Saturday, February 13, 2010

Parallels of Abraham Lincoln and B. H. Obama

Jim Crum just e-mailed me this analysis of the similarities and differences between Barack Obama and Abraham Lincoln. It is profound.

1. Lincoln placed his hand on the Bible for his inauguration. Obama used the same Bible.

2. Lincoln came from Illinois. Obama comes from Illinois

3. Lincoln served in the Illinois Legislature. Obama was in the Illinois Legislature.

4. Lincoln had little experience before becoming President. Obama had little experience before becoming President.

5. Lincoln rode the train from Philadelphia to Washington for his inauguration. Obama rode the train from Philadelphia to Washington for his inauguration.

6. Lincoln was a skinny lawyer. Obama is a skinny lawyer.

7. Lincoln was a Republican. Obama is a skinny lawyer.

8. Lincoln was highly respected. Obama is a skinny lawyer

9. Lincoln was born in the United States. Obama is a skinny lawyer.

10. Lincoln was so honest he was called Honest Abe. Obama is a skinny lawyer.

11. Lincoln led America through the civil war. Obama is a skinny lawyer.

12. Lincoln's birthday is documented and a holiday. Obama is a skinny lawyer.

13. Lincoln defended and protected the US Constitution. Obama is a skinny lawyer.

Friday, February 12, 2010

Sack Lunches

I received this from Contrairimairi:

>The Sack Lunches

I put my carry-on in the luggage compartment and sat down in my assigned seat. It was going to be a long flight. 'I'm glad I have a good book to read. Perhaps I will get a short nap,' I thought.

Just before take-off, a line of soldiers came down the aisle and filled all the vacant seats, totally surrounding me. I decided to start a conversation.

'Where are you headed?' I asked the soldier seated nearest to me.

'Petawawa. We'll be there for two weeks for special training, and then we're being deployed to Afghanistan

After flying for about an hour, an announcement was made that sack lunches were available for five dollars. It would be several hours before we reached the east, and I quickly decided a lunch would help pass the time...

As I reached for my wallet, I overheard a soldier ask his buddy if he planned to buy lunch. 'No, that seems like a lot of money for just a sack lunch. Probably wouldn't be worth five bucks. I'll wait till we get to base.'

His friend agreed.

I looked around at the other soldiers. None were buying lunch I walked to the back of the plane and handed the flight attendant a fifty dollar bill. 'Take a lunch to all those soldiers.' She grabbed my arms and squeezed tightly. Her eyes wet with tears, she thanked me. 'My son was a soldier in Iraq ; it's almost like you are doing it for him.'

Picking up ten sacks, she headed up the aisle to where the soldiers were seated. She stopped at my seat and asked, 'Which do you like best - beef or chicken?'
'Chicken,' I replied, wondering why she asked. She turned and went to the front of plane, returning a minute later with a dinner plate from first class.

'This is your thanks..'

After we finished eating, I went again to the back of the plane, heading for the rest room. A man stopped me. 'I saw what you did. I want to be part of it. Here, take this.' He handed me twenty-five dollars.

Soon after I returned to my seat, I saw the Flight Captain coming down the aisle, looking at the aisle numbers as he walked, I hoped he was not looking for me, but noticed he was looking at the numbers only on my side of the plane. When he got to my row he stopped, smiled, held out his hand and said, 'I want to shake your hand.' Quickly unfastening my seatbelt I stood and took the Captain's hand. With a booming voice he said, 'I was a soldier and I was a military pilot. Once, someone bought me a lunch. It was an act of kindness I never forgot.' I was embarrassed when
applause was heard from all of the passengers.

Later I walked to the front of the plane so I could stretch my legs. A man who was seated about six rows in front of me reached out his hand, wanting to shake mine. He left another twenty-five dollars in my palm.

When we landed I gathered my belongings and started to deplane. Waiting just inside the airplane door was a man who stopped me, put something in my shirt pocket, turned, and walked away without saying a word. Another twenty-five dollars!

