Government Induced Inflation caused the Panic of 1893 and caused the Worst Depression until the Great Depression
Britain kicked off the Industrial Revolution. Then handed off the baton to the United States in the latter half of the 19th century. As American industry roared. Great industrialists modernize America. And the world. Andrew Carnegie made steel inexpensive and plentiful. He built railroad track and bridges. And the steel-skeleton buildings of U.S. cities. Including the skyscrapers. John D. Rockefeller saved the whales. By producing less expensive kerosene to burn in lamps instead of the more expensive whale oil. He refined oil and brought it to market cheaper and more efficiently than anyone else. Fueling industrial activity and expansion. J.P. Morgan developed and financed railroads. Made them more efficient. Profitable. And moved goods and people more efficiently than ever before. Raising the standard of living to heights never seen before.
The industrial economy was surging along. And all of this without a central bank. Credit was available. So much so that it unleashed unprecedented economic growth. That would have kept on going had government not stopped it. With the Interstate Commerce Act in 1887 and the Sherman Antitrust Act of 1890. Used by competitors who could not compete against the economy of scales of Carnegie, Rockefeller and Morgan and sell at their low prices. So they used their friends in government to raise prices so they didn’t have to be as competitive and efficient as Carnegie, Rockefeller and Morgan. This legislation restrained the great industrialists. Which began the era of complying with great regulatory compliance costs. And expending great effort to get around those great regulatory compliance costs.
Also during the late 19th century there was a silver boom. This dumped so much silver on the market that miners soon were spending more in mining it than they were selling it for. Also, farmers were using the latest in technology to mechanize their farms. They put more land under cultivation and increased farm yields. So much so that prices fell. They fell so far that farmers were struggling to pay their debts. So the silver miners used their friends in government to solve the problems of both miners and farmers. The government passed the Sherman Silver Purchase Act which increased the amount of silver the government purchased. Issuing new treasury notes. Redeemable in both gold and silver. The idea was to create inflation to raise prices and help those farmers. By allowing them to repay old debt easier with a depreciated currency. And how did that work? Investors took those new bank notes and exchanged them for gold. And caused a run on U.S. gold reserves that nearly destroyed the banking system. Plunging the nation in crisis. The Panic of 1893. The worst depression until the Great Depression.
Richard Nixon Decoupled the Dollar from Gold and the Keynesians Cheered
J.P. Morgan stepped in and loaned the government gold to stabilize the banking system. He would do it again in the Panic of 1907. The great industrialists created unprecedented economic activity during the latter half of the 19th century. Only to see poor government policies bring on the worst depression until the Great Depression. A crisis one of the great industrialists, J.P. Morgan, rescued the country from. But great capitalists like Morgan wouldn’t always be there to save the country. Especially the way new legislation was attacking them. So the U.S. created a central bank. The Federal Reserve System. Which was in place and ready to respond to the banking crisis following the stock market crash of 1929. And did such a horrible job that they gave us the worst depression since the Panic of 1893. The Great Depression. Where we saw the greatest bank failures in U.S. history. Failures the Federal Reserve was specifically set up to prevent.
The 1930s was a lost decade thanks to even more bad government policy. FDR’s New Deal programs did nothing to end the Great Depression. Only capitalism did. And a new bunch of great industrialists. Who were allowed to tool up and make their factories hum again. Without having to deal with costly regulatory compliance. Thanks to Adolf Hitler. And the war he started. World War II. The urgency of the times repealed governmental nonsense. And the industrialists responded. Building the planes, tanks and trucks that defeated Hitler. The Arsenal of Democracy. And following the war with the world’s industrial centers devastated by war, these industrialists rebuilt the devastated countries. The fifties boomed thanks to a booming export economy. But it wouldn’t last. Eventually those war-torn countries rebuilt themselves. And LBJ would become president.
The Sixties saw a surge in government spending. The U.S. space program was trying to put a man on the moon. The Vietnam War escalated. And LBJ introduced us to massive new government spending. The Great Society. The war to end poverty. And racial injustice. It failed. At least, based on ever more federal spending and legislation to end poverty and racial injustice. But that government spending was good. At least the Keynesians thought so. Richard Nixon, too. Because he was inflating the currency to keep that spending going. But the U.S. dollar was pegged to gold. And this devaluation of the dollar was causing another run on U.S. gold reserves. But Nixon responded like a true Keynesian. And broke free from the shackles of gold. By decoupling the dollar from gold. And the Keynesians cheered. Because the government could now use the full power of monetary policy to make recessions and unemployment a thing of the past.
