Synopsis: Kyle Broflovski, aka "the Jew", tries to persuade the confused and frightened people in South Park to continue spending because the economy is based on trust and "faith". Stan Marsh finds that the complex financial system is ultimately directed by a U.S. Treasury that responds to crises like a "chicken with its head cut off" and has literally no clue what toxic assets are worth. Ultimately, Kyle and the younger generation must open up the "Keynesian purse strings" and relieve the debts of the over-consuming public.
This episode is a classic filled with great satire and powerful metaphors.
PART 1:
PART 2:
PART 3:
Sunday, March 29, 2009
Thursday, March 26, 2009
Rosy Projections Inspire False Confidence
Christina Romer, the Chair of the President’s Council of Economic Advisers, and Jared Bernstein, Chief Economist of the Office of the Vice President, provided estimates of the simulative effects of increased government spending in the United States in a recent paper. They claim that President Obama’s recent $700+ billion stimulus package, which will incur mountains of debt to expand government spending to compensate for declining consumer spending, will increase real GDP by 1.6 times the amount spent by the government. Based on research by Cogan, Cwik, Taylor, and Wieland of the National Bureau of Economic Research, “new Keynesian” macroeconomic models that are empirically estimated and tested depict a vastly different outcome.
The “new Keynesian” models incorporate rational expectations by individuals and firms and some degree of price rigidity in their framework, thereby enabling changes in behavior over time in response to policy decisions. Additionally, Romer and Bernstein assume that the current historically low interest rate environment persists for the entire duration of their simulation which is inconsistent with assumptions of forward-looking households and rational inflation expectations. The stimulus package, unlike those of other nations that have focused largely on infrastructure investments, contains significant tax rebates, transfer payments, and state and local government support. It is questionable if this type of “stimulus” will result in additional purchases or simply finance previously planned spending and debt retirement. Regardless, the “new Keynesian” models predict that after a very marginal impact in the first year, the government spending multipliers are less than one as consumption and investment are crowded out and people adapt their expectations to incorporate increased taxation, higher interest rates, and the likelihood of inflationary pressures. Such a result suggests that additional government spending is actually destructive to GDP growth as opposed to expansionary. Additionally, the NBER’s models estimate an increase in employment of 0.5 million people as a result of the stimulus package which is much less than the 3.5 million projection of the Obama administration and less than the average number of jobs lost in just one month in 2009.
It seems that Obama, in an effort to support his wealth redistribution agenda, has embraced the rosy projections of economic models that are based on unrealistic assumptions and fail to be validated by other commonly accepted models. Under the guise of impending economic disaster, the administration will continue to use fear to enable it to push its ideologies on an unsuspecting and fearful populace. In the end, the rich and the poor will end up paying for his reckless spending and dangerous policies.
The “new Keynesian” models incorporate rational expectations by individuals and firms and some degree of price rigidity in their framework, thereby enabling changes in behavior over time in response to policy decisions. Additionally, Romer and Bernstein assume that the current historically low interest rate environment persists for the entire duration of their simulation which is inconsistent with assumptions of forward-looking households and rational inflation expectations. The stimulus package, unlike those of other nations that have focused largely on infrastructure investments, contains significant tax rebates, transfer payments, and state and local government support. It is questionable if this type of “stimulus” will result in additional purchases or simply finance previously planned spending and debt retirement. Regardless, the “new Keynesian” models predict that after a very marginal impact in the first year, the government spending multipliers are less than one as consumption and investment are crowded out and people adapt their expectations to incorporate increased taxation, higher interest rates, and the likelihood of inflationary pressures. Such a result suggests that additional government spending is actually destructive to GDP growth as opposed to expansionary. Additionally, the NBER’s models estimate an increase in employment of 0.5 million people as a result of the stimulus package which is much less than the 3.5 million projection of the Obama administration and less than the average number of jobs lost in just one month in 2009.
