Daily Archives: February 25, 2009
Let me clarify something in the previous post. Some commenters are saying that they don’t understand how government will allow private money to be created, and relinquish the death hold they want to keep on the economy. The short answer is, I don’t think they’ll have a choice. We’ll concentrate on the US here, but keep in mind that the rest of the developed nations are in even worse shape than we are.
What allows the government–any government, but democratic ones in particular–to operate as they do is the consent of the people. Even totalitarian governments have to worry about that, ultimately, although they can keep the lid on for a time, even for a couple of generations. But even totalitarian regimes often run into explosions which topple them, eventually.
But the loss of faith in a liberal, democratic government is the kiss of death for that government. It doesn’t take a full scale revolution. it just takes people to stop cooperating. India was liberated through non-violent action. So was South Africa. nce the people say, “You’re done.” the government is done.
Right now our economic system is built on nothing more than the “full faith and credit” of the US Government. And that will last only as long as we, the people, have faith in it.
Now this particular recession may not be the one that kills that faith. It may be just one of the warning signs of a coming collapse. But a crash is coming, and, I think sooner, rather than later. We cannot continue indefinitely to fund the spending of the richest country on earth with the savings of one of the poorest.
The total debt and future obligation of the US government now exceeds, by a substantial percentage, the total with of the country’s assets. We have a mountain of debt and payment obligations that exceeds our ability to meet, even if we were able to liquidate the entire country.
If we wish to retire those obligations we have essentially two alternatives: We can repudiate them, or we can pay them off through hyperinflation, which, as a practical matter, amounts to the same thing.
For instance, let’s take social security and medicare. We simply don’t have enough money to pay those obligations. We can slash benefits, or eliminate cost of living increases, which is nothing more than repudiating the debt. We can raise the payroll tax to 30% or more, but that will slow economic growth so much that the increase in revenue will be more than offset by the increased unemployment and slower GDP growth that would result, which would make it even more difficult to pay off other obligations, such as Treasury Bonds. Or we can simply print the money, and pay off the paper obligation with money that has signifigantly less purchasing power than the face value of the obligation.
However we go about it, it amounts to a repudiation of all or part of our obliations, and reveals that the government is both faithless and, as investors take note of the repudiation and decide not to buy government paper any more, creditless as well. What paper they have, they will attempt to unload on any idiot stupid enough to take them.
The dollar will collapse to the point that imported goods, even cheap, shoddily made Chinese ones, might as well be made of unobtainium.
The life savings of million upon millions of Americans will evaporate overnight.
There will be serious hardship, and massive unemployment.
That’s the kind of hardship I’m talking about.
So, how much trust will there be in a government who, after all that, comes back and says, “We’ve learned our lesson. Trust us now. It’ll all be different this time.” among a people who’ve watched the government repudiate all of the promises made over the last 70 years?
And how much more will this be true if there is a feasible, private alternative, consisting of hundreds, perhaps thousands of independent sources of money, and credit? One whose reliability can be publicly judged every minute of every day, and which has no coercive power?
It wouldn’t take a revolution to force the government out of the money and economics business. Or the retirement or health care business. All it will take is a lack of trust. Who will want to do business with an entity that has utterly failed to deserve any trust?
The collapse itself will be the revolution.
UPDATE: By the way, the government’s repudiation of its obligations has already begun, in regards to Social Security. If you are in my age cohort or younger, you are not allowed to retire at age 65. Your retirement age is now 72. The government changed the deal. For us, we have to wait an additional 7 years to begin collecting our benefits. Those of us who do not die before age 72, that is.
That wasn’t the deal we had when we started our working lives. The government unilaterally changed the terms of our Social Security compact. They didn’t call it “repudiation” but, that’s certainly what it was.
My first reaction to Pres. Obama’s speech last night was depression. Here were the Democrats giving the president standing O’s for completely converting the Republic into a social democracy. I mentioned that on Facebook, and one of my readers said it reminded him of Amidala’s line from Star Wars Episode III: “So this is how liberty ends…with thunderous applause.”
