But Now You Know

The search for truth in human action

…Then Why Did They Hate Bush and McCain?


I am puzzled by those few remaining people who defend Obama adamantly…because most of them claimed to hate Bush.

And yet, of course, in policy Obama is just Bush III:

Bush = Obama

  • Bush had a massive “stimulus package” that used Keynesian/socialist theory to try to “help” the economy. McCain voted for it.
  • Obama voted for it. Obama followed up with a second “stimulus package” of his own.
  • Bush expanded the war in Iraq with a Surge, while gradually drawing things down in Afghanistan, pretending they were getting better. McCain supported him.
  • Obama is expanding the war in Afghanistan with a Surge, while gradually drawing things down in Iraq, pretending they are getting better.
  • Bush expanded socialized health care entitlements more than ever before in US history, with the prescription drug benefit. McCain voted for it.
  • Obama is trying to expand socialized health care entitlements more than ever before in US history.
  • Bush responded to each natural disaster by throwing money at it.
  • Obama is responding to each natural disaster by throwing money at it.
  • Bush bailed out the banks, and expanded regulations on them.
  • Obama bailed out the banks, and is expanding regulations on them, using the Bush plan.
  • Bush protected the unions while the car companies were trying to file bankruptcy, including a massive bailout.
  • Obama protected the unions while the car companies filed bankruptcy, after including a massive bailout.
  • Bush kept Guantanamo open, and “tried” people held for a year or more without trial, in secret military tribunals.
  • Obama is keeping Guantanamo open, and is “trying” people held for a year or more without trial during his own administration, in secret military tribunals.
  • Bush passed the USA PATRIOT Act to grant himself police-state powers in violation of the Constitution
  • Obama refused to rescind, or allow to expire, the USA PATRIOT Act police state powers that violate the Constitution

McCain = Obama

  • McCain proposed a trillion-dollar global warming tax/trade scheme in 2007
  • Obama proposed a trillion-dollar global warming cap / trade scheme in 2009
  • McCain opposed drilling in the Antarctic and off the coast of Florida in 2007
  • Obama opposed drilling in the Antarctic and off the coast of Florida, in 2007 and today.
  • McCain censored political speech in the name of “campaign reform” with McCain/Feingold
  • Obama is fighting to censor political speech in the name of “campaign reform” against the the Supreme Court
  • McCain supports amnesty for illegal aliens
  • Obama supports amnesty for illegal aliens
  • McCain promised to never overturn Roe v Wade
  • Obama promises to never overturn Roe v Wade
  • McCain wanted to undo the Bush “tax cuts”
  • Obama wants to undo the Bush “tax cuts”
  • McCain voted for massive new penalties and liabilities for tobacco companies
  • Obama wants massive new penalties and liabilities for tobacco companies
  • McCain voted for massive new penalties and liabilities for gun companies, and restrictions on gun shows
  • Obama wants massive new penalties and liabilities for gun companies, and restrictions on gun shows

What on earth was their problem with Bush and McCain?

Maybe they’re just racist against white people…

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March 9, 2010 Posted by | Economy, environment, Politics | , , , , , , , , , , , , , , , , , , , , | 13 Comments

Where’s the Hyperinflation?


When the unaccountable, secretive arm of the banking industry known as the Federal Reserve started lending itself (the banking industry) billions of newly invented dollars, late last year, responsible people all over America were horrified.

Some of the soundest economic minds even started predicting “hyperinflation”.

Well, it’s been three quarters, now…soon it’ll be a year.

“Where,” other people are saying, “oh where is that oh-so-scary hyperinflation?”

The answer comes in several parts:

What is Hyperinflation? Hyperinflation is a specific thing. It’s not the three percent inflation we normally “enjoy”, any more than it’s a flavor of cream pie. We must define what it is, in order to know if it happens.

