Tag Archives: federal reserve

The 5-19 Show: Money for Nothing

Show Time: Thursday May 19th, 7pm pacific, 8pm Mountain, 9pm Central, 10pm Eastern

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Guests: Nicole Pearce and Andrew Starosky from Truth About Bills.

Show Topics: Join Michelle and Rich as they discuss the IMF, if internet currencies can survive and Obama’s sudden new fascination with Oil

Recording of the Show:

Listen to internet radio with Rich Mitchell on Blog Talk Radio

Links from the Show:

CEPR Warns of Dangers of IMF Resurgence

Hear recordings of past shows: CDN On-Air Archives

Political Cartoon - A.F. Branco - Drillin' for Votes

Food and Energy Inflation Is Not Transitory

FORT LEE, N.J., April 28, 2011 /PRNewswire/ — Federal Reserve Chairman Ben Bernanke on Wednesday held his first press conference in history. The press conference took place shortly after the Fed announced its decision to leave the Fed Funds Rate at a record low of 0% to 0.25%, where it has been for an unprecedented 28 months. The U.S. economy is flooded with U.S. dollars and is close to overdosing on excess liquidity. The fact that our financial markets are not falling on the possibility of the Fed not unleashing QE3 immediately at the end of QE2 shows that we could be on the verge of hyperinflation with or without QE3.

The Federal Reserve currently has a mandate of both maintaining price stability and facilitating job creation. However, central banks don’t have the ability to create real employment. If any jobs happen to be created as a result of a central bank’s policies, they are only temporary jobs created due to the errors and distortions of phony asset bubbles. All phony asset bubbles that are fueled by monetary inflation eventually burst, sending unemployment through the roof.

Almost every major central bank besides the Federal Reserve understands the truth about job creation, and has a mandate that focuses solely on keeping price inflation low. The Bank of Japan, Swiss National Bank, Bank of Canada, and Bank of New Zealand, all have mandates that are entirely about low inflation and don’t even mention the creation of jobs or the rate of employment. Bernanke said on Wednesday that, “while it is very, very important for us to try to help the economy create jobs and to support the recovery, I think every central banker understands that keeping inflation low and stable is absolutely essential to a successful economy.”

Bernanke has decided to go down a route that no central banker has ever gone before. Bernanke has literally invented countless ways to create inflation that nobody else has ever thought of. If keeping inflation low was ever Bernanke’s slightest concern, the Fed Funds Rate would currently be north of 5% and the U.S. economy would be in a steep recession. Bernanke has never once thought about keeping inflation low. He has literally implemented every measure he could possibly think of to create as much inflation as possible, while outright lying to the American public and saying that he isn’t printing money and that inflation is under control.

Bernanke would like the public to believe that his policies of expanding the money supply through cheap and easy money will cause the U.S. economy to recover and unemployment to decline back to pre-crisis levels, and that right before price inflation spirals out of control, he can raise interest rates and prevent massive price inflation without disrupting the recovery. Unfortunately, this is impossible because the recovery isn’t real and massive price inflation is already here. Bernanke’s policies may have created 1 million artificial jobs since December of 2009, after 8.75 million jobs were lost in the previous two years, but he did this at the expense of 310 million Americans already seeing double-digit percentage increases in food and energy prices.

Since after the Real Estate bubble burst in late-2008, the primary economic concern of Americans has been finding a stable job in order to make mortgage payments and put food on the table. Under the pressure of Congress, the Fed printed enough money to prevent a much needed recession that would be healthy for the long-term U.S. economy. In its attempt to reinflate the Real Estate bubble, the Fed has been destroying the free market and creating new economic distortions, which caused an artificial bounce in the rate of employment. Unfortunately, when you add together the money the Fed has either printed or committed for bailouts and stimulus programs, over $4 million has been spent for each job created. The Fed would have been better off just crediting the bank accounts of unemployed Americans with the average U.S. income.

When asked about rising gas prices, NIA is very happy that Chairman Bernanke acknowledged that gas prices “have risen quite significantly” and are “creating a great deal of financial hardship for a lot of people”. Bernanke admitted that gas is a “necessity” as “people need to drive to work” for the artificial jobs Bernanke created at a cost of $4 million per job. However, Bernanke seemed to be confused when he said “higher gas prices add to inflation”. The truth is, Bernanke’s zero percent interest rates and quantitative easing are the inflation, and inflation leads to higher gas prices.