Activist, Interventionist Government have brought Great Economic Booms to Collapse
The Seventies was a decade of pure Keynesian economics. It was also the decade that gave us double digit interest rates. And double digit inflation rates. It was the decade that gave us the misery index (the inflation rate plus the unemployment rate). And stagflation. The combination of a high inflation rate you normally only saw in boom times coupled with a high unemployment rate you only saw during recessionary times. Something that just doesn’t happen. But it did. Thanks to Keynesian economics. And bad monetary policy.
Ronald Reagan was no Keynesian. He was an Austrian school supply-sider. He and his treasury secretary, Paul Volcker, attacked inflation. The hard way. The only way. Through a painful recession. They stopped depreciating the dollar. And after killing the inflation monster they lowered interest rates. Cut tax rates. And made the business climate business-friendly. Capitalists took notice. New entrepreneurs rose. Innovated. Created new technologies. The Eighties was the decade of Silicon Valley. And the electronics boom. Powering new computers. Electronic devices. And software. Businesses computerized and became more efficient. Machine tools became computer-controlled. The economy went high-tech. Efficient. And cool. Music videos, CD players, VCRs, cable TV, satellite TV, cell phones, etc. It was a brave new world. Driven by technology. And a business-friendly environment. Where risk takers took risks. And created great things.
History has shown that capitalists bring great things to market when government doesn’t get in the way. With their punishing fiscal policies. And inept monetary policies. Activist, interventionist government have brought great economic booms to collapse. Who meddle and turn robust economic activity into recessions. And recessions into depressions. The central bank being one of their greatest tools of destruction. Because policy is too often driven by Big Government idealism. And not the proven track record of capitalism. As proven by the great industrialists. And high-tech entrepreneurs. Time and time again.
Tags: Andrew Carnegie, banking, banking system, Big Government, Business, business friendly, business-friendly climate, capitalism, capitalists, Carnegie, central bank, competitive, computer, debt, depression, dollar, economic growth, economy, efficient, electronic, entrepreneur, farmers, Federal Reserve, gold, gold reserves, government spending, Great Depression, industrial economy, industrialists, inflation, inflation rate, interest rates, Interstate Commerce Act, J.P. Morgan, John D. Rockefeller, Keynesian, Keynesian economics, Keynesians, LBJ, miners, monetary policy, Morgan, Nixon, prices, Reagan, recession, regulatory compliance costs, Rockefeller, Ronald Reagan, run on U.S. gold reserves, Sherman Antitrust Act, Sherman Silver Purchase Act, silver, spending, technology, unemployment, unemployment rate
Monetary Policy created the Housing Bubble and the Subprime Mortgage Crisis
Those suffering in the fallout of the Subprime Mortgage Crisis can thank monetary policy. That tool used by the federal government that kept interest rates so low for so long. Following the old Milton Friedman idea of a permanent level of inflation (but small and manageable) to stimulate constant economic growth. Why? Because when people are buying houses the economy is booming. Because it takes a lot of economic activity to build them. And even more to furnish them. Which means jobs. Lots and lots of jobs.
But there is a danger in making money too cheap to borrow. A lot of people will borrow that cheap money. Creating an artificial demand for ever more housing. And not for your parent’s house. But bigger and bigger houses. The McMansions. Houses 2-3 times the size of your parent’s house. This demand ran up the price of these houses. Which didn’t deter buyers. Because mortgage rates were so low. People who weren’t even considering buying a new house, let alone a McMansion, jumped in, too. When the jumping was good. To take advantage of those low mortgage rates. There was so much house buying that builders got into it, too. House flippers. Who took advantage of those cheap ‘no questions asked’ (no documentation) mortgages (i.e., subprime) and bought houses. Fixed them up. And put them back on the market.
