Global anger mounts at 'clueless' Fed actions
Obama's minions keep devaluing the dollar by printing a torrent of new dollars. They're deposits in banks etc rather than folding notes but the effect is the same
Global anger at a fresh round of liquidity injections into the US economy swelled on Friday as Germany called the move "clueless" and emerging nations protested that it will wreak havoc on them.
Harsh criticism poured in as President Barack Obama headed for Asia on a trip he had hoped to use as a springboard for pressuring China to revalue its yuan but may end up in a fractious Group of 20 leaders summit next week.
The United States has been pressing China, largely unsuccessfully, to let its yuan currency rise more quickly to reflect the strength of what is now the world's second-largest economy and help correct global trade imbalances.
The Federal Reserve's decision this week to buy $US600 billion in long-term bonds with new money to try to revive the flagging US economy have increased fears of more money pouring across borders in search of better returns.
China landed its own blows by saying a US proposal for numerical targets for surpluses and deficits - akin to a range for yuan appreciation - smacked of outmoded central planning that won't win any friends for the United States.
Chinese Vice-Foreign Minister Cui Tiankai, who is China's chief G20 negotiator, told a news briefing that he was also worried at the prospect of a flood of money pouring into global markets in search of higher yields. "They owe us some explanation," Cui said. "I've seen much concern about the impact of this policy on financial stability in other countries."
Fed liquidity creating problems in other countries
A "common theme" is emerging that "excess liquidity in the US is creating problems in other countries," Brazil's Central Bank Governor Henrique Meirelles told reporters in Chicago.
Resentment abroad stems from worry that Fed pump-priming will hasten the US dollar's slide and cause their currencies to shoot up in value, setting the stage for asset bubbles and making a future burst of inflation more likely.
"With all due respect, US policy is clueless," German Finance Minister Wolfgang Schaeuble told a conference. "(The problem) is not a shortage of liquidity. It's not that the Americans haven't pumped enough liquidity into the market, and now to say let's pump more into the market is not going to solve their problems."
Fed Chairman Ben Bernanke, speaking to students in Florida, seized the opportunity to defend the move by saying "a strong US economy, a recovering economy, is critical, not just for Americans but it's also critical for the global economy."
New US unemployment figures on Friday, showing a surprisingly strong 151,000 jobs were created in October, caused some analysts to question whether the Federal Reserve's pledge to buy up to $US600 billion of Treasury securities was even necessary. But with a jobless rate stuck at 9.6 per cent, few doubted the Fed will proceed with buying.
German Chancellor Angela Merkel will address US policy in Group of 20 discussions on exchange rates, a government source said, adding that she shared Schaeuble's criticism.
Policymakers from the world's new economic powerhouses in Latin America and Asia have said they would consider fresh steps to curb capital inflows after the Fed's move.
South African Finance Minister Pravin Gordhan said Fed policy "undermines the spirit of multilateral cooperation" that the G20 had sought to achieve. The money will find its way into financial markets of emerging nations with potentially devastating impact on their exports, he charged.
Zhou Xiaochuan, China's central bank governor, said while Beijing could understand that the Fed was implementing more monetary easing in order to stimulate US recovery, it may not be a good policy for the global economy.
Now, it is time to govern
Without specifically saying so, modern conservative leaders have moved toward a view of conservatism as a fixed political philosophy based on the principles of the Founding, themselves informed more by Locke, Hobbes and Montesquieu than by Burke. As a result, the Republican class of 2011 is positioned to advance an articulated and cohesive ideology. This class brings to office a critical mass of members who know what they think and why they think it. They will anchor Congress more firmly to the right than ever before and shift the center of gravity rightward.
The Left has always had guiding principles and that is why it has been so easy to map its direction and define its agenda. Its effort has always been the advancement of an articulated ideology. That is why it has so efficiently advanced that agenda in its inexorable march toward its ideal society. In contrast to conservatism, it has been a philosophy, not a lifestyle. For the first time, its philosophy will be challenged by an opposing philosophy rooted in a completely different philosophical tradition and based on defined first principles with very different civic goals. For the first time, the debate will force the evaluation of fundamental assumptions on both sides. This will not be political jockeying. It will be a true clash of ideas.
