The Dow Jones Industrial Average and the Labor Force Participation Rate from Ronald Reagan to Barack Obama

Posted by PITHOCRATES - February 10th, 2014

Economics 101

(Originally published May 21st, 2013)

The DJIA and the Labor Force Participation Rate tell us how both Wall Street and Main Street are Doing

Rich people don’t need jobs.  They can make money with money.  Investing in the stock market.  When you see the Dow Jones Industrial Average (DJIA) increasing you know rich people are getting richer.  Whereas the middle class, the working people, aren’t getting rich.  But they may be building a retirement nest egg.  Which is good.  So they benefit, too, from a rising DJIA.  But that’s for later.  What they need now is a job.  Unlike rich people.  The middle class typically lives from paycheck to paycheck.  So more important to them is a growing job market.  Not so much a growing stock market.  For the middle class needs a day job to be able to invest in the stock market.  Whereas rich people don’t.  For a rich person’s money works enough for the both of them.

So the Dow Jones Industrial Average shows how well rich people are doing.   And how well the working class’ retirement nest eggs are growing for their retirement.  But it doesn’t really show how well the middle class is living.  For they need a job to pay their bills.  To put food on their tables.  And to raise their families.  So the DJIA doesn’t necessarily show how well the middle class is doing.  But there is an economic indicator that does.  The labor force participation rate.  Which shows the percentage of people who could be working that are working.  So if the labor force participation rate (LFPR) is increasing it means more people looking for a job can find a job.  Allowing more people to be able to pay their bills, put food on their tables and raise their families.

These two economic indicators (the DJIA and the LFPR) can give us an idea of how both Wall Street and Main Street are doing.  Ideally you’d want to see both increasing.  A rising DJIA shows businesses are growing.  Allowing Wall Street to profit from rising stock prices.  While those growing businesses create jobs for Main Street.   If we look at these economic indicators over time we can even see which ‘street’ an administration’s policies favor.   Interestingly, it’s not the one you would think based on the political rhetoric.

Wall Street grew 75% Richer under Clinton than it did under Reagan while Main Street grew 65% Poorer

Those going through our public schools and universities are taught that capitalism is unfair.  Corporations are evil.  And government is good.  The Democrats favor a growing welfare state.  Funded by a highly progressive tax code.  That taxes rich people at higher tax rates.  While Republicans favor a limited government.  A minimum of government spending and regulation.  And lower tax rates.  Therefore the Republicans are for rich people and evil corporations.  While the Democrats are for the working man.  Our schools and universities teach our kids this.  The mainstream media reinforces this view.  As does Hollywood, television and the music industry.  But one thing doesn’t.  The historical record (see Civilian Labor Force Participation Rate and Recessions 1950-Present and Dow Jones Industrial Average Index: Historical Data).

DJIA vs Labor Force Participation Rate - Reagan

The Democrats hated Ronald Reagan.  Because he believed in classical economics.  Which is what made this country great.  Before Keynesian economics came along in the early 20th Century.  And ushered in the era of Big Government.  Reagan reversed a lot of the damage the Keynesians caused.  He tamed inflation.  Cut taxes.  Reduced regulation.  And made a business-friendly environment.  Where the government intervened little into the private sector economy.  And during his 8 years in office we see that BOTH Wall Street (the Dow Jones Industrial Average) and Main Street (the labor force participation rate) did well.  Contrary to everything the left says.  The DJIA increased about 129%.  And the LFPR increased about 3.4%.  Indicating a huge increase of jobs for the working class.  Showing that it wasn’t only the rich doing well under Reaganomics.  The policies of his successor, though, changed that.  As Wall Street did better under Bill Clinton than Main Street.

DJIA vs Labor Force Participation Rate - Clinton

Despite the Democrats being for the working man and Bill Clinton’s numerous statements about going back to work to help the middle class (especially during his impeachment) Wall Street clearly did better than Main Street under Bill Clinton.  During his 8 years in office the LFPR increased 1.2%.  While the DJIA increased 226%.  Which means Wall Street grew 75% richer under Clinton than it did under Reagan.  While Main Street grew 65% poorer under Clinton than it did under Reagan.  Which means the gap between the rich and the middle class grew greater under Clinton than it did under Reagan.  Clearly showing that Reagan’s policies favored the Middle Class more than Clinton’s policies did.  And that Clinton’s policies favored Wall Street more than Regan’s did.  Which is the complete opposite of the Democrat narrative.  But it gets worse.

The Historical Record shows the Rich do Better under Democrats and the Middle Class does Better under Republicans

The great economy of the Nineties the Democrats love to talk about was nothing more than a bubble.  A bubble of irrational exuberance.  As investors borrowed boatloads of cheap money thanks to artificially low interest rates.  And poured it into dot-com companies that had nothing to sell.  After these dot-coms spent that start-up capital they had no revenue to replace it.  And went belly-up in droves.  Giving George W. Bush a nasty recession at the beginning of his presidency.  Compounded by the 9/11 terrorist attacks.

DJIA vs Labor Force Participation Rate - Bush

The LFPR fell throughout Bush’s first term as all those dot-com jobs went away in the dot-com crash.  Made worse by the 9/11 attacks.  As all the malinvestments of the Clinton presidency were wrung out of the economy things started to get better.  The LFPR leveled off and the DJIA began to rise.  But then the specter of Bill Clinton cast another pall over the Bush presidency.  Clinton’s Policy Statement on Discrimination in Lending forced lenders to lower their lending standards to qualify more of the unqualified.  Which they did under fear of the full force and fury of the federal government.  Using the subprime mortgage to put the unqualified into homes they couldn’t afford.  This policy also pressured Fannie Mae and Freddie Mac to buy these toxic subprime mortgages from these lenders.  Freeing them up to make more toxic loans.  This house of cards came crashing down at the end of the Bush presidency.  Which is why the DJIA fell 19.4%.  And the LFPR fell 2.1%.  Even though the economy tanked thanks to those artificially low interest rates that brought on the subprime mortgage crisis and Great Recession both Wall Street and Main Street took this rocky ride together.  They fell together in his first term.  Rose then fell together in his second term.  Something that didn’t happen in the Obama presidency.

DJIA vs Labor Force Participation Rate - Obama

During the Obama presidency Wall Street has done better over time.  Just as Main Street has done worse over time.  This despite hearing nothing about how President Obama cares for the middle class.  When it is clear he doesn’t.  As his policies have clearly benefited rich people.  Wall Street.  While Main Street suffers the worst economic recovery since that following the Great Depression.  So far during his presidency the LFPR has fallen 3.7%.  While the DJIA has risen by 86%.  Creating one of the largest gaps between the rich and the middle class.  This despite President Obama being the champion of the middle class.  Which he isn’t.  In fact, one should always be suspect about anyone claiming to be the champion of the middle class.  As the middle class always suffers more than the rich when these people come to power.  Just look at Venezuela under Hugo Chaves.  Where the rich got richer.  And the middle class today can’t find any toilet paper to buy.  This is what the historical record tells us.  The rich do better under Democrats.  And the middle class does better under Republicans.  Despite what our schools and universities teach our kids.  Or what they say in movies and television.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

President Obama’s 2014 State of the Union Address

Posted by PITHOCRATES - January 30th, 2014

Politics 101

Democrats offered Enthusiastic Applause for Unsound Policy Proposals that have no Basis in Reality

President Obama’s 2014 State of the Union address was a little longer than an hour.  But if you didn’t look at a clock it felt a lot longer.  For it was the same tripe you hear all the time from this administration.  And the political left.  It was full of misleading statements.  Inaccurate facts and figures.  And some lies.  The usual stuff you expect from the liberal left.  But what was really disturbing was the enthusiastic applause for some really unsound policy proposals that have no basis in reality.  Showing either how clueless these enthusiastic Democrats are about economics, business, national security, etc.  Or how amoral they are in their quest for power.  As they judge and implement policy not by how it will improve the lives of Americans.  But how it will improve their lives in government.

Some Big Reasons why Businesses export Jobs are Taxes, Regulations and Labor Costs

If there was ever an example of what people not to have in power this state of the union theater was it.  Following are excerpts from President Obama’s speech (see FULL TRANSCRIPT: Obama’s 2014 State of the Union address posted 1/28/2014 on The Washington Post).  Comments and analysis follow each excerpt.

And here are the results of your efforts: the lowest unemployment rate in over five years; a rebounding housing market — (applause) — a manufacturing sector that’s adding jobs for the first time since the 1990s — (applause) — more oil produced — more oil produced at home than we buy from the rest of the world, the first time that’s happened in nearly twenty years — (applause) — our deficits cut by more than half; and for the first time — (applause) — for the first time in over a decade, business leaders around the world have declared that China is no longer the world’s number one place to invest; America is.

The total number of people who left the civilian labor force since President Obama took office is 11,301,000 (see The BLS Employment Situation Summary for December 2013 posted 1/13/2014 on PITHOCRATES).  Which means the unemployment rate is meaningless.  The only reason why it’s falling is that the BLS doesn’t count unemployed people who gave up looking for jobs that just aren’t there.  Oil production on private land may be up.  While overall oil consumption is down because of the Great Recession that just won’t end.  Which is helping to keep gas prices down.  Unemployed people just don’t have the money to buy gas.  So they don’t.  Greatly reducing the demand for gas.  Thus reducing gas prices and oil imports.  George W. Bush’s last deficit was $498.37 billion.  President Obama’s first deficit was $1,539.22 billion.  And it was over $1 trillion in 2010, 2011 and 2012.  It fell to $680 billion in 2013 thanks to the sequester.  But the deficit is larger now than when President Obama assumed office.  The only reduction in the deficit is a reduction in the amount he increased it.