It seems that Obama, in an effort to support his wealth redistribution agenda, has embraced the rosy projections of economic models that are based on unrealistic assumptions and fail to be validated by other commonly accepted models. Under the guise of impending economic disaster, the administration will continue to use fear to enable it to push its ideologies on an unsuspecting and fearful populace. In the end, the rich and the poor will end up paying for his reckless spending and dangerous policies.
Monday, March 23, 2009
Heads I Win, Tails You Lose
Due to the political infeasibility of the government buying toxic assets for above market prices, Secretary Geithner and the Obama administration have developed a convoluted public-private partnership arrangement which creates a distorted risk profile and encourages leveraged speculation. Under the plan, private investors will be able to obtain non-recourse loans from the FDIC to finance 85% of the purchase price and receive matching equity contributions from the treasury. The structure of this arrangement limits the downside risk to the private investor and encourages more aggressive bidding for assets. It is no wonder that the market skyrocketed by almost 7% with the banks and brokers rising 15-20%. This plan amounts to a taxpayer funded bonanza for the banks and investors that are allowed to participate.
Ultimately, private investors will contribute approximately 7.5% equity which will be matched by the Treasury. The first 15% of losses, therefore, will be jointly incurred by the private investor and the Treasury, but any subsequent losses will be entirely absorbed by the taxpayer. The government is essentially granting a free put that is 15% out of the money to anyone who can put up 7.5% equity and buy “toxic” assets. In addition, the financing cost of the non-recourse loan is subsidized through the manipulation of interest rates by the Federal Reserve such that the private investors are receiving below market rates enabled by the government. This seems distressingly similar to the fed induced credit bubble that resulted in the current crisis. The severity of the ultimate losses will not be realized for years as the underlying assets continue to deteriorate, but the greater fool of the Federal Government, ill equipped to evaluate these complex structured products, will be left holding the bag.
Even Paul Krugman, a liberal columnist for the New York Times and economist at Princeton University, despairs over the Obama administration’s view that there are no “bad assets” but only misunderstood assets who’s true value has been unrealized by the market. As he wrote in a March 21, 2009 opinion piece in the NYT:
"The Obama administration is now completely wedded to the idea that there’s nothing fundamentally wrong with the financial system — that what we’re facing is the equivalent of a run on an essentially sound bank. As Tim Duy put it, there are no bad assets, only misunderstood assets. And if we get investors to understand that toxic waste is really, truly worth much more than anyone is willing to pay for it, all our problems will be solved.
To this end the plan proposes to create funds in which private investors put in a small amount of their own money, and in return get large, non-recourse loans from the taxpayer, with which to buy bad — I mean misunderstood — assets. This is supposed to lead to fair prices because the funds will engage in competitive bidding.
But it’s immediately obvious, if you think about it, that these funds will have skewed incentives. In effect, Treasury will be creating — deliberately! — the functional equivalent of Texas S&Ls in the 1980s: financial operations with very little capital but lots of government-guaranteed liabilities. For the private investors, this is an open invitation to play heads I win, tails the taxpayers lose. So sure, these investors will be ready to pay high prices for toxic waste. After all, the stuff might be worth something; and if it isn’t, that’s someone else’s problem.
Or to put it another way, Treasury has decided that what we have is nothing but a confidence problem, which it proposes to cure by creating massive moral hazard.
This plan will produce big gains for banks that didn’t actually need any help; it will, however, do little to reassure the public about banks that are seriously undercapitalized. And I fear that when the plan fails, as it almost surely will, the administration will have shot its bolt: it won’t be able to come back to Congress for a plan that might actually work.
What an awful mess."
Ultimately, private investors will contribute approximately 7.5% equity which will be matched by the Treasury. The first 15% of losses, therefore, will be jointly incurred by the private investor and the Treasury, but any subsequent losses will be entirely absorbed by the taxpayer. The government is essentially granting a free put that is 15% out of the money to anyone who can put up 7.5% equity and buy “toxic” assets. In addition, the financing cost of the non-recourse loan is subsidized through the manipulation of interest rates by the Federal Reserve such that the private investors are receiving below market rates enabled by the government. This seems distressingly similar to the fed induced credit bubble that resulted in the current crisis. The severity of the ultimate losses will not be realized for years as the underlying assets continue to deteriorate, but the greater fool of the Federal Government, ill equipped to evaluate these complex structured products, will be left holding the bag.
