperity forever?
Our Democrats believe it. Europe is their model. Every batty new idea they have is copied from the glorious European Union. Twenty years ago they still celebrated the Soviet Union, until that house of cards crumbled. Now they have shifted their fantasy paradise to Europe.
Over there, fifty years of increasingly centralized control have made it impossible for voters to be heard. The political parties are stuck in GroupThink. Only the fascist “protest” parties agitate for reform. The ruling class doesn’t listen. They don’t have to — they don’t have to run for election.
So European voters fled to the fascists to express their rage and despair. Imagine one out of four US voters going for Lincoln Rockwell, and you get the idea.
Read the rest, as they say.
Belmont Club has an unusually good post for yesterday. I could say that more than once a week, if truth be known. This one is quite to the point on Sequester Day.
The NHS, which its creators boasted would be the ‘envy of the world’, has been found to have been responsible for up to 40,000 preventable deaths under the helm of Sir David Nicholson, a former member of the Communist Party of Britain. “He was no ordinary revolutionary. He was on the hardline, so-called ‘Tankie’ wing of the party which backed the Kremlin using military action to crush dissident uprisings” — before he acquired a taste for young wives, first class travel and honors.
The NHS is dealing with the shortage of funds by pruning its tree of life, so to speak. He also does not tolerate anyone telling the truth about it.
it emerged he spent 15 million pounds in taxpayer money to gag and prosecute whistleblowers — often doctors and administrators who could not stomach his policies.
The public money spent on stopping NHS staff from speaking out is almost equivalent to the salaries of around 750 nurses.
The other half of the equation involves the youth.
The European Youth will remain outside the Death Pathways for some time yet. But they will spend the time waiting for their turn at affordable, caring and passionate medicine in poverty and hopelessness. With the exception of Germany youth unemployment in Europe is over 20%. “A full 62% of young Greeks are out of work, 55% of young Spaniards don’t have jobs, and 38.7% of young Italians aren’t employed.”
UPDATE: An an article at Belmont Club describes interest in alternative money creation as a way of anticipating inflation. It also goes further into a discussion of general competence.
The idea that Virginia should consider issuing its own money was dismissed as just another quixotic quest by one of the most conservative members of the state legislature when Marshall introduced it three years ago. But it has since gained traction not only in Virginia, but also in states across the country as Americans have grown increasingly suspicious of the institutions entrusted with safeguarding the economy.
What has changed is faith in the federal government, not just in Virginia but in a growing number of places. The lack of faith in the competence of government — and the soundness of the dollar — has been growing leading some states to create contingency plans in case the currency goes bust.
There may be a natural evolution to our fractionally reserved credit system that characterizes modern global finance. Much like the universe, which began with a big bang nearly 14 billion years ago, but is expanding so rapidly that scientists predict it will all end in a “big freeze” trillions of years from now, our current monetary system seems to require perpetual expansion to maintain its existence. And too, the advancing entropy in the physical universe may in fact portend a similar decline of “energy” and “heat” within the credit markets. If so, then the legitimate response of creditors, debtors and investors inextricably intertwined within it, should logically be to ask about the economic and investment implications of its ongoing transition.
Certainly “growth” seems to be fundamental to our economic health. That, of course, presumes a growing population but it also would be affected by a stagnant population with a growing age disparity. The obvious example of the latter is Japan.
The creation of credit in our modern day fractional reserve banking system began with a deposit and the profitable expansion of that deposit via leverage. Banks and other lenders don’t always keep 100% of their deposits in the “vault” at any one time – in fact they keep very little – thus the term “fractional reserves.” That first deposit then, and the explosion outward of 10x and more of levered lending, is modern day finance’s equivalent of the big bang. When it began is actually harder to determine than the birth of the physical universe but it certainly accelerated with the invention of central banking – the U.S. in 1913 – and with it the increased confidence that these newly licensed lenders of last resort would provide support to financial and real economies. Banking and central banks were and remain essential elements of a productive global economy.
The effect of asset bubbles on such a system is worrisome as the history of Japan and the recent history of the US have shown. The Panic of 1907 was largely responsible for the creation of the Federal Reserve. That financial crisis is thought, by the authors of a recent book, to have been a consequence of the 1906 earthquake in San Francisco, which destroyed a large amount of real assets and the insurance costs that were associated. The immediate cause was financial speculation but the real losses had added to the fragility of the system.