The evolution of conservatism from an inchoate, uneasy sense that things are just not right to a defined set of ideas, is a refreshing development. It enables conservatives to re-imagine the shape and purpose of government and lends cohesion to its approach to governance and coherence to its approach to public policy. It is no longer left “standing athwart history yelling ‘stop!’”, in Buckley’s formulation but, like the Founders, with the task of defining its idea of the proper role of government and its relationship to the citizen.
With Republican majorities so immediately looming, it is worth contemplating what conservatives should do with them. Conservative electoral victory presents peril even greater than its promise. It is important to note that the Republican Party’s electoral success came not from a turn to the middle, as urged by such as David Brooks and David Frum, but from a hard turn to the right. Republicans were urged by Colin Powell and other fair weather Republicans, to reject voices on the right that suggested that the Party’s troubles were not the result of too close an adherence to conservative principles but by the abandonment of them. So much for the received wisdom of Colin Powell.
It would be seductive for conservatives to indulge themselves in the sort of overweening triumphalism that led the left to its current state of electoral ruin. After so many years in the wilderness, leftists misread their mandate with Obama’s election. They thought their victory was an endorsement of their ideological goals. In the flush of victory and believing the nonsense of columnists who suggested they would never again face viable opposition from the right with the death of conservatism and the marginalization and imminent death of the Republican Party, they pursued a radical and comprehensive program that shocked the nation and roused the deep, abiding and fundamental conservatism of the American public. Conservatives must not make the same mistake.
Republicans need to deliver. But they cannot deliver everything all at once, as Democrats attempted to do these past two years. They should pursue an aggressive, but limited, agenda that addresses the immediate concerns of voters. They should pursue the art of the possible, understanding that they may not succeed at each effort.
People are scared. They see an economy in free fall and unemployment in double digits. They have seen their retirement accounts disappear and their home values plummet, if they still even have homes. They have seen their careful retirement planning evaporate and they suffer a deep sense of insecurity. It must be addressed and addressed boldly.
Conservatives know what it takes to revive an economy. They know that the free market has always provided the greatest good for the greatest number. They know, too, the destructive impact of government interference with the private sector. They know, then, what it will take to generate the economic activity that will prompt growth and job creation.
They must turn their attention, first, to opening up the flow of money so banks begin lending for the expansion of business activity. It is hard to feel sorry for bankers, but they are faced with an administration that demonizes them at every opportunity. They are told that they must start lending but, also, that if they make a mistake, their banks will be seized and they will see themselves on the 6 o’clock news being marched off to jail. They have been hit with regulations on regulations that have them tied in knots, assuming they have yet digested the comprehensive new rules that purport to create safety but which disincentivize them from making loans to any but the most creditworthy customers.
Entrepreneurs are seldom the most creditworthy of customers but they make up the engine of job creation. Loans with some inherent risk are the very loans necessary to get the economy moving again. Entrepreneurship is the balancing of risk to potential reward. Current regulation, in so completely limiting risk, has, at the same time, strangled the prospect of reward.
Republicans must first, therefore, take the step of cutting financial regulations and encouraging business and real estate lending by allowing bankers to loosen lending standards. Until lending starts to flow, the economy will languish.
Regulation is throttling economic growth. The new Congress should start the hard work of reviewing all federal regulations – one by one – and challenging any for which there is no effective continuing rationale. Hearings should be organized to which the industry groups of those most affected by regulation should be invited and at which they will be asked to present the impact of regulation on their businesses. They should be encouraged to specify which regulations the cancellation of which would be most likely to promote growth. Nothing should be off the table. If outright repeal is not possible, de-funding surely will be as the House, with its budgetary power, can refuse to fund any department, agency or program that stands in the way of economic expansion.
Closely related to challenges to regulation is the size and scope of government. Fewer regulations will diminish the rationale for current federal programs and, therefore, current personnel levels. Conservatives have consistently criticized the growth of government but neither Republicans nor Democrats have done anything but slow its growth. The time has come to reverse that growth; to actually reduce the size of government.
Both houses of Congress have committees for each department of government. Each should commence studies with an eye toward the elimination of programs and the actual reduction of departments by challenging, first, their continuing necessity and, second, their staffing and spending levels. Congress cannot cut government unless it knows what government is doing. The studies should be accompanied by the stated goal of actual budget reduction of at least 10%. The studies must be finished promptly so reform can be proposed within the year. They should, therefore, have short dates for the completion of work; say, summer of 2011.