Even Paul Krugman, a liberal columnist for the New York Times and economist at Princeton University, despairs over the Obama administration’s view that there are no “bad assets” but only misunderstood assets who’s true value has been unrealized by the market. As he wrote in a March 21, 2009 opinion piece in the NYT:
"The Obama administration is now completely wedded to the idea that there’s nothing fundamentally wrong with the financial system — that what we’re facing is the equivalent of a run on an essentially sound bank. As Tim Duy put it, there are no bad assets, only misunderstood assets. And if we get investors to understand that toxic waste is really, truly worth much more than anyone is willing to pay for it, all our problems will be solved.
To this end the plan proposes to create funds in which private investors put in a small amount of their own money, and in return get large, non-recourse loans from the taxpayer, with which to buy bad — I mean misunderstood — assets. This is supposed to lead to fair prices because the funds will engage in competitive bidding.
But it’s immediately obvious, if you think about it, that these funds will have skewed incentives. In effect, Treasury will be creating — deliberately! — the functional equivalent of Texas S&Ls in the 1980s: financial operations with very little capital but lots of government-guaranteed liabilities. For the private investors, this is an open invitation to play heads I win, tails the taxpayers lose. So sure, these investors will be ready to pay high prices for toxic waste. After all, the stuff might be worth something; and if it isn’t, that’s someone else’s problem.
Or to put it another way, Treasury has decided that what we have is nothing but a confidence problem, which it proposes to cure by creating massive moral hazard.
This plan will produce big gains for banks that didn’t actually need any help; it will, however, do little to reassure the public about banks that are seriously undercapitalized. And I fear that when the plan fails, as it almost surely will, the administration will have shot its bolt: it won’t be able to come back to Congress for a plan that might actually work.
What an awful mess."
Thursday, March 19, 2009
Congressional Tax Cheats Express Outrage over Bonuses
The public outcry over a mere $165mm in bonus at AIG is leading to a dangerous witch hunt as politicians try to cover up their culpability for the current mess that confronts our nation. Congress has approved more than $700 billion in “stimulus” for the economy under the guise of creating jobs while concurrently threatening to abrogate contracts, pass retroactive punitive taxes, and jeopardize the future viability of our financial institutions. These two policies seem largely contradictory. The hot air of indignation emanating from the mouths of some of the most prominent politicians reeks of hypocrisy as many of these politicians have been embroiled in tax scandals themselves. Charles Rangel, the New York Democrat being investigated for evading taxes and other ethical issues, has proposed a 90% tax on all bonuses from companies receiving government support. This (alleged) tax cheat, as chairman of the very committee charged with drafting our nation’s tax laws, has inspired his fellow congressmen to pursue similar tax evasion strategies. Representative Pete Stark, an elected official from California and second ranking member of Chairman Rangel’s Ways and Means committee, has claimed tax credits in the state of Maryland by claiming that a waterfront home in Anne Arundel County is his principal residence. It seems quite strange that Rep. Stark could be representing the people of California’s 13th district very effectively if he lives “permanently” in Maryland. Representative Eliot Engel of NY has similarly been identified as invoking the same credit for his home in Montgomery County.
These incidents are not isolated. Treasury Secretary Timothy Geithner was pilloried by congress for his failure to pay years of taxes while Senator Chris Dodd, among others, have been accused of receiving discount mortgages from Countrywide Financial creating a clear conflict of interest. Senator Dodd, as head of the Senate Banking Committee, has significant influence over policies that impact the nation’s financial institutions that have become subject of public fury. All of the congressional hearings and condemning speeches are convenient cover for the role that Senator Dodd, Congressman Barney Frank, and others have in the growth of subprime mortgages and the resulting implosion of the global financial system. Our economy will continue to suffer until the graft and corruption among the many unethical members of Congress. The honest and responsible Americans are being punished and exploited for the political benefit of these deviants. It is time to say “Enough is enough!”.