Good times indeed. But they couldn’t last. Because those houses weren’t the only thing getting expensive. Price inflation was creeping into the other things we bought. And all those houses at such inflated prices were creating a dangerous housing bubble. So the Federal Reserve, America’s central bank, tapped the brakes. To cool the economy down. To reduce the growing inflation. By raising interest rates. Making mortgages not cheap anymore. So people stopped buying houses. Leaving a glut of unsold houses on the market. Bursting that housing bubble. And it got worse. The higher interest rate increased the monthly payment on adjustable rate mortgages. A large amount of all those subprime mortgages. Causing many people to default on these mortgages. Which caused the Subprime Mortgage Crisis. And the Great Recession.
The Federal Reserve System conducts Monetary Policy by Changing both the Money Supply and Interest Rates
Money is a commodity. And subject to the laws of supply and demand. When money is in high demand (during times of inflation) the ‘price’ of money goes up. When money is in low demand (during times of recession) the ‘price’ of money goes down. The ‘price’ of money is interest. The cost of borrowing money. The higher the demand for loans the higher the interest rate. The less the demand for loans the lower the interest rate.
So there is a relationship between money and interest rates. Adjusting one can affect the other. If the money supply is increased the interest rates will decrease. Because there is more money to loan to the same amount of borrowers. When the money supply is decreased interest rates will increase. Because there will be less money to loan to the same amount of borrowers. And it works the other way. If the interest rates are lowered people respond by borrowing more money. Increasing the amount of money in the economy buying things. If interest rates are raised people respond by borrowing less money. Reducing the amount of money in the economy buying things. We call these changes in the money supply and interest rates monetary policy. Made by the monetary authority. In most cases the central bank of a nation. In the United States that central bank is the Federal Reserve System (the Fed).
The Fed changes the amount of money in the economy and the interest rates to minimize the length of recessions, combat inflation and to reduce unemployment. At least in theory. And they have a variety of tools at their disposal. They can change the amount of money in the economy through open market operations. Basically buying (increasing the money supply) or selling (decreasing the money supply) treasury bills, government bonds, company bonds, foreign currencies, etc., on the open market. They can also buy and sell these financial instruments to change interest rates. Such as the Federal funds rate. The interest rate banks pay when borrowing from each other. Moving money between their accounts at the central bank. Or the Fed can change the discount rate. The rate banks pay to borrow from the central bank itself. Often called the lender of last resort. Or they can change the reserve requirement in fractional reserve banking. Lowering it allows banks to loan more of their deposits. Raising it requires banks to hold more of their deposits in reserve. Not used much these days. Open market operations being the monetary tool of choice.
There is more to Economic Activity than Monetary Policy
Fractional reserve banking multiplies these transactions. Where banks create money out of thin air. When the Fed increases the money supply a little this creates a lot of lendable funds. As buyers borrow money from some banks and pay sellers. Then sellers deposit that money in other banks. And these banks hold a little of these deposits in reserve. And loan the rest. Borrowers create depositors as buyers meet sellers. And complete economic transactions. When the Fed reduces the money supply a little this process works in reverse. Fractional reserve banking pulls a lot of money out of the economy. Some treat these economic transactions, and the way to increase or decrease them, as simple math. Always obeying their mathematical formulas. We call these people Keynesian economists. Named for the economist John Maynard Keynes.
Big interventionist governments embrace monetary policy. Because they think they can easily manipulate the economy as they wish. So they can tax and spend (Keynesian fiscal policy). And when economic activity declines they can simply use monetary policy to restore it. But there is one problem. It doesn’t work. If it did there would not have been a Subprime Mortgage Crisis. Or any of the recessions we’ve had since the advent of central banking. Including the Great Depression. As well as the Great Recession.
There is more to economic activity than monetary policy. Such as punishing fiscal policy (high taxes and stifling regulations). Technological innovation. Contracts. Property rights. Etc. Any one of these can influence risk takers. Business owners. Entrepreneurs. The job creators. The people who create economic activity. And no amount of monetary policy will change this.
Tags: banks, Big Government, buyers, central bank, demand, deposits, economic activity, economic growth, economic transactions, economy, federal, Federal Reserve, fractional reserve banking, Great Recession, House, housing, housing bubble, inflation, interest rates, jobs, Keynesian, loans, McMansions, monetary, monetary policy, money, money supply, mortgage, mortgage rates, mortgages, open market operations, policy, recessions, subprime mortgage crisis, subprime mortgages, supply, the Fed
Week in Review
Big Government types everywhere look to China and say that’s how business should be done. State capitalism. Where the state can make sure that capitalism is a kinder more caring kind of capitalism. Like it is in China (see Thousands Strike in China in First Month of 2012 posted 1/28/2012 on The Epoch Times).