Bernanke is directly responsible for gas prices rising back to $3.87 per gallon, yet refuses to admit it. Bernanke placed the blame on the growing global and emerging market economies, and their strong demand for oil. He said that America’s demand for oil is going down, which NIA believes is actually due to the U.S. dollar losing its purchasing power and Americans seeing their standard of living decline. Bernanke said there is nothing that he can do about rising oil and gas prices “without derailing growth entirely”. The truth is, Bernanke already derailed growth entirely when he derailed the free market. It is impossible to see real economic growth when a government and central bank is interfering in every aspect of the economy and impeding the free market in every possible way. All nominal GDP growth in the U.S., along with growth in retail sales, is solely due to inflation. Even when the government adjusts GDP and retail sales growth to the rate of inflation, it is based off of the consumer price index, which NIA believes is currently understating price inflation by approximately 4%.

Although Bernanke denies he has the ability to reduce gas prices, he claims he can prevent “gas prices from passing into other prices and wages throughout the economy and creating a broader inflation which will be much more difficult to extinguish.” Bernanke obviously doesn’t want Americans to see higher wages because he believes it could lead to broader inflation, but NIA believes rising wages would be a good thing. Inflation hurts Americans most when the rate of inflation is far outpacing wage increases. The fact is, the U.S. is already experiencing broad inflation even without wage increases.

Bernanke’s brand new favorite word as of late seems to be “transitory”, which he used about a dozen times during his press conference. Despite what Bernanke says, NIA strongly believes that rising food and gas prices are not transitory. Bernanke likes the word “transitory” because he can use it to try and pretend that rising food and gas prices are only just a temporary phenomenon and that their current high levels aren’t here to stay. Many Americans can remember the day 40 years ago when a can of Coca-Cola cost a dime and a Hershey chocolate bar cost a nickel, with a gallon of gas back then costing only thirty-five cents. Have rising food and gas prices over the past four decades been transitory?

NIA first predicted two years ago in its documentary ‘Hyperinflation Nation’, that rising food and gas prices would soon become the primary concern of all American citizens as a result of the Fed’s dangerous and destructive monetary policies. Bernanke back then claimed that inflation would not be a problem and said that the U.S. risked deflation. If Bernanke has been so wrong about the inflation that Americans are faced with today, NIA doesn’t see how anybody can possibly believe that Bernanke will be right and that current high food and gas prices aren’t here to stay. In our opinion, the food and gas price inflation that Americans have experienced over the past 40 years, is likely to occur all over again during the next 4 years. NIA believes that 4 years from now, Americans will look back at the good old days of having cheap $4 a gallon gas.

The last thing the U.S. government wants is for the American public to realize that Bernanke is responsible for rising food and gas prices. If the public demanded to end the Federal Reserve, the government will no longer be able to spend recklessly knowing that the Fed will be there to monetize their deficit spending. In an attempt to make up excuses for rising gas prices and deflect attention away from the Fed, Congress has been pressuring the U.S. Attorney General to investigate the matter. Attorney General Eric Holder just announced the formation of the Oil & Gas Price Fraud Working Group. The stated purpose of this working group is to monitor the oil and gas markets for potential violations of criminal or civil laws to safeguard against unlawful consumer harm.

NIA considers this to be complete insanity. Any government interference in the oil markets will only drive oil prices up even higher. Oil prices are rising solely do to supply and demand. Demand is going through the roof because the Federal Reserve is creating a lot of inflation, and inflation always gravitates to the goods that Americans need the most to live and survive. Oil supplies are falling because President Obama has ordered U.S. troops to occupy Libya. In the past we at least made up excuses to invade countries like Iraq over oil by claiming they had weapons of mass destruction. Today, the U.S. government doesn’t even bother. Obama campaigned as an anti-war President, saying he would bring our troops home from the middle-east. Instead, he has increased our middle-east troop levels, and the sheep who voted for him are showing absolutely no signs of outrage.

visit: http://inflation.us for more information

Obama’s Speech on Deficit Reduction: “My finely honed Political Instincts”

Our Obama, who art on vacation, Hollowed be thy head.
Your limo come, vacation’s done,
in Chicago as it is in Hawaii.

Give us this day our daily cheese,
and forgive us our conservatism,
as we forgive those commie, pinko, progressive, tree-hugging environmentalist wacko Van Jones clones who trespass against us.

And lead us not into solvency,
but deliver us from living within our means.

For thine is the Federal Reserve, and the student loans,
and the Obama stash, forever and ever – at least until the worm turns.
Amen.

