Recently in Economy Category

SENATOR JEFF SESSIONS BLASTS CONGRESS AND OBAMA FOR BETRAYING AMERICAN WORKERS.

Republicans in Congress are cooperating with Obama in bringing in foreign workers to replace American workers desperate for work. American workers are being betrayed by the President and a Republican-controlled Congress. It doesn't matter with the voters want. No wonder, Senator Jeff Sessions says, that voters are in open rebellion.

The elites of both parties led by Speaker Paul Ryan and Senator McConnell are ignoring the interests of American workers. With the worst labor force participation rate in decades, Congress passed a bill at 2 a.m, the morning of December16th that made things worse.

Betrayal.


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HOW LIBERALS' POLICIES HAVE DAMAGED THE ECONOMY AND HURT THE POOR

To end the year, we present some practical and compelling thinking about the need for conservatives to seize the initiative if the country is to be saved. Liberal fascism has restricted our freedoms and impaired our economy with unnecessary heavy handed intervention. Liberal policies have killed human initiative and worsened the condition of the poor, particularly that of black Americans.

Dr. Thomas Sowell grew up poor in Harlem, dropped out of high school, but graduated from Harvard and acquired a doctorate in economics from the University of Chicago. He attributes his success to perseverance.

Dr. Sowell's columns are read widely in newspapers all over the country and online. He is now a senior fellow at the Hoover Institution at Stanford. Peter Robinson interviews Dr. Sowell on the occasion of the publication of his Fifth Edition of his best-selling book "Basic Economics." You won't find a better or more enjoyable 50 minutes of education than this.

Click in the lower right corner for full screen and Escape to return to the smaller size.

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SAUDIS ATTACKING U.S. OIL PRODUCTION, RISKING DISASTER AND CHAOS IN THE ISLAMIC WORLD.

Saudi Arabia, U.S. friend or enemy?

The royal family of Saudi Arabia has been "educating" Muslims worldwide for decades now that 7th Century Islam is the Islam for all times and more and more Muslims are becoming convinced this is so (witness the Islamic State). What the Saudis didn't bank on was the possibility that 7th Century true believers would one day be looking to attack and displace them.

Despite the U.S. being aware of the Islamic supremacism the Saudis were promoting to one and all, the U.S. needed Saudi and Gulf States oil, so the Islam originalists got a pass and the U.S. did not object to the Saudis' propaganda offensive.

Also, the Saudis didn't anticipate the resurgence of the U.S. as a world leader in oil production, meaning little or no reliance on Middle East oil. It might also mean a U.S. ready to blow the whistle on the Saudis stoking the flames of radical Islam.

Not good, the Saudis concluded. They needed a plan.

Producing oil by fracking is expensive, multiples more so than conventional drilling for Saudi oil. The plan: Drive world oil prices down and cripple the growth of American oil development and retain the U.S. as an oil-dependent and objection-free client.

So that is what is going on with falling oil prices. The cartel of oil producing countries led by Saudi Arabia (OPEC) have decided not to reduce production in the face of a world oil glut.

Though the Saudis deny it, it seems clear the Saudis are trying to bankrupt a large part of the American oil fracking industry. Their hope is that prices will drop so low the ability of the U.S. to produce its own oil will be substantially reduced and OPEC will be back in the driver's seat setting world oil prices. In other words, the Saudis hope to destroy this new competition by driving large segments of it out of business.

Not so fast, one British analyst says. The Saudis have misread the situation. It is the OPEC oil producing countries that need high prices more than the U.S. fracking industry does. And an even greater expansion of the Islamic State into oil-rich and unstable Libya and Algeria could be the result if those governments are deprived of the money they need to operate and subsidize their people's purchases of basics such as gasoline and bread.

Russia and Venezuela also need high oil prices to meet the revenue needs of their governments to fund the subsidies paid to their populations.

Just maybe the U.S. fracking industry can survive low oil prices and the Middle East, North Africa -- and Europe --will be the losers in the Saudis' high stake game.

Saudis risk playing with fire in shale-price showdown as crude crashes
A deep slump in prices might heighten geostrategic turmoil across the Middle East

London Telegraph
By Ambrose Evans-Pritchard

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Saudi Arabia and the core Opec states are taking an immense political gamble by letting crude oil prices crash to $66 a barrel, if their aim is to shake out the weakest shale producers in the US. A deep slump in prices might equally heighten geostrategic turmoil across the broader Middle East and boomerang against the Gulf’s petro-sheikhdoms before it inflicts a knock-out blow on US rivals.

