$27 billion. Just a quaint little sum.
The Fed essentially makes direct payments to banking executives. Direct payments.
Guaranteeing a Fat Spread on Interest Rates
Well, as Bloomberg notes:
“The trading profits of the Street is just another way of measuring the subsidy the Fed is giving to the banks,” said Christopher Whalen, managing director of Torrance, California-based Institutional Risk Analytics. “It’s a transfer from savers to banks.”
Harry Blodget explains:
But these days, trading isn’t risky at all. In fact, it’s safer than walking down the street.
Why?
Because the US government is lending money to the big banks at near-zero interest rates. And the banks are then turning around and lending that money back to the US government at 3%-4% interest rates, making 3%+ on the spread. What’s more, the banks are leveraging this trade, borrowing at least $10 for every $1 of equity capital they have, to increase the size of their bets. Which means the banks can turn relatively small amounts of equity into huge profits–by borrowing from the taxpayer and then lending back to the taxpayer.
Paul Abrams chimes in:
Congress should put an immediate halt to this practice. Banks should have to show that the money they are borrowing from the Fed is to provide credit to businesses, or consumers, or homeowners. Not a penny should be allowed to be used to purchase Treasuries. Otherwise, the Fed window should be slammed shut on their manicured fingers.
To get a clear picture of what is going on here, ignore the intermediate steps (borrowing money from the fed, investing in Treasuries), as they are riskless, and it immediately becomes clear that this is merely a direct payment from the Fed to the banking executives…for nothing. No nifty new tech product has been created. No illness has been treated. No teacher has figured out how to get a third-grader to understand fractions. No singer’s voice has entertained a packed stadium. No batter has hit a walk-off double. No “risk”has even been “managed”, the current mantra for what big banks do that is so goddamned important that it is doing “god’s work”.
Nor has any credit been extended to allow the real value-producers to meet payroll, to reserve a stadium, to purchase capital equipment, to hire employees. Nothing.
The bankers rob you. They loot your future wealth. The Fed runs the chop shop where the economy is cut up and auctioned to offshore banking cartels.
Again and again I ask, with deadly seriousness. What must be done?
Completely unexpected. No one could have foreseen it. A black swan on a random walk. Truly surprising.
Not.
CBO estimates that total authorized costs in the first two categories probably exceed $115 billion over the 2010-2019 period. We do not have an estimate of the potential costs of authorizations in the third category.
Robbers. Plain and simple.
Inflation set to crack up any recovery
The National Inflation Association is watching the government numbers.
The Bureau of Labor Statistics (BLS) today released their Producer Price Index (PPI) report for March 2010 and the latest numbers are shocking. Food prices for the month rose by 2.4%, its sixth consecutive monthly increase and the largest jump in over 26 years. NIA believes that a major breakout in food inflation could be imminent, similar to what is currently being experienced in India.
Some of the startling food price increases on a year-over-year basis include, fresh and dry vegetables up 56.1%, fresh fruits and melons up 28.8%, eggs for fresh use up 33.6%, pork up 19.1%, beef and veal up 10.7% and dairy products up 9.7%. On October 30th, 2009, NIA predicted that inflation would appear next in food and agriculture, but we never anticipated that it would spiral so far out of control this quickly.
The PPI foreshadows price increases that will later occur in the retail sector. With U-6 unemployment rising last month to 16.9%, many retailers are currently reluctant to pass along rising prices to consumers, but they will soon be forced to do so if they want to avoid reporting huge losses to shareholders.
Food stamp usage in the U.S. has now increased for 14 consecutive months. There are now 39.4 million Americans on food stamps, up 22.4% from one year ago. The U.S. government is now paying out more to Americans in benefits than it collects in taxes. As food inflation continues to surge, our country will soon have no choice but to cut back on food stamps and other entitlement programs.
Most financial experts in the mainstream media are proclaiming that the recession is over and inflation is not a problem in the U.S. Unfortunately, they fail to realize that rising food and gasoline prices accounted for 58% of February’s year-over-year 3.85% rise in retail sales. NIA believes price inflation is beginning to accelerate in many areas of the economy besides food and energy, and all increases in U.S. retail sales this year will be entirely due to inflation.
