Pushing American History in the Wrong Way: The NEH

By Justin Williams

With Barack Obama’s new appointment of former Iowa Congressman Jim Leach to chairman of the National Endowment for the Humanities (NEH), new attention is being brought onto a program called We the People. This program is funded with the purpose for furthering the study of civics and bringing Americans together through their history.

And, perhaps not surprisingly, for Obama’s fiscal budget for 2010, it is the only NEH program that is receiving a cut.

We the People won widespread laud for doing a television documentary on the life and writings of Thomas Paine who said “Government even in its best state, is but a necessary evil, in its worst state, an intolerable one”—which may explain at least in part why the Obama Administration has cut this and increased all other NEH programs.

As with most government proposals, under the fairytale-sounding narrative, there is a paragraph that tells exactly why the Obama NEH intends to expand its own select menu of programming. And just like all the other latest proposals of the Obama administration, once you begin to scratch the surface, all the deep dark matter shows.

The NEH claims that its programs will “Strengthen humanities teaching and learning in the nation’s schools and colleges.” Under that sweet-sounding tripe, it reads that they will fund “outreach programs of Humanities Initiatives for Faculty at Historically Black, Hispanic Serving, and Tribal colleges and universities.”

And there you have it: the Obama administration believes that it can bring Americans closer together by funding only colleges and universities that historically have had only minority students. Obama has chosen to increase this while reducing a program, We the People, which “support(s) enrichment workshops for K-12 school teachers at important historical and cultural sites around the nation.” So much for “cultural sites” where the “wrong” cultures may have lived.

The NEH also believes that it could “Preserve and increase access to cultural and intellectual resources essential for the American people” by supporting programs that “preserve and provide access” to “information relating to the estimated 3,000 of the world’s 6,000-7,000 current spoken languages that are on the verge of extinction.”

In other words, the program in We the People that worked at preserving “U.S. newspapers from 1836 to 1922” was not apt at doing this. And neither apparently did providing “free sets of classic works of literature” to libraries.

Americans for Limited Government has always been a supporter of rolling back government and, of course, the budget increases for the NEH continue to add more and more to the already deep hole of U.S. national debt. But the move by the Obama administration to shift policies away from these that seem to achieve goals that bring Americans together to those that seem to discriminately fund small groups is not only wrongful; it’s shameful.

And then, of course, there is the overt attack on Thomas Paine. It begs the question, why is it that the Obama administration is not showing signs of slowing down government spending on various issues (i.e. bailouts, “stimuli,” health care, etc.) but the one program cut in the NEH is the one that supported freedom fighters—and not so coincidently—treasured “that government which governs least.”

One would have hoped that the Obama Administration after inheriting a trillion-dollar deficit would have pursued a limited government budget, in order to prevent the U.S. from going deeper and deeper in debt. No matter what the cost.

Instead, the policies seem to be more of a ploy to divide the country and skew American history. All the while, of course, Obama creates new voting blocs for the Democratic Party—while making certain that those victimized by such reckless, ruthless political chicanery remain are nary once reminded that, indeed, “These are times that try men’s souls.”

Justin Williams is a Contributing Editor of ALG News Bureau.

Published in: on June 25, 2009 at 12:49 pm  Leave a Comment  
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Dr. Ron Paul: No Longer the Lone Ranger

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In 1983, largely due to the policies of the Fed Chairman Paul Volcker and President Ronald Reagan, the American people were finally rid of the burden of astronomical inflation. The policy of the Carter Administration attempting to offset unemployment with having the Federal Reserve print money was at last at an end.

At the same time, a fresh-faced congressman named Ron Paul (R-TX) decided that because of this, it was a good opportunity to investigate the very institution that had helped wreak havoc on the economy with runaway inflation. That same year, he proposed H.R. 877 a bill that would allow the General Accounting Office (GAO) to audit the Federal Reserve Board, the Federal Advisory Council, the Federal Open Market Committee, and the Fed banks and branches themselves.

Dr. Paul was able to garner only 18 co-sponsors on that bill, which died with little to no support. Like many of his bills, supporting liberty and transparency, it was sent to committee were it ultimately met its slow and unheralded death.

But, that was then and this is now. With the Federal Reserve, loose monetary policy, and impending inflation making headlines in the mainstream media, more attention is finally being paid to a near identical bill—H.R. 1207—that Congressman Paul reintroduced in February of this year.