“We go far beyond AIG, Citibank, Freddie Mac, Fannie Mae and others,” said committee Chairman Charles Rangel, a New York Democrat. “This is not going to happen again, the light is flashing and letting them know that America won’t take it.”
No, Mr. Rangel… American won’t accept hypocrisy from an unrepentant tax cheat that seeks to punish some of the most productive members of society. Unlike the charitable Mr. Edward Liddy, the CEO of AIG, most people won’t work for $1 per year while you exploit your position of power for personal gain.
“We passed a recovery act, we did not pass a license to steal,” New York Representative Steve Israel, a Democrat, said at the news conference. “The middle class will no longer subsidize pay for failure.”
Sorry, Mr. Isreal, but it is the subjects of your persecution that are paying for their own failure, not the middle class. The top 5% of households in the United States paid 57.1% of federal income taxes in 2007 and the top 20% of households paid 82.5% in 2001. It seems that the middle class is relatively exempt from taxes and, therefore, should temper their outrage over the intervention necessary to stabilize our economy.
These incidents are not isolated. Treasury Secretary Timothy Geithner was pilloried by congress for his failure to pay years of taxes while Senator Chris Dodd, among others, have been accused of receiving discount mortgages from Countrywide Financial creating a clear conflict of interest. Senator Dodd, as head of the Senate Banking Committee, has significant influence over policies that impact the nation’s financial institutions that have become subject of public fury. All of the congressional hearings and condemning speeches are convenient cover for the role that Senator Dodd, Congressman Barney Frank, and others have in the growth of subprime mortgages and the resulting implosion of the global financial system. Our economy will continue to suffer until the graft and corruption among the many unethical members of Congress. The honest and responsible Americans are being punished and exploited for the political benefit of these deviants. It is time to say “Enough is enough!”.
“We go far beyond AIG, Citibank, Freddie Mac, Fannie Mae and others,” said committee Chairman Charles Rangel, a New York Democrat. “This is not going to happen again, the light is flashing and letting them know that America won’t take it.”
No, Mr. Rangel… American won’t accept hypocrisy from an unrepentant tax cheat that seeks to punish some of the most productive members of society. Unlike the charitable Mr. Edward Liddy, the CEO of AIG, most people won’t work for $1 per year while you exploit your position of power for personal gain.
“We passed a recovery act, we did not pass a license to steal,” New York Representative Steve Israel, a Democrat, said at the news conference. “The middle class will no longer subsidize pay for failure.”
Sorry, Mr. Isreal, but it is the subjects of your persecution that are paying for their own failure, not the middle class. The top 5% of households in the United States paid 57.1% of federal income taxes in 2007 and the top 20% of households paid 82.5% in 2001. It seems that the middle class is relatively exempt from taxes and, therefore, should temper their outrage over the intervention necessary to stabilize our economy.
Monday, March 16, 2009
Private Capital in an Era of Government Intervention
The widespread manipulation of capital markets by the Federal Reserve, the legislature, and government agencies has continued to distort the balance between risk and reward. Previous efforts to soften the pain of recessions or stimulate economic activity in certain sectors (e.g. housing under Greenspan and Bush) have ended in complete disaster. Unable to learn from past mistakes, our current leaders fail to realize that distorting interest rates, housing incentives, and consumer demand causes sub-optimal economic outcomes with potentially devastating long run consequences. It is futile, however, to expect that policy makers will make the difficult decisions that lead to short term pain, but will ultimately lead to a stronger and more stable economy. They will inevitably pander to the demands of the populace who care only about their own interests rather than that of society as a whole.
Case in point is the entire premise of quantitative easing. Buying treasuries with the intent of artificially suppressing long term interest rates to encourage consumption will only lead to rampant inflation and a prolonged recession. Edward Chancellor published a piece in the Financial Times reports on the UK government's efforts to suppress interest rates by acquiring a significant percentage of outstanding Gilts.