The enterprises funded by malinvested capital chase ever smaller returns. Consumers, both individuals and businesses, are broke.
The government didn’t let failing businesses fail. It didn’t reallocate assets from failed concerns to entrepreneurs in orderly bankruptcies. No. The Fed printed money. Lots of it. Now they’re printing more money to bail out Europe.
The invisible tax of inflation will crush consumers and small businesses. Then, government and big financial institutions will gain near total political and economic control. The bankers want it all. They’re going to get it.
We will see civil unrest. It’ll be worse than Greece. Count on it.
Why Arizona is right
Some of the most patriotic Americans are Mexican-americans. Over half of the brave Texas patriots that fought and won independence from Mexico were non-Anglo Mexicans. Mexican-americans have won an extraordinary number of awards during wartime service for the United States.
Unfortunately, too many Mexican-americans and illegal aliens hate white people and hate the United States. I’m sick of it.
Watch L.A. teacher Ron Gochez call for violent insurrection and the extermination of white people.
Gochez gets one thing right. Americans do not oppose Mexican illegal immigration because of race. No. It’s because too many illegal aliens are communists and collectivists. They oppose the basic principles of individual liberty, free enterprise and the Constitution. We don’t want them to turn our country into a morass of socialism and corruption like Mexico.
Watch Mexican-americans strike down a US flag.
Watch illegal Mexican immigrants attack police with rocks and bottles.
Go here. Watch illegal-immigration insurrectionists chase and beat peaceful anti-immigration protesters. Watch the corporate media try to hide the truth: illegal aliens tried to burn down buildings with white people still inside.
If you love freedom, low taxes, and the Bill of Rights. I’m bringing beer to your party, no matter what your race. Hell, if it’s a party I like Mexican girls.
But if you want to take my wealth by confiscatory taxation and welfare, take over our health care and insurance systems, take my guns, take my freedom – then I’m bringing my big, swinging dick to to your party.
Illegal aliens are a threat to the peace. Stand against the horde of racist marxists and their enablers in the US. Stand with Arizona and state’s rights.
Related: Government ignores 12 million illegal immigrants with expired visas.
Use the Patriot Act on the bankers
Financial terrorism has arrived on our shores. As our dear leaders have explained, terrorism warrants “enhanced” law enforcement. Max Keiser and David DeGraw expose the financial terrorists in our midst.
If you think the massive sudden drop happened because one lowly trader hit one wrong button, if you actually believe that the entire stock market can plunge because of one mistaken key stroke by a low level trader, you are stunningly naïve. I hate to burst your bubble, but this was a direct attack.
In a market where 70% of all trades are executed by computer algorithms via High Frequency Trading (HFT), Goldman Sachs has the power to make the market crash or rise at will. In fact, Goldman has a major Weapon of Mass Destruction in its Program Trading monopoly of the New York Stock Exchange, as Tyler Durden described on Zero Hedge:
Goldman’s dominance of the NYSE’s Program Trading platform, where in addition to recent entrant GETCO, it has been to date an explicit monopolist of the so-called Supplementary Liquidity Provider program, a role which affords the company greater liquidity rebates for, well providing liquidity, and generating who knows what other possible front market-looking, flow-prop integration benefits. Yesterday [5/6/10], Goldman’s SLP function was non-existent. One wonders – was the Goldman SLP team in fact liquidity taking, or to put it bluntly, among the main reasons for the market collapse….
… here is the most recently disclosed NYSE program trading data….
What is notable here is that of the 1.4 billion in principal shares, or shares traded for the firm’s own account, Goldman was the top trader by a margin of over 100% compared to the second biggest program trader.
We have long claimed that Goldman is the de facto monopolist of the NYSE’s program trading platform. As such, it is certainly the case that Goldman was instrumental in either a) precipitating yesterday’s crash or b) not providing the critical liquidity which it is required to do, when the time came. There are no other options.