Upon entering the terminal, I saw the soldiers gathering for their trip to the base.
I walked over to them and handed them seventy-five dollars. 'It will take you some time to reach the base.. It will be about time for a sandwich.
God Bless You.'

Ten young men left that flight feeling the love and respect of their fellow travelers.

As I walked briskly to my car, I whispered a prayer for their safe return. These soldiers were giving their all for our country. I could only give them a couple of meals. It seemed so little...

A veteran is someone who, at one point in his life, wrote a blank check made payable to 'The United States of America ' for an amount of 'up to and including my life.'

That is Honor, and there are way too many people in this country who no longer understand it.'

May God give you the strength and courage to pass this along to everyone on your email buddy list....


Let us pray...

Prayer chain for our Military.... Don't break it!

Please send this on after a short prayer.. Prayer for our soldiers Don't break it!


'Lord, hold our troops in your loving hands. Protect them as they protect us. Bless them and their families for the selfless acts they perform for us in our time of need. Amen.'

Prayer Request: When you receive this, please stop for a moment and say a prayer for our troops around the world.

There is nothing attached. Just send this to people in your address book. Do not let it stop with you. Of all the gifts you could give a Marine, Soldier, Sailor, Airman, & others deployed in harm's way, prayer is the very best one.


Contrairimairi on Political Strategy

ContrairiMairi of Chi-town just sent me this e-mail:

Honestly, Mitchell, I think we MUST look outside BOTH parties! I do not trust ANYONE on an inside track that either party will endorse right now.....The rhetoric during election cycles all sounds so wonderful....then BAM! Once they are in office, the hierarchy pull all the strings!

I think if the Tea Party Movement is going to be ABSOLUTELY successful, we MUST disassociate from ANY and all candidates running on a Dem or Repub ticket. That is going to put a ton of pressure on the Libertarian and Constitution Party candidates, but I believe it is THE ONLY WAY! Repubs and Dems MUST be taken to their knees.

Look what happened with Brown in Massachusetts. I DID contribute, but only to send a message to D.C., "You're next!" But what really changed? Brown is a RINO from the get-go. His term will be an abbreviated version, and I can live with that for now.....but if we REALLY want America and The Constitution back, then ALL DemocRATic and Republican sponsored candidates MUST be refused!

I believe we MUST make a list of focused demands. Once that list is compiled, we MUST make candidates sign a pledge to adhere to it. If they do, they will be supported by the Tea Party Movement, grassroots, NO big-money backers......the people know how to, and WILL, spread the's already underway.....

I think the information I sent you previously form the Thomas Jefferson Center is an EXCELLENT place to start. The one thing I feel badly that they have not included, is a DEMAND that all candidates PLEDGE to rid this Country of illegal aliens. They must also pledge that there will be no such thing as an "anchor baby"......any mother who illegally enters this Country to deliver, passes her crime on to the shall NOT be eligible for citizenship and BOTH will be thrown out summarily! The arrangement shall be baby born here by a mother entering illegally should EVER have been considered a citizen. Only babies born to individuals here on a legal basis shall have that distinction!

Not sure what you will think, but we have GOT to get smart in this Country, and quit standing back wringing our hands and complaining. We have to INSIST on REAL applications to already existing laws. We have enough laws already to keep us busy....time to roll up our sleeves and get the hard work done.

E-verify MUST find and remove the illegals here.

GOD Bless,

A Dem-GOP Split is Preferable to a Bush-Like Palin

The recent election of Scott Brown has two sides. The good side is that it amounted to a rejection of the destructive Obama-Democratic health bill. The bad side is that Brown turned out to be a Progressive. For how long have the Republican rank and file been falling for this? The Democrats produce toxic policies, and in reaction the Republicans support politicians who are committed to maintaining the Democratic policies. This kind of self-destructive stupidity has become so habitual that now a supporter of government sponsored health care in Massachusetts is hailed as a savior.