But on more careful review, I find that I am not, in fact, depressed over the long-term. Indeed, last night’s speech seems to me not to herald the beginning of a new era for big government and socialism, but rather the last gasp of a dying ideology.
We are, I think, at the cusp of a new era, but it isn’t the one that Pres. Obama and his acolytes in the Congress are thinking it is. Neither the Democrats nor the Republicans, it is clear, have any idea about what is happening. Very few people do. I am going to try and explain something very complicated, and do so very simply, and as briefly as I can. So, with the realization that all simplifications are inevitably wrong in some particular, let me explain.
“Ed’s dead, baby. Ed’s dead.”*
We stand now, I think, in a very historically similar position to the one described by Barbara Tuchman, in the beginning chapter of her monumental work on the outbreak of Word War I, The Guns of August:
So gorgeous was the spectacle on the May morning of 1910 when 9 kings rode in the funeral of Edward VII of England that the crowd, waiting in hushed and black-clad awe, could not keep back gasps of admiration. In scarlet and blue and green and purple, 3 by 3 the sovereigns rode though the palace gates, with plumed helmets, gold braid, crimson sashes, and jeweled orders flashing in the sun. After them came 5 heirs apparent, 40 more imperial or royal highnesses, 7 queens, and a scattering of special ambassadors from uncrowned countries. Together they represented 70 nations in the greatest assemblage of royalty and rank ever gathered in one place and, of its kind, the last. The muffled tongue of Big Ben tolled 9 by the clock as the cortege left the palace, but on history’s clock it was sunset, and the sun of the old world was setting in a dying blaze of splendor never to be seen again.
Four years later, the world order of 1815-1914 was drowned in fire and blood. The Age of Royalty was over, and the Age of Democracy had begun. I believe that Pres. Obama’s speech of last night may very well be the historical equivalent to Edward VII’s funeral.
Ever since it began in late 2007, a blog called Fabius Maximus has been arguing that we are watching the decline and fall–indeed, collapse–of our current economic and financial system. A précis of the argument can be found here, and a more comprehensive archive can be found here. Just as the black-clad crowds lining the streets of the capitol of the British Empire on the morning of May 20, 1910 might have found it inconceivable that their generation would witness the collapse of both the European geopolitical regime, and, ultimately, the British Empire itself, so it may be inconceivable to us that we are witnessing the collapse of the Post-WWII economic and political regime. But I believe it is nevertheless true.
“MONEY! Doesn’t it make you feel good just to say that, Jerry?”
Let me start by explaining what money is. Money is a medium of exchange, that is, it is an object of some kind that I can exchange for goods and service, rather than trying to barter with people to obtain what I need. It may consist of elaborately carved cowry shells, tiny beads painstakingly stitched to strips of leather, round pieces of metal with the image of guys named Julius or Claudius hammered into them, or little pieces of high-quality paper that say “Federal Reserve Note” on them.
But whatever it is, money has certain minimal characteristics. It must be convertible, i.e., if I do a job for you, I have to be willing to accept it as payment, and whoever I buy bread or clothes from has to be willing to accept it in exchange, too. It also has to be difficult to replicate, so that when I accept it, I am reasonably assured that it is the genuine article.
For nearly all of recorded history “money” has been synonymous with gold or silver. And right up till the late 18th century, it was more or les the perfect money. It was intrinsically valuable, in that raw silver or gold was as easily convertible as hammered or minted coins. It was also practically impossible to counterfeit, the best efforts of alchemist to convert dross into gold notwithstanding. It was also relatively rare, and it difficult to obtain new supplies of it without intensive–and extremely expensive–mining operations.
Additionally, there simply wasn’t much to buy. Most people grew their own food, produced their own clothes from flax or wool, and built their own houses by hand. Money was essentially a luxury, and it bought mainly luxury goods for fat cats. Kings could raise and equip armies with it. Merchants could buy nice clothes. But for the most part, money was a tool for use by the rich, and by the relatively few urban dwellers. And, as such, gold or silver was perfect for that level of economic activity.