Caliphate leader Abu Bakr al-Baghdadi has already opened a “second front” in North Africa, targeting Algeria and Libya – two states that live off energy exports – as well as Egypt and the Sahel as far as northern Nigeria. “The resilience of US shale may prove greater than the resilience of Opec,” said Alistair Newton, head of political risk at Nomura.

Chris Skrebowski, former editor of Petroleum Review, said the Saudis want to cut the annual growth rate of US shale output from 1m barrels per day (bpd) to 500,000 bpd to bring the market closer to balance. “They want to unnerve the shale oil model and undermine financial confidence, but they won’t stop the growth altogether,” he said.
There is no question that the US has entirely changed the global energy landscape and poses an existential threat to Opec. America has cut its net oil imports by 8.7m bpd since 2006, equal to the combined oil exports of Saudi Arabia and Nigeria.

The country had a trade deficit of $354bn in oil and gas as recently as 2011. Citigroup said this will return to balance by 2018, one of the most extraordinary turnarounds in modern economic history.

“When it comes to crude and other hydrocarbons, the US is bursting at the seams,” said Edward Morse, Citigroup’s commodities chief. “This situation is unlikely to stop, even if prevailing prices for oil fall significantly. The US should become a net exporter of crude oil and petroleum products combined by 2019, if not 2018.”

Opec has misjudged the threat. As late as last year, it was dismissing US shale as a flash in the pan. Abdalla El-Badri, the group’s secretary-general, still insists that half of all US shale output is vulnerable below $85.

Continue reading....

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EVERY DEMOCRATIC SENATOR'S VOTE IN 2008 FOR OBAMA'S PROGRAM HAS RESULTED IN LOWER INCOMES FOR BLACKS, HISPANICS, WOMEN, WORKING FAMILIES AND THE MIDDLE CLASS.

Every Democratic senator seeking re-election who was in office in 2008 is responsible for the economic disaster that has befallen the families of America. Their 60 votes installed Obama's "transforming" agenda to the detriment of the middle class and poor of America. They did it all without a single Republican vote. If the voters know the truth, those Democrats will pay at the polls in November.

The Democratic Party's great political victory in 2008 led to the realization of a progressive agenda in the making for a century. But that agenda resulted in economic failure for working Americans. It failed as it has always failed: Progressive policies buy votes but destroy prosperity.


Senate Democrats vs. the Middle Class
Senators elected in 2008 made Obama's agenda possible, and its results have harmed most Americans.

By Phil Gramm and Michael Solon
WSJ Aug. 18, 2014

On Nov. 3, 2008, seven new Democratic senators were elected, giving Democrats 58 votes. Eight months later, with the Minnesota Senate race settled and Arlen Specter having switched parties, Democrats secured the 60th vote to overcome filibusters and impose absolute control over the Senate for the first time in 31 years. In 78 days, American voters will render judgment on the record of the Senate Democratic Class of 2008, and on all 35 Democratic candidates seeking to perpetuate their Senate majority.

The Senate's Democratic majority was united after the 2008 election in its commitment to President Obama's progressive vision to remake America. And with a financial crisis afoot, it was determined to not waste the opportunity.

ObamaCare, which gave government control of the health-care system, was vigorously supported, promoted and defended by every Senate Democrat. It became law in March 2010 without a single Republican vote in either house of Congress. Every Democratic senator cast the deciding vote for ObamaCare.

Since the Progressive Era a century ago, Democrats have dreamed of seizing the commanding heights of the financial system to expand government's ability to influence the allocation of credit. The passage of Dodd-Frank in July 2010, also supported by every Democrat in the Senate, made that dream a reality.

In 1993, President Clinton had been unable to pass a comparatively modest $16 billion stimulus program. Democrats in 2009 passed a massive $787 billion stimulus program with every Democratic senator voting for it. And with the tacit support of Democratic senators who have blocked every bill, resolution or amendment that impeded any aspect of his regulatory agenda, President Obama has implemented the most massive expansion of federal regulatory authority since the Great Depression.

It is impossible for any Democratic senator running for re-election this year to credibly argue that he or she did not support the president's program or provide a critical vote to enact it. No Democratic candidate can argue that by electing him or her and sustaining the Democratic majority in the Senate, voters can hope to alter the president's program.

With his party's Senate supermajority, President Obama achieved a series of historic political victories. But the question most voters will have to answer on Nov. 4 is whether this program has been good for working Americans. We think the answer is clear. As is well known, the Obama recovery is the weakest in postwar history. If the Obama recovery had been as strong as the average of the previous 10 postwar recoveries, 13.9 million more Americans would be working today and the average real per capita income of every man, woman and child in America would be $6,308 higher.

Continue reading . . .