The Tea Party has demonstrated that it is capable of perpetuation of the Progressive habit. Hence, there is no large-scale voice in America for small government. There is a chance that the Tea Party can be influenced in a libertarian direction, but I do not see any backbone or leadership that would be necessary to reject the nasty GOP national leadership. The Tea Party's connection to Fox News, an integral part of the current tax-and-spend establishment, is evidence enough. Their applause for bailout supporters like Sarah Pailin also gives pause. Let us hope things can be turned around. I am not convinced.

I think the best that libertarians can do at this point in time is support the GOP at the local level and sit out the presidential election. A split with the Republicans controlling the Senate or hopefully both houses and a Democratic president, especially a joke like Obama, is preferable to the GOP controlling both branches. The chief downside is Democratic access to the Supreme Court. But the author of the New London v. Kelo decision, John Paul Stevens, was a Ford appointee (he goes back to 1975). The decision, which gave government the right to steal homes from private citizens, was passed in a court that was 7 Republican, 2 Democratic. As Mike Heuss wrote of New London v. Kelo:

"The Supreme Court is made up 9 individuals. Of those nine people, all but two are life-long Republicans: Appointed by Nixon, Ford, Reagan and Bush Sr. Of the two Democrats on the Supreme Court Ginsburg is typically considered a moderate and so is Stephen Breyer.

"In truth, nationwide, the Republicans have placed more judges in all levels of the federal judiciary. So when I hear a Limbaugh / O'Reilly blowhard scream about activist judges, I recognize the spin and chuckle. They are saying "Maybe if I talk loud enough and label them all liberal, the Democrats will get blamed instead of us."

Thus, I don't think the GOP has made much difference for good at the presidential level. Libertarians might begin to think of the advantages of a GOP-led Senate and a Democratic president. There would be gridlock, hence government would considerably slow down. Partisan squabbling would be much preferable to what Bush did, such as the horrifying prescription drug law.

Gridlock sounds good to me. Better than seeing the national Tea Party played for a bunch of patsies with a Bush-like Palin in the White House. As well, it is more likely that the Tea Party can be influenced in a libertarian direction at the local level.

Has the Tea Party Become a Drag?

I just submitted this post at the RLC website:

I was reviewing Sarah Palin’s speech at the Tea Party convention on Youtube and was reminded of her position on the 2008 bailout. In a September 24, 2008 television interview Palin supported the bailout. But at the recent Tea Party convention she objected to bonuses that the support she had previously advocated made possible. I think the expression is that she has been shedding conservative crocodile tears.

Conservatives love to hate Saul Alinsky but in fact all activists, conservative, libertarian or left-wing, follow his advice if they aim to succeed. One of Alinsky’s rules for radicals is that a tactic that drags on too long becomes a drag. This seems to be occurring with the Tea Party.

A reader suggested this blog by the Alantic Magazine’s Andrew Sullivan. Sullivan argues that the Tea Party convention was not economically conservative but was rather dominated by Christian activists. Sullivan writes:

They have no plans to cut serious spending whatsoever. They love their Medicare, as they screamed at us last August. Do you remember them revolting against Bush’s unfunded, Medicare prescription drug bill, the worst act of fiscal vandalism since the Iraq war?

I have attended my local Tea Party meeting in Kingston, New York. I do recall others, besides myself, talking about economic issues. One individual brought up the exit of manufacturing from the US, another talked about corruption in government. There are frequent references to the nation becoming worse for future generations. These are all good signs and say to me that the Tea Party has potential left.

Since the Atlantic is not a libertarian source (disclaimer: I read it regularly more than a quarter century ago and not since) my gut would be suspicious of anything its writers have to say about the Tea Party. However, Sullivan makes a good point.

It was obvious from the beginning that the Tea Party rank and file is largely inexperienced. Moreover, these are people who have developed a bad habit of voting for big government candidates who say that they are for small government. They did it for George W. Bush and they did it for George H. Bush. They nominated John McCain, who lept at the bailout like a terrier at a steak, along with Palin and Obama. The Tea Party people realize that something has gone wrong after decades of their de facto support for big government and their solution is…to do the same thing once again. This is seen in their decision to ask John McCain’s running mate, Sarah Palin, to be the keynote speaker at their convention. Palin may speak economic conservative rhetoric at times, but she is not schooled in basic economics and can be seen in the September 2008 interview to be in the Progressive tradition.