This is an open conspiracy, folks. The oil, metals, and stock markets are captured. There is very little free market left. All is monopoly and fraud. Or maybe, it’s all just coincidence. Not.
Amped Content goes on to note that coincidentally the day after the crash, the “break up the too big to fail banks” amendment was soundly defeated by a 61 to 33 margin in Senate. And, a deal was struck to eliminate key provisions from the audit of the Federal Reserve bill. And, Goldman was meeting with the SEC to work out a settlement in their case against them.
An act of premeditated sabotage. Theater level economic subversion. That means the Patriot Act applies to the bankers.
It’s time to arrest without charge all senior banking executives suspected of involvement. No habeas corpus, just waterboarding and stress positions and “coercive confinement.” We must make them give up their terrorist comrades.
There might be another financial time bomb. Think of the children, people.
(h/t Max Keiser)
Fed supporting European welfare state (bumped)
Liquidity swaps, my ass.
In a statement on its website, the U.S. Federal Reserve said “In response to the re-emergence of strains in U.S. dollar short-term funding markets in Europe, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, and the Swiss National Bank are announcing the re-establishment of temporary U.S. dollar liquidity swap facilities. These facilities are designed to help improve liquidity conditions in U.S. dollar funding markets and to prevent the spread of strains to other markets and financial centers. The Bank of Japan will be considering similar measures soon. Central banks will continue to work together closely as needed to address pressures in funding markets.”
How long can we support this nonsense?
Support Ron Paul’s bill to audit the Fed.
Outrageous Update: Ron Paul’s “audit the fed bill” compromised in Senate.
More specifically, Paul’s language (passed by the House) to audit the Federal Reserve has been stripped from the Sanders Amendment to the Senate financial reform bill. Instead, the Sanders Amendment now contains softer compromise language that exempts monetary policy decisions, discount window operations, and agreements with foreign central banks from Government Accounting Office (“GAO”) audit.
This is of particular concern when several countries such as Greece, Portugal, and Spain are seeking IMF help in the midst of their financial crises, because American taxpayers provide fully 17% of all IMF funding.
“Taxpayers are weary of bailing out privileged banks and corporations in the US, and we certainly cannot afford to bail out entire countries. The possibility of this happening behind a veil of Federal Reserve secrecy is not acceptable,” stated Congressman Paul. “This compromise language represents a huge missed opportunity by Congress to finally make the Fed accountable for trillions of taxpayer dollars it administers. Full transparency, via a full GAO audit, is the only acceptable option. However, I am grateful to Senator Vitter for offering the original full audit language in an alternative amendment to the bill.”
The Fed is arguably the most powerful institution in the United States. It operates in secret, with taxpayer money, beholden to no political authority.
The language was added to the amendment soon after the market crash. Coincidence? Remember, The Fed and Treasury threatened Congress with martial law during negotiation over the bailouts.
Was the crash a manufactured event to prevent a full audit of the Fed? It looks like it. Scott Creighton has the scoop.
The market didn’t crash by a “glitch” and it wasn’t the European Union or Greek riots either… it was terrorism. It was a message: Don’t Fuck With Us. Congress got the message and acted accordingly.
The banking oligarchs sent a clear and unmistakable message that they could drop this nation’s economy into the toilet at any time they wished and if congress thought for a minute that they really ran America, they had better rethink that position.
That’s what happened yesterday.
It isn’t a “coincidence” that the super-computer “glitch” happened a few hours before that senate vote and just a while before the White House had a chat with Sanders about his Audit the Fed bill. It was financial terrorism, pure and simple.
Related: Jim Rogers says stock decline is just the beginning.
Update: Dow futures up over 250. If you don’t follow the markets, that’s just huge. Truly massive. Is the Plunge Protection Team already at work? Fixing things after they got what they wanted from Congress? The PPT usually take huge position in futures to swing the current markets in the “right” direction. That’s how price fixing works in America.
Update: American Taxpayers Looted To Bail Out The Euro.