By the 19th century, though, there were lots more things to buy, and lots more city dwellers, and that trend was increasing rapidly. Hard money became…problematic. The thing about having a hard currency based in gold or silver is that, at the end of the day, whether you run a fully convertible gold standard, or some sort of fractional reserve system, the size of the money supply is always constrained by the amount of gold or silver on hand.
If the economy takes off on a tear, it’s extremely difficult to expand the money supply to meet the demand. When the supply dries up, the economy just shudders to a quick stop, because nobody has enough spare money to fund more expansion. So the economy collapses until it reaches equilibrium with the available money supply, and the cycle starts again. Look at a chart of US economic activity in the 19th century and you see it’s a system of booms and busts, which were far steeper than any we’ve seen since the depression. So the fundamental problem with a gold standard is that it’s relatively inflexible when used by a vibrant, diverse economy. When everybody needs gold, and the demand is unpredictable, gold is very difficult to use unless you’re willing to live with severe booms and busts.
The Great Depression was the death knell for the gold-based world economic system. Those nations that jettisoned gold the fastest, recovered the most. Of course, WWII intervened in the depression, so it took a decade or so to get back to the business of commerce–as opposed to the business of building things to kill Nazis. But, by 1944, everyone–on the Allied side, at least–had recovered enough breathing room to meet at Bretton Woods, NH, and hammer out a new economic system.
What they came up with was a system of fiat currencies, all freely convertible in the FOREX market.
Now, governments could adjust their money supplies appropriately by printing more money or less of it, and taxing their populations more leniently or more severely, as needed. This is the system most of us have grown up with…and it’s dying.
It’s dying because of something innate in human nature that the gold standard was better equipped to deal with: the urge to loot the system.
It’s an urge that has always been there. Sometimes it has been the result of intentional government action to cheapen the currency. If you were, say, the king of Persia, you didn’t need to consult the priests of Ahura Mazda to know that if you changed from using 10 grams of gold per coin, to using only 9 grams per coin, you could stretch your gold supply by 10%. You could then take the extra gold, and buy yourself a nice hat. Or use the extra gold to make one. Whatever.
Of course, people would notice this pretty quickly, and items that used to cost 9 gold pieces would cost 10 pieces–inflation!–but because gold had an intrinsic value, the same weight of gold could be exchanged. It was still pernicious, of course, but because gold had an intrinsic value–and because the supply of gold was relatively inflexible–it wasn’t usually seriously pernicious.
Sometimes, the urge to loot the system has been done by private individuals, who figured out that if they shaved a bit off the edges of their gold pieces, they could accrue enough gold shavings to buy themselves a nice hat, too. This, by the way, is why when we began minting coins instead of hammering them out. They were minted with milled edges, making shaving attempts immediately obvious.
By the 19th century, the looting attempts became widespread, populist movements, like the “Free Silver” movement. At the time, gold was real money. If you took a bunch of gold to a Minting facility, the mint would return you an equal weight in gold coins–minus a nominal minting fee. After huge silver deposits were discovered at places like the Comstock Lode, populist agitation began for minting silver in the same way, at a ratio of 20 ounces of silver for 1 ounce of gold. The massive amount of silver floating around would, of course, have made this an extremely inflationary policy, and the farming and borrowing interests would have benefited by paying off bills for less than they had borrowed…enabling themselves to use the extra saving to buy a nice hat.
But during the First Age of Money, the looting was always constrained by the fact that gold had an intrinsic value, and that the supply of gold was inelastic. There were, therefore built-in constraints to the looting impulse.
When the Bretton Woods Agreement launched the Second Age of Money, it solved the problem of the inelasticity of the money supply, and enabled monetary authorities to fine-tune the money supply in response to economic activity. That was a good thing in the sense that it flattened–although did not eliminate–the business cycle fluctuations.