Already, just four months later, H.R. 1207 has a staggering 237 co-sponsors. And now a full-blown audit of the shadowy, secretive, bureaucracy Wall Street Journal writer Steve Moore, in an interview with the Washington News Observer (WNO) calls, “a threat to representative government,” appears imminent.

The fact is, the history of the Federal Reserve is one that can be easily summarized with a foggy picture of Soviet-style central planning causing major booms and busts since the entity’s inception in 1913. For example in a recent WNO interview, Dr. Paul characterizes the Federal Reserve as being the creator of “the inflation of World War I, the depression of 1921, the inflation of the 1920s, and the Depression of the 1930 and on and on.”

Paul compares these events—each caused at least in part by the Fed’s loose money policies—to the current situation with the credit and housing crises, which have put the nation into a deep recession.

The purpose of the Paul bill, now gathering support, is to help Congress and the American people prevent another financial disaster due to the Fed’s constant policy of offering loose credit and encouraging bad lending practices. Plus, it will enable Congress to keep an eye on the current bailout money in order to prevent abuse and fraud.

One issue the bill’s sponsors on either side of the aisle seem to be in lockstep agreement on: the government-granted monopoly over one of the most important units of currency is way too much power to leave to an unelected body that, in one swift action with the printing press, could destroy a nation.

Now the former 2008 Presidential candidate, who was characterized in the media as being insane for bringing up reform in the area of monetary policy, is finding plenty of support. Or as Dr. Paul said in his interview, all of a sudden more than a quarter century after he first proposed it, “…now it is popular to get transparency of the Fed.”

It is as if “everything old is new again”—only this time, with teeth in it.

Justin Williams is a Contributing Editor of ALG News Bureau.

Published in: on June 24, 2009 at 3:48 pm  Comments (1)  
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Mr. Crassus, Meet the Federal Reserve


Marcus Licinus Crassus became the 8th richest person world history by hiring arsonists to set fire to houses in Rome while waiting around the corner with firemen. When the fire appeared uncontrollable, Crassus would approach the owner of the house with his firemen, giving them the ultimatum, “Give me your house at below market value or watch it burn to the ground.” Only then, if the owner agreed would he put out the fire.
Marcus, meet the Federal Reserve.

The Federal Reserve, who were the arsonists that started this financial fire with their loose monetary policies causing the current financial crisis, have now become the new firemen in charge of the financial markets.

Yesterday, Barack Obama announced that he was going to put the Fed in charge of overseeing systemic risk in the economy, derivatives, executive pay, the mortgage-backed securities (which were the primary fuel the housing boom and the credit crisis), and hedge and private equity funds for the first time.

And, all the while, the Fed Board of Governors stood in the background yelling, “Burn baby, burn!”

Once again, the government’s policies are directed at creating another short-term unsustainable bubble instead of trying to fix the long-term problem that put America into this mess in the first place, loose credit. Now even more loose credit is what the American people are going to get.

Ever since Rahm Emanuel uttered the words, “You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things you think you could not do before,” the Obama Administration has pushed for more government spending along with (as ALG has reported) pressuring the Federal Reserve to use the printing press to help ease the enormous debt.

What will the Federal Reserve do when their own policies delude the banks into once again issuing loans that they shouldn’t have? Most likely, they will take a page out of the Obama playbook and divert the blame.

After the Obama Administration’s attack yesterday on the private sector, it is clear that the blame is put on market “recklessness and greed” and not the bumbling Fed bureaucrats who birthed this mess.

When the next bubble bursts in the Fed’s lap, they too will divert the blame toward market “recklessness and greed,” and God only knows what will come next. (Can you say “Novaya Ekonomicheskaya Politika?”)

The real answer, of course, in preventing another financial crisis is government transparency paired with less regulation, not more. With transparency, less regulation will follow. But there is one major obstacle stands in the way, government granted monopolies.

When the Fed was setting fire to the U.S. economy, they had (and still have) a monopoly on the U.S. currency. Just as when Crassus’ men were setting fire to Roman houses, he had a monopoly on the fire-fighting equipment.

Clearly, giving any organization a government-granted monopoly to any commodity –be it U.S. dollars or bucket brigades — without any transparency is a policy as duplicitous as it is dangerous. It virtually guarantees miscreance and sows the seeds of its own destruction.

It’s a little late for the good people of Rome. But, it’s not too late for the American taxpayer. Right now, a bill in the House of Representatives — H.R. 1207 — would, for the first time ever, empower Congress to audit the Fed. If passed it will provide much-needed transparency to an inordinately mysterious organization that, after Obama’s plan goes through, will be able to exercise ironclad control over every facet of the United States economy.