American taxpayers have been freshly liberated of hundreds of billions more dollars as part of the IMF’s new bailout package which is principally going straight to European banks, in addition to the Federal Reserve program to ship U.S. dollars to Europe, in a move that represents little more than a desperate effort to save the Euro and rescue the credibility of economic global governance [...]
As we reported last time this program was enacted, the Federal Reserve refused to say which foreign banks had received an estimated half a trillion dollars in credit swaps. The program is unconstitutional under Article 1 of the U.S. Constitution which states, “No money shall be drawn from the treasury, but in consequence of appropriations made by law.”
In addition to the credit swap program being re-enacted, the IMF portion of a separate European bailout package amounts to around $287 billion dollars. Since American taxpayers represent around 20 per cent of IMF funding, they will fork out something in the region of $57 billion dollars which which primarily go straight to French and German banks, not to mention the billions more in transfers of wealth that will occur through the Fed’s credit swap program.
The casino economy
De Borchgrave delivers the sermon.
Even the world’s most savvy stock-market giants (e.g., Warren E. Buffett) have warned over the past decade that derivatives are the fiscal equivalent of a weapon of mass destruction (WMD) – potentially lethal. And the consequences of such an explosion would make the recent global financial and economic crisis seem like penny ante. But generously lubricated lobbyists for the unrestricted, unsupervised derivatives markets tell congressional committees and government regulators to butt out.
While banks all over the world were imploding and some $50 trillion vanished in global stock markets, the derivatives market grew by an estimated 65 percent, according the Bank for International Settlements. BIS convenes the world’s 57 most powerful central bankers in Basel, Switzerland, for periodic secret meetings. Occasionally, they issue a cry of alarm. This time, derivatives had soared from $414.8 trillion at the end of 2006 to $683.7 trillion in mid-2008 – 18 months’ time.
The derivatives market is now estimated at $700 trillion (notional, or face, value, not market value). The world’s gross domestic product in 2009: $69.8 trillion; America’s, $14.2 trillion. The total market cap of all major global stock markets? A mere $30 trillion. And the total amount of dollar bills in circulation, most of them abroad: $830 billion (not trillion).
With risk over ten times world GDP, it’s just a matter of time.
When the derivative market explodes, the bankers will try to to take everything. Someone will have to stop them.
Robert Sameulson sometimes mines a gem.
The welfare state’s death spiral is this: Almost anything governments might do with their budgets threatens to make matters worse by slowing the economy or triggering a recession. By allowing deficits to balloon, they risk a financial crisis as investors one day — no one knows when — doubt governments’ ability to service their debts and, as with Greece, refuse to lend except at exorbitant rates. Cutting welfare benefits or raising taxes all would, at least temporarily, weaken the economy. Perversely, that would make paying the remaining benefits harder.
That’s the IMF’s third step, with the planned “IMF Riot” at the end. Watch what happens when millions of Americans lose unemployment payments. You’ll get your austerity riots, right on schedule.
The bankers must be stopped. So, what must be done?
Obama to sieze pensions. Follows IMF plan.
The Obama regime wants to take your retirement accounts.
In February, the White House released its “Annual Report on the Middle Class” containing new regulations favored by Big Labor including a bailout of critically underfunded union pension plans through “retirement security” options.
The radical solution most favored by Big Labor is the seizure of private 401(k) plans for government disbursement — which lets them off the hook for their collapsing retirement scheme. And, of course, the Obama administration is eager to accommodate their buddies.
Vice President Joe Biden floated the idea, called “Guaranteed Retirement Accounts” (GRAs), in the February “Middle Class” report.
In conjunction with the report’s release, the Obama administration jointly issued through the Departments of Labor and Treasury a “Request for Information” regarding the “annuitization” of 401(k) plans through “Lifetime Income Options” in the form of a notice to the public of proposed issuance of rules and regulations.
It’s all part of a well-understood pattern of organized banditry developed by the IMF.
Step One is Privatization – which Stiglitz said could more accurately be called, ‘Briberization.’ Rather than object to the sell-offs of state industries, he said national leaders – using the World Bank’s demands to silence local critics – happily flogged their electricity and water companies. “You could see their eyes widen” at the prospect of 10% commissions paid to Swiss bank accounts for simply shaving a few billion off the sale price of national assets [...]
