Week in Review
Money is a temporary storage of value. We created money to make trade easier. We once bartered. We looked for people to trade with. But trying to find someone with something you wanted (say, a bottle of wine) that wanted what you had (say olive oil) could take a lot of time. Time that could be better spent making wine or olive oil. So the longer it took to search to find someone to trade with the more it cost in lost wine and olive oil production. Which is why we call this looking for people to trade goods with ‘search costs’.
Money changed that. Winemakers could sell their wine for money. And take that money to the supermarket and buy olive oil. And the olive oil maker could do likewise. Greatly increasing the efficiency of the market. There is a very important point here. Money facilitated trade between people who created value. Creating something of value is key. Because if people were just given money without producing anything of value they couldn’t trade that money for anything. For if people didn’t create things of value to buy what good was that money?
Today, thanks to Keynesian economics, governments everywhere believe they can create economic activity with money. And use their monetary powers to try and manipulate things in the economy to favor them. And one of their favorite things to do is to devalue their money. Make it worth less. So governments that borrow a lot of money can repay that money later with devalued money. Money that is worth less. So they are in effect paying back less than they borrowed. And governments love doing that. Of course, people who loan money are none too keen with this. Because they are getting less back than they loaned out originally. And there is another reason why governments love to devalue their money. Especially if they have a large export economy.
Before anyone can buy from another country they have to exchange their money first. And the more money they get in exchange the more they can buy from the exporting country. This is the same reason why you can enjoy a five-star vacation in a tropical resort in some foreign country for about $25. I’m exaggerating here but the point is that if you vacation in a country with a very devalued currency your money will buy a lot there. But the problem with making your exports cheap by devaluing your currency is that it has a down side. For a country to buy imports they, too, first have to exchange their currency. And when they exchange it for a much stronger currency it takes a lot more of it to buy those imports. Which is why when you devalue your currency you raise prices. Because it takes more of a devalued currency to buy things that a stronger currency can buy. Something the good people in Japan are currently experiencing under Abenomics (see Japan Risks Public Souring on Abenomics as Prices Surge by Toru Fujioka and Masahiro Hidaka posted 4/14/2014 on Bloomberg).
Prime Minister Shinzo Abe’s bid to vault Japan out of 15 years of deflation risks losing public support by spurring too much inflation too quickly as companies add extra price increases to this month’s sales-tax bump.
Businesses from Suntory Beverage and Food Ltd. to beef bowl chain Yoshinoya Holdings Co. have raised costs more than the 3 percentage point levy increase. This month’s inflation rate could be 3.5 percent, the fastest since 1982, according to Yoshiki Shinke, the most accurate forecaster of Japan’s economy for two years running in data compiled by Bloomberg…
“Households are already seeing their real incomes eroding and it will get worse with faster inflation,” said Taro Saito, director of economic research at NLI Research Institute, who says he’s seen prices of Chinese food and coffee rising more than the sales levy. “Consumer spending will weaken and a rebound in the economy will lack strength, putting Abe in a difficult position…”
Abe’s attack on deflation — spearheaded by unprecedented easing by the central bank — has helped weaken the yen by 23 percent against the dollar over the past year and a half, boosting the cost of imported goods and energy for Japanese companies.
Japan is an island nation with few raw materials. They have to import a lot. Including much of their energy. Especially since shutting down their nuclear reactors. Japan has a lot of manufacturing. But that manufacturing needs raw materials. And energy. Which are more costly with a devalued yen. Increasing their costs. Which they, of course, have to pay for when they sell their products. So their higher costs increase the prices their customers pay. Leaving the people of Japan with less money to buy their other household goods that are also rising in price. Which is why economies with high rates of inflation go into recession. As the recession will correct those high prices. With, of course, deflation.
Keynesians all think they can manipulate the market place to their favor by playing with monetary policy. But they are losing sight of a fundamental concept in a free market economy. Money doesn’t have value. It only holds value temporarily. It’s the things the factories produce that have value. And whenever you make it more difficult (i.e., raise their costs by devaluing the currency) for them to create value they will create less value. And the economy as a whole will suffer.
Tags: Abenomics, barter, currency, deflation, devalue, devalue their money, devaluing, devaluing your currency, energy, export, imports, inflation, Japan, Keynesian, market, money, prices, raise prices, raw materials, recession, search, search costs, temporary storage of value, trade, value
Week in Review
Retirees can’t get by on Social Security alone. And we can’t raise Social Security payments because the program will be insolvent in a few years. Because of our aging population. More people are leaving the workforce than are entering it. So fewer people are paying taxes to support those in retirement. And those in retirement are living a lot longer into retirement than the Social Security actuaries thought they would. Which is why Social Security is going bust. And people need other sources of retirement income. And a big source of that retirement income has been our 401(k) plans. Which President Obama wants to take away (see Obama’s budget bad for 401(k) savers by Scott Hanson posted 3/19/2014 on CNBC).
President Obama’s proposed budget for 2015 would be a disaster for the millions of Americans who are underprepared for retirement. This plan would reduce the tax incentives for employers to offer retirement plans to their employees…
Under Obama’s budget plan, higher-income earners would be limited to a tax deduction at the 28 percent level, even if their current income-tax bracket is much higher…
This means they would not only pay taxes on some of their contributions today, they are fully taxed when they withdraw the money in the future. This, of course, is double taxation.