The House should implement a policy of zero based budgeting, requiring that every department and program justify its budget requests not by reference to what has been spent before but by showing that the programs for which funding is sought continue to have a reason to exist.
Spending reduction must be started in earnest. This summer, it was reported that federal employees enjoy salaries and benefits that are twice those in private industry. The House can, in connection with its budgeting power, implement the indexing of federal salaries and benefits to those in private industry. That single reform would reduce federal spending by a significant percentage. After all, the single biggest governmental expense is personnel. Public employee groups notwithstanding, the work done by federal workers is completely analogous to that in private industry. Clerical staff is clerical staff. Middle management is middle management. Purchasing is purchasing. There is no reason for such a disparity in salary and benefit levels other than that successive Congresses, Republican and Democrat, have been asleep at the wheel. Republicans need not fear the wrath of federal employees. They are not a Republican constituency.
Everyone knows that budget reduction cannot be achieved without addressing entitlements. David Stockman has argued that unless entitlement payments are reduced (or taxes raised), the budget will never be controlled, never pausing to consider that the cost of administering entitlement programs represents an enormous percentage of the total spent. Administration can be dramatically cut without a concomitant reduction in benefits. It should be undertaken immediately. That is not to say that other reforms are not necessary. They are. But they can be addressed after less controversial reductions have been achieved and we can see the impact of those reductions.
Perhaps the most dramatic immediate reform Republicans should initiate is the streamlining of the tax system. If Republicans cannot achieve this single initiative, it is difficult to imagine their achieving anything of substance. Polling shows there is a national consensus, cutting across party lines, for a system of taxation that is fairer and flatter. Yet when Republicans had control of the legislative and executive branches of government, they never seriously considered the matter. It is time to do so. Resistance will be fierce from the left and its friends in the media. Republicans will be accused of trying to take food out of the mouths of widows and orphans. They will be accused of heartlessness. But a flatter, simpler tax can result not only in a huge saving in a much reduced bureaucracy but also in the time and attention Americans must spend in determining and paying their taxes. There is even a constituency for a flat tax among Democrats. Jerry Brown, the once and future governor or California, proposed a flat tax during his presidential runs. Elected Democrats might resist it, but their constituents will support it.
A national value added tax, combined with a repeal of the income tax and the 16th Amendment that allows it to exist, would pick up the massive underground economy and would not only yield a fairer means of taxation but would give everyone a stake in the game. It would, at once, simply the system of taxation and, at the same time, fully fund government.
Finally, Republicans should cut off the head of the snake. There is little constituency for the pensions and public sector spending that are breaking the bank other than public employee unions. Their wealth and political support have kept leftism alive well past its expiration date. Freedom to work is an important American value and the vast majority of Americans no longer see a need for supporting unions, especially public sector unions. Those unions are driving states, counties and cities to insolvency and the policies they have championed by way of bloated pensions, represent a burden on generations to come and a drag on economic growth. A national right to work law would not only implement fairness for workers but would, at the same time, reduce the impact of self-interested union political spending.
If a right to work law cannot be passed over likely Democratic opposition and the threat (or reality) of presidential veto, those instrumentalities that extend undue protection to unions, such as the plethora of programs extant in the Department of Labor, can be defunded by majority vote in the House of Representatives. That could set the stage for a compromise that would begin to move the ball toward a free market in labor.
People are buying stocks while their dollars are still worth something: "Stocks rallied Thursday to their highest level since September 2008. The Dow surged nearly 220-points to its highest level since September 2008 thanks to the Federal Reserve's plan to buy $600 billion in treasurys. The Dow Jones Industrial Average closed up 219.71 points, or 1.96%, to 11434.84, its highest closing level since just before Lehman Brothers Holdings Inc. collapsed. Dow components Bank of America, J.P. Morgan Chase and Caterpillar propelled blue chips to their fifth gain in a row and biggest climb since Sept. 1."
Unemployment not budging: “October marks the 18th straight month that unemployment has been at or above 9.4 percent—the longest period of time of sustained high unemployment since the Great Depression. That is as remarkable as it is sad for millions of American families who increasingly cannot make their mortgage payments. Foreclosures are still at all time highs, even as Barack Obama claimed that the worst of the crisis was behind us. Obama’s policies have failed to put America back to work. “It is time for the Obama Administration to change course, and for the newly elected Congress to plot a new direction. ObamaCare and its many mandates are getting in the way of hiring decisions by employers."
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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)