What Causes Hyperinflation? Having defined it, we need to know if the things that cause it are happening. The Fed has printed new money for nearly 100 years, never with hyperinflation. Is what happened recently sufficient to change that?

How Long Would it Take? Is it too late? It’s been nine months; are we safe?

Well, Let’s See

What is hyperinflation?

An actually hyperinflated currency, the Zimbabwe dollar was so weak that this is a single note for one hundred TRILLION. The Fed would have to print fifty times as much as it did last fall, in order to match this ONE bill.

(caption: An actually hyperinflated currency; the Zimbabwe dollar was so weak that this is a single note for one hundred TRILLION. At the rate it printed money for two months last fall, the Fed would still need over eight years just to print enough to equal this one scrap of paper)

Well, “inflation” is when you increase the amount of money, or the supply of it compared to the demand for goods in society…but when non-economists say “inflation”, they usually mean “prices go up”.

And so “hyperinflation” is just “prices going up really, really fast”. The amount necessary to count is generally said to be “100% per year for three years”, for long-term hyperinflation, or else “50% per month” for short-term hyperinflation.

The most inflation we’ve ever suffered, in the 1970s, was less than 14% per year. Normally, it’s between 2% and 3%.

Right now, prices are going DOWN most months, not up. There isn’t even price stability now, much less price inflation.

But why would prices be going up OR down, in an unhealthy way?

Super-quick history:

Almost exactly 100 years ago, in 1907, the US suffered yet another in a long series of destructive depressions and panics, generally caused by money shortages creating runs on banks, price failures, stock market crashes, et cetera.

But this one was stopped dead in its tracks by a group of wealthy entrepreneurs who made very short-term loans to various financial groups, allowing banks to pay off depositors, et cetera. The result was the downturn cut short, never becoming a full-blown depression.

A brilliant lesson was about to be learned, but unfortunately government prevented that. Instead of a newish industry of short-term finance lenders/insurers springing up, the Federal Government announced it was going to act in that role, from now on. It created the Federal Reserve, which would use its coercive power to print imaginary new money to lend to financial institutions in times of crisis.

(Sadly, it did the opposite; it lent out newly minted money in good times, but tended to cut it off whenever there was a financial panic, which was the only time it was supposed to lend in the first place…this is part of what triggered the start of the Great Depression in 1929)

Well, the Fed is a whole other discussion, of course, so we’re going to skip ahead, now

Today:

So instead of lending out money during a crisis, the Federal Reserve increases the amount of money a few percent per year, lending it out in good times. This is part of why we have (usually moderate) inflation…the amount of money increases faster than the demand for goods, so there’s more money to spend than stuff to buy, and prices increase.

But from 2004 through 2008, the Fed did something it hadn’t done since 1938 when we went off the Gold Standard: It started DECREASING money supply:

(caption: Notice that M1, paper money and money in US banks, shrinks (goes below 0 growth) from 2004-2008)

(caption: Notice that M1, paper money and electronic money in US banks, shrinks (goes below 0 growth) from 2004-2008)

Notice that the most important line, the red M1, goes below zero (to shrinking money), and stays negative longer than it had been at any but one time in fifty years. And currency (actual paper money) falls lower than ANY time in that span.

This is because M3, which includes money in foreign banks, was going up so quickly: Money was fleeing the US because of our wars, and the 700% inflated oil prices, and our billions in new foreign aid. We would buy oil that should have cost a few hundred billion, but instead cost us trillions, and send the money for that oil to Saudi Arabia, and other foreign countries.

Over the course of four years, this added up to a shortfall of between two and three trillion dollars in the domestic US economy. That money was all overseas.

Here comes deflation

The Federal Reserve cannot possibly keep money supply balanced, as illustrated by the recent deflation

(caption: The Fed's monopoly could never work better than any other monopoly, and now it's produced deflation)

This didn’t even leave enough money to pay for our normal goods, much less allow the economy to grow…plus, of course, the cost of making things was shooting up from the high oil prices, as all things require energy, while there was LESS money to cover that universal new expense.