After briberization, Step Two of the IMF/World Bank one-size-fits-all rescue-your-economy plan is ‘Capital Market Liberalization.’ In theory, capital market deregulation allows investment capital to flow in and out. Unfortunately, as in Indonesia and Brazil, the money simply flowed out and out. Stiglitz calls this the “Hot Money” cycle. Cash comes in for speculation in real estate and currency, then flees at the first whiff of trouble. A nation’s reserves can drain in days, hours. And when that happens, to seduce speculators into returning a nation’s own capital funds, the IMF demands these nations raise interest rates to 30%, 50% and 80%.
“The result was predictable,” said Stiglitz of the Hot Money tidal waves in Asia and Latin America. Higher interest rates demolished property values, savaged industrial production and drained national treasuries.
At this point, the IMF drags the gasping nation to Step Three: Market-Based Pricing, a fancy term for raising prices on food, water and cooking gas. This leads, predictably, to Step-Three-and-a-Half: what Stiglitz calls, “The IMF riot.”
The IMF riot is painfully predictable. When a nation is, “down and out, [the IMF] takes advantage and squeezes the last pound of blood out of them. They turn up the heat until, finally, the whole cauldron blows up,” as when the IMF eliminated food and fuel subsidies for the poor in Indonesia in 1998. Indonesia exploded into riots, but there are other examples – the Bolivian riots over water prices last year and this February, the riots in Ecuador over the rise in cooking gas prices imposed by the World Bank. You’d almost get the impression that the riot is written into the plan.
And it is. What Stiglitz did not know is that, while in the States, BBC and The Observer obtained several documents from inside the World Bank, stamped over with those pesky warnings, “confidential,” “restricted,” “not to be disclosed.” Let’s get back to one: the “Interim Country Assistance Strategy” for Ecuador, in it the Bank several times states – with cold accuracy – that they expected their plans to spark, “social unrest,” to use their bureaucratic term for a nation in flames [...]
Now we arrive at Step Four of what the IMF and World Bank call their “poverty reduction strategy”: Free Trade. This is free trade by the rules of the World Trade Organization and World Bank, Stiglitz the insider likens free trade WTO-style to the Opium Wars. “That too was about opening markets,” he said. As in the 19th century, Europeans and Americans today are kicking down the barriers to sales in Asia, Latin American and Africa, while barricading our own markets against Third World agriculture [...]
“It’s a little like the Middle Ages,” the insider told me, “When the patient died they would say, “well, he stopped the bloodletting too soon, he still had a little blood in him.”
I took away from my talks with the professor that the solution to world poverty and crisis is simple: remove the bloodsuckers.
Notice the IMF’s NewSpeak. Privatization is nationalization. Market liberalization is monopoly. Market-based pricing is price-fixing by governments. Poverty reduction is theft by taxation.
Real free markets are the greatest goods a nation can have. But most people who claim to advocate free markets really support economic fascism. Their pretty words obscure the havoc and death they cause.
The bankers are destroying us. What must be done?
The Wall St. Journal’s Dave Wessel sees clearly the problem. His solution is a vapid cliché.
Demand for workers who haven’t much education—which includes many men, particularly minority-group men—is waning. A shrinking fraction of them are working. Some are looking for work; some have given up [...]
Women have suffered less in this recession. They were more likely to be in health care and other jobs that weren’t hit as hard as construction and manufacturing. They are increasingly likely to have the education so often required to get or keep a good job these days.
That’s good for their families. But will there be good-paying jobs in the future for prime-age men, particularly the ones who don’t go to college? [...]
One way to resist these market forces is to reduce the supply of workers who aren’t in demand and increase the supply of workers who are. That is, educate more and better: Fix K-12 schools, improve worker-training programs, strengthen community colleges, give more aid to college students [...]
Another option is on the demand side: Force employers to be less efficient so they have to hire more, or limit imports of goods that threaten jobs of less educated, prime-wage men—solutions with unwelcome side effects [...]