Which means that for American taxpayers – forced to watch their meager earnings go up in flames – the price of Obama’s Pyrrhic Victory will be ashes in their mouths.

Justin Williams is a Contributing Editor of ALG News Bureau.

Published in: on June 19, 2009 at 5:34 pm  Leave a Comment  
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The Ongoing Presidential Policy of Inflation

In every major United States presidential election until the early 1990’s, monetary policy was a major hot button issue. And believe it or not it even captured the popular fancy. For example, The Wizard of Oz written by L. Frank Baum, a populist sympathizer, portrayed the struggles of the movement to add silver to the American currency in his book with metaphors and symbols.

But what most people do not know is that this movement was actually fomented by a group of people who simply owed a lot of money and decided to lobby for a policy of inflation.

As a result, the Federal Reserve Act of 1913 actually began a new era of monetary policy in the United States with one primary motivation in mind: controlling inflation. The politicians, conniving as usual, had figured out an easy way to finance their debt… the printing press.

So those who wanted to rein in the recklessness decided that by making the Federal Reserve independent from Congress, they could prevent skyrocketing inflation. But, as so often occur with “the best laid plans of mice and men,” what actually happened was an inflationary credit boom that created the “roaring twenties” and a bust which the world coined “the Great Depression.”

Now if you think this sounds familiar to the current financial crisis with the housing boom and bust, you are not alone. Nor are you observing an exception to the rule.

The Federal Reserve, since it’s founding, has fostered a constant uncontrollable policy of inflation. But since they claim that they are independent, they insist that the inflation is not due to political pressures.

This, of course, is completely false.

Economist Thomas DiLorenzo finds that the Federal Reserve board has been little more than the President’s handmaiden time and time again. For example, when President Jimmy Carter wanted a strong growth in the money supply to further social welfare programs, Americans saw a jump in inflation to 8.5 per cent. Later, Ronald Reagan, wanted to stop Carter’s damaging policies and stabilize the American economy. He called in newly appointed Fed Chair Paul Volcker. And lo and behold, the “independent” Fed reversed its policies.

So, if the Federal Reserve gives in to the pressures of the President, then why is it that mainstream scholars believe that the Fed is independent? Well, the confusion begins at the divide between instrumental versus goal independence.

It’s true that the Federal Reserve has the independence to set day-to-day monetary policy without any interference, which is called instrumental independence. But the President can heavily influence and direct the goals of monetary policy, thereby making the instrumental independence worthless.

The President does this by exercising his powers of appointing the members to the Board of Governors. This board is comprised of the most powerful players in the Federal Reserve. With only five of the seven positions filled, President Obama now holds an enormous amount of power because he could add two votes to an already small board, making the current members less powerful and insisting his own appointee further his political goals.

Already, with the massive new amounts of spending, there is no doubt that Obama has been leaning on the Fed Chairman Ben Bernanke to help finance all of the new bailouts and outright spending sprees to pay the debt.

The argument is that the United States needs to provide liquidity, or more cash, to the banks so that they can continue lending out money. What is going to inevitably occur, of course, is another boom period followed by a catastrophic bust.

All the while, the American people sit in the dark, while their money is being continually devalued by the Federal Reserve’s printing press, which will cause an artificial unsustainable boom and allow Obama to claim to be economic savior. Then, when the massive bubble eventually—inevitably—bursts, Obama will be either out of office, or (particularly if the mainstream media shameless idolatry continues) simply out of reach.

Perhaps, the last best hope for preventing all of this is the passage of H.R. 1207. The bill now gathering growing support in Congress to audit the Fed already has a staggering 227 supporters. If it reaches 300, Nancy Pelosi will certainly have to hold a vote.

And the beleaguered American people—victims of the “independent” Fed’s obstinacy for well nigh a full century—will finally have a prayer.

Justin Williams is a Contributing Editor of ALG News Bureau.

Unemployment: Who is really to blame?

As soon as newly elected Democratic majority took over Congress in 2007, they aimed their scope at setting a new minimum wage. Unfortunately, while the Senators and Representatives were patting each other on the backs for passing the first bill that raised the minimum wage in nearly a decade, they forgot to consult any economics textbook.

Now with the United States deep in a lengthy recession and high unemployment continuing to rise, the latest installment of $7.25 an hour (from the original $5.15) that is on the horizon will undoubtedly put an enormous pressure upon already struggling businesses everywhere. And the result could be the most devastating round of “stagflation” since the presidency of Jimmy Carter.