I believe that libertarians need to work with the Christian right. However, we have been hammered once before, with respect to George W. Bush. The tactic of working with the Tea Party has helped expose our views, and it has been successful. But should libertarians continue to support the Tea Party? I am not certain that the leadership of the Tea Party supports our mission of limited government. Sarah Palin does not. I don’t think she understands that government activism in the bailout is logically inconsistent with support for limited government. The Tea Party may soon become a drag.

Thursday, February 11, 2010

When It Mattered, Sarah Palin Supported Big Government

September 24, 2008

Last week: "While people on Main Street look for jobs, people on Wall Street — they’re collecting billions and billions in your bailout bonuses." notes:

"Further, in traveling to Texas to stump for incumbent Governor Rick Perry after speaking under the Tea Party Nation banner, Palin is slighting the one real tea party candidate running in Texas-- a rising Debra Medina who is insistent on shaking up the status quo and triumphing over party stooges Perry & Hutchinson."

Has Sarah Palin undergone a major intellectual transformation since fall 2008? Has she read Ludwig von Mises's Theory of Money and Credit? Or is she just yanking the Tea Party's chain.

February 6, 2010 (about 8 minutes in)

I find Alex Jones's emphasis on conspiracy theories to be far fetched, and he is too harsh about Palin. But he is right that unless the Tea Party can find a candidate who opposes the bailout for intelligible reasons, it is an abject failure.

The Obama Goose Step

Gus Murphy of Brooklyn wrote the following letter to the February Olive Press concerning my January letter. My response follows:

Dear Editor,

I found Mitchell Langbert's letter in your January 14th issue quite interesting. His theory that Democrats come in two general categories, a)liars, and b) suckers, was quite persuasive.
But why just Democrats? His theory fits Republicans even better. Republican policies are even more in thrall to large corporate interests over those of common individual citizens.

Personally, it seems to me that Party loyalty most resembles rooting for sports teams; "Yay my team, good, bad, or pitiful." No one ever wonders if the Mets really deserve to win or are really objectively the best -- Mets fans just want to win any way they can.

Gus Murphy
Brooklyn, NY

From: Mitchell Langbert
Sent: Thursday, February 11, 2010 2:10 PM
Subject: Letter to the Editor

Dear Editor:

Gus Murphy makes an excellent point in your February 11 issue: both parties are culpable for the serious fiscal and monetary decline facing future generations of Americans. George W. Bush engineered a policy whereby a great deal of money, some insiders are saying $14 trillion, was donated to Wall Street. President Obama executed the Bush donation, which has been his chief achievement besides reappointing Robert Gates defense secretary. Of course Obama threw in an extra trillion of "stimulus" to corrupt contractors, such as to the mob-linked construction firm that is building the power plant in Middletown Connecticut that killed five people last week.

But there is one difference between the parties. There is a movement of Republicans called the Tea Party which rejects the big business- and special interest-linked Republican leadership. I have been at two well-attended meetings of the Kingston Tea Party. At the Tea Party, complaints about George W. Bush are as frequent as complaints about Barack H. Obama. On the other hand, I know of no large group of Democrats who have not goosestepped behind Obama every step of the way. Indeed, the Wall Street-financed media, starting with MSNBC and CNN, have made every effort to paint the Tea Party as violent extremists because they threaten the Bush-Obama, Republican-Democratic Wall Street-Washington equilibrium.

Where are the Democrats who protest Obama's massive subsidy to Wall Street? I can tell you where we Republicans are. I can also tell you where plenty of Obama-cheering limousine liberals are. But where are the Democrats who don't like $14 trillion subsidies to special interests?


Mitchell Langbert

Wednesday, February 10, 2010

Plenty of Time to Invest in Gold

Ned W. Schmidt features the above graph on his Kitco commentary and on his newsletter's website (the newsletter costs $149, a reasonable price for an investment letter).