A third option is surrender to market forces and tax the winners to subsidize the losers. Sending checks to idle men is unappealing, but the government could do more to supplement wages (or health insurance costs) for those who work at low wages.
Pffft.
Wessel’s first option is nonsense. Education is not the problem. Never has been. Highly educated workers cannot find jobs. Degreed professional have a higher unemployment rate than high school dropouts. Education makes you more expensive, and more expensive workers are highly vulnerable to foreign outsourcing. Education can make workers overqualified for jobs that are not outsourced.
Yes, I know. Overqualification is the most stupid idea ever. But what do you expect from the dullards in Human Resources.
Wessel’s second option misunderstands the problem. The problem isn’t imports. The problem is that the tax-paying US worker is forced to fund his own labor competition. The government pays companies to locate overseas and hire foreign workers in the US. To make matters worse, companies get a tax credit for foreign outsourcing. The US government uses tax dollars to put taxpayers out of a job. That’s insane.
If redistributing wealth from US workers to foreign workers is bad, then so is transferring wealth from successful workers to unsuccessful ones. That means Wessel’s third option is preposterous too.
Everyone is asking the wrong question.
We need better. Why are companies laying off men and keeping women employed? Why are companies more willing to hire women and less willing to hire men?
Because of government EEOC regulations, women employees provide a unique economic good, and hiring men imposes a unique economic cost.
Hiring women reduces regulatory risk. Vastly fewer men bring EEOC cases. Of the few men who do, vastly fewer are won. No company has ever got into trouble hiring too many women. Firing women imposes huge regulatory risk. Vastly more women bring EEOC cases, and vastly more win those cases.
Hiring men imposes a regulatory cost. Every man a company hires is a lost opportunity to reduce regulatory risk by hiring a woman. Firing a man imposes almost no regulatory risk at all. Men are not a protected class at law.
Hiring women reduces regulatory risk. Firing women vastly increases risk. Hiring men slightly increases regulatory risk. Firing men imposes only a slight risk.
That’s why men lost 80% of the jobs in this recession. That’s why high male unemployment is structural not a market phenomenon. That’s why men are giving up.
When the dice are loaded, why toss them? When everything is stacked against a man, maximizing leisure is quite rational. Smart even.
The conspiratorially named AEI project, the Shadow Financial Regulatory Committee, wants to unload the big banker’s toxic securities onto the US taxpayer.
There is, however, another option that the Shadow Committee recommends be considered. Freddie and Fannie have been placed in conservatorship and the Treasury has confirmed that their debt is now guaranteed by the U.S. Government. This means that their debt is essentially identical to Treasury debt. The Treasury could simply issue Treasury debt to Freddie and Fannie with the offsetting accounting transaction being an IOU to the U.S. Treasury. Freddie and Fannie could then swap the acquired Treasury debt for MBS held by the Federal Reserve. This transaction would have several desirable features. It would place housing debt on the books of Freddie and Fannie where it belongs and remove the Fed from financing U.S. housing policy, which is appropriately a fiscal policy and not a monetary policy function. This would also help to re-establish Federal Reserve independence from the Treasury and fiscal policy. Finally, it would free the Fed to device [sic] strategies to reduce its balance sheet by engaging in more traditional asset sales in the much deeper Treasury market where the pricing impacts would be smaller and would accommodate a more rapid reduction in excess reserves.
“Several desirable features”?!?!
- It would place housing debt on the books of Freddie and Fannie where it belongs. But the Fed took over the debt in the first place! If it rightly belonged with the Big MACs, the Fed should have left it there to begin with.
- [It would] remove the Fed from financing U.S. housing policy, which is appropriately a fiscal policy and not a monetary policy function. That’s a lie. For fifty years, the Fed has used interest rates to manipulate the debt market for real property. It’s the main mechanism used by the Fed to regulate the quantity of M3. It’s notable that the Treasury and the Fed stopped reporting on M3 in 2005.