The stupidity of Barack Hussein Obama’s supposedly intellectual political arguments goes beyond the pale. No, take that back! Obama didn’t say a thing. TOTUS did all the talking. Obama’s overhyped speech today, Wednesday, April 13th, didn’t deviate one whit from his commie track record. In fact it didn’t even start on time. He was late as usual…word has it that he was on the toilet. Presidentin’ makes you want to “go” don’t cha know. And then rumor has it that while walking to the speech he allegedly stopped along the way to squeeze the fruit – regrettably, Barney Frank couldn’t be reached for comment. Another possible reason given for the lateness of Obama’s arrival at the podium was the suggestion that the Obamas were held up reenacting that scene from the Geico commercial featuring Abraham and Mary Todd Lincoln. So Michelle supposedly told Barack to get her something good for her birthday and gives him some hints like “I want something shiny, which goes from zero to 200 in five seconds.” So Barack gets her a scale! But anyway, we digress – Time to get back on track with the weightier matter of the stupidity of Obama’s political speechifying arguments.

He’s a moron when it comes to economics, commerce, business, and finance.  Stealing the message of conservatism from the true conservatives, Obama magnanimously called on both Democrats and Republicans to balance the budget and work toward paying down the debt of the federal government. But then his inner communist took over and he decided that the way to accomplish the feat would be to put an end to the Bush-era tax cuts for those making more than $250,000 a year. Somehow, Obama is convinced that penalizing the productive will somehow translate into exalting the nonproductive elements of society. In other news apples and oranges have been deemed to be identical. “The only concrete proposal that he proposed was raising taxes,” said Eric Cantor, a member of the House GOP leadership. “That solution falls far short of dealing with the kind of crises that we’re facing,” said Cantor.

A blogger known only as Freddie Cougar said it best: “Raising taxes = ‘reducing tax expenditures,’ addressing ‘spending reductions in the tax code,’ ‘spending in the tax code,’ and ‘spending reductions in the tax code.’ Doublespeak at its finest.” It was a friggin’ campaign speech. Government has been the source of our prosperity? Good grief, it was another revisionist history lesson from our commie president. According to Obama tax cuts are the problem. “It’s all the Bush’s fault” – signed Moses. Poor Dubya, the Evil Genius. Obama is good at only one thing. He is an exceptional liar. Obama is a crybaby. Obama is a wimp. Obama is a whiner. Obama blames everyone but himself. Obama sucks. His entire talk could have been summed up thusly: “When I took office…it’s not my fault!”

Behold the Lying King! We’ve all heard the old joke that goes something like this: “What is the difference between the Lion King and Barack Obama? The Lion King is an African Lion. Obama is a Lying African.” Liberals inevitably call the joke racist. They don’t get the fact that liars can come from any continent. It’s just the plain fact, Jack that this one’s roots are from Kenya. Last we heard, after that stupefying speech, is that the village doesn’t want its idiot back. Good for the village! Perhaps the HildaBeast can spare a dime.

In a poor zoo of Africa, a lion was frustrated as he was offered not more than 1 kilogram of meat a day.

The lion thought its prayers were answered when one day a Honolulu Zoo manager visited the zoo and requested the zoo management to shift the lion to the Honolulu Zoo.

The lion was so happy and started thinking of a central A/C environment and a goat or two every day.

On its first day after arrival, the lion was offered a big bag, sealed nicely for breakfast. The lion opened it quickly but was shocked to see that it contained nothing but a few bottles of KGBean dip. The lion thought that maybe they cared too much for him as they were worried about his stomach as he had recently shifted locations.

The next day the same thing happened. On the third day again the same food bag of KGBean dip was delivered. The lion was so furious; it stopped the delivery boy and blasted him, “don’t you know I am the lion…King of the Jungle? What’s wrong with your management? What nonsense is this? Why are you delivering KGBean dip to me?”

The delivery boy politely said, “Sir, I know you are the King of the Jungle … but… you have been brought here on Frank Marshall Davis’ visa!”

Now we know that Obama’s speech was timed so as to not go up against Dancing With The Stars. We don’t know why; but considering the way Obama tap-danced around Libya and the economy, he might have won. Some people are saying Obama was a little bit testy during the speech. Hmmm… it looks like somebody’s March Madness bracket pick didn’t do so well. You know, ever since the CEO of G.E. became his advisor, everything Obama says sounds like a light bulb commercial. Walk to the light, little people! Walk to the light!

It was recently reported in the news that Obama had been accidentally locked out of the White House. For that one panicked moment Obama thought that they must have found his real birth certificate. At least the locked door to the White House gave Obama an alibi. “I didn’t do it. It was broken when I got here.” – Barack “Bart Simpson” Obama.

America has taken up the drinking game to pass the time during Obama’s speeches. Drone. Drone. Drone. Drone. Drink. Of course the game gets a little mixed up when it comes to the Obamartini – made with Absolut Zero.