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ENCOURAGING POLL FROM RASMUSSEN REPORTS: 83% THINK IT'S IMPORTANT FOR THE ECONOMIC SYSTEM TO PROVIDE EVERYONE AN OPPORTUNITY TO SUCCEED

Friday, February 14, 2014

Despite the efforts of the Obama administration to balloon the population of the idle government dependents through Obamacare and other job killing policies to build up the Democratic voter base, a new Rasmussen poll has some encouraging news.

Most voters continue to support an economic system that provides everyone a chance to succeed, and they generally believe it is fair and helpful for the economy to let those who are successful become very rich.

A new Rasmussen Reports national telephone survey finds that 83% of Likely U.S. Voters now think it is at least somewhat important for the economic system to provide everybody with an opportunity to succeed.

This is down three points from October’s all-time high.

Just 14% do not think that this is important, up from a record low of 10% in October.

This includes 59% who think it’s Very Important for everyone to have a chance to succeed, and just four percent (4%) who think it’s Not At All Important.


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WILL JOBS DISAPPEAR FASTER THAN THEY ARE CREATED?

There is a growing sense that technology may be destroying jobs faster than it is creating new ones. There will be increasing demand for people to fill intellectually demanding high paid jobs and low paid jobs demanding little talent or education, but fewer jobs in the middle.

Currently, 93 million Americans are without work. In large part this is due to the slow growth economy resulting from the anti-growth policies of the Obama administration. Too much regulation, demonization of the successful and government destruction of private sector jobs such as Obamacare is doing with its health care weapon. The consequence is that millions are being forced into government dependent poverty for Democratic votes.

But another trend is developing that may greatly effect the growth of jobs adversely even if the economy is booming.

The British publication Financial Times has published one of the better short surveys of the situation. This will be a great challenge of our times if in fact we have hundreds of millions of people who will have no satisfying work to do and who add nothing to the health of the economy.


The robots are coming and will terminate your jobs
By Tim Harford
Financial Times, December 27, 2013

In future, there may be people who – despite being fit to work – have no economic value

On August 29 1997, Skynet – a computer system controlling the US nuclear arsenal – became self-aware. Panicking operators tried to deactivate it. Skynet, perceiving the threat, launched its arsenal, killed most of humanity, and ushered in a world in which the robots ruled. So went the backstory of the 1984 movie The Terminator . But computers did not become self-aware in 1997 – the closest they managed was when Deep Blue, a B-list supercomputer, beat Garry Kasparov, the world chess champion. Despite decades of hand-wringing about robots taking over, the robots never quite seem to rise.

But perhaps 2014 will be different. Google certainly seems to think so: early in December it purchased Boston Dynamics, a producer of military prototype robots – with names such as “BigDog”, “WildCat” or “Petman” – that wouldn’t look out of place in the Terminator films. These nightmarish machines will now be brought to you by the folks who host all your email, know what your internet searches are and are tracking your phone’s location.

But while the Skynet-esque combination of Google and Boston Dynamics is unsettling, it is not in itself a reason to expect that robot technologies really will change the world. Yet the talk in the economics profession is increasingly taking that possibility seriously.

The primary cause has been with us a long time: the familiar Moore’s law, which in various guises describes growth in computing power as swift and exponential. We have got used to swift growth, but we can never quite get used to the implications of exponential growth – meaning that whatever has just happened will be eclipsed by whatever is just about to happen.
Moore’s law, loosely applied, is that computers today are twice as powerful as the computers of two years ago, perhaps just 18 months ago. Today’s mobile phone is a match for what was once a cutting-edge gaming console; that gaming console, in turn, outperforms the kind of old-timey supercomputer that the Terminator franchise once imagined taking over the world.

Software is also becoming more efficient. We tend to miss this because the bloated copies of Microsoft Word we use do not seem faster than 20 years ago. But a mobile phone running Pocket Fritz 4, a chess program, can now beat grandmasters, despite the phone running far more slowly than Deep Blue did. A chess-playing phone is not about to lead a robot uprising, so why should we care? A growing number of economists – including Massachusetts Institute of Technology’s Erik Brynjolfsson and Andrew McAfee in a new book The Second Machine Age – argue that robots and algorithms are poised to make inroads into labour markets.

Computing power is starting to solve everyday problems – which turn out to be the hardest ones. Computers were laughable drivers in 2004, when a computer-driving competition was “won” by a car that crashed after completing seven miles of a 150-mile course. Now computers drive cars safely.
In 2008, robots still struggled with a problem known as “Slam” – simultaneous localisation and mapping, the process of mentally building up a map of a new location, including hazards, as you move through it. In 2011, Slam was convincingly addressed by computer scientists using Microsoft’s “Kinect” gaming hub, an array of sensors and processors that until recently would have been impossibly costly but is suddenly compact and cheap.