"Economists applauded. Their reactions are mistaken. Quantitative easing, as it is called, poses a grave danger to Britain’s creditors. It is a perilous policy that threatens further disruption to the financial system at some future date.
On Thursday March 5, the Bank of England said it would acquire up to £75bn of gilts over the following three months. A further £75bn of Bank purchases have been earmarked. Relative to the size of the British economy, these are vast sums. The combined figure is roughly three times the stock of notes and coins in circulation and twice the country’s monetary base. It is also equal to almost a third of the stock of outstanding gilts. Put another way, the Bank is set to finance the largest peacetime deficit in British history.
...
Yet long-term bondholders have nothing to celebrate. The aim of quantitative easing, after all, is to dispel deflation and achieve the Bank’s 2 per cent annual inflation target. There is no question that a determined central bank can get rid of deflation. It is simply a question of printing enough money. Economists have another term to describe the monetisation of government debt. The history of “seigniorage” goes back to the debasement of the coinage under the Roman emperors. Seigniorage is really a tax on holders of money and government debt which is paid via inflation. When carried to excess, it leads to hyperinflation.
The exponents of quantitative easing dismiss such fears. They claim that liquidity can easily be removed at some stage in the future. But what confidence should we place in the authorities to act in a timely fashion? After all, this crisis is largely the consequence of the Federal Reserve’s easy money policy at the beginning of the decade that fuelled the global housing bubble. If the economy remains stagnant, the Bank will probably be slow to remove the liquidity. In which case, there will be inflation.
An early experiment with quantitative easing occurred in Japan in 1932. At the time, the Bank of Japan financed a large fiscal expansion by printing money. In no time, Japan went from a severe deflation to near double-digit inflation. This monetary easing was never reversed and inflation escalated throughout the decade. After the second world war, the Fed likewise printed money to buy bonds. As a result, a mild deflation in 1949 was followed by inflation of about 10 per cent a couple of years later. Owners of Treasury bonds suffered heavy losses.
...
Still, there is a possibility the Bank will react to incipient inflation and reverse its quantitative easing policy in good time. But what will happen then? For a start, the bond market would likely crash as the central bank rapidly disposes of its pile of accumulated bonds. Furthermore, the apparent gains of quantitative easing may be reversed. Unless any recovery is robust, the reduction of central bank liquidity would hurt the securities markets and the real economy. This happened in 1937 after the Fed responded to rising inflation fears by removing excess reserves from the banking system. The US stock market was cut in half and the economy nosedived.
Central banks in Switzerland, Japan and the US are set to follow Britain’s lead on quantitative easing. Bondholders everywhere are anticipating windfall gains, as the owners of gilts have enjoyed. They should not be fooled. In the years to come, owners of government debt will be the chief victims of this great monetary experiment."
Case in point is the entire premise of quantitative easing. Buying treasuries with the intent of artificially suppressing long term interest rates to encourage consumption will only lead to rampant inflation and a prolonged recession. Edward Chancellor published a piece in the Financial Times reports on the UK government's efforts to suppress interest rates by acquiring a significant percentage of outstanding Gilts.
"Economists applauded. Their reactions are mistaken. Quantitative easing, as it is called, poses a grave danger to Britain’s creditors. It is a perilous policy that threatens further disruption to the financial system at some future date.
On Thursday March 5, the Bank of England said it would acquire up to £75bn of gilts over the following three months. A further £75bn of Bank purchases have been earmarked. Relative to the size of the British economy, these are vast sums. The combined figure is roughly three times the stock of notes and coins in circulation and twice the country’s monetary base. It is also equal to almost a third of the stock of outstanding gilts. Put another way, the Bank is set to finance the largest peacetime deficit in British history.
...
Yet long-term bondholders have nothing to celebrate. The aim of quantitative easing, after all, is to dispel deflation and achieve the Bank’s 2 per cent annual inflation target. There is no question that a determined central bank can get rid of deflation. It is simply a question of printing enough money. Economists have another term to describe the monetisation of government debt. The history of “seigniorage” goes back to the debasement of the coinage under the Roman emperors. Seigniorage is really a tax on holders of money and government debt which is paid via inflation. When carried to excess, it leads to hyperinflation.
