Thursday, May 24, 2012

Is Calvin a Democrat?


Government Propaganda Comes to America: What Took So Long?

By Oleg, a former Soviet citizen

The long-awaited Progressive World of Next Tuesday has just gotten closer with the passage of an amendment in Congress that legalizes government propaganda. What could possibly go wrong with that? It worked so well in the USSR!

Drawing simplified, two-dimensional people on a propaganda poster is the same as flattening individuals under an ideological press, squeezing out and discarding their humanity and leaving some single common trait - class, gender, race, profession, ethnicity - in order to establish a simplified, two-dimensional vision of the world in the minds of target audiences.

Complex, multi-dimensional ideas are not likely to spur large groups of perfect strangers to unite in a swift, coordinated action. That can only be accomplished with a simplified message that isolates a single common characteristic in different people and exaggerates it to the point of existential importance, while suppressing more essential individual characteristics. As the secondary characteristics become primary and vice versa - voila - the individual is being sacrificed to the collective.

As an added benefit, this amendment will feed all the progressive artists congregating at the NEA trough. It just so happens that, as a former Soviet citizen, I used to create motivational visual agitation posters for the Communist Party committee in Siberia. May I apply for a grant?

Here, I just created a few posters on spec. Let's see if the American public is down with such a self-image. Feel free to contribute!

More HERE (See the original for links)


The looting of savers

Have you got money in the bank? You're going to be a patsy

By economic historian Martin Hutchinson

The French and Greek elections have made the “austerity” programs favored by Angela Merkel and other sensible policymakers seem politically highly unattractive (never mind that the spending cuts proposed by the austere have almost universally not happened, while tax increases have been onerous.) Consequently, Keynesians worldwide are recommending further bouts of government spending combined with partial repudiation of debt. Like the disgraceful monetary policies also peddled by these people, these recommendations amount to the wholesale looting of savers in favor of profligate borrowers and bloated public sectors. It’s worth reminding ourselves of the long-term consequences of such folly.

One of John Maynard Keynes’ principal crimes against sound economics was his demonization of savers. Calling for the “euthanasia of the rentier” he proposed the paradox of thrift, whereby savers in a recession are supposed to damage the ability for the economy to recover by depressing aggregate demand. Like Keynes’ equally spurious calls for increased government spending as a stimulus, this demonization of savers has been used by intellectually dishonest politicians of the left and squishy center to justify policies that have the effect of robbing savers, whether through inflation, excessive taxation or repudiation of government debt.

In reality, saving is the essential precondition for capital investment, and therefore for economic growth. Societies with inadequate savings cannot generally pull themselves out of poverty, however abundant their natural resources. You only have to look at the track record over the last half century of Asian societies, which mostly have a high cultural propensity to save, compared with Latin American societies that do not. Whereas countries like Argentina or Brazil were richer than Korea and Taiwan, little poorer than Singapore or Japan and far richer than China in 1960, today the comparison has reversed.

One of my major objections to the activities of the World Bank and the IMF is their downgrading of the importance of saving. Those institutions frequently propose high taxes on investment returns, and seem to be under the impression that the only way to start a new company is with a government grant or an investment by a major international private equity fund, such the World Bank’s offshoot the International Finance Corporation. As the Solyndra example in the United States showed, the government is an exceptionally bad venture capitalist. In addition, it can be stated with considerable confidence that enterprises that require $500 million up-front investments before having made a profit or even significant revenue are very unlikely to succeed in the long term.

Middle class saving is the key to enterprise formation in any society. Even when venture capital companies exist, as in the United States, they rapidly get drawn away from genuine venture capital towards the much easier money available in leveraged buyouts. Mitt Romney’s Bain Capital, for example, began by providing genuine venture capital to Tom Stemberg’s Staples, but rapidly discovered that most such investments were too small and the returns too slow, and switched to leveraged buyouts. The vast majority of new ventures, innovative or not, depend on the savings of their founders and their founders’ network of relatives, friends and business contacts, to get going before institutional venture capitalists will look at them.

Nurturing middle class savings is thus the most important task of government. John Locke said “Government has no other end, but the preservation of property” and he didn’t overstate the position by much. Quite my most gratifying banking experience was designing a simple bond law for the Republic of Macedonia, which allowed 800,000 Macedonian savers, whose savings had been expropriated ten years earlier by the former Yugoslavia, to get most of their savings back immediately. The country’s improvement in economic performance following the implementation of that law has been marked, and extremely pleasing.