The first month of the year in China has seen tens of thousands of people strike and protest against poor working conditions, overdue wages, or insufficient pay levels. By Jan. 22 there had been reports of at least 10 strikes and large-scale protests across China since the beginning of the year—almost one every two days. Many of the incidents involved thousands of people—in one case up to 8,000.
It’s not the goodness of government making China rich. It’s not cutting edge technology increasing productivity. It’s not a love of government that spurs their workers on to work harder and ask for less. No. It’s low wages. And the heavy hand of government settling labor disputes in the favor of the state.
In China there are no labor unions. The Big Government types always seem to leave that out when they fawn over the Chinese government and their brand of state capitalism. Cheap labor is the key to state capitalism. Unlike in free market capitalism. Where market forces set the price of labor. Not the state. Using force to keep wages low.
Tags: Big Government, capitalism, China, labor, low wages, poor working conditions, state capitalism, wages, workers, workers protest
Week in Review
More and more the Arab Spring appears to be ushering in a new conservative religious rule. Even at ground zero of the Arab Spring. Tunisia. One of the most liberal states in the Middle East. Until the Arab Spring, that is (see Thousands of Tunisians protest conservative Islam by Agence France-Presse posted 1/28/2012 on The Vancouver Sun).
Thousands of Tunisians angered by the increasing prominence of ultra-conservative Islamists in a country only recently freed from dictatorial rule took to the streets in protest Saturday…
Some in Tunisia are angry by the growing influence of radical Islamists, known as Salafists, who have dominated headlines in recent weeks.
Police on Tuesday ended a weeks-long sit-in by Salafists at the university in Manouba, about 25 kilometres (15 miles) from Tunis. The Salafists were angry the university had banned the full-face Muslim veil, or niqab, over security concerns if students were concealed from head to toe.
Journalists have also suffered attacks at Salafist protests…
Tunisia was the first country in the Arab world to initiate mass protests against its autocratic leadership, triggering a wave of protests across the region last year in what became known as the Arab Spring uprisings that led to the ouster of Egypt’s Hosni Mubarak and Libya’s Moammar Gadhafi.
The Salafists made a good showing during the recent Egypt elections. And Libya’s rebels had connections to al Qaeda. So you know where that country will be heading, too. These Middle East countries, yearning for freedom from Western-leaning dictators who their Islamist minorities hated are now falling under control of these Islamists. Who will correct that Western-lean to an Eastern-lean. Towards Iran.
Tags: Arab Spring, conservative, conservative religious state, Egypt, Iran, Islamist, Libya, Middle East, Salafist, Tunisia
Week in Review
Here’s a little Déjà Vu. All the way back to 1787 Philadelphia. Before there was a United States of America. When there was only a weak confederation of states. With representatives from each state sitting in the Congress of the Confederation. Where each state had an equal vote. And all changes to the Articles of Confederation required unanimous agreement from all states. And often times tiny little Rhode Island could alone scuttle new legislation. And did. Often. Because they had a profitable seaport. And liked charging tariffs to those who didn’t. It was quite lucrative. And paid a lot of Rhode Island’s expenses. Making their citizens happy. Because they didn’t have to pay much in taxes. Thanks to those tariffs. Flash forward to the present time and you see the same problem. Not that Ireland is like Rhode Island. But that problem of requiring unanimous agreement from all member states in the Eurozone (see Irish voters would back EU fiscal treaty: poll by Conor Humphries posted 1/28/2012 on Reuters).
European leaders are expected to agree on the fiscal compact on Monday in a bid to regain market confidence in the public finances of the 17 countries sharing the euro.
Irish citizens, who are entitled to vote on any major transfers of powers to Brussels, are seen as one of the biggest obstacles to overhaul of the bloc. They have twice rejected changes to EU treaties before voting through amended versions.
The confederation didn’t work for the Americans. Which is why they met in 1787 in Philadelphia to draft a new constitution. And create a new federal state. Something beyond a monetary union. One that was a true union. Monetarily. And fiscally. Which is why the United States of America ‘were’ truly untied. And worked. The ‘were’ being changed to an ‘is’ following the American Civil War. Emphasizing that union. While the ‘united states’ of Europe are not quite so united. And why the Eurozone is struggling to survive.