The Social Security Trust Fund doesn’t have any money in it. All the money we’re paying into Social Security is going right out to pay for someone else’s retirement. And what’s left over the government spends to buy votes. Replacing our money in the Social Security Trust Fund with IOUs. Promises to repay the money when we need it. How? By either borrowing more money. Printing money. Or taking a portion of our other retirement money we’re setting aside. Our 401(k) plans.
It’s no secret that the Democrats hate these 401(k) plans. For that’s a lot of money people are NOT spending. And money they can’t tax. The government is full of Keynesians. They believe the only healthy economy is an economy where people spend everything they earn. Keynesians see savings as leaks from the economy. And they don’t like that. For them consumption is everything. And saving is for chumps. They want our 401(k) plans. Some have even been thinking about just taking that money and replacing it with some government program. Like Social Security. So they can get that money now. And spend it. For there are so many votes to buy and so little money to buy them with. So the Democrats will wage their war on our 401(k) plans. And then move on to something else. For they have an insatiable appetite to spend.
Tags: 401(k) plans, Democrat, Keynesian, President Obama, retirement, saving, Social Security, Social Security Trust Fund
Week in Review
If President Obama and the Democrats had their way do you know what they would do? All out Keynesian economics. To the max. Huge government stimulus upon huge government stimulus. Keeping interest rates at or below zero so they can borrow as much as they’d like to pay for their deficit spending. Or just printing the money to spend. That’s what they’d love to do. Because they don’t understand economics. All they know is the politics of Keynesian economics. Power. It allows the government to spend far more than any other economic system. And that lets them buy a lot of votes.
President Obama and the Democrats look at the Chinese with awe and reverence. They would love to have the power the Chinese communists have. So they could do whatever they wanted to do. Just like the Chinese communists do. And when Prime Minister Shinzo Abe revealed his three arrows of Abenomics the left was impressed. Large-scale government spending. Aggressive monetary easing (like all that quantitative easing Ben Bernanke was doing with the Federal Reserve). And structural reforms. Government just taking over the economy to fix it and correct all the failings of the free market. This is what the Democrats want to do in the United States. Because they are so conceited that only they are smart enough to fix the problems in the economy. So how has this Keynesian assault worked in Japan? Not so good (see Blow for Abenomics as Japan’s economy grows less than expected by Rebecca Clancy posted 3/10/2014 on The Telegraph).
Revised data from the government showed that gross domestic product growth was 0.2pc in the three months to December 31 and 1.5pc for 2013…
While the data still marked Japan’s best annual performance in three years, attention will now turn to the Bank of Japan’s monetary policy statement on Tuesday, as weakening growth before next month’s tax hike may push the central bank into a fresh batch of monetary easing measures.
“With Japanese data weaker than expected and their April consumption tax hike imminent, the state of the Japanese economy is cause for significant concern,” said Rebecca O’Keeffe, head of investment at stockbroker Interactive Investor…
Mr Abe swept into power in 2012 on a promise to catapult the Japanese economy out of a decades-long slump, but his policies have met with mixed success.
The weak data hit markets in Asia, with Japan’s Nikkei closing down 1pc at 15,120.14, while China’s Shanghai Composite plunged 2.9pc and the Hang Seng dropped 1.8pc…
While authorities blame the country’s holiday season for the weak results, they add to growing worries about the Chinese economy, with the latest surveys on its key manufacturing sector showing weakness.
Abenomics didn’t work. Because Keynesian economics doesn’t work. Government spending and artificially low interest rates just don’t create robust economic activity. All they create are cronyism. Malinvestments. Asset bubbles. And more painful and longer lasting recessions. As history has shown. Especially the deflationary spiral of Japan’s Lost Decade that they’re still trying to recover from. And the Chinese may follow suit. For they have nothing but exports. And you cannot build robust economic activity on exports alone. You need a thriving middle class. Which China doesn’t have.
History has shown over and over never to vote for Keynesians. For their policies never help the people. They only help those in power. And their crony friends. Who get richer while the people get poorer. The ruling Chinese communists are doing well but the majority of Chinese are still impoverished rural peasants living on subsistence farming. And President Obama and his crony friends (especially those on Wall Street) have all been doing very well thanks to a booming stock market. While median family income has fallen during his presidency. Proving yet again the mistake it is to vote for a Keynesian.
Tags: Abenomics, Democrats, government spending, government stimulus, interest rates, Japan, Keynesian, Keynesian economics, President Obama, quantitative easing, stimulus
Week in Review
The Keynesians were applauding Shinzō Abe’s economic plans for Japan. To end the never-ending deflationary spiral they’ve been in since the late Nineties. His Abenomics included all the things Keynesians love to do. And want to do in the United States. Expand the money supply through inflationary monetary policy. Devalue the yen to make their exports cheaper. Lower interest rates into negative territory. Quantitative easing. And lots of government spending. The kinds of things that just makes a Keynesian’s heart go pitter pat.
They kicked off Abenomics in 2013. And how are things about a year later? Not good (see Japan’s deficit hits record as economic growth slows posted 3/9/2014 on BBC News Business).