But the bad thing was that it completely removed any physical restraint on the money supply. It depended on governments and monetary authorities to exercise self-restraint, rather than impersonal, externally imposed constraints. The result has been 65 years of continually expanding credit, more or less constant inflation to a greater or lesser degree, and unrestrained spending and borrowing.
Governments–and their democratic (small “d”) constituencies quickly learned that they could loot the system. Social insurance, medical care, military expansion…whatever the Big Idea of the minute was, we could have it. And if we didn’t want to pay the taxes to the government to pay for it–and, mostly, we didn’t–we could simply borrow it. We could obtain a whole bunch of little green pieces of paper now in exchange for a promise we’d pay back more little green pieces of paper sometime in the future. In the meantime, we could buy all the hats we wanted!
But now, we are obligated to pay back various people about fifty trillion pieces of green paper. Unfortunately, the entire household worth of everyone in the country is worth about forty trillion pieces of green paper.
How can the current economic and financial system possibly be considered solvent at this point? How will re-expanding the cycle of debt re-invigorate it?
No, we’ve had our fun. We got to loot the system for 65 years. Now, the hat bill is coming due.
I suspect we’ll pay the hat bill the same way that Germany repaid their war reparations debt after WWI. “Hey, you remember that reparations bill for 3 billion marks that we’re supposed to pay next week? Yeah. I just wanted to let you know that we’ve sent that order off to the printers, this week, and we should have that printed up for you by Tuesday.”
The result was massive hyperinflation, the collapse of credit, and 5 years of compete economic stagnation, serious economic pain, severe unemployment…and the ability to start over in the mid-20s with a clean balance sheet. Clean enough, in fact, that by 1936 Germany had more or less completely emerged from the Great Depression, while the employment rate in the United States hovered at around 18%.
What Pres. Obama is proposing may result in nothing more than additional spending that helps bring about the collapse of the Post-WWII economic regime, while at the same time providing–temporarily–a social safety net that will provide some help as we pass through a difficult transitional period.
“I was there at the dawn of the Third Age of Mankind…”
OK. Maybe it’s not that grandiose, but I think we are seeing the dawn of the Third Age of Money.
No one in the government realizes how the economic world is changing. So their proposed solutions are likely to be exposed over time as ineffective and, perhaps even counter-productive. The credibility of governments around the world is now invested in staving off an economic collapse. When their failures become evident, and their “solutions” are exposed as fantasies, that credibility will collapse. Who will want to buy government bonds, or use worthless government money? Who will trust the governments who lead us into the economic abyss?
Unfortunately, rather that realizing that we are entering a transition, and trying to discover how to shepherd us through that transition, they are invested in preserving the dying system of government-regulated money supply and credit. And even if they realized that we were in a transitional period, they would still do nothing about it because it would require voluntarily releasing their power over the economy.
Governments have always been in charge of money; determining what money is, how it will be exchanged, how new money will be created, etc. In part, this is traditional, in that only government had the resources and ability to fund and oversee mining and exploration activities, regulate what legal tender consisted of, and all of the other monetary functions. There simply were no other large organizations in existence to perform those tasks.
It wasn’t until the 17th century that organizations began to emerge that could begin performing those tasks, and not until the 18th century that it became practical. Private money of various types began to sprout up everywhere. 18th-century America was, for a time, replete every decent-sized bank issuing its own currency based on deposits.
Eventually, the Federal government cracked down on that private money, not so much from jealousy of the government’s role as the issuer of currency, but because private banks suffered from the same tendency to loot the system, issuing more and more inflated currency until it was worthless, and they ended up wiping out their depositors in the collapse as their obligations came due. There were some solid money banks of course, but the spectacular failures of so many private currency attempts led the government to tax them so heavily that private currency issuance became uneconomic. Governments may not have been perfect, but the constraints of the gold system meant that they didn’t fail as completely and spectacularly as private banks did.