Tags: Eurozone, Ireland, Rhodes Island, unanimous agreement, union, United States
Week in Review
The road to save the Eurozone must pass through a firewall. A big pile of money that can rush in and stop another crisis from taking hold and spreading. Money that will just sit there. And because it’s there it will give everyone confidence that the Eurozone is okay. Because if something happens again there’s that big pile of money just sitting there to help stop anything bad from happening.
It will be there, say, in the rare chance that a member state has another debt crisis and can’t raise money in the bond markets. This money will address that crisis. Keeping the state and the banking system calm. And liquid.
It is reassuring what a big pile of money can do. Just sitting there. If they just let it sit there. Which is easier said than done. In fact, this was very difficult to do in many pension funds. All that money just sitting there. Doing nothing. While budget deficits were growing. So they borrowed a little every now and then. Until those funds became dangerously underfunded. So setting up this firewall may be easier said than done. Because all of the Eurozone member states have deficits. And large debts. They may be a little skittish putting in more money to try and save a member state. Especially if that state is beyond saving (see IMF leads global push for euro zone to boost firewall by Paul Carrel and Emma Thomasson, Reuters, posted 1/28/2012 on Yahoo! News).
Countries beyond the 17-country bloc want to see its members stump up more money before they commit additional resources to the IMF, which this month requested an additional 500 billion euros ($650 billion) in funding…
In a carefully worded keynote address, Merkel suggested doubling or even tripling the size of the fund may convince markets for a time, but warned that if Germany made a promise that could not be kept, “then Europe is really vulnerable.”
On Friday, U.S. Treasury Secretary Timothy Geithner pressed Europe to make a “bigger commitment” to boosting its firewall.
Two bankers who attended meetings with Geithner at the Forum said on Friday the United States was looking for the euro zone to roughly double the size of its firewall to 1.5 trillion euros. There was no immediate comment from the U.S. Treasury.
Some countries want a free pass on their irresponsible spending ways. They want help. But they want other people to pay for it. While other countries have been carrying a much larger weight than others. Like Germany. The richest economy in the Eurozone. Whose taxpayers may be growing tired of being the go-to country in times of bailouts. And the U.S. wants the Europeans to spend more to save the Eurozone. About twice as much. Making the price of membership so high some may just consider leaving.
“The euro zone is a slow-motion train wreck,” said economist Nouriel Roubini, made famous by predictions of the 2008-09 global banking crisis.
He expected Greece, and possibly Portugal, to exit the bloc within the next 12 months and believed there is a 50 percent chance of the bloc breaking up completely in the next 3-5 years.
Hong Kong’s Chief Executive, Donald Tsang, said no matter how strong the euro zone’s firewall is, the market will look at the nature of the economies it is protecting.
“If it is protecting insolvent economies…no matter how strong the firewall is, it won’t survive,” he said..
So it may not help no matter how big the firewall is. Because most countries don’t want to be told what to do. And won’t change the way they run their countries. And without fixing the underlying problems (excessive government spending) there’s no saving the Eurozone no matter the size of the firewall.
Tags: banking system, debt, debt crisis, deficits, Eurozone, firewall, Germany, Greece, IMF, IMF funding, money, spending
Week in Review
First Standard & Poor’s. Now Fitch. Things are not looking up for the Eurozone (see Greek debt deal hit by eurozone ratings downgrades by Angela Monaghan posted 1/28/2012 on The Telegraph).
Following similar action from rival Standard & Poor’s (S&P) earlier this month, Fitch downgraded Italy, Spain and Slovenia by two notches and Belgium and Cyprus by one notch. Fitch took no action on France’s AAA credit rating despite S&P downgrading the country two weeks ago.
The rating agency warned that the eurozone crisis would only be resolved “as and when there is broad economic recovery” and with “greater fiscal integration”.
It was also being reported last night that the German government wants Greece to hand over control of tax and spending decisions to a ‘budget commissioner’ appointed by the rest of the eurozone, before the country gets its second bail-out.
The budget commissioner would have to power to veto decisions made by the Greek government, according to a proposal seen by the Financial Times, marking a significant step-up in the EU’s powers over the sovereign governments of member states…
Eurozone finance ministers said that while there were still considerable challenges ahead, they believed in the future of a united eurozone.