Japan’s current account deficit widened to a record 1.5tn yen ($15bn; £8.7bn) in January, the largest since records began in 1985.
In further bad news, the country’s economic growth figures were also revised downwards…
The sluggish growth and growing deficit come just before a planned sales tax increase, scheduled to take effect in April.
They did weaken the yen. Making it worth less than other currencies so those currencies could get more yen when they exchanged their currencies to buy those Japanese exports. Of course, when Japanese exchanged their yen for those other currencies they got less of those other currencies in return. Requiring more yen to buy those now more expensive imports. Thus increasing their trade deficit.
Japan is an island with a lot of people. They have to import a lot of their food, energy and natural resources as they have little on their island. So the weaker yen just made everything more expensive in Japan. Which, of course, lowered GDP. As those higher prices reduced the amount of buying their consumers could do.
Japan’s greatest problem is her aging population. And they have just about the oldest population in the world. As the youth have slammed the brakes on having children. So you have massive waves of people leaving the workforce the government is supporting in retirement. And fewer people entering the workforce to pay the taxes that support those retirees. Which, of course, forces higher tax rates on those remaining in the workforce. Further reducing the amount of buying their consumers can do. And no amount of Abenomics can change that.
Abenomics did not deliver what the Keynesians thought it would. Because Keynesian economics (aka demand-side economics) just doesn’t work. If it did Japan never would have had a Lost Decade to begin with. For it was Keynesian economics that gave Japan that asset price bubble in the first place. Which burst and deflated into the Lost Decade.
What Japan needs is a return to classical economic principles. Focusing more on the supply side. Lower tax rates and reduce regulation. Let the market set interest rates. Restore the policies that introduced ‘Made in Japan’ to the world. They need to make their capitalism more laissez-faire. If they do they can create the kind of economic activity that just might be able to support the generation who created the ‘Made in Japan’ label in their retirement. But you must have robust economic activity. So robust that lower tax rates can produce greater tax revenue. The supply-side economics way.
Tags: Abenomics, aging population, Consumers, currencies, deficit, exports, government spending, imports, interest rates, Japan, Japanese exports, Keynesian, Keynesian economics, lost decade, quantitative easing, retirees, Supply-side economics, taxes, trade deficit, workforce, yen
(Originally published February 27th, 2012)
Because of the Unpredictable Human Element in all Economic Exchanges the Austrian School is more Laissez-Faire
Name some of the great inventions economists gave us. The computer? The Internet? The cell phone? The car? The jumbo jet? Television? Air conditioning? The automatic dishwasher? No. Amazingly, economists did not invent any of these brilliant inventions. And economists didn’t predict any of these inventions. Not a one. Despite how brilliant they are. Well, brilliant by their standard. In their particular field. For economists really aren’t that smart. Their ‘expertise’ is in the realm of the social sciences. The faux sciences where people try to quantify the unquantifiable. Using mathematical equations to explain and predict human behavior. Which is what economists do. Especially Keynesian economists. Who think they are smarter than people. And markets.
But there is a school of economic thought that doesn’t believe we can quantify human activity. The Austrian school. Where Austrian economics began. In Vienna. Where the great Austrian economists gathered. Carl Menger. Ludwig von Mises. And Friedrich Hayek. To name a few. Who understood that economics is the sum total of millions of people making individual human decisions. Human being key. And why we can’t reduce economics down to a set of mathematical equations. Because you can’t quantify human behavior. Contrary to what the Keynesians believe. Which is why these two schools are at odds with each other. With people even donning the personas of Keynes and Hayek to engage in economic debate.
Keynesian economics is more mainstream than the Austrian school. Because it calls for the government to interfere with market forces. To manipulate them. To make markets produce different results from those they would have if left alone. Something governments love to do. Especially if it calls for taxing and spending. Which Keynesian economics highly encourage. To fix market ‘failures’. And recessions. By contrast, because of the unpredictable human element in all economic exchanges, the Austrian school is more laissez-faire. They believe more in the separation of the government from things economic. Economic exchanges are best left to the invisible hand. What Adam Smith called the sum total of the millions of human decisions made by millions of people. Who are maximizing their own economic well being. And when we do we maximize the economic well being of the economy as a whole. For the Austrian economist does not believe he or she is smarter than people. Or markets. Which is why an economist never gave us any brilliant invention. Nor did their equations predict any inventor inventing a great invention. And why economists have day jobs. For if they were as brilliant and prophetic as they claim to be they could see into the future and know which stocks to buy to get rich so they could give up their day jobs. When they’re able to do that we should start listening to them. But not before.
Low Interest Rates cause Malinvestment and Speculation which puts Banks in Danger of Financial Collapse
Keynesian economics really took off with central banking. And fractional reserve banking. Monetary tools to control the money supply. That in the Keynesian world was supposed to end business cycles and recessions as we knew them. The Austrian school argues that using these monetary tools only distorts the business cycle. And makes recessions worse. Here’s how it works. The central bank lowers interest rates by increasing the money supply (via open market transactions, lowering reserve requirements in fractional reserve banking or by printing money). Lower interest rates encourage people to borrow money to buy houses, cars, kitchen appliances, home theater systems, etc. This new economic activity encourages businesses to hire new workers to meet the new demand. Ergo, recession over. Simple math, right? Only there’s a bit of a problem. Some of our worst recessions have come during the era of Keynesian economics. Including the worst recession of all time. The Great Depression. Which proves the Austrian point that the use of Keynesian policies to end recessions only makes recessions worse. (Economists debate the causes of the Great Depression to this day. Understanding the causes is not the point here. The point is that it happened. When recessions were supposed to be a thing of the past when using Keynesian policies.)