I wish I were more enthusiastic but I still wish everyone a good year. The “fiscal cliff” talks have ended about as I expected. The Republicans have pretty much rolled over. The House has yet to vote and I wonder how that will go. If they all grew a spine (or some other anatomical parts) they would vote “present” and let the Democrats pass the bill by themselves. Drudge has a link to the Breitbart story.
According to the Congressional Budget Office, the last-minute fiscal cliff deal reached by congressional leaders and President Barack Obama cuts only $15 billion in spending while increasing tax revenues by $620 billion—a 41:1 ratio of tax increases to spending cuts.
When Presidents Ronald Reagan and George H.W. Bush increased taxes in return for spending cuts—cuts that never ultimately came—they did so at ratios of 1:3 and 1:2.
“In 1982, President Reagan was promised $3 in spending cuts for every $1 in tax hikes,” Americans for Tax Reform says of those two incidents. “The tax hikes went through, but the spending cuts did not materialize. President Reagan later said that signing onto this deal was the biggest mistake of his presidency.
“In 1990, President George H.W. Bush agreed to $2 in spending cuts for every $1 in tax hikes. The tax hikes went through, and we are still paying them today. Not a single penny of the promised spending cuts actually happened.”
In the Carboniferous Epoch we were promised abundance for all,
By robbing selected Peter to pay for collective Paul;
But, though we had plenty of money, there was nothing our money could buy,
And the Gods of the Copybook Headings said: “If you don’t work you die.”
Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew,
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four –
And the Gods of the Copybook Headings limped up to explain it once more.
It’s too long to post all of it and, for those who are unsure of the source of the title, copybooks were supplied for all school children in England, when it was still England. The copy books had traditional aphorisms on each page that children were expected to learn.
Another expression that relates to the books was someone “blotted his copybook.” This meant making an error that was difficult to correct.
The “copybook headings” to which the title refers were proverbs or maxims, extolling virtues such as honesty or fair dealing that were printed at the top of the pages of 19th-century British students’ special notebook pages, called copybooks. The school-children had to write them by hand repeatedly down the page.
The work has been described as “beautifully captur[ing] the thinking of Schumpeter and Keynes.” David Gilmour says that while topics of the work are the “usual subjects”, the commentary “sound better in verse” while Alice Ramos says that they are “far removed from Horace’s elegant succinctness” but do “make the same point with some force.”
I don’t think I would agree that Keynes is an example of the copybook headings’ wisdom although his recommendations have been wildly distorted by politicians.
We are coming to a period when math will be far more determinant than wishful thinking in terms of our lives.
As it will be in the future, it was at the birth of Man –
There are only four things certain since Social Progress began –
That the Dog returns to his Vomit and the Sow returns to her Mire,
And the burnt Fool’s bandaged finger goes wabbling back to the Fire –
And that after this is accomplished, and the brave new world begins
When all men are paid for existing and no man must pay for his sins
As surely as Water will wet us, as surely as Fire will burn
The Gods of the Copybook Headings with terror and slaughter return!
I’ve tried to think about anything but the coming economic calamity but this column from the Daily Telegraph is too perceptive to ignore. Of course, the liars include most of the US media, press and TV. We have to get our news from the British media about American politics. The US media has become an arm of the Democratic party.
Must we assume now that no party that speaks the truth about the economic future has a chance of winning power in a national election? With the results of presidential contests in the United States and France as evidence, this would seem to be the only possible conclusion. Any political leader prepared to deceive the electorate into believing that government spending, and the vast system of services that it provides, can go on as before – or that they will be able to resume as soon as this momentary emergency is over – was propelled into office virtually by acclamation.
So universal has this rule turned out to be that parties and leaders who know better – whose economic literacy is beyond question – are now afraid even to hint at the fact which must eventually be faced. The promises that governments are making to their electorates are not just misleading: they are unforgivably dishonest.
I have not believed that Romney’s problem was one of poor communication or salesmanship. Certainly, the turnout numbers show that Obama’s organization made the most of a very intrusive data mining system. The possibility that the system of the campaign will become part of the political party’s permanent infrastructure is worrisome. I don’t want to be an alarmist but one feature of totalitarian governments, after the French Revolution, was the intrusion into daily life.