Problems such as language recognition and Slam have so far prevented robots working alongside humans; or on tasks that are not precisely defined, such as taping up parcels of different sizes or cleaning a kitchen. Perhaps the robots really are now on the rise.

Consider “Baxter”. Traditional industrial robots are major capital investments: vast machines kept apart from human workers for safety reasons. Baxter, by contrast, claims to be able to do much of the same work, is cheaper, safely works with humans, and is – its manufacturers claim – intuitive to reprogramme. And if Baxter fails to live up to the hype, Moore’s law means that the robot’s successors – with a computer eight to 10 times more powerful for the price in five years’ time – will not.

What is sobering is that we have already seen convincing evidence of the impact of technology on the job market. Alan Manning of the London School of Economics coined the term “job polarisation” a decade ago, when he discovered that employment in the UK had been rising for people at the top and the bottom of the income scale. There was more demand for lawyers and burger flippers. It was middle-skill jobs that were disappearing. The same trend is true in the US, and is having the predictable effect on wages: strong gains at the top, some gains at the bottom, stagnation in the middle.

The leading explanation is that technological change has favoured certain skills and displaced others. Typists, clerks, travel agents and bank tellers find their skills less valued. Mechanisation now dominates agriculture, large-scale construction and manufacturing. We tend to imagine that manufacturing jobs have disappeared to China; in fact, manufacturing employment in China has been falling. Even the Chinese must fear the robots.

Of course cheap, ubiquitous computing power has brought many good things – and will bring more. The question is whether we are equipped to deal with the possibility that in future, there will be people who – despite being willing and fit to work – have no economic value as employees. By the time today’s 10-year-olds have their degrees, computers could be a hundred times cheaper and smarter than they are today. A future full of robot servants could be a bright future indeed, but only if we can adapt our institutions quickly enough.

Even termites might be undercutting jobs in the future. View this video on what Harvard researchers are working on.

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OBAMA'S DEMOCRATIC INTERVENTIONIST GOVERNMENT IS CHOKING THE ECONOMY

Don't let anybody, including Obama, kid you. We are still in a recession and it is the Democratic government's fault. There's lots of evidence this is true and here is a sensible observation about what Republicans should campaign about.

Republicans have a once-in-a-generation opportunity to roar back to power given the miserable performance of the economy on Obama’s watch. But they still could fall on their faces.

The problem is NOT government spending, contrary to the well-meaning obsession of the Tea Party. That will BECOME the problem a decade or two from now. The problem now is obstacles to investment: the highest corporate tax rate in the world, onerous regulation, the crazyquilt uncertainty of Obamacare. America needs aggressive tax cuts and regulatory rollback. It also needs to spend more on infrastructure, which is becoming a major obstacle to growth. It needs to spend more on R&D, particularly on cutting-edge military R&D. The way to do this, I’ve argued for years, is to emulate Roosevelt’s alphabet-soup federal agencies and put unemployed Americans to work repairing infrastructure at $20 an hour, rather than paying $50 an hour to the construction unions. That’s heresy from a free-marketeer like me, but it makes economic sense and will drive the Democrats crazy. Highlighting added

Read it all.

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NIALL FERGUSON CONCURS: THE REPUBLICANS ARE RIGHT, THE DEBT IS THE PROBLEM

Harvard Professor Niall Ferguson (and noted British historian) agrees that the national debt has reached crisis stage and Obamacare will only make it worse. A huge new entitlement is something the nation cannot afford.

Niall Ferguson: The Shutdown Is a Sideshow. Debt Is the Threat

An entitlement-driven disaster looms for America, yet Washington persists with its game of Russian roulette.

By NIALL FERGUSON
Wall Street Journal

In the words of a veteran investor, watching the U.S. bond market today is like sitting in a packed theater and smelling smoke. You look around for signs of other nervous sniffers. But everyone else seems oblivious.

Yes, the federal government shut down this week. Yes, we are just two weeks away from the point when the Treasury secretary says he will run out of cash if the debt ceiling isn't raised. Yes, bond king Bill Gross has been on TV warning that a default by the government would be "catastrophic." Yet the yield on a 10-year Treasury note has fallen slightly over the past month (though short-term T-bill rates ticked up this week).

Part of the reason people aren't rushing for the exits is that the comedy they are watching is so horribly fascinating. In his vain attempt to stop the Senate striking out the defunding of ObamaCare from the last version of the continuing resolution, freshman Sen. Ted Cruz managed to quote Doctor Seuss while re-enacting a scene from the classic movie "Mr. Smith Goes to Washington."