The problem is that these are not real economic expansions. They’re artificial ones. Created by cheap credit. Which the central bank creates by forcing interest rates below actual market interest rates. Which causes a whole host of problems. In particular corrupting the banking system. Banks offer interest rates to encourage people to save their money for future use (like retirement) instead of spending it in the here and now. This is where savings (or investment capital) come from. Banks pay depositors interest on their deposits. And then loan out this money to others who need investment capital to start businesses. To expand businesses. To buy businesses. Whatever. They borrow money to invest so they can expand economic activity. And make more profits.
But investment capital from savings is different from investment capital from an expansion of the money supply. Because businesses will act as if the trend has shifted from consumption (spending now) to investment (spending later). So they borrow to expand operations. All because of the false signal of the artificially low interest rates. They borrow money. Over-invest. And make bad investments. Even speculate. What Austrians call malinvestments. But there was no shift from consumption to investment. Savings haven’t increased. In fact, with all those new loans on the books the banks see a shift in the other direction. Because they have loaned out more money while the savings rate of their depositors did not change. Which produced on their books a reduction in the net savings rate. Leaving them more dangerously leveraged than before the credit expansion. Also, those lower interest rates also decrease the interest rate on savings accounts. Discouraging people from saving their money. Which further reduces the savings rate of depositors. Finally, those lower interest rates reduce the income stream on their loans. Leaving them even more dangerously leveraged. Putting them at risk of financial collapse should many of their loans go bad.
Keynesian Economics is more about Power whereas the Austrian School is more about Economics
These artificially low interest rates fuel malinvestment and speculation. Cheap credit has everyone, flush with borrowed funds, bidding up prices (real estate, construction, machinery, raw material, etc.). This alters the natural order of things. The automatic pricing mechanism of the free market. And reallocates resources to these higher prices. Away from where the market would have otherwise directed them. Creating great shortages and high prices in some areas. And great surpluses of stuff no one wants to buy at any price in other areas. Sort of like those Soviet stores full of stuff no one wanted to buy while people stood in lines for hours to buy toilet paper and soap. (But not quite that bad.) Then comes the day when all those investments don’t produce any returns. Which leaves these businesses, investors and speculators with a lot of debt with no income stream to pay for it. They drove up prices. Created great asset bubbles. Overbuilt their capacity. Bought assets at such high prices that they’ll never realize a gain from them. They know what’s coming next. And in some darkened office someone pours a glass of scotch and murmurs, “My God, what have we done?”
The central bank may try to delay this day of reckoning. By keeping interest rates low. But that only allows asset bubbles to get bigger. Making the inevitable correction more painful. But eventually the central bank has to step in and raise interest rates. Because all of that ‘bidding up of prices’ finally makes its way down to the consumer level. And sparks off some nasty inflation. So rates go up. Credit becomes more expensive. Often leaving businesses and speculators to try and refinance bad debt at higher rates. Debt that has no income stream to pay for it. Either forcing business to cut costs elsewhere. Or file bankruptcy. Which ripples through the banking system. Causing a lot of those highly leveraged banks to fail with them. Thus making the resulting recession far more painful and more long-lasting than necessary. Thanks to Keynesian economics. At least, according to the Austrian school. And much of the last century of history.
The Austrian school believes the market should determine interest rates. Not central bankers. They’re not big fans of fractional reserve banking, either. Which only empowers central bankers to cause all of their mischief. Which is why Keynesians don’t like Austrians. Because Keynesians, and politicians, like that power. For they believe that they are smarter than the people making economic exchanges. Smarter than the market. And they just love having control over all of that money. Which comes in pretty handy when playing politics. Which is ultimately the goal of Keynesian economics. Whereas the Austrian school is more about economics.
Tags: asset bubbles, Austrian economics, Austrian school, Austrian school of economics, bad debt, banking, banking system, business cycle, businesses, central banking, cheap credit, consumption, credit, debt, depositors, deposits, economic activity, economic exchanges, Economics, economists, fractional reserve banking, free market, Great Depression, Hayek, human behavior, income stream, inflation, interest rates, investment, investment capital, Keynes, Keynesian, Keynesian economists, loan, malinvestment, market forces, market interest rates, mathematical equations, monetary tools, money supply, predict human behavior, prices, quantify, recessions, savings, savings accounts, savings rate, speculation, unquantifiable, workers
Week in Review
There was a sketch on the Benny Hill Show that reminds me of Keynesian economists. Benny was singing a song and they were showing the unrequited love around him. They showed one woman who loved a man. But that man loved another woman. Who loved Benny. And who did Benny love? The camera remained on Benny. Because that’s who he loved.