Of course, once in power all governments must deal with reality – even if they have been elected on a systematic lie. As one ex-minister famously put it when he was released from the burden of office: “There’s no money left.” So that challenge must be met. How do you propose to go on providing the entitlements that you have sworn never to end, without any money? The victorious political parties of the Left have a ready answer to that one. They will raise taxes on the “rich”. In France and the United States, this is the formula that is being presented not only as an economic solution but also as a just social settlement, since the “rich” are inherently wicked and must have acquired their wealth by confiscating it from the poor.
I see no sign of any recognition of reality yet by Obama or his government. The “fiscal cliff” negotiations, if they can be called that, have been a farce. The Republicans have allowed themselves to be maneuvered into secret negotiations which have been demagogued and which have set them up for blame for what is coming. They would have been far better advised to insist on open negotiations, on C-SPAN if necessary.
This dwindling supply of space in central Washington comes amid growth in the office sector over the years and a population that is back on the rise after decades of decline. Washington’s population has grown 8% since 2000 to more than 600,000, adding an estimated 46,000 residents, as young people in particular have flocked to live there.
The article discusses proposed changes to the DC zoning ordinances so that more office space and high-rise condos could be added to the area north of the Mall and between the White House and the Capitol.
I devoted a few seconds of rumination to the architectural issue, before it hit me. What the article says is that all of the country’s wealth and power are being concentrated in the Imperial Capital. The real problem is not building heights, it is the concentration of political power. I think we need a meme or slogan to carry us through to November, and through the subsequent campaign to re-establish constitutional government in the United States. So here is my suggestion:
Vote Republican — Send the Recession to Washington
Your thoughts are welcome. So are bumper sticker designs.
So what next? The best first step is to free up labor markets world wide. Specifically, we need policies that take aim at the unbearable political forces that seek to tighten the regulatory noose on voluntary labor markets.
Unfortunately, the dominant attitude of macroeconomists is to assume that nothing that takes place within the labor market (of which Krugman never speaks) is large enough to influence the large macro trends to which they attribute today’s high employment rates.
The blunt truth is exactly the opposite. The calcification of labor markets is the primary impediment to economic recovery. The direct effects of government regulation of labor can matter far more than the indirect effects of macroeconomic policy, whether Keynesian or austerity-based. Neither austerity nor lavish public expenditures will improve the overall situation, which is why the massive increase in American public debt has not nudged unemployment rates down. The only workable solution has to stress job creation, not by misdirected subsidies, but by dismantling the government obstacles to market exchange.
Ann Althouse has a good post today. I can’t get through her Captcha system so I thought I would post a few comments here. This NY Times op-ed piece is the source for her observations. It is behind the Times’ idiotic payment wall so go to her blog for the link.
TODAY is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.
To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.
That certainly states the issue clearly. What does he complain about ?
I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief.
But this was not always the case. For more than a decade I recruited and mentored candidates through our grueling interview process. I was selected as one of 10 people (out of a firm of more than 30,000) to appear on our recruiting video, which is played on every college campus we visit around the world. In 2006 I managed the summer intern program in sales and trading in New York for the 80 college students who made the cut, out of the thousands who applied.
I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.
“….Boyd would comment in the 80s that the approach was having significant downside on American corporations as former WW2 officers climbed the corporate ladder, creating similar massive, rigid, top-down command&control infrastructures (along with little agility to adapt to changing conditions, US auto industry being one such poster child).”
Wheeler’s comment reminded me of the following post that I had meant to blog earlier:
One occasion in particular in the late 1970s brought this home to me. McNamara had come to one of our staff meetings in the Western Africa Region of the World Bank, where I was a young manager, and he had said he would be ready to answer any questions.
I felt fairly secure as an up-and-coming division chief and a risk-taking kind of guy. So I decided to ask McNamara the question that was on everyone’s lips in the corridors at the time, namely, whether he perceived any tension between his hard-driving policy of pushing out an ever-increasing volume of development loans and improving the quality of the projects that were being financed by the loans. In effect, was there a tension between quantity and quality?
When the time came for questions, I spoke first at the meeting and posed the question.
His reply to me was chilling.
He said that people who asked that kind of question didn’t understand our obligation to do both—we had to do more loans and we had to have higher quality—there was no tension. People who didn’t see that didn’t belong in the World Bank.
This too from a speech by Robert McNamara, “Security in the Contemporary World”:
The rub comes in this: We do not always grasp the meaning of the word “security” in this context. In a modernizing society, security means development.