They’re still trying to save the Eurozone because they can’t save the Eurozone. Greater fiscal integration? Hand over tax and spending decisions? Having a veto over other sovereign nations? It sounds like to save the Eurozone will require some erasing. Of the borders between these sovereign states. Something that sovereign states don’t like. Being conquered. Only with Euros and debt. Instead of artillery and bullets. Or sword and lance.
So to save Greece all the Greek people have to agree to is to become a vassal of the greater power. Sort of a step back in time. To the days of feudalism. Where the poorer states serve their lord. Who serves their sovereign. The new Eurozone structure. Whatever that may be. Where the stronger member states will be among the nobility and have greater privileges than the poorer states. Who will be among the serfs. Grateful for the generosity of their masters. And showing due gratitude and obedience.
It’s a simple plan. But knowing the history of Europe one that is not likely to work. Not in an age when the trend is towards independence. Not subjugation. Hell, even Scotland is talking about their independence from the United Kingdom. So to think the Greeks are just going to surrender their sovereignty is wishful thinking. Not in the land where Western Civilization was born. Not in the country that contains the once great city-state of Athens. That inspired Alexander the Great. And the Romans. No. That’s just a wee bit too much history for the Greeks to surrender.
Tags: debt crisis, Eurozone, Eurozone debt crisis, fiscal integration, Fitch, greater fiscal integration, Greece, Greek, S&P, sovereignty, Standard & Poor's, surrender, veto
Week in Review
In Keynesian economics the government plays a large role in the economy. By buying a lot of stuff. And by hiring lots of government workers at all levels of government who buy lots of consumer goods. Keynesians say these government expenditures are important. Especially during bad economic times. For when no one else is spending only the government can step in and sustain spending. Even if it’s paying someone to dig a ditch. And then fill it back in. Because the wages for that person doing that useless activity will be used to buy consumer goods. And it will stimulate the economy.
Interestingly, this love of government spending does not extend to military personnel. Or defense spending. Which, according to Keynesian economics, are just what the economic doctor ordered. But, alas, they are always the first government spending to be cut to pay for other government spending. Why? Well, military personnel tend to vote Republican. And defense spending tends to feed a lot of money to large corporations (see Boeing faced with strong headwinds by Tim Devaney posted 1/25/2012 on The Washington Times).
The Chicago-based plane-maker announced a 20 percent increase in earnings and record revenue gains in 2011…
But Boeing now faces likely cuts in U.S. defense spending, rising pension costs and a higher tax rate…
The company’s tax rate is expected to increase to 35 percent in 2012 from 33 percent last year, which will cost the company an additional $92 million, or 12 cents per share.
The Democrats use class warfare. For they have little success with their policies and can’t run on successful track records during elections. And in class warfare you need enemies. Old rich people. And, of course, evil corporations. Hence the attacks on the industrial military complex. Which Democrats are all in favor of.
And note that increase in their taxes. That’s not an increase to $92 million. That’s an additional $92 million. Here I thought Boeing’s job was to build and sell airplanes. When apparently they are nothing more than a cash piñata for the government to whack open to pay for more government spending. That isn’t spent on, of course, defense spending. Or Republicans.
Tags: Big Government, Boeing, class warfare, corporations, defense spending, Democrats, economy, government spending, Keynesian, Keynesian economics, Keynesians, military personnel, Republicans, taxes
Week in Review
NASA doesn’t like President Obama. For it was on his watch that they retired the Space Shuttle program. And now have to rely on the Russians to ferry American astronauts to the International Space Station. Pretty sad for it was NASA that put a man on the moon. No one else has. And now the American space program has been reduced to hitchhiking rides on old Russian rocket systems that were used during the glory days of NASA (see Last man on the Moon backs Mitt Romney’s race to White House orbit by Jacqui Goddard posted 1/28/2012 on The Telegraph).
In an open letter endorsing Mr Romney’s candidacy, veterans including Apollo 17 moonwalker Gene Cernan, first space shuttle pilot Bob Crippen and former head of Nasa Mike Griffin, feted him as the only contender capable of reversing the “disarray” wreaked on Nasa by President Obama.
Their boost comes after several days of campaigning by the Republican hopefuls on Florida’s Space Coast, a region that thrived during Nasa’s glory days but which is now facing economic gloom following the retirement of the space shuttle last year and confusion over what will succeed it.