Keynesian economists are a lot like that. They like to sound erudite. They like to write things with impressive economic jargon in it. The layman can’t understand a thing they say or write. But that’s okay. As they are writing to impress their peers. People who are as narcissistic as they are. And they tell each other how brilliant they are with all of their demand-side pontificating. Pinching each other’s cheeks and saying, “Who’s a good economist? You are. You’re a good economist. Yes you are.” Even though they are always wrong. Reminding me of another television show. Hogan’s Heroes. Where Colonel Hogan and Colonel Klink were disarming a bomb in the compound. They’re down to two wires. One disarms the bomb. The other detonates it. Colonel Hogan asks Colonel Klink which wire to cut. He picks one. And just as he’s about to cut it Colonel Hogan changes his mind and cuts the other wire. Disarming the bomb. Colonel Klink asks him if he knew which wire to cut why did he ask him. And he replied that he wasn’t sure but he knew for sure that Colonel Klink would pick the wrong wire.
This is just like a Keynesian economist. Ask them what to do to help the economy and you can be sure they’ll pick the wrong thing to do. Because they love their demand-side economics with all their charts and graphs and equations. For it feeds into their superiority complex. As they can baffle people with their bull s***. Well, the truth is that the economic data doesn’t support demand-side economics. For all of the stimulus spending Keynesians have encouraged governments to do have never pulled an economy out of a recession. It has only extended a recession. And made it more painful. For if you want to help the economy you have to work on the supply side. Make it easier for people to be creative and bring things to market. Things people will buy. Even if they had no idea that they existed before seeing them in the market (see How Taco Bell’s Lead Innovator Created The Most Successful Menu Item Of All Time by Ashley Lutz posted 2/26/2014 on Business Insider).
The Doritos Locos Taco is one of the most successful fast food innovations of all time.
Taco Bell released the product in 2012 and sold more than a billion units in the first year. The fast food company had to hire an estimated 15,000 workers to keep up with demand…
The team went through more than 40 recipes, and Gomez told Business Insider he sometimes felt like the idea would never come to fruition.
“Execution was so difficult,” he said.
Gomez was eventually able to perfect the shell by using the same corn masa found in Doritos. He also discovered a process that would evenly distribute the seasoning on the shells. And the company found a way to contain the cheese dust in the production process.
Even after Gomez created the ultimate shell, he still had to design production facilities that would make millions of them.
But for Gomez, the years of effort was worth it.
“When we shared the idea with our consumers, they loved it,” Gomez said. “I was blown away with how immediately popular Doritos Locos Tacos became.”
The taco is the most popular menu item in the fast food chain’s 50-year history.
This wasn’t demand-driven. As Keynesians believe everything is. Get more money into the hands of consumers and they will demand things. Thus increasing economic activity. But not a single consumer was demanding the Doritos Locos Taco. As there was no such thing to demand. And giving them more money wasn’t going to bring it to market. Only creative people with an idea and an indefatigable passion brought this to market. Spending a lot of years and lots of money to bring to market something people weren’t demanding. And might not even like. But they did. And it was a big success. This is how you create economic activity. On the supply side. Cut tax rates and costly regulations. Like Obamacare. So other people are encouraged to be creative and use their indefatigable passion to bring other things to market. Creating a whole lot more economic activity than just giving people a stimulus check and telling them to go out and create economic activity. Because once that Keynesian stimulus is spent it cannot create any more economic activity. Unlike all of the economic activity it takes to sell a billion or more Doritos Locos Tacos a year.
Tags: demand, demand-side, demand-side economics, Doritos Locos Taco, economic activity, economists, Keynesian, Keynesian economists, narcissistic, recession, stimulus, supply, supply-side, Taco Bell
You can call a Man Fatso but not a Woman because of the Double Standard when it comes to being Fat
Back when David Letterman was on NBC and the show was called Late Night with David Lettermen they had an old football player on one night. I think he was a defensive linesman or a linebacker. Who played football before there was money in playing football. Back then it was just guys playing a game hard and then getting drunk afterwards.
On this episode of Late Night this football player was telling a story about one game. It was late in the fourth quarter. The score was already decided. Nothing could happen to change who was going to win the game. But the other team was still playing hard. Trying to win. So after one play he wandered over and entered the other team’s huddle and said something like, “Come on, guys. Let’s just wrap this up and go get some beers already.” At which point one of his teammates yelled over to him from the other huddle, “Hey fatso! You’re in the wrong huddle.”
“Hey fatso! You’re in the wrong huddle.” It’s funny. For that’s the way guys are. They hurl insults at each other. And if you were a heavy guy there was nothing wrong with calling you ‘fatso’. It’s the way men joke around. It doesn’t work with women, though. If you have an overweight female coworker and you address her as fatso you’ll find yourself in sensitivity awareness training. Or fired. Because there is a double standard when it comes to being fat. You can call a man fatso. But not a woman.
Anyone espousing Keynesian Policies should be Criticized for they are doing Harm to the Economy
The political opposition and the main stream media treat President Obama with kid gloves. They will not attack him. Or even criticize his policies. Because President Obama is the first black president. And the political opposition and the mainstream media are terrified that someone will call them racist if they do. They fear that so much they’d rather see the economy collapse from his Keynesian economic policies than risk being called a racist.