The result? Deflation, and therefore a money shortage, that led to the economic depression starting in 2008. There was not enough money to run the economy, so prices began FALLING, the US suffering what appeared to be a “loss” of about three trillion dollars. This was simply the change in prices to represent the trillions missing because of M1 shrinking for four years.

The Federal Reserve’s response? It actually CUT its offered money supply in 2008, by refusing to lend to banks suffering financial trauma…once again failing to act in its sole official role of “lender of last resort” as in 1907.

But it couldn’t keep that up, because deflation destroys a market economy.

So, once this cutting off of emergency money caused the banks to start failing, the Fed belatedly loosened its purse strings: It lend out over two trillion dollars to financial institutions, in just a few months.

Is It Enough to be Hyper?

Now if the Fed did this all the time, lending out a trillion dollars each month when the economy was just fine, we might really have hyperinflation.

But, instead, the Fed did this ONE TIME, starting from a money deficit of three trillion dollars.

So, in fact, what it did was produce enough new money to, hopefully, make up for the money shortage.

Being down trillions of dollars, then adding two trillion, could not make prices double every year. Or even once.

Even if there had been no shortage, two trillion is not enough to increase prices by 50% every month, nor 100% every year, because it is a fraction of the many trillions of dollars in our economy, and only happened one time. Hyperinflation requires more money to be printed even as prices are going through the roof, so that people come to expect it and overprice things ahead of time.

But, even if it had been enough to cause hyperinflation, there’s one last big factor:

Time delay.

How Long?

We can’t guarantee that there will be NO backlash from this infusion of money, until about 18 months have passed. Historically, changes in money supply take between 6 and 18 months to hit prices in an economy. It has to gradually spread throughout the system, being spent, invested, and saved over and again, until its full impact is felt and absorbed.

So we have until mid 2010 to see whether there are SOME effects from the unhealthy throwing of two trillion unearned dollars at our socialized banking institutions.

What About Government Spending?

For better or worse, it is actually impossible for government spending to “stimulate” an economy, at all. And since the current “stimulus packages” are financed by bonds and deficit, not the printing of money, they are actually DE-Flationary. Read the above link, to understand exactly why these things are so.

Sorry, Not Even Close

But, ultimately, whatever backlash there is, it cannot be hyperinflation. With an economy of, depending on how you count, eight to twelve trillion dollars, you can’t make prices jump even 50%, even for ONE month (and it must keep happening, to be hyper), by printing two trillion new dollars. Not even if there were not already deflation to counter.

The great danger, to this day, is deflation, not inflation, which can produce a long-term spiral of economic depression

The great danger, to this day, is deflation, not inflation, which can produce a long-term spiral of economic depression. What's worse, is that the Consumer Price Index, adjusted to compensate for annual cycles like Christmas spending and winter energy prices, showed deflation six months earlier than this chart.

July 25, 2009 Posted by | Economy, Politics | , , , , , , , , , , , , , , , | 26 Comments

Why Stimulus Spending Depresses the Economy


There is a good reason why Bush’s “economic stimulus” plans helped land us in economic depression, and why Obama following that precedent with bigger, badder stimulus plans will do even more harm.

It is the same reason why Japan’s “stimulus plans”, upon which ours were partially based, kept them in an economic depression for a decade, and did the same thing in Sweden.

Here’s How

  • Lost Money: Every penny spent is taken from the private sector: whether through taxes; or by borrowing that robs from private investment, so nothing is gained. Then that money is wasted before it’s spent, because of the cost of bureaucracy, red tape, political motivation, and the lack of any control over the benefit of what it’s spent on.
  • Crowding Out: The government spending competes with private spending, but has no checks or balances, no responsibility, so that it can crush the private competition out of the market, causing more economic harm instead of helping. It hires away workers and managers with large budgets, yet contributes less. It draws away research and investment from the private sector, et cetera.
  • Chilling Effect: Healthy private investment and behavior is seen as punished, as unconditional public spending displaces it. Government spending tends to reward failure, and not to create wealth, while private spending depends upon productivity and success to expand. Bad companies, which do not contribute enough to society to justify their existence, have their ineffective ways perpetuated, instead of being excised and replaced with new competition.