On July 24th the government will force the business community to pay their employees for more than the market rate. But those businesses, already struggling just to keep their doors open, will not magically receive new revenue to pay those employees.

Instead, they will keep only their best employees and lay the others off. So while, the American people were told that the minimum wage bill was passed to help the low-skilled workers, it is in actually those very workers who would be hurt.

Now instead of more workers receiving higher wages, there will be more workers receiving no wages at all.  So much for government planning.

As unemployment rises, of course, more pressures are put upon the government to extend unemployment benefits. And more unemployment benefits add more government debt to an already bankrupt country.

And it is not just the federal minimum wage that Americans have to worry about, but also the state minimum wage laws. Many states raised their own minimum wage laws with the passing of this federal bill, exacerbating an already dire situation.

For example, states with more than a two-dollar increase in their minimum wage from 2006 to today had higher unemployment than those who had less than a one-dollar increase.

Over that time, states like California, Colorado, Michigan and Ohio, which have had a more than two-dollar an hour increase from their minimum wages, had their unemployment rates increase 6.1, 3, 6, and 4.8 per cent respectively.

On the other hand during this time, states like Alaska, Arkansas, Connecticut, and Maine, which had a less than one-dollar increase in their minimum wage, saw their unemployment rates increase only 1.5, 1.3, 3.5, and 3.3 percent.

Admittedly since the United States fell into a recession over that time, it is understandable to see higher than normal levels of unemployment. But it is clear that new restrictive minimum wage laws additionally fueled higher unemployment.

Simply put, minimum wage law causes a shortage of jobs and a surplus of labor. Both of which spell disaster for individual workers, as well as the economy as a whole.

So once the latest installment of minimum wage is fully in place, Americans will see more unemployment, a deepening recession, and a massive increase in unemployment benefits in coming months. This policy will make the economic recovery more difficult and the opportunity for the average Joe much smaller.

Luckily, for the Congressional Democrats and many state legislators who passed this law in 2007, the recession has taken the rap for the current rates of unemployment. This smoke and mirror has allowed the Democrats on the hill to shirk responsibility for the current crisis.

But once the American people see another spike in unemployment after the July minimum wage increase, these politicians who hurt the business community will have nowhere to hide, which seems only fair since so many of their victims will have nowhere to work.

Justin Williams is a Contributing Editor of ALG News Bureau

Published in: on June 17, 2009 at 12:03 pm  Leave a Comment  
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Timmy Wonka and the Chocolate Factory

Written by Justin Williams from NetRightNation.com

The Federal Reserve Board, at the behest of Treasury Secretary Tim Geithner, has now decided to initiate a new program that will lend up to $1 trillion dollars for anything from student loans to small business bailouts. And his began the ultimate blurring of the lines between a commercial bank and the role of the Federal Reserve.

It is all to be done under a new program known as the Term Asset-backed Securities Loan Facility, or TALF, created in October of last year. Significantly, TALF was set up not by Congress—which is, of course, answerable to those whose tax dollars it spends. It was created by the Fed itself, which is answerable to …well, itself. Commercial banks, which traditionally made TALF like loans, are defined as financial intermediaries. The Federal Reserve is supposed to be the lender of last resort. This means that the job of commercial banks (i.e. Bank of American, Wells Fargo, and BB&T) is to match those who are willing to save their money with those who are looking for a loan.

The Federal Reserve, on the other hand, is supposed to protect the fractional reserve banking system by supplying cash when banks get in trouble and people try to withdrawal all their assets at once. Now with Geithner’s new TALF plan, the Federal Reserve is in direct competition with these commercial banks. In short, in yet another major step in fulfilling the administration’s socialist agenda, the government is now preparing to use its fiat money printing press to compete with individual’s savings at private banks.

And there is no doubt that the Fed, having a monopoly on the printing press, will be able to destroy any attempt by the banks to fight back. For example, if Bank of America loans out money and the loan defaults, they lose money and learn that they should make their lending practices stricter. This is how the financial free market is supposed to work. If the Federal Reserve loans out money and the loan defaults, all they have to do is print money to make up for the loss. Commercial banks cannot print money they must raise their money from depositors, which is any person who holds a savings account or a CD.

Already with the constant pressure from the Fed to push down current rates of interest, today’s savings accounts lack any significant real rate of return. After the Federal Reserve gets done destroying the competition, the commercial bank’s real (minus inflation) interest rates will be nonexistent. In other words, there will be no real incentive for Americans to keep their money in a savings account. But not to worry: the Fed has even more tricks up its sleeves. As it prints more money to make more loans, the nominal (before accounting for inflation) interest rate will naturally rise with inflation.