President Obama is a Keynesian. Like most people in Washington making policy are. Which is a shame. As the historical record clearly shows these policies fail. But our politicians still manipulate interest rates. And spend money. Believing in the fallacy of demand-side economics. Which didn’t work to end the Great Depression. It only made the stagflation of the Seventies worse. It created a dot-com bubble and a dot-com recession. And it created a housing bubble and a subprime mortgage crisis. Giving us the Great Recession. And further Keynesian policies on top of these past failed policies have given us the worst economic recovery since that following the Great Depression.
So anyone espousing Keynesian policies should be attacked and criticized. For they are doing harm to the economy. And the country. Which is why the Democrats love President Obama. (Well, at least before Obamacare threatened their reelection chances). Because they can have him do all the things they want to do. Manipulate interest rates. Keep them near zero. By printing money. And then borrow even more money at those near-zero interest rates. Allowing the government to go on an orgy of spending. That’s why they love President Obama. (Well, at least before Obamacare threatened their reelection chances). For if anyone criticizes this reckless and irresponsible policy they can just label them a racist. And they immediately shut up. Just knowing this keeps people from speaking up in the first place.
It’s easier to Lie when you can Scare away Criticism with Charges of Racism or Sexism
But the political opposition and the mainstream media have no problem calling Governor Christie a fat man. Christie is not black. A woman. Or a Democrat. So he’s fair game. They can make the most vile fat slurs with him and it’s okay. Fatso. Fat-ass. Whatever. They don’t call it hateful. They just laugh. And pile on. They’ll even go so far as to call him a fat elephant on the cover of Time Magazine. Putting a very large profile of him that takes up most of the cover and call him the elephant in the room (a GOP reference). Because it’s okay to call him fat-ass and every other possible fat slur you can think of. But do you know who you can’t call fat? Hillary Clinton.
Should Hillary Clinton run for president again the political opposition and the mainstream media will treat her with kid gloves. They won’t call her fatso. Or fat-ass. Because that wouldn’t be nice. It’s okay to use those invectives against Governor Christie. (Just take the Christie fat slurs and replace his name with hers and see the kind of reactions you get). But if you dare use that tone with Hillary Clinton they will label you a sexist. Accuse you of being afraid of strong women (but not so strong as to be able to put up with fat jokes like Governor Christie). Proof that there is a Republican war on women. And should she win the presidency there will be little criticism of her policies. Because no one wants to be labeled a sexist. Or be accused of being afraid of strong women. Especially with the first female president. So she will get a pass on most everything she does. Like President Obama. Despite being as deserving of attacks and criticism. For she is a Keynesian, too.
With only 23% of the nation identifying as liberal the left has trouble passing their liberal policies. So they lie, of course. A lot. And it’s easier to lie when you can scare away criticism with charges of racism. Or sexism. Which is why they like President Obama so much. (Well, at least before Obamacare threatened their reelection chances). He was the first black president. Which made it harder for some to criticize him. Which helped make the lying easier. So they will most likely try to follow this strategy. Perhaps with Hillary Clinton. Who may be the first female president. Following that with other ‘firsts’. Until the opposition and the mainstream media learn that criticizing a woman’s policies doesn’t make you a sexist. Or afraid of strong women. It just means you’re criticizing a person with bad policies who happens to be a woman. Just as they will be able to criticize a black president one day.
Tags: afraid of strong women, criticism, criticize, Democrats, double standard, fat, fat slurs, fatso, first black president, first female president, Governor Christie, Hillary Clinton, interest rates, Keynesian, Keynesian policies, kid gloves, lie, lying, mainstream media, men, Obamacare, political opposition, President Obama, racist, sexist, spending, strong women, women
The Unemployment Rate is 13.6% when you count all Unemployed Workers
The economy is getting better and better. There are more new jobs. And the unemployment rate continues to fall. According to the Bureau of Labor Statistics (BLS). But this is little succor for the 10,948,000 who have lost their job since President Obama began trying to make the economy better. No matter what the BLS says (see the Employment Situation Summary posted 2/7/2014 on the Bureau of Labor Statistics).
Total nonfarm payroll employment rose by 113,000 in January, and the unemployment rate was little changed at 6.6 percent, the U.S. Bureau of Labor Statistics reported today. Employment grew in construction, manufacturing, wholesale trade, and mining…
Among the major worker groups, the unemployment rates for adult men (6.2 percent), adult women (5.9 percent), teenagers (20.7 percent), whites (5.7 percent), blacks (12.1 percent),and Hispanics (8.4 percent) showed little change in January. The jobless rate for Asians was 4.8 percent (not seasonally adjusted), down by 1.7 percentage points over the year. (See tables A-1, A-2, and A-3.).
The number of long-term unemployed (those jobless for 27 weeks or more), at 3.6 million, declined by 232,000 in January. These individuals accounted for 35.8 percent of the unemployed. The number of long-term unemployed has declined by 1.1 million over the year. (See table A-12.)