Lost Money

Your Neighbors

1194819_old_windowYour neighbors are planning to upgrade all of their crappy single-pane, wooden windows to nice thermal-pane replacement windows.

(Don’t ask how I know, just work with me, here…)

Your neighbors, therefore, shall cause the full employment of a team of six carpenters/installers, for one week. And those workers will, in turn, use their pay in ways that end up rewarding others, by spending or investing.

Of course they’ll also be profiting the company that sells windows, which in turn will reward its suppliers by ordering more, et cetera.

Your neighbors will, too, have nicer windows. Their house will be more comfortable. They will save money on their energy bills. And, if they are Global Warming True Believers, they will also feel very good about their effort to save the earth.

All of this benefits society and the economy. Even the feel-good parts.

Big Brother

But perhaps your neighbors will be prevented from doing this, by Big Brotherment.

Maybe their taxes are, or will be, high enough that they won’t be able to afford to buy those thermal replacement windows.

Perhaps, in fact, the amount necessary to upgrade their house will, in fact, be spent on a Stimulus Package, funded by their taxes.

That tax money, instead of being spent on their house, will instead filter through the government bureaucracy. The majority of it will actually be paid to bureaucrats, who produce nothing but paperwork and rules.

What’s left, in theory, will go to some union contractors in Iowa, to finance a Corn Museum. Never mind that Corn makes more money for its producers than any other crop, the government is financing this to “stimulate” the economy.

So a team of three union carpenters will get paid for about five days, based on your neighbor’s tax money. Three, because a majority of the money was lost to red tape, and only five days, because the union monopoly dominating the government contract in question is overpaid.

Better still, once their hourly coffee breaks and four mandatory half-hour breaks are deducted, and you take into consideration the bizarre “safety” rules in their contract, that leave them standing around more often than working, what you will actually get is about the amount of work one carpenter’s could do in five days.

And it will be dedicated to building the 23rd corn museum in the United States.

So the options are:

Free Market

  • Your neighbors get a house full of thermal windows.
  • Six carpenters get fully employed for a week.
  • A window company is rewarded for improving the lives of your neighbors.
  • Money is saved on energy.
  • The planet is no longer doomed.

Government Stimulus

  • Iowa gets 0.01% of a corn museum.
  • Three carpenters get employed for five days, to do the work of one carpenter.
  • People may, if the project is ever finished using other people’s tax money, get to save an hour over driving to the privately funded corn museum next door in Illinois.

Now a government bureaucrat will, in defense of his precious Pork budget, say “but we can’t be sure your neighbor will buy thermal replacement windows!”

But, quite frankly, we can be just about 100% certain that they will spend it on something they value. I’m not entirely clear on how even pet rocks and full body massages would be any less of a contribution to the economy than another corn museum.

And, seriously, much of the government’s spending benefits society less than corn museums, too.

Bridges to nowhere, two thousand dollar toilet seats, military equipment the generals said they didn’t want, but some senator insisted on funding because it is built in his state, methadone for junkies that is more addictive and toxic than the heroin it is replacing, free benefits for illegal aliens…

Face it, the corn museum was actually an optimistic example of government benefiting society.

Ultimately, each dollar the government spends must come from a dollar ALREADY taken from your pocket, directly or indirectly. There is no stimulation, because it’s just the same dollar. And, worse, YOU would have bought something you felt was beneficial, not wasted it on some bureaucratic make-work project.