Now, as president, I’m committed to making Washington work better, and rebuilding the trust of the people who sent us here.

Really?  You’re committed to rebuilding the trust of the people?  Mr. “If you like your health insurance you can keep your health insurance.  Period.”  Otherwise known as the lie of the year.  You’re going to rebuild the trust of the people?  Good luck with that.  What with your pants on fire and all.

Today, after four years of economic growth, corporate profits and stock prices have rarely been higher, and those at the top have never done better. But average wages have barely budged. Inequality has deepened. Upward mobility has stalled. The cold, hard fact is that even in the midst of recovery, too many Americans are working more than ever just to get by; let alone to get ahead. And too many still aren’t working at all.

Well, finally something Republicans can agree with the president about.  Yes, his economic policies have benefitted Wall Street.  While hurting Main Street.  Finally some bipartisan agreement.

So let’s make that decision easier for more companies. Both Democrats and Republicans have argued that our tax code is riddled with wasteful, complicated loopholes that punish businesses investing here, and reward companies that keep profits abroad. Let’s flip that equation. Let’s work together to close those loopholes, end those incentives to ship jobs overseas, and lower tax rates for businesses that create jobs right here at home. (Cheers, applause.)

There are only a few reasons why businesses export jobs.  And the big three are taxes, regulations and labor costs.  The Obama administration wants to raise taxes.  They’ve increased regulatory costs.  And they support costly union labor.  So everything they stand for encourages businesses to export jobs.

But — but I’ll act on my own to slash bureaucracy and streamline the permitting process for key projects, so we can get more construction workers on the job as fast as possible. (Applause.)

So how’s that approval for the Keystone XL pipeline coming along?  That thing you’ve been studying since 2010?  Which by the laws of arithmetic is approximately 4 years ago.  Is this slashing bureaucracy and streamlining the permitting process?  At this rate it would probably be quicker to elect a Republican president in 2016.  You know, someone who, when it comes to economic activity, walks it while the Democrats only talk it.

We also have the chance, right now, to beat other countries in the race for the next wave of high-tech manufacturing jobs. And my administration’s launched two hubs for high-tech manufacturing in Raleigh, North Carolina, and Youngstown, Ohio, where we’ve connected businesses to research universities that can help America lead the world in advanced technologies.

Universities are in the grant business.  They want as many grants as they can get to help bring money into the university.  And to do so they will study anything the government wants them to.  No matter how wasteful it is.  While some of the biggest high-tech companies started in garages.  Apple, Google, Hewlett Packard and Microsoft.  To name a few.  Yes, there is a lot of university-driven research.  But the big innovation is more entrepreneurial.  Created by people thinking up new stuff no one thought of yet.  Which is the last thing you want government involved in.  That same government that can’t build a website using 1990s technology.

Let’s do more to help the entrepreneurs and small business owners who create most new jobs in America. Over the past five years, my administration has made more loans to small business owners than any other. And when 98 percent of our exporters are small businesses, new trade partnerships with Europe and the Asia-Pacific will help them create even more jobs. We need to work together on tools like bipartisan trade promotion authority to protect our workers, protect our environment and open new markets to new goods stamped “Made in the USA.” (Applause.)

You want to help entrepreneurs and small business?  Get rid of Obamacare.  And slash tax rates.  This will provide incentive.  And allow them to reinvest more of their earnings to grow their business.  Allowing them to create those jobs.

Now, one of the biggest factors in bringing more jobs back is our commitment to American energy. The “all the above” energy strategy I announced a few years ago is working, and today America is closer to energy independence than we have been in decades. (Applause.)

‘All of the above’ as long as it isn’t coal, oil or nuclear.  But if it’s solar power and wind power they are committed to giving more tax dollars to their friends and bundlers in the green energy industry.

Meanwhile, my administration will keep working with the industry to sustain production and jobs growth while strengthening protection of our air, our water, our communities. And while we’re at it, I’ll use my authority to protect more of our pristine federal lands for future generations. (Applause.)

You can’t sustain production and jobs growth by strengthening protection of our air, water and pristine federal lands.  That’s just more regulatory costs.  And raising energy costs by not allowing any oil or natural gas production on those pristine federal lands.  Raising energy costs by restricting supply.  Which raises business costs.  In addition to those new regulatory costs.

Every four minutes another American home or business goes solar, every panel pounded into place by a worker whose job can’t be outsourced. Let’s continue that progress with a smarter tax policy that stops giving $4 billion a year to fossil fuel industries that don’t need it so we can invest more in fuels of the future that do. (Cheers, applause.)

That says it all.  Fossil fuels don’t need subsidies because their costs are affordable.  While solar (and wind power) are so costly that they are unaffordable.  Unless government heavily subsidizes them.

But the debate is settled. Climate change is a fact. (Applause.) And when our children’s children look us in the eye and ask if we did all we could to leave them a safer, more stable world, with new sources of energy, I want us to be able to say yes, we did. (Cheers, applause.)

There is no such thing as settled science.  Only science that has yet to be disproved.  Besides, once upon a time glaciers stretched down from the poles to near the equator.  And then receded back to where they are now.  All without any manmade carbon in the atmosphere to warm the planet.  As we were still simple hunter and gatherers then.  So if the glaciers moved more before there was manmade global warming they’ll move again regardless of what man is doing to warm the planet.

Finally, if we’re serious about economic growth, it is time to heed the call of business leaders, labor leaders, faith leaders, law enforcement — and fix our broken immigration system. (Cheers, applause.) Republicans and Democrats in the Senate have acted, and I know that members of both parties in the House want to do the same. Independent economists say immigration reform will grow our economy and shrink our deficits by almost $1 trillion in the next two decades. And for good reason: When people come here to fulfill their dreams — to study, invent, contribute to our culture — they make our country a more attractive place for businesses to locate and create jobs for everybody. So let’s get immigration reform done this year. (Cheers, applause.) Let’s get it done. It’s time.

Funny how that argument doesn’t apply to birth control and abortion.  The reason we need to “fix our broken immigration system.”  For if we were having babies at the rate when government created the welfare state we could pay for that welfare state today.  But thanks to the Sixties, birth control, abortion and feminism women stopped having babies.  Which is fine if a woman doesn’t want to.  But the progressives designed the welfare state based on them being baby machines.  Creating a greater number of taxpayers with each generation.  So more people pay into the welfare state than collect from it.  The way it must be for a Ponzi scheme to work.

That’s why I’ve been asking CEOs to give more long-term unemployed workers a fair shot at new jobs, a new chance to support their families. And in fact, this week many will come to the White House to make that commitment real.

When you raise the cost of labor (union labor, Obamacare, etc.) businesses tend to look at automating production instead of hiring that costly labor.  They may not be able to do anything about the higher regulatory costs but they can do something about higher labor costs.  Use more machines than people.  If you want CEOs to create new jobs stop making labor so costly.  And you can start with getting rid of Obamacare.

Of course, it’s not enough to train today’s workforce. We also have to prepare tomorrow’s workforce, by guaranteeing every child access to a world-class education. (Applause.)…

Five years ago we set out to change the odds for all our kids. We worked with lenders to reform student loans, and today more young people are earning college degrees than ever before. Race to the Top, with the help of governors from both parties, has helped states raise expectations and performance. Teachers and principals in schools from Tennessee to Washington, D.C., are making big strides in preparing students with the skills for the new economy — problem solving, critical thinking, science, technology, engineering, math.

Yes, more kids are going to college than ever before.  But they’re going there to have fun.  And to facilitate their fun many are getting easy, worthless degrees in the social sciences and humanities.  Costly degrees that universities sold them promising them future riches.  Enriching the university.  While impoverishing their graduates.  For a high-tech company has no use for these degrees.  Which is why a lot of these people end up in jobs they didn’t need that costly degree to do.  And our high-tech companies are using the visa program to get foreigners who have the skills they want.  Problem solving, critical thinking, science, technology, engineering and math.

It requires everything from more challenging curriculums and more demanding parents to better support for teachers and new ways to measure how well our kids think, not how well they can fill in a bubble on a test. But it is worth it — and it is working.

If you want kids to do better we need to champion marriage and family more.  And they should embrace religion a little more.  Instead of encouraging our young women to use birth control and abortion to avoid marriage and family.  And pulling every last vestige of religion from our lives.  Kids growing up in a household with a mother and a father who go to church do far better on average than kids growing up in a single-parent household and don’t go to church (see Strong families steeped in Conservative Values and Traditions do Well in America posted 1/11/2014 on PITHOCRATES).

Research shows that one of the best investments we can make in a child’s life is high-quality early education. (Applause.) Last year, I asked this Congress to help states make high-quality pre-K available to every 4-year-old. And as a parent as well as a president, I repeat that request tonight.

Actually, research doesn’t show that.  Yet they keep saying that.  For it’s like that line in the musical Evita, “Get them while they’re young, Evita.  Get them while they’re young.”  The sooner they can take them away from their parents the sooner they can start turning them into Democrat voters.  Such as teaching them to blame their parents for the manmade global warming that is killing the polar bears as they have no ice to rest on while eating their baby seals.

You know, today, women make up about half our workforce, but they still make 77 cents for every dollar a man earns. That is wrong, and in 2014, it’s an embarrassment.

Women deserve equal pay for equal work. (Cheers, applause.)

Actually, it’s closer to 91 cents (see The White House’s use of data on the gender wage gap by Glenn Kessler posted 6/5/2012 on The Washington Post).  And the small difference is not due to discrimination but personal choice.  When you look at aggregate wages women will make less than men.  Because more women are teachers (with 3 month off without pay) than men are.  Some women work fewer hours at work to spend more time with their children. While men tend to work more overtime.  Men also work the more dangerous and higher paying jobs.  And are more likely to belong to a union.  When you compare childless, single men and women with a college degree some women are actually earning more than men.  Figures don’t lie but liars figure.  And for the contortions the Obama administration did here The Washington Post’s The Fact Checker gave the president one Pinocchio.