Meanwhile, President Obama has become the Hamlet of the West Wing: One minute he's for bombing Syria, the next he's not; one minute Larry Summers will succeed Ben Bernanke as chairman of the Federal Reserve, the next he won't; one minute the president is jetting off to Asia, the next he's not. To be in charge, or not to be in charge: that is indeed the question.

According to conventional wisdom, the key to what is going on is a Republican Party increasingly at the mercy of the tea party. I agree that it was politically inept to seek to block ObamaCare by these means. This is not the way to win back the White House and Senate. But responsibility also lies with the president, who has consistently failed to understand that a key function of the head of the executive branch is to twist the arms of legislators on both sides. It was not the tea party that shot down Mr. Summers's nomination as Fed chairman; it was Democrats like Sen. Elizabeth Warren, the new face of the American left.

Yet, entertaining as all this political drama may seem, the theater itself is indeed burning. For the fiscal position of the federal government is in fact much worse today than is commonly realized. As anyone can see who reads the most recent long-term budget outlook—published last month by the Congressional Budget Office, and almost entirely ignored by the media—the question is not if the United States will default but when and on which of its rapidly spiraling liabilities.

True, the federal deficit has fallen to about 4% of GDP this year from its 10% peak in 2009. The bad news is that, even as discretionary expenditure has been slashed, spending on entitlements has continued to rise—and will rise inexorably in the coming years, driving the deficit back up above 6% by 2038.

A very striking feature of the latest CBO report is how much worse it is than last year's. A year ago, the CBO's extended baseline series for the federal debt in public hands projected a figure of 52% of GDP by 2038. That figure has very nearly doubled to 100%. A year ago the debt was supposed to glide down to zero by the 2070s. This year's long-run projection for 2076 is above 200%. In this devastating reassessment, a crucial role is played here by the more realistic growth assumptions used this year.

As the CBO noted last month in its 2013 "Long-Term Budget Outlook," echoing the work of Harvard economists Carmen Reinhart and Ken Rogoff: "The increase in debt relative to the size of the economy, combined with an increase in marginal tax rates (the rates that would apply to an additional dollar of income), would reduce output and raise interest rates relative to the benchmark economic projections that CBO used in producing the extended baseline. Those economic differences would lead to lower federal revenues and higher interest payments. . . .

"At some point, investors would begin to doubt the government's willingness or ability to pay U.S. debt obligations, making it more difficult or more expensive for the government to borrow money. Moreover, even before that point was reached, the high and rising amount of debt that CBO projects under the extended baseline would have significant negative consequences for both the economy and the federal budget."

Just how negative becomes clear when one considers the full range of scenarios offered by CBO for the period from now until 2038. Only in three of 13 scenarios—two of which imagine politically highly unlikely spending cuts or tax hikes—does the debt shrink from its current level of 73% of GDP. In all the others it increases to between 77% and 190% of GDP. It should be noted that this last figure can reasonably be considered among the more likely of the scenarios, since it combines the alternative fiscal scenario, in which politicians in Washington behave as they have done in the past, raising spending more than taxation.

Only a fantasist can seriously believe "this is not a crisis." The fiscal arithmetic of excessive federal borrowing is nasty even when relatively optimistic assumptions are made about growth and interest rates. Currently, net interest payments on the federal debt are around 8% of revenues. But under the CBO's extended baseline scenario, that share could rise to 20% by 2026, 30% by 2049, and 40% by 2072. By 2088, the last date for which the CBO now offers projections, interest payments would—absent any changes in current policy—absorb just under half of all tax revenues. That is another way of saying that policy is unsustainable.

The question is what on earth can be done to prevent the debt explosion. The CBO has a clear answer: "[B]ringing debt back down to 39 percent of GDP in 2038—as it was at the end of 2008—would require a combination of increases in revenues and cuts in noninterest spending (relative to current law) totaling 2 percent of GDP for the next 25 years. . . .

"If those changes came entirely from revenues, they would represent an increase of 11 percent relative to the amount of revenues projected for the 2014-2038 period; if the changes came entirely from spending, they would represent a cut of 10½ percent in noninterest spending from the amount projected for that period."

Anyone watching this week's political shenanigans in Washington will grasp at once the tiny probability of tax hikes or spending cuts on this scale.

It should now be clear that what we are watching in Washington is not a comedy but a game of Russian roulette with the federal government's creditworthiness. So long as the Federal Reserve continues with the policies of near-zero interest rates and quantitative easing, the gun will likely continue to fire blanks. After all, Fed purchases of Treasurys, if continued at their current level until the end of the year, will account for three quarters of new government borrowing.