What was missing in private currency of the time, and what has been missing in the current post-WWII financial system is feedback. Yes, there is some, but it takes a long time to filter into the monetary authority, and is derived indirectly from statistics on economic activity, rather than by any sort of direct observation. The Fed raises interest rates today, for instance, and it takes around eight months to observe the indirect effects of the monetary policy change. This is why the role of the Fed, has often been described as steering a car by looking through the rear-view mirror. Based on seeing where you’ve been, you make decisions about where you must go. That may be a form a feedback, but it is so separated in time from the inputs that it’s an inherently unstable system.
By the same token, what killed depositors in banks that issued private money was a lack of feedback. It wasn’t possible to see that bankers were looting the system in time to withdraw your money.
We call this lack of feedback asymmetrical information. We’ve never been able to even approach the ability to have full information about what a bank or government is doing that may affect the money supply, or economic activity as a whole. We’ve never been able to see all sides of the story, as it were. So, we’ve had to more or less leave it in the hands of government, simply because governments have been the only organizations with the size and scope to reduce, even partially, the problem of feedback.
So, it seems pretty hopeless, doesn’t it? The financial world we’ve grown up with is collapsing under the sheer weight of looting. If governments can’t do it, and a return to the gold standard can’t do it, then where are we? At the edge of another dark age?
I foresee the rise of private money once again, and returning in such force as to negate the government’s role in the economy. In fact, the pieces for creating the Third Age of Money are already there.
The Internet will be the platform for the new money. But it’s just the platform; the communications media. The actual objects that make up the Third Age of Money will almost be located in cyberspace.
First, there is encryption. In the not-too-distant future, you will go online with a persona, i.e., an online identity with a unique, highly encrypted digital signature. No more logging in with different user names and passwords at 100 different web sites. Your persona will be uniquely identified as you through the use of 4096-bit or 8192-bit public key encryption. Your persona will be impossible to forge or duplicate. It will be unique. Your “bank” and your “money” will be similarly encrypted.
Second, is your ATM/debit card. It won’t be exactly the same, of course. It will be far more secure, probably through the use of biological identification systems to verify authorization, such as retinal scans. It will be linked directly to your persona’s bank account.
Third, is the ability of all the major banks and credit card companies to do online transactions, and to convert one system of private money to another at a publicly known exchange rate. So, you can pay directly to your account–or withdraw from it–in Discover Dollars, or MasterBucks, or Credit Suisse Francs. Or perhaps there might even be a universally acknowledged unit of currency–the “Credit”–that all the private companies agree to use.
But, the most important element of creating a reliable private money system that is resistant to looting the system is feedback. The reduction of asymmetrical information. And that exists, too. eBay has been using it for years. Indeed, in no small way, the system implemented by eBay may be a key element of our future.
Imagine a system where, every time I do business with your persona, I rate your reliability, and it doesn’t matter of the persona is an individual or a bank…or a government. Every day, millions of people who do transactions in MasterCard can rate the reliability and value of the MasterBucks system. Private companies like Standard and Poors or Moody’s would not only rate MasterBucks, but consumers would rate the reliability of S&P or Moody’s judgments.
And not only are the bank’s persona’s being rated, but your persona is as well, by every one who does business with it.
Put them all together and you have a secure form of private money that’s convertible, impossible to forge, and is subject to constant feedback about its value and performance. Does MasterBucks have too high a debt ratio or too much exposure to non-performing loans at MasterCard? No problem. It’s instantly convertible to Credit Suisse Franks. And the conversion rate lowers MasterBucks reliability ratings even more, signaling the company to correct its course, or lose its depositors.
Think of the implications this has for taxation, especially income taxation. Keep all your money in Credit Suisse Francs, say, and the US government will never even be able to see a record of your deposits or withdrawals. How will they track your income? And who will want to pay governments that failed to prevent the collapse for…well…anything? Who will accede to the demand for money by governments that repudiated their debts, and destroyed the life savings of millions?