Now, women hold a majority of lower-wage jobs, but they’re not the only ones stifled by stagnant wages. Americans understand that some people will earn more money than others, and we don’t resent those who, by virtue of their efforts, achieve incredible success. That’s what America’s all about. But Americans overwhelmingly agree that no one who works full-time should ever have to raise a family in poverty. (Applause.)

In the year since I asked this Congress to raise the minimum wage, five states have passed laws to raise theirs.

You’re not going to have a lot of upward mobility when you pay people more to remain in the jobs they hate.  All the talk about making college more affordable and bringing employers and community colleges together to help give people the skills they need to fill the jobs employers have is all for nothing if they just pay people more for doing an entry-level job.

Let’s do more to help Americans save for retirement. Today most workers don’t have a pension. A Social Security check often isn’t enough on its own. And while the stock market has doubled over the last five years, that doesn’t help folks who don’t have 401(k)s. That’s why tomorrow I will direct the Treasury to create a new way for working Americans to start their own retirement savings: MyRA. It’s a — it’s a new savings bond that encourages folks to build a nest egg.

Once upon a time people opened a savings account at their local bank and they saved to buy a house.  And they saved for their retirement.  That’s how people saved when they didn’t have a pension or a 401(k).  They can’t do that today because of the Federal Reserve destroying the banking industry by keeping interest rates at zero.  If the Fed stopped printing money and let investment capital come from our savings like they did before the Keynesians gave us the Federal Reserve people would be saving like we once did.  And we’d stop having Great Depressions, stagflation and Great Recessions.  Created by their prolonging the growth side of the business cycle.  Which raises prices higher than they normally would go.  Making the contraction side of the business cycle that much more painful.  As those prices have a much longer way to fall than they normally would.  Thanks to the Fed’s meddling with interest rates.

MyRA guarantees a decent return with no risk of losing what you put in. And if this Congress wants to help, work with me to fix an upside-down tax code that gives big tax breaks to help the wealthy save, but does little or nothing for middle-class Americans, offer every American access to an automatic IRA on the job, so they can save at work just like everybody in this chamber can.

You know why they want these MyRAs?  Because they can’t stand people saving money.  They love Social Security.  Because they can borrow from the Social Security Trust Fund.  Which is what they will do with these MyRAs.  They will take this money and spend it.  Filling the MyRA Trust Fund with a bunch of IOUs.  Just like they do with the Social Security Trust Fund.  And then provide a retirement benefit like Social Security.  That is too small to live on.  Whereas if we saved the money ourselves our retirement nest-egg will be much larger.  And it will provide for our retirement.  Unlike Social Security.

And since the most important investment many families make is their home, send me legislation that protects taxpayers from footing the bill for a housing crisis ever again, and keeps the dream of homeownership alive for future generations. (Applause.)

It was Bill Clinton that set the stage for the subprime mortgage crisis with his Policy Statement on Discrimination in Lending (see Bill Clinton created the subprime mortgage crisis with his Policy Statement on Discrimination in Lending posted 11/6/2011 on PITHOCRATES).  Using the heavy hand of government to get lenders to qualify the unqualified.  Then the Fed’s artificially low interest rates were the bait for the trap.  Enticing people to borrow huge sums of money because those interest rates were just too good to pass up.  Even if they weren’t planning to buy a house to begin with. The subprime mortgage crisis and the resulting Great Recession were government made.  If we want to prevent the taxpayers from footing the bill for another housing crisis we need to get the Keynesians out of government.

Already, because of the Affordable Care Act, more than 3 million Americans under age 26 have gained coverage under their parents’ plans. (Applause.)

More than 9 million Americans have signed up for private health insurance or Medicaid coverage — 9 million. (Applause.)

The Washington Post gave this lie three Pinocchios (see Warning: Ignore claims that 3.9 million people signed up for Medicaid because of Obamacare by Glenn Kessler posted 1/16/2014 on The Washington Post).  For they’re counting some 3.9 million who would have signed up anyway for Medicaid regardless of the Affordable Care Act.  Also, the government was counting people who put a health care plan into their shopping cart as if they signed up for it.  Which many couldn’t.  As they haven’t programmed the back end of the health care website yet to actually accept payment or to pass that information on to the insurers.

And here’s another number: zero. Because of this law, no American, none, zero, can ever again be dropped or denied coverage for a pre-existing condition like asthma or back pain or cancer. (Cheers, applause.) No woman can ever be charged more just because she’s a woman. (Cheers, applause.) And we did all this while adding years to Medicare’s finances, keeping Medicare premiums flat and lowering prescription costs for millions of seniors.

That’s right.  Women with reproductive systems that men don’t have won’t pay more for their health insurance than men pay for theirs.  How can they do that?  Simple.  They just are charging men more.  To cover the cost of a reproductive system they don’t have.

Citizenship means standing up for the lives that gun violence steals from us each day. I have seen the courage of parents, students, pastors, and police officers all over this country who say “we are not afraid,” and I intend to keep trying, with or without Congress, to help stop more tragedies from visiting innocent Americans in our movie theaters and our shopping malls, or schools like Sandy Hook. (Applause.)

If you take away guns from law-abiding gun owners that won’t keep dangerous people with mental health issues that want to harm people out of our movie theaters, our shopping malls or schools like Sandy Hook.  For there are other ways to harm people.  Just look at the Boston Marathon bombers.  The people he’s talking about not only had mental health issues but they were also smart.  Many were even college students.  Who probably could think of other ways to hurt people.  And you just can’t take away everything they might use to harm people.  But you can place these people somewhere where they can’t harm anyone.

You see, in a world of complex threats, our security, our leadership depends on all elements of our power — including strong and principled diplomacy. American diplomacy has rallied more than 50 countries to prevent nuclear materials from falling into the wrong hands, and allowed us to reduce our own reliance on Cold War stockpiles.

Since President Obama assumed office he did nothing to support the Green Revolution in Iran.  Which kept the hard-line Islamists in power there.  He gave Egypt to the Muslim Brotherhood by telling Hosni Mubarak that he had to go.  Removing the stable anchor of the Middle East.  And moved Egypt closer to Iran.  (The Egyptian people eventually rose up to overthrow the oppressive Muslim Brotherhood).  He went to war in Libya and helped to overthrow Colonel Muammar Qaddafi.  Who at the time was a quasi ally in the War on Terror.  After the Iraq invasion frightened him into believing he may be next.  President Obama was thanked for his Libyan war by al Qaeda with 4 dead Americans in Benghazi on the anniversary of 9/11.  He waited too long to act in the Syrian civil war.  Which only brought al Qaeda into the conflict.  He failed to attain a status of forces agreement in Iraq.  So he pulled all U.S. forces out of Iraq which has only invited al Qaeda in.  And it looks like this will be repeated in Afghanistan.  He blamed George W. Bush’s wars as recruitment tools for al Qaeda.  While his extensive drone use is doing the same thing.  Especially in Yemen.  The hotbed of al-Qaeda in the Arabian Peninsula.  All that his diplomacy and leadership has done was to make the world a more dangerous place.

American diplomacy, backed by the threat of force, is why Syria’s chemical weapons are being eliminated. (Applause.) And we will continue to work with the international community to usher in the future the Syrian people deserve — a future free of dictatorship, terror and fear.

His diplomacy with Bashar al-Assad in Syria only gave his oppressive regime legitimacy in the civil war he was raging against his people.  Making it easier for Assad to kill Syrians with conventional arms while he gives up a token amount of his chemical weapons.  While also making Russia who brokered the deal the dominate player in the region.

And it is American diplomacy, backed by pressure, that has halted the progress of Iran’s nuclear program — and rolled back parts of that program — for the very first time in a decade. As we gather here tonight, Iran has begun to eliminate its stockpile of higher levels of enriched uranium.

It’s not installing advanced centrifuges. Unprecedented inspections help the world verify every day that Iran is not building a bomb. And with our allies and partners, we’re engaged in negotiations to see if we can peacefully achieve a goal we all share: preventing Iran from obtaining a nuclear weapon. (Applause.)

All Iran is doing is pausing their program.  And chemically altering some of their enriched uranium to meet the requirements of this diplomatic deal.  But this chemical process is reversible.  And they will reverse it once they get what they want.  This deal makes the world no safer.  If anything it makes it more dangerous.  For it does not diminish the Iranian nuclear program in the least.  But gives them more time to work on it as they prop up their regime with much needed supplies thanks to a relaxation of the sanctions against them.

These negotiations will be difficult; they may not succeed. We are clear-eyed about Iran’s support for terrorist organizations like Hezbollah, which threaten our allies; and we’re clear about the mistrust between our nations, mistrust that cannot be wished away. But these negotiations don’t rely on trust; any long-term deal we agree to must be based on verifiable action that convinces us and the international community that Iran is not building a nuclear bomb. If John F. Kennedy and Ronald Reagan could negotiate with the Soviet Union, then surely a strong and confident America can negotiate with less powerful adversaries today. (Applause.)

The sanctions that we put in place helped make this opportunity possible. But let me be clear: if this Congress sends me a new sanctions bill now that threatens to derail these talks, I will veto it. (Applause.) For the sake of our national security, we must give diplomacy a chance to succeed.