Security is not military hardware, though it may include it. Security is not military force, though it may involve it. Security is not traditional military activity, though it may encompass it. Security is development. Without development, there can be no security. A developing nation that does not in fact develop simply cannot remain “secure.” It cannot remain secure for the intractable reason that its own citizenry cannot shed its human nature.
If security implies anything, it implies a minimal measure of order and stability. Without internal development of at least a minimal degree, order and stability are simply not possible. They are not possible because human nature cannot be frustrated beyond intrinsic limits. It reacts because it must. [break]
Development means economic, social, and political progress. It means a reasonable standard of living, and the word “reasonable” in this context requires continual redefinition. What is “reasonable” in an earlier stage of development will become “unreasonable” in a later stage.
As development progresses, security progresses. And when the people of a nation have organized their own human and natural resources to provide themselves with what they need and expect out of life and have learned to compromise peacefully among competing demands in the larger national interest then their resistance to disorder and violence will be enormously increased.
Think about this in terms of the “armed nation building” of the past decade or so and in terms of successive Clinton, Bush, and Obama administration policies. Really not that much difference if you look at it in terms of securing stability through development – armed or otherwise. Not a novel observation in any way, but bears in mind repeating as the 2012 Presidential campaign continues its “running in place” trajectory….
Update:“Running in place” and “trajectory” don’t really go together, do they? Oh well. You all know what I mean….
James C. Bennett, author of The Anglosphere Challenge (Rowman & Littlefield, 2004), and Michael J. Lotus (who blogs at Chicagoboyz.net as “Lexington Green”), are proud to announce the signing of a contract with Encounter Books of New York to publish their forthcoming book America 3.0.
America 3.0 gives readers the real historical foundations of our liberty, free enterprise, and family life. Based on a new understanding of our past, and on little known modern scholarship, America 3.0 offers long-term strategies to restore and strengthen American liberty, prosperity and security in the years ahead.
America 3.0 shows that our country was founded as a decentralized federation of communities, dominated by landowner-farmers, and based on a unique type of Anglo-American nuclear family. This was America 1.0, as the Founders established it. The Industrial Revolution brought progress, opportunity and undreamed-of mobility. But, it also pushed the majority of American families into a new, urban, industrial life along with millions of unassimilated immigrants. After the Civil War, new problems of public health, crime, public order, and labor unrest, on top of the issues of Reconstruction, taxed the old Constitution. Americans looked for new solutions to new problems, giving rise to Progressivism, the ancestor of modern liberalism.
America 3.0 shows that liberal-progressive solutions to the challenges of America 2.0 relieved some problems, and kicked others down the road. But they also led to an overly powerful state and to an overly intrusive bureaucracy. This was the beginning of America 2.0, the America we grew up with, which dominated the Twentieth Century.
America 3.0 argues that the liberal-progressive or “Blue State” social model has reached its natural limits. Even as it continues to try to expand, it is now dying out before our eyes. We are now living in the closing years of the 20th Century “legacy state.” Even so, it has taken the shock of the current Great Recession to make people see the need for change. As a result, more and more Americans are calling for a return to our founding principles. Freedom and individualism are on the rise after a century-long detour.
America 3.0 shows that our current problems can be and must be transcended with a transition to a new America 3.0, based on modern technology, decentralized communities, and self-reliant families, and a reassertion of fiscal responsibility, Constitutionally limited government and free market economics. Ironically the future America 3.0 will in many ways be closer to the original vision of the Founders than the fading America 2.0.
America 3.0 gives readers an accurate, and hopeful, assessment of our current crisis. It also spotlights the powerful forces arrayed in opposition to the needed reform. These groups include ideological leftists in media and the academy, politically connected businesses, and the public employees unions. However, as powerful as these groups are, they have become vulnerable as the external conditions change. A correct understanding of our history and culture, which America 3.0 provides, shows their opposition will be futile. The new, pro-freedom, mass political movement, which is aligned with the true needs and desires of Americans, is going to succeed.
America 3.0 provides readers a program of specific “maximalist” proposals to reform our government and liberate our economy. America 3.0 shows readers that these reforms are consistent with our fundamental culture, and with our Constitution, and will make Americans freer and more prosperous in the years ahead.
America 3.0 provides a “software upgrade” for the Tea Party and for all activists on the Conservative and Libertarian Right. It provides readers with historical evidence and intellectual coherence, to channel the energy and enthusiasm of the rising mass political movement to renew America.