I can foresee huge implications for the future that are very pro-liberty. In the long term. In the short term, though, if I’m right, and the current financial system is collapsing we will be in for a very rough decade or so. Very rough indeed.
*Apologies to Quentin Tarantino.
Perhaps you’ve heard about Joe Biden’s latest gaffe regarding his task of overseeing the Recovery Act:
How can the public know that the money is allocated correctly? That’s the question CBS’s Maggie Rodriguez asked.
“We’re going to put every bit of this transparently up on a website. You’re gonna know. You’ll be able to go on a website. Every single bit of this will be on a website,” he explained.
“You know, I’m embarrassed. Do you know the website number?” he asked looking offstage. “I should have it in front of me and I don’t. I’m actually embarrassed.”
He was able to get the website “number” from someone off camera.
“Recovery.gov. It’s Recovery.gov. It’s up and running,” he said with newfound confidence.
If that doesn’t inspire confidence, then maybe you should just go visit the “number” VP Joe suggested. Before you do, however, keep in mind that, from far to wide and low to high, the Obama administration has been touting not just the need for transparency,
Orzag said the two goals are to spend stimulus money “quickly” and “wisely,” adding, “We have to go beyond normal procedures to a higher level of transparency.”
But also on the determination and ability of the administration to deliver it:
“I [Pres. Obama] am also proud to announce the appointment of Earl Devaney as Chair of the Recovery Act Transparency and Accountability Board. For nearly a decade as Inspector General at the Interior Department, Earl has doggedly pursued waste, fraud and mismanagement, and Joe and I can’t think of a more tenacious and efficient guardian of the hard-earned tax dollars the American people have entrusted us to wisely invest.”
Apparently, the whole point of Recovery.gov is to show where your tax dollars are going, and what they are being spent on. So let’s have a gander.
On the front page, my eyes were immediately drawn to the large graph dominating the left side of the page:
Wow! According to that chart, the largest expenditure by far ($288 Billion) is going to tax relief. Heck it’s twice as much as the next category of State and Local Fiscal Relief which is only get a paltry $144 Billion. That’s fantastic news. I feel so bad now for thinking that the bill was nothing more than a huge wealth transfer and goodies giveaway. Tax relief is always a good idea when it comes to pulling ourselves out of a recession.
But wait? What’s that asterisk? I click on the chart and am taken to a lovely bubble graph that displays the same information. But with more bubbles, which are always nice. And bubble are transparent too, right?
Yep. There it is again, that $288 Billion in tax relief, dwarfing all the puny spending bubbles. Of course, being an intelligent person, I know that you have to add all of the spending bubbles together to see how they compare to the tax relief, but it’s strangely comforting to see that giant, transparent bubble named Tax Relief making all the other bubbles seem, somehow, insignificant.
Unfortunately, that asterisk is still there as well. I follow it down to the bottom of the page where, in tiny print, I see these words:
* Tax Relief – includes $15 B for Infrastructure and Science, $61 B for Protecting the Vulnerable, $25 B for Education and Training and $22 B for Energy, so total funds are $126 B for Infrastructure and Science, $142 B for Protecting the Vulnerable, $78 B for Education and Training, and $65 B for Energy.
I think my bubble has burst. But that’s how government works now I guess: making bubbles bigger than they ought to be.
First the Obama speech. My overall impression was that of a campaign speech. High flying rhetoric, intentions hidden in comfortable rhetoric that Americans find more acceptable than other and contradictions which were so evident that I’m surprised the media let them pass (ok, not really, but I thought I’d jab them a little). However, in reality, it was much more than that as I’ll cover a little further on. But, as usual, very well delivered.