Crowding Out

(caption: Buying stuff on closeout from a bankrupt company helps the economy far more than a government check)

(caption: Buying stuff on closeout from a bankrupt company helps the economy far more than a government check, regardless of whether it saves the bankrupt company)

And let’s not forget that the government’s spending competes with private spending. There is a pressure against private industry, when it’s forced to compete with a government that can forcibly finance a project without any standards for success.

Workers

As noted above, if you are a carpenter, you can get a job where you are paid for what you accomplish, in the private sector, or you can get a job in a government contract where a union monopoly guarantees you more pay, for less work, a coffee break every single hour, and you’re not actually expected to even succeed, or do good work.

With government spending, therefore, one ends up with fewer skilled workers in the private sector.

Research

Better an easy government research job with no results required except regular publication of results, than private sector research, that must actually prove some contribution to society.

This is why things like cancer research and alternative energy research have produced only insanely expensive, ineffective results.

Business

Why build a privately financed corn museum, when there is a public one planned nearby? The free market depends on the pressure of demands, which can be supplied because of the reward of profit, fame, et cetera. All of which is quashed by public competition…producing LESS economic activity, prolonging, or even creating, economic downturn.

Investment

This is even true of investment. Why risk money buying stocks, or investing in any other resource that actually helps create wealth and grow the economy, if the government is issuing trillions in bonds that it can guarantee, at gunpoint, it will be able to afford to pay off?

This is part of why the US stock market is below where it was a dozen years ago; the past nine years of massive growth in government spending have crowded out even investment, depressing economic growth and the availability of money for business and individual use.

Chilling Effect

1164432_carpenter_series_1Capitalism helps society prosper, in part, by requiring that businesses be efficient and useful, or else be displaced by other, better, more efficient competition. Government “stimulus” spending helps bad behaviors and inefficient companies survive, preventing the openings for new, better ways.

Reward Failure

Government spending, too, has to reward failure and punish success, directly. Not just by bailing out failures, but with its own agencies: It would be irresponsible to expand the budget of a project that was already coming in ahead of schedule and under budget. What a waste of taxpayer dollars! Instead, if the agency wants to expand its budget, it must fail. It must show how it is over budget and behind schedule, and how natural this is, how more money and power will help it achieve its goals.

Punish Success

Meanwhile, responsible, productive businesses are punished for their contribution to society.

What if Ford ends up the weakest of the three automakers, because it didn’t take the thirty billion taxpayer dollars and declare bankruptcy? What does this tell companies in other industries, when they’re considering whether to be productive, or else squander money and go crying to the stimulus committees for bailouts?

Government Gangrene

There are hundreds of billion dollars in bad investments, loans, et cetera, that need to simply fail, because they cannot ever be productive. Right now they are gangrene on society’s body, just burdening our health and slowly spreading…but the stimulus/bailout money keeps them from being removed, and even helps them expand, quashing healthy alternatives.

The Solution

In each case, around the world in history, the only way to get out of economic depression was for the government to STOP killing the economy with its fake “stimulus” packages.

Examples

It took Japan and Sweden ten years to figure this out. Some other countries never have, and still are suffering for it.

Even in the US, the government constantly expanded spending to “stimulate” from 1929 through 1938, and only truly enjoyed healthy economic growth when spending and regulation were massively cut in the late forties and fifties.

The opposite of this was the depression of 1920-21, where banks failed, commodity prices plummeted (like housing prices now), the stock market crashed…and the US government did virtually nothing.

That lack of “stimulus” resulted in a depression less than two years long, unlike the decade of the other examples.

Check out the extensive history of economic downturns in the US, for more.

Self-Transfusion?

Ultimately, government spending actually sucks the life out of the economy, increasing and prolonging economic depression, because it must take private money in order to “spend” the public money…as if you gave yourself a blood transfusion by taking blood your left arm and putting it in your right…with the stress of the transfusion actually leaving you weaker than when you started.

July 15, 2009 Posted by | Economy, Politics | , , , , , , , | 14 Comments

   

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