Then as in the 1970s, the nominal interest rate gives people the illusion that they are making more money in their savings account, which is actually being devalued by inflation. This, of course, is a double whammy—because what actually matters is the real interest rate. This is the true amount of wealth an individual is accumulating. For example, if John Taxpayer puts $100 dollars in his savings account then he would be very happy if he receives a 7 per cent rate of interest (2008 average rate was less than 1 percent). Both this means that every year the bank will pay him $7 dollars on that initial $100 dollars.

If the inflation rate is at 6 percent, which was the average in the 1970s, then John is actually only making $1 dollar a year making the real rate of interest only 1 percent. Though government hopes, John just won’t notice Secretary Geithner and the Federal Reserve both believe that they can delude the American people, by creating another unsustainable bubble by printing money and competing with (while destroying) American savings. It’s a bubble that will be much bigger than the last.

And, it’s not only a bubble we cannot afford; it’s one we cannot survive. Unfortunately, unless the fiscal conservatives in Congress step in, the only thing that the American people can do is watch as their currency disintegrates. Or as Austrian Economist Ludwig von Mises said, “Money, like chocolate in a hot oven, [will be] melting in the pockets of people.”

But unlike chocolate the American people will be left with anything but a sweet taste in their mouths – or for that matter, sound money in their devalued bank accounts!

Justin Williams is a Contributing Editor of ALG News Bureau.

Paying a Loan Back Never Felt So Bad…

From NetRightNation:

When the government offered $700 billion dollars to buy trouble assets from many banks across America, some were very hesitant to accept these funds.

For example, BB&T’s former (as of 12/31/09) CEO John Allison wrote a letter to Congress explaining that certain bad governmental policies are to blame for the current financial crisis. BB&T is still strong and lending money according to Allison and now CEO Kelly King.

Later, when BB&T along with many other major financial institutions wanted to wash their hands clean of government funds, they were told that they would not be allowed until they passed strict tests, as ALG News previously reported. Even though Barack Obama said that he has no interest “in managing these banks—or running auto companies or other private institutions, for that matter,” he has now granted a small few the right to repay their TARP loans. Why not all of them?

The ten banks that will be paying back $68 billion dollars include: J.P. Morgan Chase & Co., Goldman Sachs Group Inc., Morgan Stanley, BB&T, U.S. Bancorp, American Express Co., Capital One Financial Corp. Bank of New York Mellon Corp., Northern Trust Corp. and State Street Corp.

What exactly is the secret recipe that the bureaucrats came up with to allow these banks to repay loans? Nobody knows. Or at least, nobody is saying publicly.

All that Secretary Geithner stated in his release to the press was that the banks’ willingness to pay is “an encouraging sign of financial repair, but we still have work to do.” Barack Obama has not let the banks off the hook either. He said that “the return of these funds does not provide forgiveness for past excesses or permission for future misdeeds.”

And while the government takes their sweet time deciding which banks can and cannot pay back their loans, they continue reap in the dividends from these “troubled” banks. The federal government has already turned a profit of $4.5 billion in dividend payments from all of the banks, including $1.8 billion from the ten banks listed above. That, even though failing businesses do not usually pay out dividends.

Why is it exactly that the banks have to jump through hoops just to pay back loans? Nobody knows. Or at least, nobody is saying.

Banks sometimes discourage early payment of loans with penalties on mortgage contracts, but this is always agreed to beforehand and protects the bank’s profit. There was no announcement at the outset of any penalty for early payment. And it was understood that the government was not a profit-making entity. And yet, the government has saw fit to control arbitrarily who is and is not allowed to pay.

What are the terms and conditions for repayment?

These banks should be allowed to pay back the loans, anytime they deem it necessary. Those bankers should know what’s better for their business than some bureaucrat who has never run a business in his lifetime. It’s not up to the government to tell a bank that it is too fragile to come off government assistance.

President Obama, since day one, has tried to get involved into every aspect of these financial institution’s decisions, where he continues to play up the myth that capitalism is to blame to all of society’s ills. What he—and Congress and the bureaucracy—are still in denial of is that the Federal Reserve was behind the bubble to begin with its policies of loose credit and easy money.

In short, the financial crisis was a governmental failure. Not a market failure.

Finally, to make matters worse, there isn’t even a plan of what to do with the money being repaid from these banks. In the press release issued by the Treasury Department today, Geithner states that “proceeds from repayment will be applied to Treasury’s general account. These repayments help to reduce Treasury’s borrowing and national debt. The repayments also increase Treasury’s cushion to respond to any future financial instability that might otherwise jeopardize economic recovery.”