But the mere prospect of a taper, beginning in late May, was already enough to raise long-term interest rates by more than 100 basis points. Fact (according to data in the latest "Economic Report of the President"): More than half the federal debt in public hands is held by foreigners. Fact: Just under a third of the debt has a maturity of less than a year.

Hey, does anyone else smell something burning?

Mr. Ferguson's latest book is "The Great Degeneration: How Institutions Decay and Economies Die" (Penguin Press, 2013).

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THE DEBT CRISIS REPUBLICANS ARE SEEKING TO SOLVE AND OBAMA IS SEEKING TO EXPLODE

If you want to understand why the Republicans are correct in battling against Obamacare and tying it to the debt crisis the nation is facing, read this article.


The Real Debt Ceiling

Arnold Ahlert
October 3, 2013
FrontPageMagazine

The rollout of ObamaCare and the subsequent government shutdown have engaged the attention of millions of Americans. Unfortunately, both issues are inconsequential compared to what will likely be another battle over raising the debt ceiling. Even more unfortunately, most Americans have little grasp of the economic issues that have brought us to the precipice for the second time in two years.

Most Americans do know the nation is $16.7 trillion in debt, but far fewer understand the implications of such debt. In fact, precious few Americans even know which nation underwrites more of our debt than any other. The overwhelming majority believes it is either China or Japan. The overwhelming majority couldn’t be more wrong. The largest underwriter of U.S. debt is the United States of America, courtesy of the Federal Reserve.

The Fed’s Keynesian-economics-on-steroids buying spree is called “Quantitative Easing” (QE). It consists of spending $85 billion per month, with no end in sight. Of that total, $40 billion is spent on mortgage-backed securities and $45 billion on longer-term Treasury securities.

Where does the Fed get the money to buy these securities? It “prints” money to buy them. To put this in household terms, the Fed is essentially paying down one credit card–by charging it to another credit card. During the Obama administration, QE, along with Congress spending additional revenue we don’t really have, has increased the national debt by an additional $6 trillion. QE has also debased the currency, since creating more currency makes each piece of currency worth less–on the way to becoming worthless.

The Fed has coupled this idea with a Zero Rate Interest Policy (ZIRP), thoroughly convinced that both agendas will “stimulate” the economy, because borrowing money is cheap, and the new money has to go somewhere. That “somewhere” has been the stock market, which has been pushed to record highs as a result. Fed Chairman Ben Bernanke and his fellow Keynesians believe that pumping up the market will result in a “trickle down” effect, as those Americans who feel wealthy with regard to their stock portfolios will spend money and create new jobs. The Fed has pursued QE in one form or another for five years.

During those same five years, the official unemployment rate has never dipped below 7.4 percent, according to the Bureau of Labor Statistics (BLS). That number is a fraud because it fails to acknowledge that we have lowest workforce participation rate in 35 years, and BLS doesn’t count the people who have given up looking for work as unemployed. If the workforce participation rate were the same as it was just before the financial crisis hit in 2008, the unemployment rate would be approximately 11.3 percent.

Furthermore, despite the nation being in a so-called recovery since 2009, we have record numbers of Americans receiving food stamps, record numbers collecting disability checks, and a record number of Americans living in poverty. Americans’ annual household income has also declined by 4.4 percent during the recovery, which is worse than the 1.8 decline that occurred during the recession.

As for inflation, the Fed claims it is under control. Americans might argue otherwise, considering the reality that food and fuel prices have gone up substantially under this administration. Yet many of those same Americans are unaware of the reality that food and fuel prices are not included when the government calculates the inflation rate. While not counting the price of fuel might have some validity, since many Americans use public transportation, every American has developed a habit of eating to sustain themselves.

In short, the Fed’s QE approach is nothing less than disastrous.

And despite everything you hear from this president, his administration, and the rest of the Democratic Party that purports to care for “ordinary Americans,” aka the middle class, it’s precisely the middle class that is being squeezed. ZIRP is a so-called “one-percenter’s” dream, because it pumps up the banks and Wall Street, even as the middle class that prefers not to invest its hard-earned money in the stock market can’t get decent return on savings anywhere else. On the other end of the spectrum, the aforementioned dependency class is also getting taken care of, due to the reality that the statist party is more than willing to countenance increasing numbers of Americans on the government dole in return for their loyalty.

This dual accommodation of both the financial and entitlement communities has engendered a monstrous amount of national debt, fueled by the record-setting, trillion dollar-plus annual deficits needed to pay for it. And despite the Fed’s money printing prowess, even they can’t pony up the kind of revenue necessary to underwrite the entire effort.