- This [transfer of debt to the Big MACs] would also help to re-establish Federal Reserve independence from the Treasury and fiscal policy. True. However, Fed independence is a very bad thing. ‘Independent’ means independent of control by the citizenry. Fed independence is unconstitutional. The Congress cannot delegate the power to coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures. Monetary regulation is expressly put under control of the People. An independent Fed is a criminal enterprise.
The Fed is not a free-market institution. In free markets some businesses fail, and then entrepreneurs acquire the assets in an orderly bankruptcy, and then the process of creative destruction creates jobs, wealth, and freedom. That’s not what the Fed promotes. Now you know that’s not what AEI promotes.
AEI bills itself as a free-market organization. Now you know. AEI are liars and crony capitalists.
Everyone in the Fed, the heads of the large banks, everyone in Goldman Sachs, all of the Fed member banks, and most of the Treasury department – they’re hyenas feeding on the citizenry. They have stolen more money than any organized mafia in human history. The country is in thrall to a criminal gang of international bankers.
The bankers have stolen quadrillions. They are dispossessing the citizenry. They will destroy what’s left of individual economic freedom in this country.
I ask you, in grave tones, what must be done?
Related: International Monetary Fund socializes losses and privatizes profits. Neo-feudalism.
Long-term unemployment soars
The Wall St. Journal links to a scary chart at George Mason University’s Mercatus Center.
Veronique de Rugy explains the chart.
[...] According to seasonally adjusted data from the Bureau of Labor Statistics, last month, over 44.1% of unemployed workers (6.5 million workers) had been unemployed for 27 weeks or more; at the start of 2008, 18.3% of unemployed workers fell into this category. Importantly, these measures of unemployment exclude workers who want employment but were, for various reasons, not included in BLS’s unemployment calculations – an estimated 5.8 million workers [...]
Consider also the rate of underemployment.
Over 40% of Americans have lost their careers. Half of these dispossessed citizens have no prospect for future employment.
Yet, it’s easy to find empirically blind, faith-based economic assessments like this from Georg Riesman.
Contrary to the negative associations it has, outsourcing serves to reduce the prices that Americans pay by more than it reduces their incomes. In fact, on overall, net balance, under today’s monetary conditions, it does not even reduce the money income of the average American worker at all, while it does reduce the cost of production and price of some of the things that he buys. The reason for these results is that the reduction in cost of production, and ultimately in the price of a service that is outsourced, corresponds to the extent to which the relevant wage rates in India, or wherever else, are lower than those in the United States. At the same time, however, the fall in income of the American workers whose jobs have been outsourced is much less than this, and in the economic system as a whole, a fall in income is non-existent.
Reisman goes on to argue,
Thus, for example, assume that workers who provide telephone support to software buyers or credit-card holders must be paid $15 per hour in the United States, while comparably good workers can be employed in India at $1 per hour. The cost saving will probably not be as great as a reduction to one-fifteenth of its original amount, because now there is the cost of setting up and maintaining a longer-distance and probably more elaborate communications network. So let’s say that when allowance is made for this additional cost, the cost works out to be the equivalent of Indian workers having to be paid $1.50 per hour. Thus the cost is ten percent of what it was.
Now when there are cost reductions, competition operates sooner or later to bring about corresponding price reductions, just as when there are cost increases there will sooner or later be corresponding price increases. To the extent that the cost of producing something is reduced by ninety percent, the corresponding part of its price will also tend to be reduced by ninety percent.
At this point, we must ask why the American workers who had been earning $15 per hour do not meet the competition of the Indian workers and retain their jobs by agreeing to work for just under $1.50 per hour. To ask the question is to answer it. There is no thought of meeting the competition of the Indian workers in this way because the alternatives available to the American workers while perhaps significantly less than $15 per hour are still far, far in excess of $1.50 per hour—say, $10 or $12 per hour.
Thus here we have a case in which the cost of production, and ultimately the price of something that Americans will pay, falls by ninety percent, while the wages of the affected workers fall by much less: twenty percent or thirty-three and a third percent.
And here we see the error. Cost inputs in India do not determine the real price of a good in the US. This is a surprising oversight by Riesman, because it’s is an application of the erroneous surplus labor theory of value.