And then there was Barry’s Audacity of Hype. Did he really say “My finely honed political instincts”? Bwahahahahahahahahahahahahahahaha! I can’t breathe! First off, Barack, you are a politician. Second, all of our taxes are spent on the entitlements. Everything else is funded by loans. Barack, you are a fiscal imbecile. “Gubmint cheese is the best cheese there is. And it is free. Free for you and free for me,” – the essence of Obama’s talk about his stash and entitlements. “I’ll take Manchurian Candidate for $500, Alex.” Ahhh, Komrades. It is boootiful day in USSA. Did he say corpseman? This dumbass couldn’t even pass a middle school speech class. By Friday afternoon he will backpedal on everything he said by making what he said “perfectly clear”. Got it? For the Obamassiah, there is no issue he cannot straddle. Oh fer cryin’ out loud. Did he just denounce his own 2012 budget? Is he mentally challenged? Does he not recall what he threw out in January? Obama is nothing but a Puppet of Meat. Yo, Meat Puppet! Nobody’s clapping so quit waiting for the applause. It ain’t coming your way.

Is there any doubt about his Marxism? Like was said up front, Obama’s stupidity goes beyond the pale. What level of Hell has the United States of America sunk to when Obama’s sophist rhetoric is actually taken seriously?  Isn’t America starting to feel a bit bloated from all the smoke being blown up its collective arse? Furthermore, what the Hell is a Kwag-mahr? Is Kwag-marh a city in Pohkeesstohn?

Four trillion in cuts over 12 years…backed by his “fail-safe” guaranty. Wimpy: “I’ll gladly pay you Tuesday for a hamburger today.” LOL, when has congress ever followed up on a guarantee? Lock box anyone? America is going to have to practice bending over a LOT more… Can this get any worse? Of course it can! Darn it, Mr. President, would you at least treat us to dinner and a movie first?

Obama’s pandering for the senior vote is getting old. Note to Obama: You have lost the senior vote and you will not get it back. You stupid meat puppet teleprompter reading political hack. We all find you taxing, which explains this:

The Tax System – Explained With Beer

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100.

If they paid their bill the way we pay our taxes, it would go something like this:

  • The first four men (the poorest) would pay nothing.
  • The fifth would pay $1.
  • The sixth would pay $3.
  • The seventh would pay $7.
  • The eighth would pay $12.
  • The ninth would pay $18.
  • The tenth man (the richest) would pay $59.

So, that’s what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.

‘Since you are all such good customers,’ he said, ‘I’m going to reduce the cost of your daily beer by $20.’
‘Drinks for the ten now cost just $80.’

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men – the paying customers? How could they divide the $20 windfall so that everyone would get his ‘fair share?’

They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:

  • The fifth man, like the first four, now paid nothing (100% savings).
  • The sixth now paid $2 instead of $3 (33%savings) .
  • The seventh now pay $5 instead of $7 (28%savings) .
  • The eighth now paid $9 instead of $12 ( 25% savings).
  • The ninth now paid $14 instead of $18 ( 22% savings).
  • The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

‘I only got a dollar out of the $20,’ declared the sixth man. He pointed to the tenth man, ‘but he got $10!’
‘Yeah, that’s right,’ exclaimed the fifth man. ‘I only saved a dollar, too. It’s unfair that he got ten times more than I!’

‘That’s true!!’ shouted the seventh man. ‘Why should he get $10 back when I got only two? The wealthy get all the breaks!’

‘Wait a minute,’ yelled the first four men in unison. ‘We didn’t get anything at all. The system exploits the poor!’

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

For those who understand, no explanation is needed.

For those who do not understand, no explanation is possible.

So Barry, what are we cutting in order to balance the budget? Oh, I see, you’re cutting employment and taxing the rich. Great plan!!! Okay, JackWagon, WHAT DO WE CUT? – Besides Defense? Typical Obama speech, lots of hype and no substance. I thought Pakistan said no more drones. Obama never ceases to amaze. He is laying on the lies and class warfare like there’s no tomorrow. Logic isn’t his strong suit. Come to think of it…nothing is his strong suit…unless flies on the lip count for something. America felt like it was watching tennis during Obama’s speech. Left – right, left – right. Teleprompter 1, teleprompter 2.

Obama could have stood on the podium and picked his nose for 30 minutes. The Main Stream Media would have still declared the speech a victory, and that was that. Obama throws out accusations at conservatives but offers no plan of his own. He avoids specifics like the plague. You can just envision Obama saying something like this: “I will give every American everything they want and it won’t cost a cent. I’m leaving it to Congress to figure out how to make that happen.”

The jackwagoniest of jackwagons; what a miserable, pathetic president we have. Expectations for today’s speech were low, but he still managed to hook an ankle on the bar he could have easily stepped over.

The highlight of the speech was Rip Van Biden’s reaction to it – which was a big effing deal! Joe slept though it!

Joe Biden engaging in a Big Effing Deal!