America 3.0 shows that our capacity for regeneration is greater than most people realize. Predictions of our doom are deeply mistaken. We are now living just before the dawn of America’s greatest days. Within a generation, positive changes beyond what we can currently imagine will have taken place. That is the America 3.0 we are going to build together.
The Greeks do not need Germany to come bail them out. Russia was in something of a similar situation in the mid-1800s and resolved their financial and strategic difficulties by selling Alaska to the United States. At the time Russia feared that they had to sell Alaska or lose it to British Colombian expansion.
There are over 6,000 islands in Greece of which only 227 are inhabited. These 5500+ are all assets that could be used to satisfy Greece’s debts either by concession, Hong Kong style, or outright sale as Russia’s Alaska holdings were sold. At the very least this is an option that should be talked about. Strategically, a sale could be offered to France, Italy, or the UK (I do not believe the US would be interested) that would create interesting possibilities of introducing a buffer state between the remaining Greek Aegean territory and Turkey. The islands themselves may or may not be worth much but their economic zones, fisheries, and resource possibilities are intriguing.
The idea ultimately may turn out to be insufficient by itself to save Greece. But you really don’t know until you present the idea and so far nobody seems to be pursuing it. I find it odd that a proven method for raising money that does not require default or endanger the EU is not even on the table for consideration.
Gov. Rick Perry has famously called Social Security a ponzi scheme, a monstrous lie. The Economist magazine, in covering the story has now told its own monstrous lie. It is lying via a graph it included with the story.
SS fantasy finances, Economist version
The legally mandated 2011 Social Security Trustee Report lays out the actual fund exhaustion date as 2023 on page 3 of the report. So, 2023, 2037, what’s the difference? Electorally, it’s a very big deal. If you’re a current beneficiary today at age 66, you would be 78 in 2023, right at the edge of your life expectancy but more likely than not you would be alive. You would be 92 in 2037 and more than likely dead. If a senior is going to be alive when the big Social Security benefit cut kicks in, it is within their planning window and consequently the chances that they will be a Perry voter go up. Up to now, attempts at reforming Social Security were done so early that the crisis was only going to affect somebody else. Now, every senior who grasps when the crisis will hit knows it will hit them when they are going to be older, weaker, and even more unemployable than they are now. By putting out a pretty, lying graph, the Economist gives ammunition to the left-leaning mass media to write their own stories that also minimize the number of seniors who grasp the truth.
In short, the Economist is putting false numbers out there, ones that will have an effect of lulling seniors into a poorer financial state right when they will be old and frail and unable to do anything about it. What happened to their editors, their fact checkers, their sense of decency? Is everybody to be sacrificed for the electoral convenience of US Democrats in the 2012?
I mean, I’m right here in Texas and I know what both a good economy and bad economy look like in Texas. Being told by people out of state that Texas doesn’t have a good economy right now is akin to someone on the Internet claiming that it’s raining cats and dogs in Austin when I can look out my window and see sunshine and clear blue skies.
Most of these weird arguments are coming from leftists whistling past the graveyard. Texas governor Rick Perry is basing his presidential aspirations on Texas’s relatively sound economy, so that has brought a lot of delusional people out of the woodwork, all desperately trying to sell the idea that the Texas economy actually sucks. Well, it doesn’t.
In reality, the strongest argument against Perry is that Texas has the weakest governor of any of the states, so he can’t claim the primary credit for Texas’s performance as he might in other states.
Most other state constitutions concentrate significant power in the office of the governor and the governors often have near sole control over the executive branch. The Texas constitution divides executive power over several state offices. The Texas governor must share power with the lieutenant governor, the speaker and the state comptroller. All state senior executives are elected in their own right as are many of the state boards. So, the executive branch’s contribution to economically sound government in Texas is the result of a broad political culture of responsibility that elects a lot of good people to many offices, instead of being the result of a single insightful leader (e.g., Christie in New Jersey).
Texas is sound today because of the actual depression we struggled through alone during the period from 1984-1994 as a result of the oil bust. We jettisoned a century of southern-populist quasi-socialism because we ran out of other people’s money and were forced by circumstance to adopt a free-market approach. An entire generation of future politicians and voters got a hard lesson in the dangers of high government spending 20 years before the rest of the nation did. We learned to keep government small and business-friendly because we had to in order to survive.