The Soviet Union never attacked U.S. soil.  And there was a reason they didn’t.  They were rational.  And knew they would lose a great deal in a war with America.  Especially a nuclear one.  Which is why they never used their nuclear weapons.  But Iran giving a nuclear weapon to a shadowy group that is not a state?  With little to lose in using a nuclear weapon?  If it’s not a nuclear missile there will be no way in knowing where the nuclear bomb came from.  We can have our suspicions that Iran made it and gave it to someone.  But do we nuke Iran over that?  What if there are more nukes in the hands of al Qaeda, Hezbollah, al-Qaeda in the Arabian Peninsula, etc.?  You could nuke Iran back to the Stone Age but it won’t stop those others being used.  The president insists this will not happen as Iran signed an agreement.  The only problem with that is the Iranians are liars.  And they call the United States the Great Satan.   These two facts suggest that replacing those sanctions with a promise not to build nuclear bombs was probably not a wise trade.

But for more than two hundred years, we have put those things aside and placed our collective shoulder to the wheel of progress: to create and build and expand the possibilities of individual achievement; to free other nations from tyranny and fear; to promote justice and fairness and equality under the law, so that the words set to paper by our founders are made real for every citizen.

Use our collective shoulder to expand individual achievement?  The president believes in the former more than the latter.  He didn’t help the Iranians get free from tyranny when he had the chance.  And he turned the Egyptian people over to tyranny.  The Muslim Brotherhood.  Who were oppressing women and Christians.  Fairness and equality under the law?  Ask those Tea Party groups who were targeted by the IRS about fairness and equality under the law.  The Constitution?  That document of negative rights?  The left hates it.  And insists it’s a living document that can evolve over time to suit the needs of an expanding government.  So they can do exactly what the Founding Fathers wrote the Constitution to prevent from happening.

The Left endorses Unsound Policy Proposals with no Basis in Reality to improve their Chances of Winning Elections

The country is more conservative than liberal (see Liberal Self-Identification Edges Up to New High in 2013 by Jeffrey M. Jones posted 1/10/2014 on Gallup).  Which is why liberals want state-funded pre-K to start indoctrinating our children as soon as possible.  To get them away from their parents so they can begin the process of turning them into Democrat voters.  It’s why kids are getting worthless social science and humanities degrees.  To further indoctrinate them.  Because their views are minority views.  So they need to play loose with the facts.  And lie.  Which is easier to do with indoctrinated kids than educated adults.  You’ll even hear Democrats talk about lowering the voting age.  To get a few more years of voting out of these kids before they grow old and wise.  And begin voting conservative.  So they do what they can to dumb down education.  Lie.  Cheat.  And buy as many votes as they can by giving away free stuff.  And the thing they really want to give away is citizenship for illegal aliens.  Who they are sure will be forever grateful.  And show it by voting Democrat.

This explains the enthusiastic applause for unsound policy proposals that have no basis in reality.  For the left is not interested in improving the lives of Americans.  They just want to improve their chances of winning elections.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Debt, Jobs and Criticism—Carter, Reagan, Clinton, Bush and Obama

Posted by PITHOCRATES - November 19th, 2013

History 101

The Democrats used the Power of the Purse to oppose the Reagan Agenda wherever they Could

The left hated President Reagan.  They called him just a “B” movie actor.  With many references to Bedtime for Bonzo.   With the implication that Reagan was a chimpanzee.  He was called stupid.  Senile.  And they said he hated the poor.  The usual stuff when it comes to Democrats calling the opposition names.  But as about as demeaning as it gets.  For the Democrats hated Ronald Reagan with a passion.  They may have hated him even more than George W. Bush.  Another president they called stupid.  Even making similar chimpanzee references.

They fought Reagan tooth and nail.  The Democrats held the House and they used the power of the purse to oppose the Reagan agenda wherever they could.  So Reagan had to compromise on some things.  Especially tax hikes.  But for the most part he kept his word to the American people.  And maintained high approval ratings.  Making it harder for the Democrats to block all of the Reagan agenda.  Which just made the left hate him more.

It’s funny the short memories Democrats have.  For any criticism of President Obama is met with charges of racism.  And because of that few criticize him.  Because no one wants to be called a racist.  Giving President Obama a free pass for most if his presidency.  Something neither George W. Bush nor Ronald Reagan ever enjoyed.  Yet the left says the right says the most vile things about President Obama.  Unprecedented things.  Like calling him a liar when he lied during the State of the Union Address.  Which must be different from saying ‘Bush lied people died’ over and over again.

President Obama is on Pace to add more Debt than Ronald Reagan

Among the terrible things the left said Ronald Reagan was doing was running up the debt to unsustainable levels.  And he did run up the debt.  About 99.4% during his 8 years.  Or about 12.4% a year.  Much of that spending, though, was to reverse the damage Jimmy Carter did to national defense.  He had gutted defense spending so much (cancelling bombers and missile programs) that the Soviet Union thought for the first time that they could win a nuclear war against the United States.  At least with Jimmy Carter as president.  They actually started drafting nuclear first-strike plans to replace the deterrence of mutually assured destruction (MAD).  Anyway, that spending led to the collapse of the Soviet Union.  Allowing the U.S. to win the Cold War.  Giving Bill Clinton a huge peace dividend during his presidency.

Bill Clinton wanted to nationalize health care.  And it didn’t go over well.  His big spending liberal agenda got neutered at the midterm elections.  As he angered the people so much the Republicans won both the House and Senate.  Forcing Clinton to the center.  Dropping any thoughts of national health care.  With Republicans even forcing welfare reform on him.  The Republican Revolution kept spending down.  And the debt only grew 13.6% during Clinton’s 8 years.  Or about 1.7% a year.

After the 9/11 terrorist attacks George W. Bush ramped up military spending.  For national security.  And two wars.  He also ramped up domestic spending.  Giving us Medicare Part D.  A program to subsidize the prescription drugs for Medicare recipients.  In the 8 years of the Bush presidency he added about 41.4% to the national debt.  About 5.2% a year.  Which sounded like a lot until President Obama came along.  A near trillion dollar stimulus bill that stimulated little.  Investments into failed solar power companies and electric car companies.  Automotive (i.e., union pension fund) bailouts.  In his 5 years in office Obama has raised the debt by 53.8%.  Or 10.8% each of his 5 years.  A little more than twice the rate of George W. Bush.  At this pace he will even add more debt than Ronald Reagan.  Adding up to 18.3% per year (over 8 years) if no one stops his spending.

Under President Obama the Gap between Black and White Unemployment grew Greater

President Obama said those ‘wise’ investments and higher taxes on those who could afford to pay a little more would generate economic activity.  His income redistribution would balance the playing field.  And raise the poor out of poverty.  While people everywhere celebrated the first black president.  For it would bring the races together.  This is why some on the right joked that President Obama was the messiah.  Because he was going to do all of that.  As well as make the ocean levels fall.  Black America especially loved the nation’s first black president.  As 95% of the black vote went to Obama in 2008.  Though the enthusiasm waned a bit in 2012.  As only 93% of the black vote went to Obama.  And how has black American done under the Obama economic policies.  Well, not as good as they did under the Bush economic policies (see archived data from Table A-2. Employment status of the civilian population by race, sex, and age in the Employment Situation Archived News Releases by the Bureau of Labor Statistics).

Unemplyment Rates by Race Age Sex 2003-2013 R2

The Great Recession officially ran from December 2007 to June 2009.  Which corresponds to the transition from George W. Bush to Barack Obama.  People often call the Great Recession the worst recession since the Great Depression.  Of course they say that primarily because the current economic recovery is the worst since that following the Great Depression.  And the reason for that is President Obama’s economic policies.

Unemployment was lower for everyone under Bush.  On average the unemployment rate for white/black men, women and 16-19 year olds under Bush was 4.2%/9.3%, 4.0%/8.2% and 14.7%/31.1%, respectively.  Under President Obama these numbers jumped to 7.8%/15.7%, 6.7%/12.2% and 21.8%/40.3%.  Which should give black America cause for concern.  For under President Obama the gap between black and white unemployment grew greater.  The gap between black and white men went from 5.1 to 7.9.  An increase of 55.6%.  The gap between black and white women went from 4.2 to 5.5.  An increase of 32.9%.  And the gap between black and white 16 to 19 year olds went from 16.5 to 18.5.  An increase of 12.7%.  So whatever President Obama is doing it isn’t helping America find work.  Especially black America.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , ,

Bush didn’t Lie but President Obama Did

Posted by PITHOCRATES - October 31st, 2013

 Politics 101

Bill Clinton said in a 2005 Interview that the 1981 Israeli Bombing of an Iraqi Nuke Plant was a Good Thing

“Bush lied people died.”  You heard that a lot all during President Bush’s presidency.  The left was shouting it from the mountain top.  “Bush lied people died!”  Saying that the dumbest man ever to occupy the White House fooled the most brilliant people in the world—liberal Democrats—into voting for the invasion of Iraq.  Because Saddam Hussein had weapons of mass destruction (WMD).

Saddam Hussein used WMDs on March 16, 1988.  It was the closing days of the Iran-Iraq War.  In the Kurdish town of Halabja in Northern Iraq.  Hussein was no friend of the Kurds.  And the Kurds had no love for Hussein.  Which is why Kurdish guerillas fought with the Iranians against Saddam Hussein.  And after the Iranians took this Kurdish town in northern Iraq Hussein had no problem with committing an act of genocide in Halabja.  Which he did on March 16, 1988.  The largest chemical attack against a civilian population in history.

On June 7, 1981, Israel carried out a surprise bombing of an Iraqi nuclear reactor under construction.  For they feared a Saddam Hussein with nuclear weapons.  During the Persian Gulf War the Americans bombed what was left of that nuclear reactor.  For they, too, feared a Saddam Hussein with nuclear weapons.  Though publicly condemned by pretty much everyone at the time of the bombing most were probably happy the Israelis did that unpleasant task for them.  Even Bill Clinton said in a 2005 interview that the bombing was a good thing.