The exponents of quantitative easing dismiss such fears. They claim that liquidity can easily be removed at some stage in the future. But what confidence should we place in the authorities to act in a timely fashion? After all, this crisis is largely the consequence of the Federal Reserve’s easy money policy at the beginning of the decade that fuelled the global housing bubble. If the economy remains stagnant, the Bank will probably be slow to remove the liquidity. In which case, there will be inflation.
An early experiment with quantitative easing occurred in Japan in 1932. At the time, the Bank of Japan financed a large fiscal expansion by printing money. In no time, Japan went from a severe deflation to near double-digit inflation. This monetary easing was never reversed and inflation escalated throughout the decade. After the second world war, the Fed likewise printed money to buy bonds. As a result, a mild deflation in 1949 was followed by inflation of about 10 per cent a couple of years later. Owners of Treasury bonds suffered heavy losses.
...
Still, there is a possibility the Bank will react to incipient inflation and reverse its quantitative easing policy in good time. But what will happen then? For a start, the bond market would likely crash as the central bank rapidly disposes of its pile of accumulated bonds. Furthermore, the apparent gains of quantitative easing may be reversed. Unless any recovery is robust, the reduction of central bank liquidity would hurt the securities markets and the real economy. This happened in 1937 after the Fed responded to rising inflation fears by removing excess reserves from the banking system. The US stock market was cut in half and the economy nosedived.
Central banks in Switzerland, Japan and the US are set to follow Britain’s lead on quantitative easing. Bondholders everywhere are anticipating windfall gains, as the owners of gilts have enjoyed. They should not be fooled. In the years to come, owners of government debt will be the chief victims of this great monetary experiment."
Wednesday, March 11, 2009
The Endless Chaos
The following is an excerpt from an article by Andy Grove, a Stanford University professor and former CEO of Intel, in the March 11, 2009 - Washington Post
There is nothing more difficult . . . than to take the lead in the introduction of a new order of things.
-- Niccolò Machiavelli
Machiavelli's 500-year-old warning notwithstanding, we elected a president who is committed to "change." The economic meltdown in which our country finds itself at the start of his administration makes his difficult task even more daunting. In less than two months, the hopeful enthusiasm that welcomed the Obama administration has given way to growing worry and frustration. I find myself wringing my hands, not over the goals President Obama has set but over the ineffectual ways the administration has pursued them. I have no qualifications to judge how well the Obama team manages the political dynamics, but as a business executive with 40 years' experience, much of it managing change, and a part-time academic dedicated to studying why so few corporations succeed in navigating change, I feel compelled to comment not on the what of the Obama team's efforts but on the how.
I have found that to succeed, an organization must travel through two phases: first, a period of chaotic experimentation in which intense discussion is allowed, even encouraged, by those in charge. In time, when the chaos becomes unbearable, the leadership reins in chaos with a firm hand. The first phase serves to expose the needs and options, the potential and pitfalls. The organization and its leaders learn a lot going through this phase. But frustration also builds, and eventually the cry is heard: Make a decision -- any decision -- but make it now. The time comes for the leadership to end the chaos and commit to a path.
We have gone through months of chaos experimenting with ways to introduce stability in our financial system. The goals were to allow the financial institutions to do their jobs and to develop confidence in them. I believe by now, the people are eager for the administration to rein in chaos. But this is not happening.
Until the administration does this, we should not embark on attempting to fix another major part of the economy. Our health-care system may well be ripe for a major overhaul, as are our energy and environmental policies. Widespread recognition that all of these reforms are overdue contributed to Barack Obama's victory in November. But if the chaos that resulted from initiating such an overhaul were piled on top of the unresolved status of the financial system, society and government would become exhausted. Instead, the administration must adopt a discipline; not initiating a second wave of chaos before we have a chance to rein in the first.