See the photo for proof. Old Joe has heard the commie spiel so many times that he can doze off through an entire progressive speech and not miss a thing. No big deal, Joe. The rest of the country was going comatose, too. All you missed, Joe, was Obama saying “My vision for America is one where we live within our means, blinded by my socialistic government ideology.” Got it, Joe? Good! Now, remember, Joe, that for the rest of us our vision for America is to wipe away all you FDR/Johnson/LBJ/progressing/Obama stains from our Republic. All we know is that Obama’s plan is heavy on the “fail” and light on the “safe.” Obama says he wants America to live within its means? Okay! – Then no more flying in a favorite chef from Chicago to make pizza at the White House. No more ridiculously expensive vacations on the public’s dime! No more lobster deliveries for Michelle. No more flying Obama’s dog Bo around on his own private jet. Man, I dunno. I mean, it’s probably pretty hard subsisting on a $15T budget. Perhaps Obama meant everybody but the government has to live within their means. There, that’s better! Be thankful for small gifts, America – at least he’s not using the stupid Slurpee story anymore.

That’s an F+ for effort, Barry, and a G- for substance. “My vision for America is one where we live within our means.” No it’s not, Barry. LIAR! LIAR! LIAR! LIAR! LIAR! LIAR! LIAR! LIAR! LIAR! LIAR! LIAR! LIAR! LIAR! LIAR! LIAR! LIAR! LIAR! LIAR! LIAR! LIAR! LIAR! LIAR! LIAR!

Gene Roddenberry was a prophet. Ladies and Gentlemen, I present Landreu, the automated president….programmed to respond. Click, whir, Dolby Sound enabled. Here’s Barry at his best:

“Let me be clear, as I’ve always said the time for change is now and we are the ones we’ve been waiting for. Thank you and goodnight.” –  Barack Hussein Obama

Dems’ Gas Tax Hike Would Fuel Tea Party Anger

The average price of a gallon of gasoline is $2.87, a number which will continue to climb as the Federal Reserve’s “quantitative easing” scheme lowers the value of the dollar. That’s a 50% increase from only two years ago; in the weeks following the presidential election, the average price was about a dollar lower. But according to some Democrats, today’s price isn’t high enough.

Senator Thomas “Tom” Carper (D-DE) wants to raise the federal gasoline tax by twenty-five cents over a period of two years, increasing the current rate—18.4 cents per gallon—by 136% to 43.4 cents per gallon. The last time the tax went up, in 1993, it was increased by a mere 4.3 cents.

Has Carper filled up recently? Does he drive? Or are his vehicles powered by pixie dust and wishes?

The senator travels to Washington, D.C., by train regularly, so perhaps he can be forgiven for apparently forgetting that most Americans are already feeling pain at the pump, and will continue to struggle to afford fuel even without a mind-blowing 136% tax increase.

Then again, he might not be forgiven. With the exceptions of Wilmington, Dover, and a handful of overdeveloped beach towns, Delaware is a rural state. It’s not uncommon for residents to drive twenty miles to work, and in many cases “work” consists of serving summer visitors, as tourism is vital to the First State’s economy. One could almost believe that Carper is intentionally trying to anger his constituents, who will have an opportunity to reelect or fire him in less than two years.

Democrats defend the proposed increase by arguing that revenue must be generated somehow, somewhere, so why not at the tens of thousands of gas stations across the United States?

Their feeble argument reflects their thorough disconnection from the people they pretend to serve. The T-E-A in Tea Party stands for “Taxed Enough Already,” and the results of the recent election can only be interpreted as an unsubtle backlash against big government and tax-and-spend policies, yet still Democrats (and, curiously, some Republicans) insist on raising revenue to fund a predetermined budget. While working families scrounge and cut back, the government spends their hard-earned wealth freely—which is one of several reasons that the country entered a recession in the first place.

The federal government does not have a revenue problem. It has a spending problem. In the real world, a household earns a certain amount, and bases its budget on that income. Why should Congress be above such a common-sense approach to handling finances?

The Democrats’ gas tax hike is not only utterly unnecessary; it will harm a vast majority of Americans, stifle the recovery and growth of businesses big and small, and possibly derail efforts to rejuvenate the economy.

Americans expect to see unfeigned efforts to cut spending, eliminate unnecessary agencies and programs, and reduce the seemingly infinite reach of the federal government, and while only an imbecile would believe that this can happen overnight, the average voter is not so naïve as to be fooled by half-hearted attempts to alter minor details of the progressive agenda, like rearranging the deck furniture on a sinking ship. Fundamental, far-reaching reform is craved, which is why a proposal to do the opposite—to raise taxes for no reason—seems more like a poorly-timed joke than a serious suggestion.