Saddam Hussein violated the Terms of the Gulf War Cease Fire by not Documenting the Destruction of his WMDs

The Congress saw the same intelligence the Bush administration saw in the run-up to the Iraq War.  It was so convincing that Joe Biden, Hillary Clinton, John Kerry and Harry Reid voted to give George W. Bush the authority to invade Iraq.  Who all feared a Saddam Hussein with WMDs.  For as bad as 9/11 was it could have been worse if the terrorists had WMDs.  Hussein had WMDs.  And he had no moral compunction against using them.  As proven by Halabja.  Making him a very dangerous man in a world where terrorists who hate America are in the market for WMDs.

So there was a very strong case against Saddam Hussein.  Especially when you throw in his violation of the terms of the Gulf War cease fire agreement.  In particular the documentation of his destruction of his WMDs that he agreed to do.  Which was a tantamount admission of having them.  WMDs.  But he didn’t document the destruction of his WMD stockpiles.  Because he did not destroy them.  Which meant one thing.  He still had weapons of mass destruction.  Which is probably why Joe Biden, Hillary Clinton, John Kerry and Harry Reid voted to give George W. Bush the authority to invade Iraq.  For they were terrified…of being on the wrong side of history when those WMDs they knew he had were found.

Well, we found no WMDs in Iraq.  Probably because Hussein shipped them off to Syria for safekeeping.  Assuming he would remain in power after the Iraq War.  Just as he remained in power after the Gulf War.  After the invasion nonsense was done he could go to Syria and take his WMDs back.  And perhaps get them into the hands of a terrorist for use against an American city.  To retaliate for the big headache George W. Bush gave him.  Of course his subsequent capture and execution put a wrench into all future plans he may have had.

Liberals play Fast and Loose with the Truth as Telling the Truth rarely helps the Liberal Agenda

President Obama made some promises about Obamacare during the Affordable Care Act debate.  Because the people were against it.  They didn’t want anything near quasi national health care.  So he kept saying that Obamacare wasn’t a government takeover of our health care system.  And that it would actually make the private health insurance industry better.  It would cover more.  While costing less.  And the best thing about the Affordable Care Act was this (see Obama’s pledge that ‘no one will take away’ your health plan by Glenn Kessler posted 10/30/2013 on The Washington Post).

“That means that no matter how we reform health care, we will keep this promise to the American people: If you like your doctor, you will be able to keep your doctor, period. If you like your health-care plan, you’ll be able to keep your health-care plan, period. No one will take it away, no matter what.”

The Fact Checker on The Washington Post gave this statement Four Pinocchios.  Their highest level of dishonesty.   Or ‘whoppers’.  As About The Fact Checker calls Four Pinocchios.  Basically saying the president lied about Obamacare to get the Affordable Care Act passed into law.  And lied again to win reelection.  For the election results may have been different if he had told the truth.  If he had said that some will lose their doctors and some will lose their health-care plan.  If he had said that premiums and deductibles would rise.  If he had would the people who had insurance and doctors they liked vote for him?  No.  Probably not. 

So President Obama and the Democrats told lies that deceived a great many people to get what he couldn’t get by telling the truth.  Obamacare.  One of the most divisive pieces of legislation ever passed in Congress.  Passed on purely partisan lines.  No Republicans voted for the Affordable Care Act.  Unlike the legislation that gave George W. Bush the authority to invade Iraq.  Which had bipartisan support.  With both Republicans and Democrats voting for it.  Yet the left said, “Bush lied people died.”  But when it comes to President Obama’s flagrant lies about the Affordable Care Act all you hear are crickets from the left.  Because for them the truth is whatever they say it is.  And a lie is whatever they say it is.  For the only way to pass their liberal agenda is to play fast and loose with the truth.  As telling the truth rarely helps the liberal agenda.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Is the New York Times ready to blame Bill Clinton for the Subprime Mortgage Crisis?

Posted by PITHOCRATES - August 18th, 2013

Week in Review

President Obama likes to say that the Republicans only want to try the failed policies of the past.  And he’s both right and wrong.  For the Republicans do want to implement the policies of the past.  Because these policies did NOT fail.  Contrary to President Obama’s recurring bleat.  For the policies of President Reagan were based on classical economics.  Those same policies that made America the world’s number one economic power.  While the policies of the left, Keynesian economic policies, have failed every time they’ve been tried.  And reduced America’s economic prowess.

Before John Maynard Keynes came along during World War I the U.S. economy was steeped in the philosophy of our Founding Fathers.  Thrift.  Frugal.  Rugged individualism.  These are the things that made America great.  For over a hundred years Americans worked hard and saved their money.  Spending as little for the here and now.  Always planning for the future.  They put everything they didn’t have to spend into the bank.  As everyone put away these small amounts of money banks turned the aggregate of these numerous small deposits into capital.  Which investors borrowed at reasonable interest rates because we had a high savings rate.  Providing plenty of capital to grow the American economy.  Thanks to a sound banking system.   That exercised sound lending practices.  With investment capital a high savings rate provided.

This system worked so well because people balanced risk with reward.  Bankers made wise lending decisions based on the likelihood of those loans being repaid.  And investors with a history of wise and responsible borrowing had continued access to that investment capital.  While banks who took too great a risk failed.  And investors who took great risks soon found themselves broke with no further access to investment capital.  This balance of risk and reward complimented with a populace that was thrifty and frugal with their money created Carnegie Steel.  The Standard Oil Company.  And the Ford Motor Company.  Risk takers.  Who balanced risk with reward.  And paid a heavy price when they took too great a risk that had no reward.

But the days of Andrew Carnegie, John D. Rockefeller (Standard Oil) and Henry Ford are gone.  These men probably couldn’t—or wouldn’t— do what they did in today’s regulatory environment the left has created.  The higher taxes.  And the financial instability caused by the left’s destruction of the banking system.  As the left has made high-finance a plaything for their rich friends.  By transferring all risk to the taxpayer.  Allowing bankers to take great risks.  With little downside risk.  Giving us things like the subprime mortgage crisis.  Where President Clinton’s Policy Statement on Discrimination in Lending (1994) unleashed 10 federal agencies on banks to pressure them to loan to the unqualified or else.  So they did.  Using the Adjustable Rate Mortgage as the vehicle to get the unqualified into homeownership.  These with no-documentation mortgage applications, zero-down, interest-only, etc., put people into homes by the droves.  Especially those who could not afford them.  Of course, banks just won’t loan to the unqualified without some federal assistance.  Which came in the guise of Fannie Mae and Freddie Mac.  Who bought those toxic mortgages from these lenders, repackaged them into collateralized debt obligations and sold them to unsuspecting investors.  And, well, you know the rest.

So Bill Clinton gave us the subprime mortgage crisis.  And the Great Recession.  It’s always the same.  Whenever liberals get into power they do the same thing over and over again.  They destroy the economy with policies that only benefit them and their rich friends.  America’s aristocracy.  Yet they talk the talk so well people believe that THIS time things will be different.  But they never are.  Already President Obama is talking about doing the same things to increase homeownership that got us into the subprime mortgage crisis.  And his disastrous policies didn’t even prevent his reelection.  Because he can talk the talk so well.  Just like Clinton.  So well that few look at the swath of destruction in their wakes.  At least, not on this side of the Atlantic (see The New York Times takes down the Clinton Foundation. This could be devastating for Bill and Hillary by Tim Stanley posted 8/14/2013 on The Telegraph).

Is the New York Times being guest edited by Rush Limbaugh? Today it runs with a fascinating takedown of the Clinton Foundation – that vast vanity project that conservatives are wary of criticising for being seen to attack a body that tries to do good. But the liberal NYT has no such scruples. The killer quote is this:

For all of its successes, the Clinton Foundation had become a sprawling concern, supervised by a rotating board of old Clinton hands, vulnerable to distraction and threatened by conflicts of interest. It ran multimillion-dollar deficits for several years, despite vast amounts of money flowing in.

A lot of people are scratching their heads as to why the New York Times would run this story.  For it is very out of character for a liberal paper to attack a liberal icon.  Could it be to air out this dirty laundry long before Hillary is a candidate for president?  What, that?!?  That’s old news.  We’ve talked about it already.  Talked it to death.  Nothing to see there.  So let’s focus on what’s important for the American people.

Or could it be that the left has grown tired of the Clintons?  After all, Barack Obama was the first black man elected president.  Something the young people can get excited about.  But will today’s young even know who the Clintons are?  Could be a problem for a party that historically gets the youth vote.  So is this the first sign that Hillary won’t be the anointed one in 2016?  And is this an opening broadside against Hillary?  A harbinger of what is yet to come?  Perhaps.  Or it could mean people are just not falling for the Clinton charm anymore.  Something our friends in the British media have no problem seeing through.

The cynical might infer from the NYT piece that the Clintons are willing to sell themselves, their image, and even their Foundation’s reputation in exchange for money to finance their personal projects. In Bill’s case, saving the world. In Hillary’s case, maybe, running for president.