Worldwide monetary policies, in place now for almost 4 years, are uniquely unkind to savers. By forcing interest rates, both short-term and long-term below the rate of inflation, they force savers to receive a negative real return or take large risks to achieve a positive one. That’s the reason for the success of speculative bubbles like that in Facebook shares, which have created a market capitalization larger than General Motors off a stream of advertising revenue only 4% the size of the company’s market capitalization. One commentator described the Facebook IPO as the largest “pump and dump” in stock market history. It has a lot of company for that distinction (when normed by contemporary Gross Domestic Product.) Certainly the South Sea Company and the Mississippi Company, those twin British and French bubbles of 1719-20, had more commercial reality to them. After all Robert Knight, the South Sea Company cashier, who absconded to Antwerp with the company’s records, appeared before potential investors in a well-powdered periwig, not a hoodie!

The latest Keynesian solution to the unwillingness of debt markets to finance further bouts of government spending is to spend yet more money, but to finance it by monetary expansion and partial repudiation of debt. This would get debt levels down, but would close the markets to further debt issues, since investors are not so foolish as to lend to borrowers who have already defaulted on their obligations. Even Argentina, which has enjoyed a remarkable economic boom since defaulting on its debt in 2005, has not been able to return to the capital markets, much to the surprise of its leaders. Thus this approach, if undertaken directly, is unlikely to lead to success.

There is however an alternative approach, which currently appears more and more attractive to distraught Keynesians, and that is financial repression. Under this technique, which was most successfully applied by the British government to work down its excessive debt level at the end of World War II, regulations are used to prevent domestic savers from moving their money into international assets. Monetary authorities are then encouraged to promote inflation, to the extent that domestic interest rates are kept below the rate of inflation. Using this technique, governments can run deficits for a generation or more, while the value of their debts is reduced by inflation. Add in a stiff income tax, to penalize further the nominal interest returns of savers foolish enough to buy government debt, and the government’s debt position can be retrieved quite nicely over a 20-30 period – at the cost of the nation’s savings and the rest of the economy. Needless to say savers, especially those fool enough to believe in the government’s promises to maintain a sound currency, were robbed blind and ended their lives impoverished.

Repression is clearly in the sights of the left at this time – after all, savers generally tend to vote for the right. The idea of looting their political opponents to increase public spending, while having that looting proceed invisibly, so that their fingers are not on the weapon, is attractive to leftist politicians everywhere – it is in a sense THE central flaw of democracy. Of course, the most blame should attach to those politicians like Harold Macmillan, Richard Nixon and, it increasingly seems likely, David Cameron, who rely on savers’ votes to get elected and then betray their own supporters.

Fiscal austerity is needed, but as France and Greece have shown, it is unlikely to win its proponents much electoral support. That is particularly the case if, as in Britain the austerity consists primarily of tax increases, so that the economy declines while the deficit remains unaffected by the apparent austerity. In any case fiscal austerity alone is not enough. If it is not combined with sound monetary policy, savings rates will decline and the savings pool itself will be drained by negative real interest rates. In the long term, that can only lead to impoverishment; in a globalized world, the skills of Western employees are not so superior to those in emerging markets that they can expect to retain higher living standards without a healthy pool of capital to accompany them.

The need now is thus for a revolution in monetary policy, that raises the risk-free interest rate well above the rate of inflation, and allows savers at last to receive a real return on their money without investing in the likes of Facebook. It probably won’t happen until inflation gets seriously out of hand, so my advice to savers is this: make sure a substantial percentage of your money is in gold, in order that you will survive the painful burst of inflation that is needed before global monetary authorities are brought to their senses.



What Should You Believe? Government Stats or Your Own Eyes?

Price inflation is running at an annualized rate of 4.8 percent, according to official data released Friday by the U.S. Bureau of Labor Statistics.

That is more than double the Federal Reserve’s target rate of 2 percent annual inflation. And as millions of Americans have come to learn since the government 40 years ago began playing games with this and other economic statistics to make things look better than they really are, there is good reason to take this latest report with a shaker or two of salt. Even if we accept the figure at face value, there are good reasons to scoff.

