American Elephants


Why Things Aren’t Getting Better: by The Elephant's Child
November 12, 2012, 5:55 pm
Filed under: Capitalism, Economy, Statism, Taxes | Tags: , ,

President Obama managed to convince the people last Tuesday that government spending stimulates the economy, and that he cares about them. Perhaps he does care, but he’s way off on the government spending:

The Obama administration spent $5.60 for
every $1 of economic growth.

For the government to function, it needs to sell its debt at very low interest rates. The world has usually liked our debt, because they trust the United States to pay them back. If the world doesn’t want to buy our debt (our bonds), then bond prices will fall, interest rates will rise, and the government will be spending huge amounts of money just to pay the interest rates on our debt.

So who is buying our debt? It is our very own Federal Reserve which buys 70% of our debt. To get the money to buy the debt — they print money. But even if they are just printing money, that debt must be paid back, and interest rates can’t really get any lower. Which means that the government is running on fumes.

The Obama administration spent $5.60 for
every $1 of economic growth.

This means that the left hand of the government is borrowing money from the right hand of government. There is no one on the planet, whether it is the rich or the Chinese who can afford to continue bankrolling that rate of the return. And that’s why government spending not only doesn’t stimulate the economy, when a big chunk of the funds meant to stimulate the economy go into the pockets of cronies, it is not a hopeful solution.



Here’s Another Must-Watch Interview With Two of Our Most Interesting Economists. by The Elephant's Child

I am an enormous fan of  the Hoover Institution’s Uncommon Knowledge programs.  This last week, Peter Robinson interviewed Richard A. Epstein and John Taylor.   Peter Robinson’s question:  Are we all Keynesians Now? After introducing the opposing approaches to economics of John Maynard Keynes and Milton Friedman, economists Richard Epstein and John Taylor discuss U.S. monetary policy from the 1970s onward.

Richard A. Epstein, on the left above,  is a founder of the field of law and economics.  He is director of the John M. Olin Program in Law and Economics at the University of Chicago and a fellow at the Hoover Institution.  John Taylor is a former undersecretary of the Treasury for international affairs.  He is a fellow at the Hoover Institution and a professor of economics at Stanford University.

The controversy in the world of economics and finance today is between the Keynesian economics that the Obama administration follows and the free market ideas of Milton Friedman that the Republicans believe are proven to be more effective.

This interview is like sitting in on a conversation with three brilliant friends. Each segment in about 6 minutes long, so you can watch at your pleasure.  What’s neat is that you can go back and review any part that you didn’t understand.  Unlike those college seminars, if you didn’t take good notes, all you have to do is play them over again.

The previous interviews are all available at the same link above.  They range from Thomas Sowell, to Dambisa Moyo, Charles Kesler, Antonin Scalia and John Bolton to mention only a few of the many guests.  I recommend them highly.



Look For The Union Label, It’s Plastered in The Most Unlikely Places! by The Elephant's Child

Since 1955, the share of workers who belong to a union has dropped from 33 percent to about 11 percent.  Though unions have become increasingly unpopular, they managed to scrape together $52 millions of member dues to donate to Democrat political campaigns this last year.   The unions have helped to wreck two major industries, automobiles and steel.

Democrats are not ungrateful.  The Unions have been rewarded  with shares of GM and Chrysler that should belong  to the taxpayers.  Now, Denis Hughes, president of the AFL-CIO in New York, who has been interim head of the New York board of the Federal Reserve since May, when Stephen Friedman stepped down, is expected to become permanent head.  So now this union activist has been elevated to one of the most important financial posts in the country, a troubling sign of the Obama administration’s over-reliance on organized labor.

Federal Reserve chief Ben Bernanke has been nominated to a second term,  no surprise, as this is a time of unusual financial crisis.  The naming of Denis Hughes is the surprising news, of the ‘what could they be thinking’ kind.

Hughes has no significant financial experience.  He is not an economist, and his educational background does not inspire confidence.  He has a B.S. degree from the Harry Van Arsdale School of Labor Studies at Empire State College.  His experience has been as a union official and political operative.  His entire career has been spent strong-arming and fighting the very people he will now be regulating.  He may be more expert at extracting concessios from corporate America than in the complications of high finance.

As Investors Business Daily asks:

More to the point, can those on Wall Street who come before him in routine regulatory matters expect fair treatment?  Will union issues become part of the New York Fed’s agenda?  Will banks find requests to expand or merge stymied  because unions fear a loss of jobs somewhere?

Elevating a person to the most important of the Fed Banks, whose experience would suggest an inbred hostility to capitalism and free markets, seems dangerous.  Yet the White House has also named former United Steelworkers adviser Ron Bloom from head of the auto task force to “industrial policy czar” in charge of manufacturing.  Itself an astounding nomination.  Where does this government find the authority for an “industrial policy czar?”  And since when does America have an industrial policy?

Unions have consistently been hostile to capitalism and the free market.  They are opposed to free trade, and favor restrictions.  They are inclined towards protectionism in the contrary belief that imports will damage their own opportunity.  They favor minimum wage laws which harm beginning workers.

Unions are being rewarded with huge chunks of stimulus funds for construction and infrastructure projects that are restricted to union labor.  Stimulus funds will also go to rescue union pension funds which are in financial trouble, since they spent their union dues on politics.

Policies always have consequences, and Democrats have little interest in consequences, only in their good intentions.  High labor costs and hostility to the free market will drive  business and investment overseas.  Unemployment will continue to rise— including union jobs—  and  economic recovery will be long, long  delayed.




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