Once again there are more new jobs and the unemployment rate fell. Further proof the Obama administration says that their policies are working. But the low unemployment rate is misleading. As there are 91,455,000 people who are no longer in the labor force (see Table A-1. Employment status of the civilian population by sex and age). An increase of 10,948,000 since President Obama entered office. The BLS doesn’t count these unemployed people as unemployed in their calculation of the official unemployment rate. If you did that would raise the unemployment rate to 13.6%. Which is a lot higher than the official 6.6%. And better reflects public sentiment on the economy.
Ironically, the people hurt most by the Obama economic policies—teenagers, blacks and Hispanics—are also the biggest supporters of the president. Which tells us they obviously support him for reasons other than the economy. And apparently put those reasons above having a job. At least based their respective unemployment rates.
If we count all Unemployed and Underemployed the Current Economic Recovery would take more than 20 Years
Of the people they actually count as unemployed about a third of them have been unemployed for 27 weeks or more. So a large percentage of the unemployed are not suffering from frictional unemployment. That brief period of unemployment between jobs. No. These people have lost their jobs. And can’t find new ones. While others can find only part-time jobs.
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) fell by 514,000 to 7.3 million in January. These individuals were working part time because their hours had been cut back or because they were unable to find full-time work. (See table A-8.)
In January, 2.6 million persons were marginally attached to the labor force, little changed from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. (See table A-16.)
If you add the people up who want a full-time job but can’t get one that’s 9,900,000 who can’t find a full-time job. If we only add 113,000 jobs a month it will take over 87 months to get these people the full-time jobs they want. Or more than 7 years. If we count the last 5 years of the Obama presidency it will take the economic recovery out to 12 years. If we add the people who have left the labor force to the underemployed (the part-time workers looking for a full-time job) that would extend the economic recovery to 244 months. Or more than 20 years. Which is longer than the length of the economic recovery following the Great Depression.
The Obama administration still blames George W. Bush for causing the Great Recession. But one thing they do say over and over is that it was the worst economic disaster since the Great Depression. So they are saying that the Great Depression was worse than the Great Recession. Yet the current economic recovery is on track to last longer than the economic recovery following the Great Depression.
President Obama’s Economic Recovery is on Course to be the Worst Economic Recovery in U.S. History
The Great Depression and the Great Recession share something in common. In both the government used Keynesian economics to try and pull the nation out of the economic crisis. With huge government stimulus spending. You can see evidence of the FDR spending today. Such as the Hoover Dam. But you can see little evidence from President Obama’s stimulus spending. For there are no Hoover Dams anywhere. Just a lot of empty buildings that housed failed green energy industries. With no new jobs to show for it. Such as those good-paying jobs in the green energy industry that President Obama promised his stimulus spending would produce. But, alas, it did not. In fact, that’s just one thing this administration is not good at. Creating jobs. Even the jobs they created appear suspect.
Employment in manufacturing increased in January (+21,000). Over the month, job gains occurred in machinery (+7,000), wood products (+5,000), and motor vehicles and parts (+5,000). Manufacturing added an average of 7,000 jobs per month in 2013.
In January, wholesale trade added 14,000 jobs, with most of the increase occurring in nondurable goods (+10,000).
Mining added 7,000 jobs in January, compared with an average monthly gain of 2,000 jobs in 2013…
Employment in other major industries, including transportation and warehousing, information, and financial activities, showed little or no change over the month.
These numbers don’t make sense. Much like Keynesian economics. The economy created jobs in manufacturing (machinery, wood products, motor vehicles and parts). Wholesale trade added jobs. Mining added jobs. But this new economic activity required no new financing. Which is odd. For it takes money to make money. Also, there were no new jobs in transportation and warehousing. Which begs the question. What did they do with all the stuff they made from all those new manufacturing jobs? Did it ever leave these factories? Or is there another explanation? Did the people who entered the labor force just replace people who left it? For no net change? Perhaps.
The manufacturing workweek declined by 0.2 hour to 40.7 hours, and factory overtime edged down by 0.1 hour to 3.4 hours.
Or perhaps this explains how they could add jobs in an industry that required no additional financing, transportation or warehousing. Hiring new workers while shortening the workweek and cutting back on overtime. Or a combination of this and people leaving the labor force to net out any economic gain from these new jobs. Whatever the explanation is one thing is certain. The economy is not improving. And President Obama’s economic recovery is on track to be the worst economic recovery in U.S. history. Despite the glowing jobs reports showing new job creation month after month. And a continuing falling unemployment. Things they can only show by not counting the 10 million or so who are no longer employed.
Tags: blacks, BLS, economic crisis, economic recovery, economy, employment, Employment Situation Summary, full time job, Great Depression, Great Recession, Hispanics, jobs, Keynesian, Keynesian economics, labor force, part-time job, President Obama, stimulus, stimulus spending, teenagers, underemployed, unemployed, unemployment, unemployment rate
The Democrat Party is the Cool Uncle that buys Booze and Cigarettes for his Nieces and Nephews
People characterize the Republicans as being a bunch of old fogies. Out of touch. Who don’t have a clue about the world today. Unlike their children
do. Who are wise beyond their years. For they know there is nothing really bad with underage drinking and smoking. Smoking marijuana. Or doing other drugs. And there is nothing wrong with casual sex. Sexting. Or nude selfies.