The price of gold for the past few years seems to have tracked the rate of monetary growth, but recently diverged sharply. The reason, as Schmidt shows, is contraction of industrial loans leading to less monetary growth. However, the monetary base expanded exponentially, far more rapidly than money itself, which would explain the divergence along with the contraction in loans.

The point that Schmidt is making is very good. First, note on the graph that at least until '08 the gold price has tended to anticipate monetary expansion but trail monetary contraction. Gold investors underestimate the possibility that the Fed will raise rates and contract the money supply. They are right in the long term but can be wrong in the short term. Second, the gold investors have diverged from monetary growth since '08. This may be a larger than usual short term error. Third, it is true that in the short run the contraction in loan activity in a fractional reserve banking system leads to reduced inflation or deflation. But longer term, over the next couple of years, there will be heavy pressure to inflate further, as Schmidt points out. Moreover, government borrowing will create pressure on the Fed to expand the money supply to purchase additional bonds. Until recently, foreign governments have been buying US debt to keep the dollar strong. There are signs that this policy will abate as China has been talking about tightening its money supply. On the other hand, there may be pressure to inflate in Europe as southern European countries suffer from socialist fiscal mismanagement.

Schmidt asks:

"Will that red line turn positive? Yes. Already the lack of economic growth inspired by weak U.S. money supply growth is evident in the economic statistics. Preliminary report on the U.S. economy for the fourth quarter of 2009 was dismal, despite the praise of journalists unschooled in economics. That weak economic growth will increase the pain felt by the Obama Regime and the U.S. Congress. With U.S. national election only nine months in the future, great pressure will be applied to the Federal Reserve. Bernanke may finally get to use that helicopter, either from which to hurl money or to seek asylum in some other land."

In fact, the helicopter left the heliport years ago. The tripling of the monetary base in '08 provides the banks with plenty of liquidity. Government will take advantage of it if consumers cannot. Government spending is inevitably inflationary. Inflation is the difference between the value that the investments facilitated by the new money create and the amount of new money. Government does not create value, it merely allocates consumption. So when most of the new money is borrowed by government, hyper-inflation is likely.

This provides a simple explanation for the recent weakness in gold. But longer term the liquidity-addicted financial-bureaucratic complex will take advantage of the liquidity to expand relentlessly.

Miss Me Yet?

AOL carries this picture, h/t Jim Crum.

America In Extremis

The time has come to spin off the federal government and download it onto the states, leaving just national defense, interstate commerce and conflict resolution to the federal government. The federal government has proven itself to be unmanageable, with the growth of special interests, Medicare and Social Security, not to mention the many bureaucratic government agencies like the Department of Agriculture and the Department of Labor that should be simply shut down.

The states ought to be parceled out the federal responsibilities, and given the option to discontinue or continue them. States like New York, Massachusetts and California would undoubtedly continue the wasteful stupidity, and better and more intelligently run states will discontinue it. This will put the sharp regional differences between the backward "blue" states and the more enlightened "red" states into focus. Ultimately the "blue" states will lose population and go bankrupt as population will emigrate to the "red" states.

GOP Should Nominate Paterson

A few weeks ago Cindy Johansen forwarded an e-mail in which New York's Governor David A. Paterson (D-NY) calls for a spending cap to stem the out of control growth of New York's finances. For a New York Democrat, that is darn good. I e-mailed back Cindy that I would be surprised if New York's Progressive GOP came up with someone better than Paterson.

In the e-mail, Paterson wrote:

"Last week, I proposed an Executive Budget for 2010-2011 that includes a spending cap to control state spending. Tied to that cap is a property tax circuit breaker that would provide property tax refunds to New York's working families. The spending cap will impose long-term fiscal discipline by forcing state government to live within its means. The cap puts New York State on a path to economic recovery that will lead to future budget surpluses -- which will then be returned to taxpayers through property tax relief."

I went to my dentist in Manhattan today but when I returned home I stopped in the Boiceville supermarket and saw headlines in the Post and the Daily News about Paterson's "beleaguered" administration. Apparently, rumors have emanated from misinformation about a forthcoming New York Times article.