On Friday, Mr Romney admitted to a crowd at Cape Canaveral – home to Nasa’s Kennedy Space Centre – that if elected, he would assemble expertise to help chart a new course for the space programme. Mr Gingrich said that he already had one in mind: colonizing the Moon by the end of his second term as president.
Obama is making no friends in the space community. Despite his quest for jobs of the future. And if any jobs would qualify as jobs of the future they would have to be space jobs. But there’s a problem with these jobs. They’re not unionized enough. And don’t send a lot of campaign money to Democrat coffers. Hence Obama’s lack of interest in NASA.
Interestingly, the old guard of NASA is endorsing Mitt Romney. Who will establish a blue ribbon panel to figure out what to do with NASA. While Newt Gingrich is proposing Apollo – Phase II, the return to the moon. This would be a boon to the space community. Which is what you’d think the old guard would want. Unless they don’t believe the taxpayers would never support such a bold and expensive program like that. Or they think it was just expedient politics before the Florida primary. Or they just don’t believe Newt Gingrich can win in the general election. And they want someone who appears to be more moderate. And can reach across the aisle. Like John McCain. Who lost in 2008 to Barack Obama. Which just goes to show you how well moderates fair against Democrat ‘moderates’ (Obama ran as a moderate but gave us Obamacare).
Tags: jobs of the future, Mitt Romney, NASA, NASA old guard, Newt Gingrich, Obama, space community, Space Shuttle
Week in Review
In full campaign mode, Obama seeks the support of unions in the manufacturing industry (see Why Manufacturing Can’t Solve The Jobs Problem by Roya Wolverson posted 1/27/2012 on Time Business).
Among other things, Obama’s State of the Union speech Tuesday drove home the idea that U.S. industries need more protection. “Over a thousand Americans are working today because we stopped a surge in Chinese tires,” he said in his speech. That’s all fine and good if your goal is to hold on to U.S. manufacturing jobs. But it’s not going to solve the country’s overall unemployment problem. And in the end, it may cost the American consumer more than those jobs are worth.
For one thing, raising trade barriers on imported goods like tires makes tire-buying more expensive for American consumers, which, as Matthew Yglesias points out, only undermines those consumers’ ability to spend elsewhere. It also provokes countries like China to raise trade barriers on U.S. goods, which makes the job of increasing U.S. exports and export-related jobs even harder. Even if protections did save some manufacturing jobs, they wouldn’t be enough to move the needle on unemployment. It’s worth remembering that only 11% of U.S. jobs come from manufacturing, thanks to globalization, which has taken jobs abroad to lower-wage countries, and technological advances that have increased worker productivity. And that percentage has been declining steadily for several decades.
…And since we can’t reverse that process, the biggest gains in the job market can’t come from greater protections, but instead from gains in technology. Standard Chartered’s Gerald Lyons made the point today that, despite the enduring public perception that technology kills jobs, for every one job technology destroys, it creates 2.1 other jobs. Thus, instead of clinging to our past by supporting unproductive industries and erecting trade barriers, the U.S. has to find “the types of jobs that are fit for this country’s future,” argues Diamond.
Once upon a time the whale oil business was booming. And a lot of people where employed in the whaling industry. Until John D. Rockefeller came along. Who created Standard Oil. Introduced Americans to kerosene. And put the whale oil business out of business. Creating far more jobs in the petroleum exploration and refining business than the whale oil business ever did. Now if President Obama were in office during this time he would have placed a tax on kerosene to protect those whale oil business jobs. Because although he may talk about the jobs of the future, he wants to protect the jobs of the past. Especially if they are protected by a strong union.
When only 11% of U.S. jobs are in manufacturing, this protection of the jobs of the past is also very costly. Because to save 11% of jobs in the economy he will raise prices on everything in the economy. Meaning 100% will pay a surtax so the 11% can keep these jobs of the past. So to sustain a little economic activity he will kill a lot of economic activity. Which doesn’t make sense. But it will protect union jobs. And sustain contributions to Democrat coffers. Which is the whole point of saving these jobs of the past.
Tags: Consumers, economic activity, jobs, jobs of the future, jobs of the past, kerosene, manufacturing jobs, Obama, protectionism, union, whale oil, whale oil business