So, which is it? Does the Treasury keep the cash or run TARP indefinitely? The repayments might be used to pay off the federal debt, or they might get recycled back into the program, and TARP will never end. Again, nobody knows, and nobody’s saying.

And with the Obama Administration serving notice to banks that they are not off the hook yet—even in repayment—it is no wonder that many of those same banks were reluctant to take the money to begin with.

Justin Williams is a Contributing Editor of ALG News Bureau.

Published in: on June 12, 2009 at 12:16 pm  Leave a Comment  
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The Kennedy Socialized Medicine Triple Whammy

From NetRightNation.com

Over the weekend the Kennedy health care bill–aimed at inserting government into the nooks and crannies of every doctor’s office and operating room–was leaked to the press. Not so coincidently, this enormous growth of government comes as Americans celebrate the 60th anniversary of George Orwell’s book 1984.

In this book, Orwell depicts various insidious instances when Big Government engages in what is called “newspeak.” “Newspeak,” of course, is when the words of a language are distorted to fit a totalitarian regime’s plan to restrict liberty.

There is little doubt that when Harry Reid and Ted Kennedy’s people sat down to draft this bill, they took great pride in elevating “newspeak” from cliché to archetype. Doubtlessly laughing up their sleeves all the while, they named the bill that restricts and coerces millions of Americans the “American Choices Health Act.”

This bill, of course, neither improves American’s health, nor their choices in health care.
Its goal is said to be to give all American’s health care. But the only way it can get it done is by forcing individuals to take government-rationed health care while coercing the employers to take money from employees’ paychecks to pay for the restricted coverage.

And that, truly, is a socialist double whammy.

Somehow by giving up their freedom of choice, Americans are supposed to save a heavily overburdened welfare state that already operates dangerously in the red. It is being reported that in the next 10 days, the White House will release how this plan will knock off $200 to $300 billion in Medicare. At the same time, we are informed, people will be lining up to get a taste of this new “free” health care.

In economics, it is said “incentives matter.” And when it comes to health care costs and benefits, incentives often matter most. When the average American is deciding whether to take health care or not, they are weighing the benefits and costs. This is no different than buying milk at the grocery store. Now that the cost is being subsidized to those who are 500 percent above the poverty line, they will be more apt to try and collect their newly distributed benefits.

For America this means longer wait lines for doctors and for surgery, along with radically increased costs to an already overbloated Big Government. But conveniently for them, Kennedy and Reid left out any and all of the accounting costs in the bill. Though, a previous low estimate was in the range of $1.2 to $1.5 trillion over the next 10 years.

But wait, as the TV infomercial hipsters shout, there’s even more!

Just when it couldn’t seem to get any worse, Kennedy and Dodd are proposing yet another new bill that will only clog the major healthcare arteries even more. It is called “The Healthy Families Act.” This bill forces businesses to pay sick leave to all employees–in the name of preventing the swine flu (as well as any other ailment that happen to take an employee’s fancy.)

To prevent abuse of this, employees will have to document their illness, and that, of course, means even more mandatory–and costly–trips to the doctor. Naturally, there will be more than enough people who will volunteer to spend the day reading magazines and waiting for the doctor (or at least they claim they are) then going to work and being a productive member of society. How can we be so sore? Check out the local welfare and unemployment offices.

Which means the entire health care hoax has now become the true socialist triple whammy.

Kennedy, Pelosi, and Obama are not only incentivizing people to overburden the doctor’s offices, but also now they are even paying those who do work to take more time off and spend it in the waiting room. All the while, bringing the U.S. closer and closer to becoming a kissing cousin to the many unsustainable welfare states of Europe.

Justin Williams is a Contributing Editor of ALG News Bureau.

Published in: on June 11, 2009 at 8:14 pm  Comments (1)  
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The Myth of Bernanke’s Money Helicopter

From NetRightNation.com

When the Federal Reserve Chairman Ben Bernanke spoke at famed economist Milton Friedman’s ninetieth birthday, he praised the Nobel laureate for his work on the “permanent-income theory of consumer spending.” This seemed to demonstrate that he understood consumer spending was not dependant on current income, but instead was influenced by future expectations. But that was then and times change.