According to the liberal blog Huffington Post, Lawrence Schwartz, Paterson's chief of staff, wrote a letter to the Times. The Huffington Post observes that misinformation about a Times article was circulating with the Times's knowledge but the Times did nothing to correct the rumors and the article will do nothing to correct the rumors when it is released.

Perhaps Paterson should consider running as a Republican. He is probably more conservative than most of GOP front runners, with the exception of Rudy.

Monday, February 8, 2010

No Such Thing as a Safe Currency, Save One

Jon Nadler of Kitco quotes Bloomberg's Ben Levisohn:

“For all the concern over the $1.6 trillion US budget deficit and record debt load, the dollar is as valuable now as 35 years ago. Measured against a basket of currencies from the G-10 nations proportioned against each other, the greenback is up about 3 percent since 1975, according to the Bloomberg Correlation-Weighted Currency Index. That was four years after the Bretton Woods agreement set up in 1944 to link currencies to gold, collapsed.”

At the same time, Nadler bears bad news about the darn euro, quoting The Sydney Morning Herald, which notes that even prostitutes in Greece are threatening strikes because of loss of welfare benefits:

"The stakes are high, not just for Greece but for the entire euro zone, where efforts to forge a common economic identity are threatened. Last week, the panic spread to Portugal and Spain, and the cost of insuring their debt against a default soared to record levels as investors bet that, like Greece, governments in those countries won't be able to rein in bloated budgets."

Nadler points out that the continent's financial problems are linked to Democratic Party-style social welfare programs that have decimated its economic growth. Again quoting the Sydney Morning Herald:

"on a continent where the culture and legitimacy of the mother state are so deeply ingrained - and now in some cases unaffordable - a question remains: can the European Commission say 'no more' to prodigal nations like Greece and, to a lesser extent, Spain and Portugal? And how will the countries themselves confront the political fallout of economic distress?"

Given the failure of Democratic Party-style economics in Europe, it is amazing that anyone reads the European-style New York Times anymore, or that Americans have elected an administration that is committed to instituting Europe's failed tribalist philosophy here in the more civilized, individualist United States.

Also of importance are the implications of the dollar's strength. I just blogged about the effects on employment of a strong dollar and how the US government and the Fed have orchestrated the exit of high wage jobs via monetary policy. No currency is safe because the others will inflate as much as we do. What is amazing about this process of dollar repatriation given risk in Europe, which, quoting Nadler, I predicted a month ago using my coin flip method of investing, is that massive deficits and expansion of the monetary base, have been accompanied by increasing DEMAND for the dollar. When the supply of dollars goes up, cheapening them, demand also goes up? Is this a curious application of Say's Law, that supply creates its own demand?

I think not. There is a chasm between Wall Street's short term thinking and longer term reality. Keynes said that in the long term we're all dead, but Keynes is dead and we won't have to wait that long, hopefully (from a death standpoint).

If, given the high inflation rates of the past 40 years the dollar has held its own against other currencies, there is no such thing as a safe currency, save one. Spell it G-O-L-D. That does not mean that gold is going up next week or next month. But the world is on a welfare addiction habit, and the welfare addiction is destroying the source of the "good faith" of the US government. By raising spending, providing stimulus handouts and increasing the money supply, the US government is telling America's hard working employees: "You are fools. Look at the looters at Goldman Sachs." By taxing incomes, the US government is telling you: "Do not work, live off government." By subsidizing the welfare mothers on Wall Street, the US government is telling any entrepreneur: "Why waste your time? Get a value-destroying job in New York City."

If you trust the current pattern of events, trust the current strength of the dollar. Otherwise, think about alternatives. Stocks are fine, but inflation confuses investment, credit is overextended, lending is on hold and the US economy is a mess, starting with over-investment in real estate. This will result in downward adjustments in consumers' wealth and reductions in access to credit.