Thus we tax, and we do borrow from other nations.

On the tax side of the equation, those who pay them have done yeoman’s work. For the first 11 months of FY2013, the federal government received a record-setting $2.47 trillion in revenues. Yet they spent all of it, plus an additional $755 billion during the same period. Thus, on the borrowing side of the equation, we are constantly adding to our national debt, and have again “maxed out” our spending limit, reaching the so-called debt ceiling.

Yet even as we constantly bump up against a new debt ceiling, we continue paying interest on the debt we’ve already accumulated. In 2012, the interest on that debt totaled $360 billion. Like the minimum payment on a household credit card, that massive amount of spending does nothing more than maintain the debt at its present levels. Nothing is being paid down.

For the nation in the short term, the media-driven hysteria about the notion that America would default on paying its debt if we don’t raise the debt ceiling, is pernicious nonsense. Currently, interest payments are running about 7 percent of revenue. The worst case scenario is that the Treasury Department would be forced to prioritize where the rest of the money would be spent. Undoubtedly this would ignite a huge fight, as Congress and the administration would be forced to decide which government programs are truly important, and which, to use the jargon-du-jour, are “non-essential.”

Such a fight would be extremely unpleasant, but the nation would survive. Furthermore, neither party has said they are willing to default on our debt, but Republicans want concessions aimed at bringing the debt under control.

Why Republicans want those concessions brings us back to the Federal Reserve and their ZIRP. What the overwhelming majority of Americans don’t know is that we’re paying a record low interest rate of 2.4 percent just to maintain the status quo.

The average interest rate the Treasury paid on U.S. debt over the last 20 years is 5.7 percent. Americans might tolerate paying 7 percent of every dollar collected just for interest, but what about 10 percent, or 20 percent–or more? Not for more Social Security, Medicaid, Medicare, military, or any other government program. Just interest. Just to maintain. How many American families could sustain themselves if 20 percent of their income or more did nothing but keep their credit card debt right where it is now?

And 20 percent may be an optimistic number. CNBC’s Peter J. Tanous explains that just our public debt–as opposed to the money the government owes itself because the politicians have raided the Social Security “lockbox,” for example–will be $16.6 trillion in seven years, according to Congressional Budget Office (CBO) estimates. At an average interest rate of 5.7 percent, the interest payment will be about $930 billion. In 2012, the IRS collected $1.1 trillion in personal income taxes. Based on that figure, debt service would consume 85 cents of every dollar Americans pay in personal income taxes.

Tanous notes something else as well. “Some economists will also suggest that interest rates may go much higher than 5.7 percent largely as a result of the massive QE exercise of printing money at an unprecedented rate,” he warns.

What then? It is not inconceivable that America could be headed for a real debt ceiling, described by National Review’s Kevin Williams as one where immutable reality boils down to “a more or less identical partial shutdown of the government plus suspending most or all Social Security payments indefinitely, eliminating federal health-care benefits, and/or defaulting on our bonds and enduring the subsequent economic chaos” (italic in the original).

An American politician vividly expressed the consequences of continually raising our borrowing limit and accumulating more debt as a result:

“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure,” he said. “It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Leadership means that ‘the buck stops here.’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.”

That politician was Barack Obama in 2006.

Barack Obama in 2013? ”Raising the debt ceiling, which has been done over a hundred times, does not increase our debt; it does not somehow promote profligacy.” Except that it does. Every time we have raised the debt ceiling, our debt level has increased.

Thus, “insane” Republicans are demanding concessions for raising the current debt ceiling. Those concessions include a one year delay of the new and massively expensive (more than triple its original cost estimate) healthcare bill, a blueprint for tax reform, medical malpractice reform, approval of the Keystone pipeline, and an increase in offshore drilling for energy. The president’s Twitter response is telling. ”I won’t negotiate on anything when it comes to the full faith and credit of the United States of America.”

Due to unprecedented levels of government spending by both parties–nothing more, nothing less–the full faith and credit of the United States of America is hanging by a thread. Either we stop engaging in that insanity or we are finished as a nation. Politicians lie. Math does not

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GLOBAL COMPETITION IN MANUFACTURING LABOR COSTS

The Financial Times has compiled a table showing global manufacturing hourly labor costs in various countries. It is an eye opener. Click on table to enlarge.

Costs of Global Manufacturing no pic.jpg

What's particularly interesting is that Mexico's manufacturing workforce is now larger than that of the U.S. Mexican manufacturing labor costs are five times less than those in the U.S. and less than six times what they are in China.