Obama said that electing Democrats would be like putting a car in “D,” to drive forward. He just neglected to mention how expensive driving would be with his party behind the wheel.

Fed Proposing Carter Era Inflationary Policy to Fix Economy

You’d think Paul Volcker was in the driver’s seat again.  While he’s no longer running the Fed, perhaps his leadership as the President’s chief economic advisor is giving him more of a voice than any of us want.

In his turn at the Fed, it was Volcker that pushed for the massive and crippling inflation that many of us remember having lived through.  Many in the Fed are considering giving that strategy another shot.

The Federal Reserve spent the past three decades getting inflation low and keeping it there. But as the U.S. economy struggles and flirts with the prospect of deflation, some central bank officials are publicly broaching a controversial idea: lifting inflation above the Fed’s informal target.

The rationale is that getting inflation up even temporarily would push “real” interest rates—nominal rates minus inflation—down, encouraging consumers and businesses to save less and to spend or invest more.[1]

Didn’t we learn anything from the move in the 80’s to end the inflationary mess?  Do they really think that consumers and businesses are holding on to their money because %1.36 interest on a CD is an amazing way to grow money?  From what planet do these ridiculous, Keynesian, demand-side retards come from?  The Fed is trying to fix a problem over which it has little power.  Consumers aren’t spending because they are worried about the jobs situation and business are holding on to extra cash because the regulatory and tax situation are still in-limbo.  Tack on Obamacare, looming EPA craziness, and an anti-business administration in Washington D.C. and you have the perfect recipe to paralyze an economy.

Don’t forget that the interest rates that the Fed controls would also push up lending rates on the second mortgages, lines of credit and credit cards that small businesses and consumers use to fund a portion of their spending.  If more money goes to paying the interest, less will go to actual spending.

The loonies in the Fed need to sit tight and we the people will help in November.  Getting a pro-business Congress that secures the Bush era tax cuts for the near future, slaps some limits on Obama’s czarist regulatory agencies, and puts real stimulative legislation in-play are the real solutions to our current economic situation.  Paying $5.00 for a loaf of bread will simply move the spending from non-essentials like T.V.s and travel to well ..bread.


[1] Wall Street Journal -“Fed Officials Mull Inflation as a Fix”http://online.wsj.com/article/SB10001424052748704689804575536391713801732.html?mod=WSJ_hpp_LEFTWhatsNewsCollection

Learning Economics From Chinese Students

As shameful as it is, a Chinese student gets what we’re struggling to understand – government policies are stifling consumption, exports and therefor the economy.

Bloomberg.com post mentioned that when a professor was discussing the nation’s move to keep interest rates low, a student chimed in with true wisdom:

Peking University professor Michael Pettis was discussing declining bank-deposit returns when a student interrupted with a story about her aunt that may stymie China’s plan to boost consumer spending.

“To send her son to university in six years it means she must replace each yuan in lost income with one from her wages,” the student said, according to Pettis.

Read it again, this example demonstrates one of the pressures that government-control of the economy (or in our case, Fed control) exerts.  By keeping interest rates artificially low, investment income is hard to come by through anything but the most-volatile markets: Bond yields stink, CDs are worthless, and savings accounts generate no appreciable income.  That means that savers now have less income to pay for normal expenses and that limits their ability to buy goods and services within the economy.  Without investment income, your paycheck is all there is and that’s not enough.

China’s problem is very much similar to ours:

“Consumption is already at a dangerously low level,” said Pettis, author of the “The Volatility Machine,” a 2001 book that examines financial crises in emerging markets. “If it doesn’t begin to rise very quickly, China has a problem because household consumption will continue to drop as a share of GDP.”

Consumption represents as much as 70% of U.S. GDP.  This lack of non-wage income, a large portion of income of retirees and near-retirees, means there is simply less to spend.  This represents another downward push on the supply of money.  If deposits in banks decline due to CDs and savings accounts being poor investments or not growing effectively, the banks have fewer assets to loan against.  We are a fractional reserve system and only money loaned creates more money.  As I discuss in this post on serious deflationary concerns, that’s the last thing we need.

As the post continues, it raises an interesting point that is of concern with Obama’s current direction.  It’s been well-publicized that the President would like us to rely more on exports and less on consumer spending to power the U.S. economy.

The Group of 20 nations has urged China to boost domestic consumer spending to help offset reduced consumption from debt- strapped consumers in the U.S. and Europe. If Chinese shoppers fail to take over that mantle as the government’s 4 trillion yuan in stimulus wanes, then the nation may have to fall back on exports for growth. That would revive trade disputes with the U.S., which is battling 9.5 percent unemployment, said Huang.

Great, protectionist trade battles to return:  Chicken tariffs anyone?