Since we learned our lesson, the people of Texas have repeatedly elected pro-economic-creative, pro-growth and small-government politicians to all offices across the state. Perry deserves some credit for our sound economy because he has been one of the principle political leaders of the last decade but, frankly, if it hadn’t been Perry it would have been someone else just like him, because that is what the political culture of Texas demands. Perry is a cork bobbing in a torrent of responsible Texans en masse.
In the end, it is not political leadership but the wisdom and discipline of the people that counts in America. Texas is better off than the rest of America because our depression taught us all that it is economic-creatives that generate a sound economy and not government. If the rest of the country doesn’t learn that lesson, it won’t matter if Perry or another responsible candidate is President or not.
How to stimulate the economy without inflating the currency or borrowing any more money.
Assemble all requests for federal permits.
Sign them for final approval (as in if they’re interim permits, they are approved for final status as if all other interim applications had been filed and been approved as well). Use auto pens if needed.
That’s it, no step 3 required.
There is now, and always is, a backlog of projects that have funding, are ready to go, and only wait the approval of the various administrative arms that they have complied with this or that regulation. If those projects go forward, the economy will be in better shape. So why not just sign the permits, let construction proceed, and mitigate the bad decisions on the back end when the economy has recovered?
Just to make things clear, there are 51 executives in the USA who can do this. The President would likely have the biggest effect but certainly governors would be able to do this on their own as well.
I spent the past six months reading about Calvin Coolidge. I was interested in why the 1920s were a period of great prosperity and why the severe recession/ depression of 1920-1921 was so short. At its peak, there was 25% unemployment. Gross domestic product dropped by 6.9% in one report.
The recession of 1920–21 was characterized by extreme deflation — the largest one-year percentage decline in around 140 years of data. The Department of Commerce estimates 18% deflation, Balke and Gordon estimate 13% deflation, and Romer estimates 14.8% deflation. The drop in wholesale prices was even more severe, falling by 36.8%, the most severe drop since the American Revolutionary War. This is worse than any year during the Great Depression (adding all the years of the Great Depression together, however, yields more severe deflation). The deflation of 1920–21 was extreme in absolute terms, and also unusually extreme given the relatively small decline in gross domestic product.
The Harding-Coolidge administration took office in March 1921 and the recession was over in months. Why ? Governments were smaller then and had less influence on the economy. The Wilson Administration has been widely described as the equivalent of a fascist regime with its war time controls and economic meddling. Again from the Wikipedia article:
One reason I believe that the US government has grown so large and has been able to rack up so much debt is because of a general belief (especially among young people that)
- Government is fair, transparent and effective
- the private sector is scheming and opaque
The general public didn’t always feel this way. Back when the “Reagan Revolution” swept through he made the famous crack that we should always fear the comment “We are from the government, and we are here to help you”. There was a widespread belief that the private sector should lead the way and that government should play a supporting role, running things like the military and infrastructure spending, but not to generally take over key functions of the economy.
Younger people, in order to get into any sort of exclusive college, need to “volunteer”. In past years’ in the US volunteering typically meant joining a constructive organization or working with your church, but now there are a wide array of programs that students filter through in order to have a convincing resume to apply to these selective schools, and likely putting down church activities doesn’t help much at all. I think that people are confusing these sorts of volunteer organizations with the reality of how governments actually work, which is quite different, since government organizations have an innate tendency to 1) propagate 2) expand their domain 3) put themselves first in terms of salaries and benefits rather than focusing on value to the taxpayer. These sorts of behaviors also occur amongst volunteer organizations but not to the same degree.
People also have a more trusting belief that the government role is actually EFFECTIVE. In reality, government is usually a bystander when events occur. For instance Sarbanes-Oxley was invented in the wake of Enron to prevent financial scandal through making companies’ financials more transparent and other “reforms”. However, these “reforms” did nothing to prevent the 2007-9 meltdown where major companies went from financially sound and a clean audit opinion to utterly bankrupt in a matter of months, often for opaque balance sheet related items that were conceptually similar to the Enron-esque accounting items that Sar-box supposedly fixed. And as far as the BP spill; government employees by the thousand supposedly had oversight of that sort of behavior and yet were in fact ineffective in preventing the events in the gulf. The SEC did nothing to catch or track Madoff despite many warnings due to institutional bias and failure; even now they are trying to catch up to Wall Street, despite having a huge budget and thousands of staffers.