It’s nothing new to report that there’s an unhealthy relationship in America between money and politics, but it’s there all the same. While the little people are getting hit with Obamacare, high taxes and joblessness, a class of businessmen enjoys ready access to politicians of both Left and Right that poses troubling questions for how the republic can continue to call itself a democracy so long as it functions as an aristocracy of the monied. Part of the reason why America’s elites get away with it is becuase they employ such fantastic salesmen. For too long now, Bill Clinton has pitched himself, almost without question, as a homespun populist: the Boy from Hope. The reality is that this is a man who – in May 1993 – prevented other planes from landing at LAX for 90 minues while he got a haircut from a Beverley Hills hairdresser aboard Air Force One. The Clintons are populists in the same way that Barack Obama is a Nobel prize winner. Oh, wait…

Wish America could see Clinton and Obama as plainly as this.  And not get lost in the gaze of their eyes.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , ,

Alec Baldwin apologizes for his Gay Slur tweeted in the Heat of the Moment

Posted by PITHOCRATES - June 30th, 2013

Week in Review

Bill Clinton cheated on his wife.  With a few women.  Even with (at least) one in the White House.  But he is still loved by the left.  Especially the ladies.  Because Bill Clinton says he is a feminist.  Someone who doesn’t objectify or sexualize women.  Even though a string of infidelities would suggest otherwise.  But that doesn’t matter.  For if you act like a feminist most of the time you can get away with some very bad behavior some of the time.  That’s a big perk about being a liberal.  You can get away with a lot.  All you have to do is say you’re sorry (see Alec Baldwin apologizes to NY gay group for tweets by Associated Press posted 6/28/2013 on Yahoo! News).

Alec Baldwin has apologized to a New York City-based lesbian, gay, bisexual and transgender rights group for a series of tweets that could be interpreted as homophobic.

Baldwin’s messages were directed at a newspaper reporter who accused his wife of tweeting during the funeral for the former star of “The Sopranos” James Gandolfini (gan-dahl-FEE’-nee). Baldwin says in a letter to GLAAD posted on its website Friday his tweets didn’t have anything to do with “issues of anyone’s sexual orientation.”

According to CBS News he called the reporter a “queen.”  In order to insult him.  For many men will insult another man by calling him a homosexual.  Because of all that testosterone coursing through their bodies.  Making some of these men wear their shirts open to show all that crispy chest hair.  And date women young enough to be their daughters.  Or even their granddaughters.  Because these manly men have so much heterosexual charms that they can get these young women.  While other men who aren’t as sexy as them walking on a European beach with their bellies hanging over their Speedo swimsuits might as well give it up and be a “queen.”  The ultimate insult a manly man with a young wife can hurl at another man.  For they are so hetero that they can get the young hottie as these ladies just can’t resist that crispy chest hair.  Or that glorious belly.  While these beautiful young women stay away from these other men as if they were “queens,” seeing them as so sexually unappealing that they can’t even imagine them pleasuring a woman.

So men hurl gay slurs at their friends.  For this is how men joke around with other men.  They insult each other.  And being called a “queen” impugns that they cannot satisfy a lady.  The greatest insult of all.  Throw in a few drinks and these can become fighting words.  For men are very sensitive about their bedroom skills.  And know that other men are, too.  So the gay slur is often the go to insult.

The men who use the gay slur may not be homophobic.  But they don’t want anything to do with that lifestyle.  As they are all about rocking their woman’s world in the bedroom.  And making sure that others know just how much of a swaggering stud they are.  Especially when their woman is much younger than they are.

Most times these gay slurs are harmless.  Because they aren’t directed at gay people.  And are not meant to attack gay people.  They’re used most times among friends.  And soon to be ex-friends.  But if someone on the right uses one they are accused of a hate crime.  While those on the left just have to say, “Sorry.”  And all is forgiven.

The left will attack anyone on the right for a momentary slip of the tongue.  Saying it is a sign of deeply held bigoted hateful views.  Even if it was something they said 20 years earlier.  But if a liberal has a momentary slip of the tongue it is NOT a sign of deeply held bigoted hateful views.  But it does make one wonder what a person really thinks when they go to a gay slur in the heat of the moment.  Not jokingly hurling the gay slur at a friend.  But at someone that fills them with a deep seething hatred.  Is he just going through the motions of being a good liberal?  Just so he can avoid being attacked for very bad behavior some of the time?  Who knows?  But one thing for sure if you don’t want to be held to a high standard every time you stick your foot in your mouth it is better to be a liberal.

It’s a pity that the left can’t be so forgiving to those on the right suffering from foot-in-mouth disease.

www.PITHOCRATES.com

Share

Tags: , , , , , , , ,

Kim Jong Un turns to Adolf Hitler’s Mein Kampf for Advice for North Korea’s Economic Ills

Posted by PITHOCRATES - June 22nd, 2013

Week in Review

President Bill Clinton entered into an agreement to help them build two nuclear reactors to produce electric power if the North Koreans agreed to give up their nuclear weapons program.   But they went ahead and built nuclear weapons anywhere.  President Clinton also gave them some satellite knowledge.  Navigational black boxes.  Allowing them to launch a satellite into space.  Which upon launching crashed in the ocean.   Which the North Koreans salvaged.  And got the navigational black box.  Giving them not only nuclear weapons but the knowledge to create an ICBM to deliver that nuclear weapon.  And ever since they’ve threatened us with nuclear belligerency to get what they want.  They agree to stand down on their nuclear weapon program in exchange for food or energy aid.  And when that aid runs out they threaten us with nuclear belligerency again.

President George W. Bush included North Korea in the Axis of Evil.  And was not as friendly to Kim Jong Il as his predecessor was.  But Kim Jong Il is dead now.  And his son Kim Jong Un has taken over.  So how much better did things get with the new Kim?  Not much.  In fact, they may have gotten worse (see Report: Kim Jong Un handing out copies of ‘Mein Kampf’ to senior North Korean officials by Max Fisher posted 6/17/2013 on The Washington Post).

Senior North Korean officials received copies of “Mein Kampf,” Adolf Hitler’s rambling prison memoir, as gifts for Kim Jong Un’s birthday this January, according to a report by New Focus International, a North Korean news organization that sources from defectors and volunteer citizens within the country…

The book was apparently not distributed to endorse Nazism so much as to draw attention to Germany’s economic and military reconstruction after World War One…

“Kim Jong Un gave a lecture to high-ranking officials, stressing that we must pursue the policy of Byungjin in terms of nuclear and economic development,” New Focus’s North Korean source told them by phone. “Byungjin” translates literally to “in tandem” and refers to official policy of developing the nuclear program and economy simultaneously.

The nuclear program is still front and center in national policy.  Some things never change.

So they’re going to take some economic lessons from Adolf Hitler’s Mein Kampf?  To recreate the economic miracle Hitler had following World War I?  It’s a little too late for that.  For a lot of the things Hitler did North Korea already has done.  Seize private property.  Limit imports.  Abolish trade unions.  Cut wages.  Force people to work longer hours.  Default on debt.  Print money to pay for public works projects.  And military rearmament.  Then plan on using the proceeds from world conquest to fix their balance sheet.

A lot of these are non-options for Kim Jong Un.  For there is no private property to seize.  They don’t have any trade unions demanding higher wages or better working conditions to abolish.  Public work projects?  If they haven’t been able to light up the night after all of these years with a grand public works project chances are they never will.  They already have a military-first national policy like the Nazis did.  They have one of the largest land armies in the world.  And already have nuclear weapons.  Yet they still have a horrible economy.  Proving again Keynesian economics doesn’t work.  For that was basically what Hitler had.  An economic system somewhere between the Soviet Union and the United States.  State capitalism.  Heavy on the state.

But for state capitalism to work you need a large private sector economy to interfere in.  And North Korea just doesn’t have that.  What they have is nothing but state spending.  And state spending just doesn’t work.  If it did North Korea’s economy would be greater and stronger than South Korea’s economy.  But it’s not.  For South Korea has lit up their night.  And they are doing quite well.  So well that they are one of the four Asian Tigers.  Because they embraced free market capitalism.  And when they do stray into state capitalism theirs is a kind that is very heavy on the capitalism.  Not the state.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , ,

Entrepreneurs Fail not because they are Stupid but because of an Anti-Business Environment

Posted by PITHOCRATES - June 16th, 2013

Week in Review

The ‘capitalism’ we have today isn’t our Founding Father’s capitalism.  Yet critics of today’s ‘capitalism’ act as if it is.  And point to the inherent flaws of this ‘capitalism’.  As an excuse to bring in more governmental regulations to fix the problems of ‘capitalism’.  Which is the reason why today’s ‘capitalism’ isn’t capitalism.  It’s not the same economic system that made the United States the number one economic power in the world.  No.  It’s moved more towards European social democracy.  The system that gave the European nations their sovereign debt crises.  But those learned intellectuals speaking from their ivory towers still talk about fixing the problems of ‘capitalism’.  Without really understanding what the real problem is.  And it ain’t capitalism.  It’s the interference of capitalism and free markets.  This is the source of all our problems today.  And unless you address these problems you’re just wasting your time (see How to Reduce ‘Infant Entrepreneur Mortality’ by Sramana Mitra posted 6/10/2013 on the Harvard Business Review Blog).

Ever since the 2008 financial crisis, intellectuals have had to ask themselves, ‘Does Capitalism Still Work..?’

Two particular problems stand out. First, Capitalism has been hijacked by speculators. Second, the system enables amassing wealth at the tip of the pyramid, leaving most of society high and dry. Both problems have resulted in a highly unstable, volatile world order that jitters and shocks markets periodically, leaving financial carnage and mass scale human suffering.

The first problem with ‘capitalism’ today is that intellectuals are trying to fix it.  There isn’t anything wrong with capitalism.  The problems we have today have nothing to do with capitalism.  Because what we have today is state capitalism.  Crony capitalism.  European social democracy.  We have too much government in capitalism.  Who are favoring their big corporate friends in exchange for big corporate campaign donations.  And the only reason we have these speculators is because of the government.  Who is pumping so much cheap money into the economy for the speculators to speculate with.  And when their crony capitalist friends fail the government bails them out with tax dollars.  Because there is no downside to speculation when you have friends in government speculators will speculate.