Earlier this year, Chairman Bernanke did a complete about face when he supported Congress’ efforts to plunge the United States into more debt in the name of a fiscal stimulus. Bernanke 2.0 said he believed that because of the strong likelihood that there would be an economic slowdown, “…consideration of a fiscal package by the Congress at this juncture seems appropriate.” So much for the Fed Chair’s monetarist root or at least so it seems. Fortunately, there is more to the story.

Chairman Bernanke 3.0 has now begun to denounce the massive government spending, doing a highly adept fiscal two-step. Bernanke now states that the United States “…cannot allow ourselves to be in a situation where the debt continues to rise; that means more and more interest payments, which then swell the deficit, which leads to an unsustainable situation.”

Yet through it all, while Bernanke spends time bouncing back and forth between Keynesianism and Monetarism, he completely misses the real problem, one for which he is directly responsible.

The Federal Reserve is currently using monetary policy to try to stimulate the economy, while the Congress is trying to use deficit spending, also known as fiscal stimulus, to stimulate the economy. The two now are apparently fighting over which they think would be most effective. What they do not realize is that the real solution is neither.

As Friedman showed in much of his work, “crowding-out” prevents a fiscal stimulus bill from ever being effective. “Crowding-out” means that since the government can only raise money from debt or taxes, all Congress is doing is uselessly moving money around.

Raising taxes to fiscally stimulate would just cause private sector spending to decrease, as they have less disposable income. Debt financed stimulus, which is what Congress has been doing, causes interest rates to rise thus making it harder for new private investment to sprout up. In other words, this debt actually causes the banks to be more hesitant to gives out loans, thus exacerbating the current financial problem.

Where the monetarists, like Friedman and Bernanke, went wrong is supporting monetary policy as a safe alternative. They believed in printing money during a recession in order to prevent a contraction in the money supply, which is what they attribute as the primary cause of the Great Depression. Their reasoning (unsound as it may be) is that, unlike a fiscal stimulus, the newly printed money would be evenly distributed inside the economy.

This “Helicopter Effect” is supposed to give people the comforting vision of the Federal Reserve flying over the country throwing free money out the window, thus saving us from an economic downturn. This way the money would not discriminately go to special interests and everyone would be health, wealthy, and though certainly not wise enough to know they were being duped.

Granted it sounds good in touchy-feely theory. Unfortunately, it is poppycock, flapdoodle, and unmitigated balderdash in raw fact.

The Austrian School of Economics exposes this myth for what it is. Ludwig von Mises and Murray Rothbard both crushed this theory and show that the helicopter ends up being just as discriminatory as other politically mattered hijinks. Rothbard, in The Case Against the Fed, states that the Fed printing money is “…a process of transmitting new money from one pocket to another, and not the result of a magical and equiproportionate expansion of money in everyone’s pocket simultaneously.”

In the current financial crisis, the Fed caters to a clearly exclusive club that receives the money: mostly the big banks. Now with the threat of nationalization and massive governmental controls on the banks, the bankers will have no choice but to loan the new money out to whomever they are told to by the bureaucrats. And the bureaucrats, in turn, will favor those that are in the good graces of their political paymasters.

Now with the Fed being responsible for more than $7.76 trillion of financial “rescues” over the past 22 months, the chance of handing out that money indiscriminately is patently absurd. Men, after all, are not angels. Yet, thanks to the many government laws barring auditors from the Fed’s books, the American people (as well as their representatives in Congress) are unable to check and see if these discriminatory practices really do go on.

The Government Accounting Office cannot audit the Federal Reserve’s transactions with foreign governments and banks, transactions made by the Federal Open Market Committee, and they cannot even look at the discussions of major policy decisions. The Fed’s reserve banks have argued that they are private institutions, beyond the reach of any action including the Freedom of Information Act (FOIA). The Board of Governors simply refuses to comply, stating they are allowed to withhold “internal” memos as well as commercial and trade secrets information

In short, the Fed’s message to the American people is even worse than “give us your money—or else.” It’s simply “give us your money and there is no else.” Not even an “elsewhere”—since no other agency anywhere else in government has to power to rein in the Federal Reserve autocrats.

That is why Congress needs now to pass the bill to audit the Federal Reserve, their Board of Governors, and the Reserve Banks that was proposed on February 26th by Congressman Ron Paul. Since then it has gained 186 cosponsors, including 36 Democrats and 150 Republicans, and this number needs to continue to grow to ensure passage.

Without these audits, Chairman Bernanke and his Board will continue to pretend that they have some magical money helicopter that will indiscriminately hand out these newly printed fiat bills. And the once-respected “permanent income theory of consumer spending” will continue to give rapid way to the “eternal fact of Federal Reserve autocracy.”