How will those problems be cured? Ben Bernanke has already done it. Expand the amount of money. But entrepreneurship has been hammered through decades of high tax rates, regulation and harassment of small business. My local pharmacist says he spends half his day filling out government forms. The same in other businesses. So stocks are not exciting. Too much regulation; too much mismanagement; too much malinvestment that needs to be cleaned up.

That leaves commodities. But in the short run, they will be subject to ongoing attacks from the central banks. But are you willing to trust the federal government and the dollar over the long haul?

Connecticut Democrats Pollute and Now Kill

The Hartford Courant's Dan Harr states in the above video that the Connecticut plant that exploded, killed five and harmed at least 14 other people today was funded with one billion dollars in financing from Goldman Sachs last year. As well, its development depended on political relationships involving Connecticut's Democratic Party leadership. The plant is, in fact, a government financed boondoggle. Connecticut taxpayers were already on the hook for $340 million over 15 years to ensure payments to Goldman Sachs's creditors or derivatives holders. One sees links among government, investment banking and criminally-linked construction firms in this tragedy.

Dan Riehl of Riehl World View (h/t Larwyn) notes that three Democratic politicians, Vice President Biden, Congressman Jim Himes and Senator Christopher Dodd, were introduced by Craig Miller, an employee of the firm that is building the plant as a government-linked contractor, O&G Industries, at another of its sites funded through stimulus money. According to Rob Varnon, staff writer for, the developer, Phil Armetta, "was indicted by a federal grand jury alongside other owners of trash hauling businesses as part of the same federal investigation." I suppose his assistants were named Paulie Gaultieri and Silvio Dante.

Varnon adds:

"the plant was controversial from conception mainly on environmental grounds, though some questioned the involvement of the primary developer, Philip Armetta, a politically connected businessman." Varnon adds about the plant:

"environmentalists were concerned about spills of fuel or other discharge, especially into the Connecticut River.

"One group gathered 600 names opposing the plant in 2002 because of concerns about the impact on wetlands in the area and whether it would limit access to nature trails running through the Maromas area."

Sunday, February 7, 2010

How National Debt Drives Out Jobs

Many Americans are concerned about the loss of good jobs. In the manufacturing sector, especially, jobs have disappeared in favor of lower wage retail jobs. The reason is in the expansion of government indebtedness and increasing tax burdens.

In a free market money system such as existed under the gold standard and theoretically ought to exist today under the free floating currency system, if a nation imports an increasing amount, its currency ought to fall in value. Thus, if US plants close and move operations to Asia, then demand for the dollar declines and demand for the yuan or the yen increases. As the demand for the foreign currency increases, the foreign currency becomes more valuable and the dollar becomes less valuable. As the dollar becomes less valuable, it buys less foreign merchandise. Moving overseas becomes less attractive because goods sold in the foreign currency become more costly. So firms stop moving overseas and some return here.

That has not happened in the current Federal Reserve Bank/US treasury regime since the Reagan years. Rather, increasing trade and current account imbalances have not lead to a lower dollar. Rather, the yuan and other currencies have been stable against the dollar, resulting in increasing demand for merchandise manufactured overseas. As a result jobs have moved overseas. This is a process manufactured by the federal government and the Federal Reserve Bank in tandem with foreign central banks.

That is, there has been de facto pegging of foreign currencies against the dollar. This is done through purchases of the national debt. As the national debt is sold, foreign buyers including the Japanese, Chinese, Saudis and Europeans, purchase it, in so doing purchasing dollars with foreign currency in order to buy the debt. This keeps the dollar stronger. If foreign holdings of foreign debt were to be sold, the dollar would collapse. Or, if as seems to be happening now, foreign governments stop purchasing escalating quantities of debt, the dollar will weaken.

Because the dollar has been propped up, US jobs have moved out of the country to a greater extent than they would have were the dollar not propped up. The effect might be large. No one knows the damage that the de facto pegging has done to higher end US jobs.