Read the entire article here.
There is nothing more difficult . . . than to take the lead in the introduction of a new order of things.
-- Niccolò Machiavelli
Machiavelli's 500-year-old warning notwithstanding, we elected a president who is committed to "change." The economic meltdown in which our country finds itself at the start of his administration makes his difficult task even more daunting. In less than two months, the hopeful enthusiasm that welcomed the Obama administration has given way to growing worry and frustration. I find myself wringing my hands, not over the goals President Obama has set but over the ineffectual ways the administration has pursued them. I have no qualifications to judge how well the Obama team manages the political dynamics, but as a business executive with 40 years' experience, much of it managing change, and a part-time academic dedicated to studying why so few corporations succeed in navigating change, I feel compelled to comment not on the what of the Obama team's efforts but on the how.
I have found that to succeed, an organization must travel through two phases: first, a period of chaotic experimentation in which intense discussion is allowed, even encouraged, by those in charge. In time, when the chaos becomes unbearable, the leadership reins in chaos with a firm hand. The first phase serves to expose the needs and options, the potential and pitfalls. The organization and its leaders learn a lot going through this phase. But frustration also builds, and eventually the cry is heard: Make a decision -- any decision -- but make it now. The time comes for the leadership to end the chaos and commit to a path.
We have gone through months of chaos experimenting with ways to introduce stability in our financial system. The goals were to allow the financial institutions to do their jobs and to develop confidence in them. I believe by now, the people are eager for the administration to rein in chaos. But this is not happening.
Until the administration does this, we should not embark on attempting to fix another major part of the economy. Our health-care system may well be ripe for a major overhaul, as are our energy and environmental policies. Widespread recognition that all of these reforms are overdue contributed to Barack Obama's victory in November. But if the chaos that resulted from initiating such an overhaul were piled on top of the unresolved status of the financial system, society and government would become exhausted. Instead, the administration must adopt a discipline; not initiating a second wave of chaos before we have a chance to rein in the first.
Read the entire article here.
Sunday, March 8, 2009
The California Doctrine
A recent article in the Economist chronicles the shift in the political power to leftist Democrats from California. With the House Speaker Nancy Pelosi and power committee chairmen Henry Waxman and George Miller hailing from the Golden State, it is easy to fathom how Californian dogmas pervade the political discussion. Senators Dianne Feinstein and Barbara Boxer, both hailing from the ultra-liberal San Francisco Bay Area, command powerful as chairs of the Committee on Intelligence and the Environment and Public Works Committee, respectively. The Democrats ascension to power has been empowered by a clamoring for change, but the centrist values of the majority of Americans is unlikely to be represented by this powerful group of politicians.
Despite rhetoric that professes support for the middle class, Democrats from California have historically enacted legislation that maintains the status quo of the landed elite. By disguising their agenda though laws that ostensibly designed to protect the environment or the rights of workers, they have succeeded in drastically raising the cost of living in California while driving out the types of jobs that enable ascension of the socioeconomic ladder. As a result, middle class families flee the state every year in search of better jobs and a more affordable lifestyle, leaving only the wealthy elite and their lower class service workers. Many of these service workers are immigrants, often illegal, living packed in substandard dwellings far from the extravagant locales of their employers. The politicians of California vigorously fight to maintain their low cost immigrant workforce to ensure their wealthy supporters have a steady supply of cheap, dependable labor.
Many of the state’s most powerful politicians are entrenched in the wealthy elite, hailing from Beverly Hills, Pacific Heights, and San Francisco. They are vested in developing a society of a sophisticated upper class and their economically dependent servants, much as the wealthy plantation owners used their power and influence to perpetuate slavery. The politicians enact laws that create such stringent environmental and regulatory barriers that the cost of doing business becomes astronomical. This drives typical middle class jobs out of the state and makes it prohibitively expensive to young families to survive, let alone advance their position, in California. The lower class (which subsides on the generous welfare disseminated by the state) and the immigrants (which are enabled by the lax immigration enforcement by police officers) are indebted to the wealthy elite for their survival.