This is why the children of old fogies like the Democrat Party. Because the Democrats get them. Unlike their parents. Their parents tell them they shouldn’t stay out late, drink, smoke, do drugs or have sex. While the Democrats decriminalize marijuana and work to decriminalize other drugs. Provide free birth control. And abortion without parental notification. Making the Democrat Party the cool uncle that buys booze and cigarettes for his nieces and nephews. So is it any wonder that the youth vote goes Democrat?
The ironic thing, though, is that these old fogies were once young themselves. And some were pretty wild in their youth, too. But once they became parents things changed. For when it’s their daughter they don’t want her being objectified. Encouraged to explore her sexuality by having so much casual sex that she catches a sexually transmitted disease or gets pregnant. Especially if they did in their youth. Which is the last thing they want for their little girl. Who is and will forever remain their little girl.
Keynesian Economics conditioned People to accept that Government knows Best
This is the rule. Not the exception. As kids grow up fighting their parents they reach a point in life where they realize that their parents were right all along. That if they had only spent more time on their homework and less time partying things would have turned out better. Life may have been less fun in the short-run but much better in the long-run. They’d had an earlier start in their career. A career with better pay and benefits. They could have bought a house sooner. Met someone to marry and start a family with sooner. Instead of finding themselves at 25 buried under student loan debt for a degree that can’t get them a job. And a decade or so of hooking up having conditioned men to shun any serious commitment. Leading their daughters to turn to serial dating and online dating. As they struggle to find someone else who has grown up, too.
This is what the old fogies know. That their kids don’t. You get wiser with age. Thanks to education. And experience. Two things the young just don’t have. And never will. Because by the time they grow wise from education and experience they are no longer kids. But well on their way to ‘old fogery’. Which is, of course, a problem for the Democrat Party. For a wise voting public will not help them win elections. As their Keynesian economic policies have nothing but a long record of failure. Giving us the Great Depression, the stagflation of the 1970s, the dot-com recession and the Great Recession. To name a few bad economic times Keynesian economics have given us. Things older people know from education and experience. But the kids voting Democrat don’t.
Keynesian economics ushered in the era of Big Government. And did something the Socialists could not. Conditioned people to accept that government knows best. Especially young people. Uneducated and inexperienced young people. Despite the Democrats’ horrible record concerning things economic. Because of this record the Democrats use lies and deceit to attack free market capitalism. That economic system that worked better than any other. To get people who knew no better to mistrust free market capitalism. And ask for the government to fetter unfettered capitalism. To make the world a fairer place.
The Democrats use Public Education to teach our Kids to Distrust Capitalism and to Trust Government
It sounds good to the inexperienced and uneducated. Because it feels good to think in terms of fairness. And if there is one thing the young have are emotions. They like to use their hearts. Not their brains. As they are idealistic and naïve. Unlike those old fogies who are realists. They can’t be fooled or swayed by the Democrat lies because they have learned and experienced a lot in their long lives. And heard the same old Democrat lies all through those long lives. Which is why the Democrats work so hard on the youth vote. The War on Women, their lax drug attitudes, birth control, abortion, gay rights…all of these are to get the young to think in terms of fairness. To tug on their heartstrings. To get them emotional. And keep them emotional. As well as ignorant.
The more ignorant people are the easier it is to lie to them. Anyone who knows the history of Western Civilization will understand how life became better for people as we moved closer to free market capitalism. Anyone who knows classical economics will understand how thrift, savings, free trade, sound money, etc., made America the number one economy in the world. While the Keynesian policies of today are threatening to knock America out of that number one spot. People who understand these things are not going to vote Democrat. Which is why the Democrats work hard to keep people from learning these things. By constantly lying about them. And not teaching them in the institutions they control. Our public schools. And our institutions of higher education.
The Republican equation for winning votes is a difficult equation. Knowledge + Experience + Reason = Republican Votes. It’s difficult because the Democrats have long controlled public education. Thanks to their friends in the teacher unions. And their friends running our institutions of higher education. Which spend more time teaching our kids to distrust capitalism. And to trust government. To feel more. And think less. To live for today. And not worry about tomorrow. Making it very difficult for the Republicans to get young voters to vote for them. As they are unknowledgeable (thanks to our public schools), inexperienced (because they are young) and prefer emotion over reason (because feeling is more fun than thinking). Which is why old fogies (the knowledgeable, experienced and thinking) vote Republican and the youth vote does not.
Tags: abortion, birth control, capitalism, casual sex, deceit, Democrat, Democrat Party, Democrats, distrust capitalism, drugs, education, emotions, experience, free market, free-market capitalism, government knows best, higher education, ignorant, Keynesian, Keynesian economic, lies, marijuana, old fogies, parents, public schools, Republican, Republicans, trust government, young people, youth vote
(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).
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.
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.
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.
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.
Tags: Barack Obama, Bill Clinton, bubble, Bush, Clinton, corporations, Democrats, DJIA, dot.com, Dow Jones Industrial Average, economic indicator, Great Recession, interest rates, jobs, Keynesian, labor force participation rate, LFPR, Main Street, middle class, Reagan, Republicans, rich people, Ronald Reagan, stock market, subprime mortgage, tax rates, Wall Street, working class, working man, working people
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