The Jindal speech, on the other hand, suffered by comparison. And, in fact, it suffered badly. Whoever helped him put that together should have skipped the “folksy” stuff and gotten down to business. By the time he finally got to the point, I was slack jawed with stupification. Having just sat through a 45 minute Obama speech I wanted a quick “give it to me now” response. 5 minutes into the Jindal speech we still didn’t know where he was going with it. My guess is by that time, most people who had thought about watching him had thrown up their hands, hit the can and were raiding the liquor cabinet.
Back to the Obama speech. As I thought about it more I realized he’d very carefully hidden the intention of his administration and the Democrats to convert this country into a cradle to grave European-style socialist country. Seriously. It’s all in there, but you have to carefully pick it out. While he never came right out and said it, he sure hinted around the edges. Probably the closest he came to actually laying it out was this:
That is why it will be the goal of this administration to ensure that every child has access to a complete and competitive education –- from the day they are born to the day they begin a career.
The same basic message was given concerning health care. When speaking about the budget he made this statement:
It includes an historic commitment to comprehensive healthcare reform –- a down payment on the principle that we must have quality, affordable healthcare for every American.
Two things to note – he didn’t say “health insurance” for every American. He said “health care”. And he also seems to have backed off of not making this mandatory.
He hit it again when talking about the two largest entitlement programs we have:
To preserve our long-term fiscal health, we must also address the growing costs in Medicare and Social Security. Comprehensive healthcare reform is the best way to strengthen Medicare for years to come. And we must also begin a conversation on how to do the same for Social Security, while creating tax-free universal savings accounts for all Americans. [So those “savings accounts” of old W’s weren’t so bad after all, huh? – ed.]
And here is where one of the glaring contradictions comes out. While claiming that the government’s version of health care will be much more efficient and less costly than the private version, he contradicts himself when he says we must get the spiraling Medicare and Medicaid costs under control. I’ll remind you of what we were promised Medicare would cost when it began, and I’ll further remind you that the real cost ended up at least 6 times that amount. I’ll also remind you that each year, that program has about 60 billion in waste, fraud and abuse. One of the efficiencies Obama claims will bring cost down is the elimination of that waste, fraud and abuse. That promise is as old as politics and still unfulfilled.
Last night, during the liveblogging, when Obama got to the auto industry, and started throwing “we” around, I asked “who is the ‘we’ he keeps talking about? Of course when you read the passage, I’m sure you will be able to figure it out:
As for our auto industry, everyone recognizes that years of bad decision-making and a global recession have pushed our automakers to the brink. We should not, and will not, protect them from their own bad practices. But we are committed to the goal of a retooled, reimagined auto industry that can compete and win.
I bet “we” are. The question is, will the “we” who are known as the public be willing to buy these autos designed and “reimagined” by government?
And, of course, the populist Obama was present as well . That’s a very old and tired political trick which still manages to work unfortunately. A method of creating an emotional distraction while you propose things which are much worse:
This time, CEOs won’t be able to use taxpayer money to pad their paychecks or buy fancy drapes or disappear on a private jet. Those days are over.
Just hearing a President of the United States say such a thing should send shivers up your spine. Instead it was one of the major applause lines of the night.
And this too should have caused those who love freedom to pause and understand the underlying promise of the words spoken:
A surplus became an excuse to transfer wealth to the wealthy instead of an opportunity to invest in our future. Regulations were gutted for the sake of a quick profit at the expense of a healthy market.
Transfer wealth to the wealthy? How by letting them keep more of their money? How is that a “transfer”? Well, it becomes a transfer if you believe it really isn’t theirs at all. And the spending spree the Democratic Congress and the Obama administration are embarking upon certainly makes that case. With the lie about “no earmarks” in the “stimulus” bill again given voice, and with a 410 billion omnibus spending bill with 9,000 earmarks and another trillion being thrown into the financial sector, not to mention the cost of health care “reform”, S-CHIP and the coming cap-and-trade system, there’s no question where the “transfer of wealth” will be going during the next 4 years is there?