Now that the Californian leftists have seized control of Congress and wrestled power away from their party’s poster-boy President, they will attempt, through their positions of power and influence, to dictate the agenda and disseminate their social constructivism throughout the nation. Their stringent environmental laws and punitive business legislation will strangle the life out of our fragile economy. The current unemployment rate across California tops 10%, but the policies promoted by these politicians could easily drive unemployment much higher. It is the middle class that suffers most when unemployment rises as the wealthy elite can tap their vast financial resources to survive the rough times. The assault on the middle class has not ended with the election of President Obama. On the contrary, the worst is yet to come.
Despite rhetoric that professes support for the middle class, Democrats from California have historically enacted legislation that maintains the status quo of the landed elite. By disguising their agenda though laws that ostensibly designed to protect the environment or the rights of workers, they have succeeded in drastically raising the cost of living in California while driving out the types of jobs that enable ascension of the socioeconomic ladder. As a result, middle class families flee the state every year in search of better jobs and a more affordable lifestyle, leaving only the wealthy elite and their lower class service workers. Many of these service workers are immigrants, often illegal, living packed in substandard dwellings far from the extravagant locales of their employers. The politicians of California vigorously fight to maintain their low cost immigrant workforce to ensure their wealthy supporters have a steady supply of cheap, dependable labor.
Many of the state’s most powerful politicians are entrenched in the wealthy elite, hailing from Beverly Hills, Pacific Heights, and San Francisco. They are vested in developing a society of a sophisticated upper class and their economically dependent servants, much as the wealthy plantation owners used their power and influence to perpetuate slavery. The politicians enact laws that create such stringent environmental and regulatory barriers that the cost of doing business becomes astronomical. This drives typical middle class jobs out of the state and makes it prohibitively expensive to young families to survive, let alone advance their position, in California. The lower class (which subsides on the generous welfare disseminated by the state) and the immigrants (which are enabled by the lax immigration enforcement by police officers) are indebted to the wealthy elite for their survival.
Now that the Californian leftists have seized control of Congress and wrestled power away from their party’s poster-boy President, they will attempt, through their positions of power and influence, to dictate the agenda and disseminate their social constructivism throughout the nation. Their stringent environmental laws and punitive business legislation will strangle the life out of our fragile economy. The current unemployment rate across California tops 10%, but the policies promoted by these politicians could easily drive unemployment much higher. It is the middle class that suffers most when unemployment rises as the wealthy elite can tap their vast financial resources to survive the rough times. The assault on the middle class has not ended with the election of President Obama. On the contrary, the worst is yet to come.
Wednesday, March 4, 2009
Rising Unemployment Hinders Economic Recovery
With unemployment rising around the country, President Obama ignores the stimulative effects of entrepreneurial capital and continues to tout "reforms" that will choke off private investment and discourage labor growth. Among his dangerous policies is an unwavering support of labor unions, including a recent order supporting project labor agreements (see Lou Dobbs clip below). A new executive order by President Obama "encourages government bureaucrats to adopt discriminatory, union-only project labor agreements for any 'large-scale construction project' – defined as any project costing over $25 million – and thus discriminate against the 92.5 percent of private sector workers who have chosen for a wide variety of reasons not to join a union." According to National Right to Work, "Big Labor stands to rake in literally hundreds of millions of dollars in new forced-dues revenue seized straight out of workers’ paychecks, whether they support the union or not." Obama has enacted this executive order despite the fact that his own economic advisor, former Treasury Secretary Larry Summers, conducted research concluding that: "Another cause of long-term unemployment is unionization. High union wages that exceed the competitive market rate are likely to cause job losses in the unionized sector of the economy. Also, those who lose high-wage union jobs are often reluctant to accept alternative low-wage employment."
Once again, Obama is either confused by the economic realities or ignores the painful environment that confront him while pandering to his cronies and political supporters.
Once again, Obama is either confused by the economic realities or ignores the painful environment that confront him while pandering to his cronies and political supporters.
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