People like to blame the banks and Wall Street for the subprime mortgage crisis.  But they didn’t create that crisis.  They just played their part.  The government created it.  By pumping cheap money into the economy to keep interest rates artificially low.  To encourage people to buy houses.  Even those who weren’t even considering buying a house.  Or those who simply couldn’t afford to buy a house.  These people changed their behavior based on the government’s manipulation of the interest rates.  As the government intended to do.  And they made everything worse with policies to encourage more and more home ownership.  The big one being Bill Clinton’s Policy Statement on Discrimination in Lending.  Where the government threatened lenders to lend to the unqualified or else.  So they did.  Using the subprime mortgage to qualify the unqualified.  And then the government-sponsored enterprises, Fannie May and Freddie Mac, bought those toxic subprime mortgages from these lenders, chopped and diced them into investments called collateralized debt obligations.  And sold them to unsuspecting investors as high-yield, low-risk investments.  Because they were backed by the safest investment of all time.  The home mortgage.  Only they didn’t tell these investors that these mortgages were toxic subprime mortgages being paid by people who couldn’t qualify for a conventional mortgage.  The safest investment of all time.  The conventional home mortgage.  So these lenders were able to clear these toxic mortgages off of their balance sheets.  Allowing them to issue more toxic subprime mortgages.  They were making money by writing these risky subprime mortgages.  But incurred no risk.  So they kept qualifying the unqualified for more and more mortgages.  Which was profitable.  Safe.  And kept the government off of their backs as threatened in Bill Clinton’s Policy Statement on Discrimination in Lending.

This isn’t capitalism.  This is government and their crony capitalist friends using their power, privilege and influence to game the system.  To enrich themselves.  This is what caused the mess we have today.  Where speculators and those in government get richer.  While Main Street America sees its median income fall.  And entrepreneurs struggle to stay in business.

Everybody talks about the role small businesses play in growing economies and creating jobs. However, as it stands, in America alone, 600,000 businesses die in the vine every year. This colossal infant entrepreneur mortality is a product of colossal levels of ignorance about how to build and sustain businesses.

And a myriad of governmental regulations, taxes and a litigious society.  Entrepreneurs today have to spend a lot of money and time protecting their money and time.  They need accountants and tax lawyers to help them comply with an ever growing regulatory environment.  And a boatload of insurances to keep the sharks at bay who all want a piece of their wealth and will sue if given the least opportunity.  It’s so complex that if they try to navigate their own way through these enormous burdens places on business they often make mistakes.  Or simply overlook something that they shouldn’t have.  Often times they just don’t charge enough to cover all of these costs they never expected when starting their businesses.  So when, say, a tax bill comes due they simply don’t have the cash on hand to pay it.  And then the downward death spiral begins.  This is why restaurants and construction companies are the number one and number two business to fail.  Where we have brilliant chefs and trades people who can cook or build something better than anyone else.  But are so out of their element when dealing with the business side of their trade.  The regulatory costs, taxes, insurance, etc.  And find they spend more of their time not doing what they love—cooking or building—but pushing paper through a labyrinth of red tape.  And often don’t find out they are not charging enough to cover all of the regulatory costs, taxes, insurance, etc., until it’s too late.

There is actually a method to the madness of entrepreneurship. And while the ‘character traits’ that support entrepreneurship — courage, tolerance for risk, resilience, persistence — cannot be taught, the method of building businesses can and should be taught.

In fact, it should be taught not just at elite institutions, but at every level of society, en masse.

If we can democratize the education and incubation of entrepreneurs on a global scale, I believe that it would not only check the infant entrepreneur mortality, it would create a much more stable economic system.

No.  That’s not the answer.  The reason why a lot of people remain employees instead of going into business themselves is that these people don’t want to deal with all the regulatory headaches their bosses have to deal with.  A tradesperson would rather work their 8-hour shift and go home.  They don’t want to deal with payroll taxes, workers’ compensation insurance, liability insurance, vehicular insurances, health insurance, real property taxes, personal property taxes, quarterly tax filings, business income tax, use tax, OSHA requirements, environmental requirements, city and state inspections, permits and licenses, etc.  If a tradesperson could just throw his or her tools in a truck and go into business they would.  But they can’t.  So they won’t.  Because it’s just so much easier being an employee than an employer.  Who are always guaranteed a paycheck if they work.  While an employer only gets paid after everyone, and everything, else gets paid.

You want to reduce infant entrepreneur mortality rates?  Get the government out of the private sector.  And give these entrepreneurs a chance.  You’d be surprised at what they can do if the government just leaves them alone.  Just like Andrew Carnegie, John Rockefeller, Henry Ford, etc., did.  Who probably couldn’t do what they did today.  Not in today’s anti-business environment.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , ,

The Dow Jones Industrial Average and the Labor Force Participation Rate from Ronald Reagan to Barack Obama

Posted by PITHOCRATES - May 21st, 2013

History 101

The DJIA and the Labor Force Participation Rate tell us how both Wall Street and Main Street are Doing

Rich people don’t need jobs.  They can make money with money.  Investing in the stock market.  When you see the Dow Jones Industrial Average (DJIA) increasing you know rich people are getting richer.  Whereas the middle class, the working people, aren’t getting rich.  But they may be building a retirement nest egg.  Which is good.  So they benefit, too, from a rising DJIA.  But that’s for later.  What they need now is a job.  Unlike rich people.  The middle class typically lives from paycheck to paycheck.  So more important to them is a growing job market.  Not so much a growing stock market.  For the middle class needs a day job to be able to invest in the stock market.  Whereas rich people don’t.  For a rich person’s money works enough for the both of them.

So the Dow Jones Industrial Average shows how well rich people are doing.   And how well the working class’ retirement nest eggs are growing for their retirement.  But it doesn’t really show how well the middle class is living.  For they need a job to pay their bills.  To put food on their tables.  And to raise their families.  So the DJIA doesn’t necessarily show how well the middle class is doing.  But there is an economic indicator that does.  The labor force participation rate.  Which shows the percentage of people who could be working that are working.  So if the labor force participation rate (LFPR) is increasing it means more people looking for a job can find a job.  Allowing more people to be able to pay their bills, put food on their tables and raise their families.

These two economic indicators (the DJIA and the LFPR) can give us an idea of how both Wall Street and Main Street are doing.  Ideally you’d want to see both increasing.  A rising DJIA shows businesses are growing.  Allowing Wall Street to profit from rising stock prices.  While those growing businesses create jobs for Main Street.   If we look at these economic indicators over time we can even see which ‘street’ an administration’s policies favor.   Interestingly, it’s not the one you would think based on the political rhetoric.

Wall Street grew 75% Richer under Clinton than it did under Reagan while Main Street grew 65% Poorer

Those going through our public schools and universities are taught that capitalism is unfair.  Corporations are evil.  And government is good.  The Democrats favor a growing welfare state.  Funded by a highly progressive tax code.  That taxes rich people at higher tax rates.  While Republicans favor a limited government.  A minimum of government spending and regulation.  And lower tax rates.  Therefore the Republicans are for rich people and evil corporations.  While the Democrats are for the working man.  Our schools and universities teach our kids this.  The mainstream media reinforces this view.  As does Hollywood, television and the music industry.  But one thing doesn’t.  The historical record (see Civilian Labor Force Participation Rate and Recessions 1950-Present and Dow Jones Industrial Average Index: Historical Data).

DJIA vs Labor Force Participation Rate - Reagan

The Democrats hated Ronald Reagan.  Because he believed in classical economics.  Which is what made this country great.  Before Keynesian economics came along in the early 20th Century.  And ushered in the era of Big Government.  Reagan reversed a lot of the damage the Keynesians caused.  He tamed inflation.  Cut taxes.  Reduced regulation.  And made a business-friendly environment.  Where the government intervened little into the private sector economy.  And during his 8 years in office we see that BOTH Wall Street (the Dow Jones Industrial Average) and Main Street (the labor force participation rate) did well.  Contrary to everything the left says.  The DJIA increased about 129%.  And the LFPR increased about 3.4%.  Indicating a huge increase of jobs for the working class.  Showing that it wasn’t only the rich doing well under Reaganomics.  The policies of his successor, though, changed that.  As Wall Street did better under Bill Clinton than Main Street.

DJIA vs Labor Force Participation Rate - Clinton

Despite the Democrats being for the working man and Bill Clinton’s numerous statements about going back to work to help the middle class (especially during his impeachment) Wall Street clearly did better than Main Street under Bill Clinton.  During his 8 years in office the LFPR increased 1.2%.  While the DJIA increased 226%.  Which means Wall Street grew 75% richer under Clinton than it did under Reagan.  While Main Street grew 65% poorer under Clinton than it did under Reagan.  Which means the gap between the rich and the middle class grew greater under Clinton than it did under Reagan.  Clearly showing that Reagan’s policies favored the Middle Class more than Clinton’s policies did.  And that Clinton’s policies favored Wall Street more than Regan’s did.  Which is the complete opposite of the Democrat narrative.  But it gets worse.

The Historical Record shows the Rich do Better under Democrats and the Middle Class does Better under Republicans

The great economy of the Nineties the Democrats love to talk about was nothing more than a bubble.  A bubble of irrational exuberance.  As investors borrowed boatloads of cheap money thanks to artificially low interest rates.  And poured it into dot-com companies that had nothing to sell.  After these dot-coms spent that start-up capital they had no revenue to replace it.  And went belly-up in droves.  Giving George W. Bush a nasty recession at the beginning of his presidency.  Compounded by the 9/11 terrorist attacks.