When other factors such as transportation costs are taken into account, our neighbor Mexico is becoming an excellent outsourcing alternative for U.S. companies, assuming the expertise can be developed in Mexico that China has already acquired.

Couple with that with the growing advantage the U.S. now has and will have over the rest of the world in the cost of energy due to the shale revolution. Already European industry is setting up new plants in the U.S. to take advantage of the low costs of energy. and the potential for substantial improvement in global competitive position is before us. Good news for the U.S., good news for Mexico.

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GUESS WHAT? BORROW AND SPEND DOESN'T WORK

The Financial Times of London is more left than the New York Times, yet here is one of its columnists talking economic sense!

I am reproducing the article because most of what the FT has is protected by a paywall. I pay enough for my subscription I feel I can take a few liberties.

=========================================

Spend and borrow will not save the left

By Philip Stephens in the Financial Times of April 5, 2013

The welfare state was built on growth. That is what social democrats should focus on

Whatever happened to European social democracy? Liberal financial capitalism perished in the great crash of 2008. The shredding of the Washington consensus promised to allow Europe’s centre-left to remake the bargain between state and markets. In the event, the champions of government now count themselves among victims of the crash.

Europe’s political geography is one of mostly centre-right governments challenged here and there by populist insurgents. In the few places where the centre-left holds sway it is in trouble. Elsewhere, in the more familiar role of opposition, it looks unconvincing. All the while the post-crash nationalisation of private sector debts presents a lethal threat to Europe’s cherished social model.

I hear progressive politicians complain that this is unfair. Why should voters be more trusting of those most responsible for this terrible economic mess than of those who have always believed in fettered markets? There are two answers to this. The first is that the centre-left colluded in the credit boom: as long as the money was there to be redistributed, no one asked too many questions. The second, and more important, is that the progressive response in the aftermath of the crash has been wholly unconvincing.

France’s Socialist government looks to be in office but not in power. François Hollande was in difficulties well before the tax evasion scandal now engulfing his administration. As it happens the president is not a madcap leftie. By French standards, his reforms are halfway radical. But his election victory was essentially a rejection of Nicolas Sarkozy. Without much of a grand plan of his own, Mr Hollande has failed to show that elusive but vital leadership quality known as “grip”. Instead, his government has come to be defined by a barmy plan for a 75 per cent tax rate on the rich.

Continue reading "GUESS WHAT? BORROW AND SPEND DOESN'T WORK"

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WHAT IS COMING DOWN


THE COMING AVALANCHE OF DEBT

The United States is over $16 trillion in debt. The point is rapidly approaching
where our young people cannot look forward to a prosperous future, and in
November voters chose to make matters worse rather than better. Michael Ramirez
depicts the avalanche that is about to descend on our heads:

h/t Power Line blog.

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ARE ENTITLEMENTS CORRUPTING AMERICA?

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MARRIAGE, CHILDREN, POVERTY AND THE FUTURE OF RETIREMENT PROGRAMS

Where is America headed? Populations are plummeting worldwide as women are bearing fewer and fewer children. The future of government retirement programs are in jeopardy because there won't be enough workers to support those who have retired.

Until recently, it was thought that the U.S. was immune from this problem. However, recent data shows that birth rates in all ethnic groups in the U.S. have dropped sharply to well below "replacement rate," the rate needed to keep the population stable.

There are various reasons for this: Higher education for many causing a delay in marriage and child-bearing and personal decisions against marriage and children being among the most prominent. Professor Robert George of Princeton believes that

"limited government “cannot be maintained where the marriage culture collapses and families fail to form or easily dissolve. Where these things happen, the health, education, and welfare functions of the family will have to be undertaken by someone, or some institution, and that will sooner or later be the government.” Marriage is what makes the entire Western project​—​liberalism, the dignity of the human person, the free market, and the limited, democratic state​—​possible.

“The two greatest institutions ever devised for lifting people out of poverty and enabling them to live in dignity are the market economy and the institution of marriage. These institutions will, in the end, stand or fall together.”

Will people care enough about the future of mankind to change their habits when the culture in which they live are pushing them in the opposite direction, towards "now" and self indulgence?

The article by Jonathan Last addressing these issues is a must-read.

Click here.

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SANTA CLAUS CAME ON NOVEMBER 6TH

In a poll released today 52% said they believed Santa Claus was a Democrat. Romney wawas right in his post-election analysis.

ObamaClaus - Gorrell.gif

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WE ARE THE PARTY OF LINCOLN.
WE STAND FOR FREEDOM AND EQUAL OPPORTUNITY FOR ALL.



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