Low interest rates are intended to create investment through credit and therefor grow the economy, but left too long and in a disinflationary economy, they create a just the environment required to foster deflation.  As this article at AARP.com states:

On Thursday, James Bullard, the president of the Federal Reserve Bank of St. Louis, warned that the Fed’s current policies were putting the American economy at risk of becoming “enmeshed in a Japanese-style deflationary outcome within the next several years.”

So we’re keeping loose monetary policy because even the Fed has figured out that deflation is a real concern.  What’s startling is that the Fed’s next action will pull even more investment income out of the market.

Mr. Bullard, in an conference call with reporters on Thursday, said he was not calling right away for the Fed to drop its position that interest rates would remain exceptionally low for “an extended period,” or to resume buying long-term Treasury securities to stimulate the economy.

When the Fed buys Treasury bonds, it means they are infusing cash into the economy by buying U.S. Treasury debt: monitizing the debt.  This action will lower the rate on bonds (yields) which should make it less-expensive to borrow money.  In economics, there are two sides to every position.  If borrowing costs are low, lending incentive is minimized.  The risk-reward ratio gets out-of-kilter.  Why risk money for  measly 3% return?  If investor/saver mind-set is to stuff cash into a mattress, lowering interest rates won’t fix that and in-fact may make it worse.

A Chinese student uses a simple story to relate that the world may be heading into an unavoidable deflationary spiral.  Throwing money at it (stimulus), artificially lowering borrowing costs (fed actions) and just pretending that the recovery is happening (Obama and Biden on T.V.) are not the solutions.  It is quite possible that deflation is the solution to the bubbles that governments have caused over the last decade.  If we don’t let them occur, they will anyway.. just worse.  If that’s the case, are you prepared?

Is Obama Pursuing a Weak Dollar Policy?

Paul Volcker - Obama's Chief Economic Advisor

Paul Volcker - Obama's Chief Economic Advisor

Within a few days of Obama entering the White House, Tim Geithner stated that a strong dollar is in the best interest of our economy.  The actions taken to date and some historical analysis of Obama’s chief economic advisor, Paul Volcker, would point at a policy of continued weakening of the U.S. currency.  If the dollar continues it’s slide just an additional 5% it will be at be at an all-time low.

Today, the Wall Street Journal published an article stating that, “Pacific Rim government leaders will tell U.S. President Barack Obama about global concerns over the falling dollar and burgeoning U.S. debt at a summit this week..”.  Their concerns are well founded and can be grouped together with those of the Chinese, European Union, Brazil and Canada.

One indicator of the Administration’s desire for an even-weaker dollar is it’s push to have China stop managing it’s currency and allow it to float.  If that happens, the only possibility is a stronger yuan, and therefor a weaker dollar.  Furthermore, on October 31st of this year, Obama said that the U.S. economy should be based even more on exports.  In order for that to occur, our currency needs to greatly weaken against those of countries we have a large trade imbalance with.. like China.

A weak dollar isn’t all bad news as long as the decline is controlled, slow, and has a desired end-point.  When the dollar weakens, international exports from America become less-expensive for others to buy.  This increases foreign demand for American products.  This only works when the American products don’t require components from other countries as those items are imports and will cost much more under a weakened U.S. currency.

One implication of a weak dollar is inflation.  As the dollar weakens, so does it’s purchasing power.  Imports become more expensive which will relieve downward-pressure on domestic products allowing those items to increase in price as well.  The dollar is also how all trades in oil are transacted.  As the dollar weakens, crude gets more expensive.  Considering that petroleum is an input into so much of our economy (fuel for trains, trucks, planes, ingredient in plastics, rubber, etc), it hits Americans both directly in the gas tank and indirectly in stores, restaurants and vacation spots.

Carter era gas lines

Carter era gas lines

The last sustained depreciation of the dollar was during 1977 and 1978.  There are some striking resemblances to that bleak period in U.S. economic history to today.  We have a liberal Administration, we have hostages in Iran (I’m fairly certain that is not linked to the weak dollar), and Paul Volcker is back.  During the late 70’s Volcker was the Federal Reserve chairman and directly orchestrated the dollar’s collapse – on purpose.  Gas, groceries, imports and just about everything else got insanely expensive as double-digit inflation hit the pocketbooks of U.S. citizens.

We’ve seen a too-weak dollar before and it wasn’t pretty.  Now we have some of the same people, trying the same thing, again.

Economy Nearing Carter-Era Catastrophe – Volcker Present Again

Jobless RecoveryInterpreting the latest unemployment report could make one’s head spin, but there is valuable information in it other than the tragic 10.2% unemployment rate and the fact that the economy has shed an additional 190,000 jobs in the last month.  Yahoo news points at a separate survey that shows 558,000 more people were unemployed in October than September.  This discrepancy is due to the fact that once someone gives up looking for a job or runs out of benefits, they are not longer technically “unemployed”.