Justin Williams is a Contributing Editor of ALG News Bureau.

Death by deficit by Tony Blankley

Today’s article of the day comes from the Washington Times:

The ancient Latin historian Livy famously described the terminal plight of the late Roman Republic. “Nec vitia nostra nec remedia pati possumus” (“We can bear neither our shortcomings nor the remedies for them”).

As I reread this phrase in Christian Meier’s biography of Julius Caesar this weekend, I couldn’t help thinking of America’s current fiscal profligacy – which has been growing for years at an ever-accelerating rate.

Of course, since last fall’s financial/economic crisis, the rate of profligacy has become supercharged. Like the Roman Republic’s lament, we think we can’t survive without deficit spending – but soon we won’t be able to survive with the deficit spending, either.

In 2012, federal debt will be higher than $15 trillion. Annual interest probably will be between $1 trillion and $1.7 trillion – depending on whether long bonds remain at about 3.5 percent or go to recent historic rates (6 percent to 7 percent). Deficits will average about $1 trillion a year: $22 trillion by 2019. Yearly interest payments then will be more than $2 trillion. That’s the good news.

That assumes the world continues to buy our Treasury notes at plausible rates. We had a slight foretaste of the future last week when 10-year U.S. Treasury bond yields shot up 60 basis points on soft demand and a Standard & Poor’s warning of a possible ratings downgrade of British bonds. The bond market may well rebel ultimately against our government’s excessive borrowing and spending (insufficiently supported by adequate national economic strength).

The “good news” of only $22 trillion in debt supported by purchasable bonds also assumes that our economy recovers this year and we then have continued steady economic growth. Of course, the more the government borrows, the less will be available for the private sector (the part of the economy that produces things). And the less available borrowing there is for investment and consumption in the economy, the slower the economy will grow – if it grows at all.

The not-so-good news on top of this astounding and growing indebtedness is that we will have to borrow even vastly more than the current budgets propose. Starting in 2017 (just eight years from now) the Medicare trust fund will be depleted. We will begin to experience a Medicare revenue shortfall that ultimately will total $35 trillion to $40 trillion over those next 60 years. Social Security’s depletion begins 20 years later and will have a shortfall of a little less than $10 trillion over the same period.

Oh, and the current budget projects that defense spending will decrease as a percentage of the federal budget. While the overall budget is slated to grow 75 percent over the next decade, defense is to grow just 17 percent. Only imminent and eternal peace would permit such low defense expenditures. The administration’s health plans also will add a currently unfunded $1.5 trillion per decade.

Not only does continued, increased government borrowing ever more sap our economy, but as the baby boomers retire, we will move from what recently were four workers to each retiree to two workers for each retiree. That means a weaker economy with fewer workers and more retirees will not produce enough to support all of government’s costs – even with massive and persistent tax increases.

And if, as seems possible, sometime in the next decade the world resists lending our government enough money (because our economy will be too small to produce enough to pay the ever-growing interest on the debt) – we finally will be forced to make choices of what to buy and what to forgo. Maybe only subsidized pain pills rather than medical treatment for old people? Just 50 percent Social Security payments? Default on federal debt payments? Or what the Chinese are already worried about – monetizing the debt leading to hyperinflation?

But the Roman Republic’s experience hints at an even more profound danger. The political tasks flowing from the growing demands of the republic’s empire were of a magnitude and type that could not be managed by its form of government. However, the Roman Republic was prepared neither to give up its growing empire nor to modify its government to deal with such challenges.

Similarly for the United States today, we are not prepared to forgo what all this soon-to-be unavailable deficit spending can buy us (health care, bank bailouts, defense spending, food stamps, etc.). Nor can our governments (and the publics who elect them) stop the spending.

Eventually for the Romans a contradiction arose between concern for the tasks that needed to be performed and concern for their form of government. The contradiction was resolved and the problems solved at the price of their republic: Came Gaius Julius Caesar.

Surely (presumably?) for the next decade, the United States will bungle onward with both our form of government and our deficit spending. But sometime soon after 2017, when Medicare’s trust fund begins its depletion (or earlier if the world stops buying our bonds) the shocking reality of being forced to do without borrowing will shape – and probably misshape – both our way of life and our form of governance.

Tony Blankley is the author of “American Grit: What It Will Take to Survive and Win in the 21st Century” and executive vice president for global affairs of the Edelman public relations firm in Washington.

Published in: on June 3, 2009 at 6:04 pm  Leave a Comment  
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