DJIA vs Labor Force Participation Rate - Bush

The LFPR fell throughout Bush’s first term as all those dot-com jobs went away in the dot-com crash.  Made worse by the 9/11 attacks.  As all the malinvestments of the Clinton presidency were wrung out of the economy things started to get better.  The LFPR leveled off and the DJIA began to rise.  But then the specter of Bill Clinton cast another pall over the Bush presidency.  Clinton’s Policy Statement on Discrimination in Lending forced lenders to lower their lending standards to qualify more of the unqualified.  Which they did under fear of the full force and fury of the federal government.  Using the subprime mortgage to put the unqualified into homes they couldn’t afford.  This policy also pressured Fannie Mae and Freddie Mac to buy these toxic subprime mortgages from these lenders.  Freeing them up to make more toxic loans.  This house of cards came crashing down at the end of the Bush presidency.  Which is why the DJIA fell 19.4%.  And the LFPR fell 2.1%.  Even though the economy tanked thanks to those artificially low interest rates that brought on the subprime mortgage crisis and Great Recession both Wall Street and Main Street took this rocky ride together.  They fell together in his first term.  Rose then fell together in his second term.  Something that didn’t happen in the Obama presidency.

DJIA vs Labor Force Participation Rate - Obama

During the Obama presidency Wall Street has done better over time.  Just as Main Street has done worse over time.  This despite hearing nothing about how President Obama cares for the middle class.  When it is clear he doesn’t.  As his policies have clearly benefited rich people.  Wall Street.  While Main Street suffers the worst economic recovery since that following the Great Depression.  So far during his presidency the LFPR has fallen 3.7%.  While the DJIA has risen by 86%.  Creating one of the largest gaps between the rich and the middle class.  This despite President Obama being the champion of the middle class.  Which he isn’t.  In fact, one should always be suspect about anyone claiming to be the champion of the middle class.  As the middle class always suffers more than the rich when these people come to power.  Just look at Venezuela under Hugo Chaves.  Where the rich got richer.  And the middle class today can’t find any toilet paper to buy.  This is what the historical record tells us.  The rich do better under Democrats.  And the middle class does better under Republicans.  Despite what our schools and universities teach our kids.  Or what they say in movies and television.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Housing Boom, Bubble and Bust

Posted by PITHOCRATES - April 15th, 2013

Economics 101

Building and Furnishing Houses creates Great Economic Activity

Central to any booming economy are healthy home sales.  For home sales unleash great economic activity.  From the first surveys of a new subdivision.  To the new sewers and water systems.  Gas and telephone.  Cable television and broadband Internet.  Concrete for basements, driveways and sidewalks.  Structural steel (that beam in the basement and steel poles holding up the house).  Rough carpentry.  Electrical work and plumbing.  Drywall, windows and roofing.  Painting, flooring, doors and hardware.  Heating and air conditioning.  Lighting and plumbing fixtures.  Brick, siding and landscaping.  Etc.

All of this takes manufacturing to make these construction products.  All these manufacturers need raw materials.  And raw material extraction needs heavy equipment and energy.  At all of these stages of production are jobs.  Extracting raw materials.  Processing raw materials.  Manufacturing products out of these raw materials.  Building this production equipment.  Interconnecting these stages of production is every form of transportation.  Rail, Great Lake freighter, river barge and truck.  Requiring even more jobs to build locomotives, rolling stock, ships and trucks.  And jobs to operate and maintain them.  And build their infrastructure.  Filling all of these jobs are people.  Earning a paycheck that will let them buy a house one day.

Then even more economic activity follows.  As people buy these homes and furnish them.  Washers and dryers.  Refrigerators, stoves, microwaves, food processors and coffee makers.  Furniture and beds.  Light fixtures and ceiling fans.  Rugs, carpeting and vacuum cleaners.  Telephones, televisions, music systems, modems and computers.  Curtains, drapes, blinds and shades.  Shower curtains, bath mats, towels and clothes hampers.  Mops, buckets, cleaning supplies and waste baskets.  Lawnmowers, fertilizers, hoses and sprinklers.  Snow shovels and snow blowers.  Cribs, highchairs, diapers and baby food.  Etc.  All of these require manufacturers.  And all of these manufacturers require raw materials.  As well as transportation to move material and product between the stages of production.  And to our wholesalers and retailers.  More jobs.  More people earning a paycheck.  Who will one day buy their own home.  And create even more economic activity.

Bill Clinton pressured Lenders to Lower their Requirements and Subprime Lending took Off

This is why governments love housing.  And try to do everything within their power to increase home ownership.  Which is why they changed the path to home ownership.  After World War II when the building of subdivisions took off there was the 3-6-3 savings and loan.  Where savings and loan paid 3% interest on savings accounts.  Loaned money to home buyers at 6%.  And were on the golf course by 3 PM.  And the mortgage was the 30-year conventional mortgage with a 20% down payment.

The conventional mortgage was the mortgage of our parents.  Who had no problem putting off their wants to save money for that 20% down payment.  They prioritized.  And planned for the future.  But the conventional mortgage has an obvious drawback.  It limits home ownership to those who can save up a 20% down payment.  Pushing home ownership further out for some.  Or just taking that option away from a large percentage of the population.  So the government stepped in.  To help those who couldn’t save 20% of the house’s price.

Mortgage Qualification Decreasing Down Payment

As we lowered the down payment amount it allowed lower-income people the opportunity of home ownership.  But it didn’t get them a lot of house.  That is, those who could afford a 20% down payment could buy more house for the same monthly payment than those who couldn’t afford it.  And a house in a better neighborhood.  Which some said was unfair.  Some in government even called it discriminatory.  As Bill Clinton did.  Who pressured lenders to lower their lending requirements to qualify the unqualified.  His Policy Statement on Discrimination in Lending helped to fix that alleged problem.  And kicked off subprime lending in earnest.  Leading to the subprime mortgage crisis.  And the Great Recession.

Conventional Wisdom was to Pay the Most you could Possibly Afford when Buying a House

But lowering the down payment wasn’t enough.  Even eliminating it all together.  The people needed something else to help them into home ownership. And to generate all of that economic activity.  And this was something the government could fix, too.  By printing a lot of money.  So banks had a lot of it to lend.  Thus keeping interest rates artificially low.  And we can see the effect this had on home ownership combined with a zero down payment.  It allowed people to buy more house for the same given monthly payment.  Even more than those buying with the 3-6-3 conventional mortgage.

Mortgage Qualification Decreasing Mortgage Rate

Falling interest rates bring in a lot more people into the housing market.  Which is good for sellers.  And good for the economy.  A lot more people than just those who could afford a 20% down payment can now buy your house.  As people bid against each other to buy your house they bid up your price.  Raising home prices everywhere.  Increasing the demand for new housing.  Which builders responded to.  Creating a housing boom.  As builders flood the market with more houses.  At higher prices.  That new homeowners move into.  And max out their credit cards to furnish.  Creating a lot of debt people are servicing at these artificially low interest rates.  But then the economy begins to overheat.  And other prices begin to rise.  Leaving people with less disposable income.  The housing boom turns into a housing bubble.  House prices are overvalued.  Those artificially low interest rates created a lot of artificial demand.  Bringing people into the market who weren’t planning on buying a house.  But decided to buy only to take advantage of those low interest rates.

Conventional wisdom was to pay the most you could possibly afford when buying a house.  For all houses gained value.  You may struggle in the beginning and have to make some sacrifices.  Say cut out steak night each week.  But in time you will earn more money.  That house payment will become more affordable.  And your house will become more valuable.  Which will let you sell it for more at a later date letting you buy an even bigger house in an even nicer neighborhood.  But when it’s cheap interest rates driving all of this activity there is another problem.  For printing money creates inflation.  And inflation raises prices.  Gasoline is more expensive.  Groceries are more expensive.  As prices rise households have less disposable income.  And have to cut out things like vacations.  And any discretionary spending on things they like but don’t need.  Which destroys a lot of economic activity.  The very thing the government was trying to create more of by printing money.  So there is a limit to the good economic times you create by printing money.  And when the bad consequences of printing money start filtering through the rest of economy the government has no choice but to contract the money supply to limit the economic damage.  And steer the economy into what they call a soft landing.  Which means a recession that isn’t that painful or long.

The Price of Artificially Low Interest Rates is Inflationary Booms, Bubbles and Great Recessions

As interest rates rise home buying falls.  Leaving a lot of newly built homes unsold on the market.  And that housing bubble bursts.  Causing home values to fall back down from the stratosphere.  Leaving a lot of people owing more on their mortgage than their houses are now worth.  What we call being ‘underwater’.  And as interest rates rise so do the APRs on their credit cards.  As well as their monthly payments.  And those people who paid the most they could possible afford for a house with an adjustable rate mortgage saw their mortgage interest rates rise.  As well as their monthly payment.  By a lot.  So much that these people could no longer afford to pay their mortgage payment anymore.  As a half-point increase could raise a mortgage payment by about $50.  A full-point could raise it close to $100.  And so on.

Increasing Monthly Payment dur to Increasing Mortgage Rate

With the fall in economic activity unemployment rises.  So a lot of people who have crushing credit card debt and a house payment they can no longer afford lost their job as well.  Causing a rash of mortgage foreclosures.  And the subprime mortgage crisis.  As well as a great many personal bankruptcies.  Causing the banking system to struggle under the weight of all this bad debt.  Add all of this together and you get the Great Recession.

This is the price of artificially low interest rates.  You get inflationary booms.  And bubbles.  That burst into recessions.  That are often deep and long.  Something that didn’t happen during the days of 3-6-3 mortgage lending.  And the primary reason for that was that the U.S. was still on a quasi gold standard.  Which prevented the government from printing money at will.  The inflationary booms and busts that come with printing money.  And Great Recessions.

 www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

« Previous Entries