I‘m a big booster of the military (yeah, yeah, I know, big surprise) but when it or members of the military do dumb, stupid or illegal things, I call them out. This is one of those times:
A U.S. soldier on active duty in Iraq has called President Obama an “impostor” in a statement in which he affirmed plans to join as plaintiff in a challenge to Obama’s eligibility to be commander in chief.
The statement was publicized by California attorney Orly Taitz who, along with her DefendOurFreedom.us Foundation, is working on a series of legal cases seeking to uncover Obama’s birth records and other documents that would reveal whether he meets the requirements of the U.S. Constitution.
“As an active-duty officer in the United States Army, I have grave concerns about the constitutional eligibility of Barack Hussein Obama to hold the office of president of the United States,” wrote Scott Easterling in a “to-whom-it-may-concern” letter.
As Neptunus Lex says, “this is a guy way out of his swim lane”. Lex mirrors my reaction exactly:
I’m no particular fan of the president’s agenda, but this smells too like the actions of those refuseniks who insisted that the 2000 presidential election was invalid because the result failed to conform to their preferences. Only this is worse, because the individual in question is an active duty officer serving in a combat zone. It’s going to create a huge headache for both his soldiers and their chain of command, all of whom have much better things to do with their lives – like preserve them – than to coddle the whimsies of a rogue 2LT.
He swore an oath to support and defend the Constitution of the United States. This is mere vanity.
And it is utter stupidity. I don’t support this LT any more than I supported the LT who refused to deploy because he had decided that the Iraq war was “illegal”. They need to get this guy out of Iraq where his divided attention might end up getting someone killed. Then they should help him quickly learn to reassimilate into civilian life again (where he will surely become the darling of a few far-right fringe groups).
Sen. Chuck Schumer has decided he, not the Constitution, should be final arbiter as to whether states take the stimulus money or not:
“No one would dispute that these governors should be given the choice as to whether to accept the funds or not. But it should not be multiple choice.”
So he sent a letter to the OMB Director, Peter Orszag in which he said:
As you know, Section 1607(a) of the economic recovery legislation provides that the Governor of each state must certify a request for stimulus funds before any money can flow. No language in this provision, however, permits the governor to selectively adopt some components of the bill while rejecting others. To allow such picking and choosing would, in effect, empower the governors with a line-item veto authority that President Obama himself did not possess at the time he signed the legislation.
Well, Chuckie, no language in there says they must accept it all either. And, btw, many governors do enjoy line item vetoes.
And then there’s that pesky 10th amendment.
Fed Chairman Ben Bernanke says bank nationalization is unlikely:
Stress tests of big US banks that start this week are unlikely to lead to any of them being seized by regulators and nationalised outright, Federal Reserve chairman Ben Bernanke told Congress on Tuesday.
His comments provided the clearest signal yet that US authorities hope to support major banks as going concerns in the private markets, taking equity stakes as necessary to shore up their capital in what would amount to partial nationalisations.
Stocks rose in response, with the S&P 500 index rising 4 per cent from the previous session’s 12-year lows. Both Citigroup and Bank of America rose about 21 per cent to lead the market higher.
Asked whether the stress tests will lead regulators to move in to take outright control of some banks under powers used to deal with failing institutions, the Federal Reserve chairman said: “No, I don’t think so.”
He made it clear that he does not believe that outright nationalisation makes sense today.
“I do not see any reason to destroy the franchise value or to create the huge legal uncertainties of trying to formally nationalise a bank when it just is not necessary.”
He said the authorities had other ways to “exert adequate control to make sure they are doing what is necessary to become healthy and viable”.
Obama has been trying to play down nationalization for the last week as well, though some would argue that a partial nationalization has already taken place.
You have to wonder if nationalization would cause a run on banks. Wall Street was clearly worried about the prospect. Stocks tanked last week even as Obama was denying plans to nationalize, but they jumped when Bernanke said nationalization was unlikely.
Despite Obama basically telling us last night that the Era of Big Government is back and on steroids, Wall Street was has been skeptical of his plans. For the first time in months, I’m proud of Wall Street.