Paul Volcker, the President’s chief economic adviser, and others are pointing to the idea that perhaps this is a jobless recovery.  To be a jobless recovery – first, one would expect a recovery.  If the economy were recovering, credit wouldn’t be shrinking, banks would be mending, and consumers would be spending.  In direct contradiction to a jobless recovery:

5 banks failed this week, 121 for this year alone:

United Commercial Bank, San Francisco, CA
Gateway Bank of St. Louis, St. Louis, MO
Prosperan Bank, Oakdale, MN
Home Federal Savings Bank, Detroit, MI
United Security Bank, Sparta, GA

Consumer spending dropped by the largest amount in nine months:
Consumer Spending Falls In September, Biggest Drop In Nine Months

Consumer confidence drops in October:
Consumer Confidence Survey

Real incomes flat and spending drops relative to inflation:

Income Flat, Spending Falls as Consumers Stay Wary

The sources vary, but are consistent.  We are not experiencing a jobless recovery, we are heading into a jobless stagnation.  This is exactly where we were during the Carter years, we are following the same actions under some of the same people, and are expecting a different result.

Many credit Volcker’s fed for ending inflation during the Reagan era by invoking a recession to reign-in out-of-control inflation.  The problem being, we don’t have any inflation.  With real-incomes dropping, consumption dissipating and credit drying-up, there is not way for producers to raise prices and expect anyone to buy much of anything.  So is the recent push of massive government spending an attempt to re-ignite inflation so that Bernanke and Volcker can work together to end it and save us all?

Carter era gas lines

Carter era gas lines

During the early 80’s, Volcker created a recession on purpose by tightening monetary policy.  His Keynesian theory then was that it was more important to reign-in inflation than save jobs.  This measure was actually needed only because of  failed Keynesian thought that continuing inflation was good for the economy.  Using monetarist policies, he corrected what Keynesian thought had brought about.

The problem now is that we don’t have job growth and we don’t have inflation.  The massive amounts of cash being poured into the economy by the Fed are not inducing price increases, it’s just watering down the money supply.  Money is being dumped into the stock market at alarming rates, mainly because there’s nowhere else for it to go.  Buying bonds is self-defeating considering the Treasury rates, investing in business at this time is suicidal.. Bernanke is using failed tactics probably at the behest of Obama’s chief adviser on the economy.  Monetary deflation with no corresponding economic inflation.

This looks like an orchestrated attempt to cause inflation so that we can do the same things that we did before.  Dump trillions into the economy and eventually producers will raise prices… well..  what if they don’t?   What if we just end up with a dept to income ratios (debt-to-GDP) rate of 70%+ (we’re at 66% by the way)?  We could easily end up spending everything that comes into this country to just service debt.  The Japanese have lost a decade of growth to thinking like this.

It’s time to cut spending, quit dumping money into the economy, let the pain correct the bubble that exists and move forward.  The Fed created the near hyper-inflationary mess that cost Carter his Presidency, made a mess during Bush’s stay, and is trying to put us in a place where they have any clue of what to do.  I am fairly certain that they don’t know how to get us to that place or a healthy economy.

While Obama is busy blaming bush, he has kept on the one person probably the most-responsible for the mess we have – Bernanke.  The President has also brought Carter’s Volcker back into the mix and Barack is egging them both on.  One can hope this is more due to nativity than purpose.

Transparency Needed Into the Federal Reserve

I realize that I would have to wait in a fairly long line to call Ron Paul a paranoid, old-thinking, isolationist psycho, and I’d gladly take the wait just to have the opportunity.  But, Paul has been pushing for a congressional audit of the Federal Reserve for more than two decades and he might just get it now.

Republicans, Libertarians, and Democrats alike are all now calling for a look into the way-too-secret moves of the Federal Reserve Board and Barney Frank, Chairman of the House Financial Services Committee, has now thrown in his support for the idea.

The calls for transparency are coming from every corner considering the undisclosed emergency lending that the Fed has performed during this financial crisis.  Federal Reserve operations have resulted in trillions of dollars of debt placed firmly on the shoulders of American taxpayers and we’re not sure what we got… if anything.

In an article at newsblaze.com, the author states that the Federal Reserve has intervened at least 34 times in the financial marketplace for a cost of at least $1.8 trillion.  What we don’t know is who or for what the $700 billion for the Treasury, $300 billion for housing rescues, $200 billion to banks, or $50 billion for “exchange stabilization”.

Ron Paul is certifiable.  But on this one, he may have gotten it right.  “Even a blind squirrel finds a nut some days”.

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