I recently received this summary of Exxon’s compensation policies since I am a shareholder. While Exxon is universally maligned among the left in fact their behavior is completely optimal as far as incentives for executives, and transparent. From the document:
The compensation program supports the retention of these and all other executives by holding back and putting at risk a large percentage of annual compensation until retirement and later.
Other practices include 1) no employment contracts 2) no payments or benefits are triggered by a change in control 3) no severance programs. In addition all of their US executives participate in the same programs so that they are aligned.
The government, on the other hand, despises transparency and accountability, along with their related organizations. The Chicago Tribune had an excellent article titled “Stimulus funds wasted in national home weatherizing program, critics say“. The article discusses one of the many “stimulus projects” that the government created as part of the massive effort to prop up the economy; all taxpayers will be paying for this for years to come in the form of repayment on our Federal debt.
The money spent… is a tiny fraction of the $90.5 million federal and state officials are pouring into the nonprofit CEDA to weatherize homes for the poor, but hundreds of jobs have been plagued by workmanship problems, according to state and federal records. As CEDA’s part in the federal stimulus program heads into its final months, contractors continue to fail 1 in 7 inspections, and a federal plan to fix mistakes revealed in a blistering audit last year still hasn’t been completed, federal officials said.
And not only is the program not working as intended, the government and their partners in the non-profit sector (that sprang up to eat at the trough of the stimulus funds) is extremely reticent to provide information to the journalists at the Chicago Tribune, which seems at odds with their public mission (although predictable to anyone that has a basic understanding of how governments actually function).
And by the state doling out money to a nonprofit, which is not subject to open-records laws, officials have kept from the public how millions of taxpayer dollars are spent. CEDA refused to provide information about its contractors, some of which have lengthy records of complaints, the Tribune found.
As the government moves into a larger sector of the economy, paid for with taxes taking from businesses in the private sector and their employees, you should expect grudging transparency at best, muted and confusing responses when problems occur, and no accountability among government officials for failures and outright lies. For instance no one would be fired related to the mis-management of this program, for example.
We need for people to understand how the “dead hand” of bureaucrats will strangle the country and that problems and denials should be expected as the norm and not an exception when these sorts of programs run amok.
Peonage is a form of involuntary servitude that is undertaken to pay off a debt. Realistically, peonage is what we in the US are facing if we do not get our spending under control.
Today, when politicians propose to continue the spending train with unrealistic, pie-in-the-sky spending cuts that will never happen, they are proposing decades of peonage for us and our posterity. This is worse than wrong policy, it is viscerally offensive to everyone who understands the situation.
The norms of political correctness in the US do not normally permit a white to accuse a black of working to violate the 13th amendment. We do not live in normal times. President Obama is dancing on the edge of a precipice and if he persists in going over the edge, he will be taking the country with him. We must have serious proposals from both parties to step back and restore sustainable government finances. The Republicans have stood and delivered. President Obama and his party have prettied up debt peonage for the nation.
[I received the following press release today. I hope many of our readers will attend.]
CHICAGO – Thousands of concerned citizens are set to gather at noon on April 18 at Daley Plaza at 50 W. Washington to protest out of control spending, unsustainable deficits and the unprecedented growth of government. People will come together in downtown Chicago, where the tea party movement began, to hold politicians of both parties accountable, stop runaway spending and defend freedom and individual liberty.
“We are very concerned with the direction of our country and our state,” said Chicago coordinator Steve Stevlic. “The decisions made in Washington and Springfield over the next two years will set a path for a generation. We feel the best way to improve the economy, create jobs, and build a sustainable future for our children and grandchildren is to reform government
and restore liberty.”
What: Chicago Tax Day Tea Party: Reform Government. Restore Liberty.