For instance, at the American Institute for Economic Research, the economists strip out seldom-purchased big-ticket items that the Bureau of Labor Statistics leaves in its calculations. The AIER’s Everyday Price Index studies the prices of things people buy daily, weekly, or monthly, such as groceries, prescription medicine, telephone and cable services, etc. That’s the inflation rate that most directly affects people.

The Everyday Price Index shows inflation climbing 8.1 percent over the last year. At an 8.1 percent rate of inflation, the purchasing power of the dollar falls by half in nine years.



Red Ink drowns economies rather than grow them

Headlines blared over the weekend that Obama was winning his way by convincing the G-8 countries (U.S., Germany, Japan, United Kingdom, Italy, France, Canada and Russia) to pursue a policy of “growth” rather than “austerity” in dealing with the crushing sovereign debt crisis in Europe and around the world.

In the Orwellian world we live in, “growth” means more spending, and “austerity” means painful cuts which destroy economies.

One would think that a simple survey of the U.S. economic shambles would put an end to the government spending = growth myth. CBS News reports that Obama has accumulated almost $5 trillion in new debt, exceeding the total of his predecessor’s eight years in office in just over three.

If growth followed massive government spending, then the U.S. economy should be humming along rather than the current anemic 2.2 percent in the first quarter of 2012. When adjusted for inflation in commodities, the real GDP for the first quarter stood at 1.7 percent, a far cry from the Obama predicted 3 percent rate for the year.

Our economy has an 8.1 percent unemployment rate that has dropped not due to job creation, but due to people dropping out of the workforce. In fact, 319,000 fewer Americans are employed today than when Obama took office — quite a record of growth for Europe to follow.

Obama’s “growth” agenda has been fueled by about $3 trillion in stimulus including the failed $800 billion fiscal stimulus and more than $2.5 trillion in monetary stimulus courtesy of Ben Bernanke and the Federal Reserve Bank.

Now, Obama is working on the European leaders to push them toward policies that would push down the accelerator on sovereign debt creation which has been proven to only make the overall debt crisis worse.

Ironically, the so-called “austerity” alternative that Obama is urging to be rejected has not even been tried as countries like Greece have not made the choice to cut their budgets enough to staunch the flow of red ink, so there is no baseline in the current crisis to show that budget balancing doesn’t generate growth.

The sad fact is that those who cling to the failed socialist policies of the past will not give up the illusion that Keynesian economics is anything more than a theory designed to gradually slip free people into the bondage of ever growing government debt.

As the world watches these leaders of the largest “democracies” on the planet engage in meetings designed to save the crumbling European socialist infrastructure and the banks that lent the money to enable it, we see the clash of national histories and cultures.

Germany, with its collective memory of the hyperinflationary despair caused by massive deficit spending after WWI which led to the rise of Adolph Hitler, chooses the route of fiscal responsibility. Even with this history, the German debt to gross domestic product has risen from 58.8 percent in 2002 to 81.2 percent in 2012.

The United States under Obama, has embraced fiscal recklessness under the mantle of “growth” and has seen our debt to GDP increase from 64.4 percent in 2008 to crashing the 100 percent mark in 2012.

Just so the U.S. doesn’t feel too lonely having our national debt exceed our total annual economic production, fellow G-8 member Italy has a GDP to debt ratio of 120 percent. Of course, Italy is considered a prime candidate for needing a bailout to prevent them from defaulting on their debts, so one wonders how wise it is to include them in the room when discussing whether the prudent economic policy is politically difficult budget cuts or an Alice in Wonderland spending spree. Not to be outdone, Japan has beaten everyone in the race toward fiscal insanity having blown past the 200 percent threshold and having twenty years of economic stagnation.

So, now Obama wants to try to sell the world on the concept of additional spending being the key to future economic prosperity. Hopefully, the rest of the world treats his economic prescriptions with the same respect that the U.S. Senate treated his budget and just says no.

No matter how hard Obama and the world’s creditors try to redefine the meaning of growth and turn common sense on its head, more government deficit spending can only further stagnate economic growth. After all, if deficit spending created economic growth, the U.S. debt to GDP would be shrinking in response to our unprecedented deficits, and not even Obama can argue that red ink is actually black.




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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)


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