Added to the mix is the Federal Reserve Bank's persistent monetary expansion. Despite the ongoing purchase of the national debt by foreign dollar supporters, the Federal Reserve Bank also has been purchasing national debt. Inflation since 1980 has been close to 4%, which in earlier decades would have seemed very high but has resulted in the curious belief in recent years that 4% inflation = 0% inflation. The Republicans have not helped in this regard, mistakenly claiming that the monetarist policies of Paul Volcker were due to a choice made by Ronald Reagan. That is not exactly right, because Jimmy Carter appointed Volcker and Reagan was elected because the public was angry about economic declines brought about by Volcker's monetary policies that ultimately stopped hyper-inflation. It is true that the Reagan administration permitted Volcker to continue these policies for two more years without forcing the Keynesian notion of "supply side economics" advocated by the Republican establishment in those years.

Inflation increases the degree to which foreign governments subsidize the US economy. This in turn facilitates consumption, which stimulates demand for retail sales and new homes. It does not stimulate sustainable business growth, though. Ultimately these policies will fail. In the long run, much of America will find itself unemployed, and it will take decades to rebuild a free economy, if all Americans haven't been brainwashed by the ideologically socialist school system by then.

In 1970, the real hourly wage in the United States was roughly the same as it is today. This is a dismal performance, for before the establishment of the Federal Reserve Bank and for five or six decades afterward real wages in the US increased 2 percent per year. This was especially true during the period when there was (a) no Federal Reserve or National Bank and (b) there was the highest amount of innovation in history, between 1836 and 1913. In contrast, the real wage became stagnant at the very time that President Richard M. Nixon (R) abolished all constraints on inflation and encouraged the Fed to inflate in order to boost the stock market and ensure his reelection. The boost-the-stock-market measure of the economy that began in the 1920s was perpetuated during the longest period of real wage stagnation in history, from 1970 through today.

Despite the stagnant real hourly wage, low population density regions such as the Hudson Valley and Catskills have seen massive construction of retail operations that in 1970 were primarily seen in dense suburban areas. That is, less profitable retail operations have been made profitable by two forces. The first, increasing efficiency due to Wal Mart's, McDonald's and other firms' innovation, is very much in the tradition of laissez faire capitalism. The second, low interest rates due to the Federal Reserve Bank's inflationary policies is more in the tradition of the Soviet Union's central planning agency, Gosplan. The results of the second force will be the same as in the Soviet Union.

That is, economic growth has not proceeded because of sustainable demand but because of monetary expansion. Thus, much of the American economy now depends on an unsustainable economic bubble. The bubble has been due not only to the Federal Reserve Bank but also due to foreign governments, who have bought into the curious idea that they benefit from having their workers work at very low wages in order to subsidize US consumption.

Income taxation re-enforces the lack of economic growth. Innovation depends on entrepreneurship, but entrepreneurship depends on the accumulation of capital. In the 19th century, entrepreneurs from low-income backgrounds like John D. Rockefeller could start from nothing and save a year's pay in three years, as Rockefeller did. He used that seed money to purchase a store, and then sold the store to purchase an oil refinery. In the 21st century, half or more of a middle class person's income goes to tax--sales tax, property tax, income tax, state tax, gasoline tax, etc., etc. As a result, the savings rate has been diverted to greedy teachers and bureaucrats who do not create value. Few "progressives" have ever compared the performance of Rockefeller and the American education establishment. Since 1970, literacy, numeracy and other measures have declined as ever more money is thrown at government schools. Between 1865 and 1913, the per barrel price of oil fell dramatically as Rockefeller and his organization innovated relentlessly, vastly improving the American standard of living. It is the education establishment that is greedy. They destroy and do not produce. Rockefeller by comparison was an altruistic saint.

The misallocation of resources and people is vast. It is ironic that the Democratic Party, which is responsible for framing these policies under Franklin D. Roosevelt, is the same party that claims that there is no environmental "sustainability" due to the suburbs or that over-expansion of suburban malls harms the environment. This is the fruit of socialistic planning by the Federal Reserve Bank and the central government. A capitalist economy would have done a much better job of allocating resources between current and future generations. Americans today would be much better off and would have bright prospects, but would not have as wide an array of retail merchandise or jumbo homes.