Where: Daley Plaza, 50 W. Washington St., Chicago
When: Noon on Tax Day, which is Monday, April 18
Illinois 8th District Rep. Joe Walsh, who has gained national notoriety for refusing his congressional pension and healthcare benefits, sleeping in his office and opposing the Continuing Resolutions that have funded government at 99 percent of current spending levels
Herman Cain, Businessman, Presidential Candidate
Grover Norquist, President, Americans for Tax Reform
Jonathan Hoenig, Capitalistpig.com
John Tillman, CEO, Illinois Policy Institute
Cisco Cotto, WLS-AM 890 Host
Dan Proft, WLS-AM 890 Host
Adam Andrzejewski, Founder, For the Good of Illinois
Alex Cortes, Let Freedom Ring, Wheresmywaiver.com
Dr. Arie Friedman, Docs 4 Patientcare
Media Contact: Steve Stevlic, Chicago Tea Party Patriots
email@example.com or (708) 289-5443
The Core Values of the Tea Party Patriots are:
Constitutionally Limited Government
For more information on the Tea Party Movement in Chicago, Illinois and nationally, please visit:
Sigh – compared to Indiana and Wisconsin where the legislators are “on the run”, in Chicago and Illinois it is just the usual “tax and spend”. Unions here don’t have to worry about any pesky regulations or laws that might limit their behavior because they own the city and the state and can pretty much do as they please. I’m sure that has nothing to do with the fact that Illinois has among the most under-funded pensions in the US and that our governor is making noise about having the Federal government backstop our pension obligations, as you can see here:
Gov. Pat Quinn included the backstop proposal in the 2012 state budget he released last week. Critics said it would amount to a federal bailout of underfunded state pension programs and pronounced it dead on arrival in Washington. “Hell no–not happenin’,” a House Republican aide said.
But one expert said policymakers could consider the idea in the future, as states lobby Congress and the White House for help in tackling their growing pension obligations. A federal guarantee would allow Illinois and other states with fiscal problems to sell pension bonds at lower interest rates.
Illinois faces an $80 billion pension shortfall. Quinn’s proposed budget said “significant long-term improvements will come only from additional pension reforms, refinancing the liability and seeking a federal guarantee of the debt, or increasing the required state contributions.” Quinn claims previous state pension reforms will save Illinois taxpayers billions of dollars.
While the Federal government backstop of state pension debt went nowhere, it clearly is a strategy that will be tested at some point in the future, since Illinois has not implemented any of the policy changes necessary to sufficiently fund our obligations or reduce future requirements. Our unions will be on the vanguard of bankrupting Illinois to the point where there is no choice but to apply for Federal aid while the state is flat on our back.
Powerline today has an analysis of the USA as if it were a firm applying for funds from Kleiner, Perkins. The presentation has a number of slides, some of which I will reproduce here. The link to the full presentation doesn’t work, unfortunately.
[Jonathan adds: Click on the large charts to display them at full size.]
The net worth of the US is on the right side scale. The trend is pretty obvious. The small improvement is probably a sign of some recovery in the past year.
Spending has followed historical events, such as World War II. The trend, however, is not good. After 1930, spending on entitlements began and has grown out of control.
Defense spending is blamed by leftists but there has not been a lot of defense spending since Vietnam.
Taxes have followed a steady trend line until Obama was elected. The sharp rise has not helped as costs far outstrip revenue.
What, then, is the problem ?
Entitlements plus interest alone will exceed revenue by 2027. That’s 16 years from now.
The left wants to raise taxes.
How high must tax brackets go ?
How do we compare to other countries ?
Better than some and not so good as others.
Can the left stop denying reality and start to discuss it?
I am certain that not everyone here is as stupid as I am.
I try very hard to keep factual information from you. To wit, here is some bad analysis of our fiscal situation.
Of course, I could be wrong and I’m not this dumb. But probably not.
[fixed it for you. If you’re not even going to acknowledge our good faith attempts to allow you to comment while simply requiring that you not insinuate everyone’s stupidity then we can only assume you don’t mind the same treatment in return – mod.
Posted by: Mike K
They constantly use fake versions of my signature, which of course the moderators could stop. It fits their pattern. Modifying my comments is also standard and they actually think this is clever.
The situation in Madison Wisconsin has been so well covered by Ann Althouse on her blog, that I have not felt it necessary to mention it. Yesterday, the situation began to change. This is what union rule would look like:
The state Senators had passed the limited budget bill that included only the collective bargaining provisions. The Democrats had blocked the fiscal portions of the bill by fleeing the state two weeks ago. Walker has had this option since they left but he and Majority Leader FitzGerald, were negotiating with the Democrats in hopes the standoff could be ended. The negotiations (not reported by the MSM, of course) broke down when it became apparent that the Democrats are nationalizing this controversy. Walker then encouraged the Senate Republicans to go ahead with Plan B. They did and the law was signed by Walker yesterday.
My prediction: 10 years from now public higher education, at least in many states, will have ceased to exist. 20 years from now state governments will realize that they still own the buildings and property on their former state university campuses and start charging us rent to use them. 25 years from now citizens will complain that they can’t afford to send their children to college–any college. But by then the peasant class will be so firmly established that it won’t really matter.