It is not true that a ninety percent lower supplier input-price implies a ninety percent lower consumer price! Just because someone can buy something for less doesn’t mean they will sell it for less. Riesman must surely know it. To make his claim is to ignore the most basic facts of the free-market supply and demand model. It doesn’t get more basic than that.
This is the kind of muddled thinking one encounters among faith-based economists. Everything is consistent, the arguments are relevant and interesting – until we reach the question of outsourcing. Then, it’s all fallacy and obfuscation.
That’s the logical counter-argument, but there’s an empirical one too. Fact: real wages fall and stagnate. Fact: real prices don’t fall in response to imports. This chart shows that real wages and real prices track one another over time.
Real wages have declined. Real prices track wages.
How can this be? It’s obvious, once you see it. Currency values act as a third equilibria with the supply and demand of goods. It creates the opportunity for arbitrage instead of trade.
Our hypothetical call center capitalist, call him Joe Shmoe, outsources to India as an act of arbitrage not an act of trade. Joe hopes to increase the bid-ask spread for his services and thereby increase his profits. He buys labor where it is cheap relative to the US dollar. Each dollar will buy more in the Indian economy than the rupee will buy in the US economy. This fact is neither a result nor a cause of imbalances in supply or demand. Hence, it is not entrepreneurial activity strictly defined. Labor arbitrage is a result of fiat currency values.
Governments set the values of their currency to manage the rate and degree of both trade and arbitrage. This is the economic theory of Monetarism. It is a liberal trade philosophy, but it is not a free trade philosophy.
Who benefits from currency-based labor arbitrage? Owners of capital benefit; they get the larger bid-ask spread. The Indian call center workers benefit; they get jobs at US$1.50. Do US workers benefit? Reisman says they get lower prices. I have shown that claim is false. Prices have not fallen relative to wages, even with massive import and outsourcing levels.
Gomory and Baumol explain further,
Right. Suppose you make a good in the U.S. Why would you lose it to overseas? Because somebody outside can make it more cheaply. True, consumers are coming out ahead in that one industry. But they’re paying a price somewhere else. The goods they always imported get more expensive.
Outsourcing is labor arbitrage not trade. It should be analyzed as absolute advantage not comparative advantage. Outsourcing involves multiple equilibria and requires a more thoroughgoing logical analysis. Outsourcing, unlike trade, does not necessarily benefit everyone. It can profit owners of capital and workers in foreign countries, at the expense of US workers.
That’s why we have insanely high long-term unemployment. That’s why we must end crony capitalism. That’s why we must create real free markets.
“No alternative? How about insurrection!”
Max Keiser explains the giant fraud that is the global economy.
Throw the financial terrorists out of the country. Start with Goldman Sachs.
Watch it all.
“We’re poorer for this [phony] GDP growth, not richer.”
Stossel on outsourcing
It was Stossel vs Dobbs. Stossel won on the rhetoric. On the facts, he’s still wrong.
Stossel showed a chart called the “Clothing Price Index.” I’ve been unable to find the data for that chart, but here’s the Consumer Price Index since 1990 when outsourcing began in earnest.
As outsourcing increases, so do prices. According to faith-based economists, that can’t happen. Their theory says outsourcing should produce lower prices.
It would be true, if money were asset-based. It’s not. Money exchange rates are set by fiat. Lower price inputs in China do not imply lower real prices for the imported goods in the US.
It’s a fact, real prices have steadily increased as we have imported goods from countries with lower price inputs. If the theories of faith-based economists cannot account for this fact, then their theories are either inconsistent or incomplete. I think Monetarism is inconsistent, while the Austrian School theory is incomplete.
The Austrian School has ignored the effect of multiple equilibiria – money-price and product-price equilibiria in a fiat currency system. Multiple equilibiria changes radically the logical analysis of trade under comparative advantage. Austrian School economists ignore this fact. They simply duck under the water and fish out one red herring after another.
Faith-based economist are still ducking the issue. Man up boys. Hear that Stossel?
Probably not.
The Fed monetizes Big Business debt
The Fed prints $1.3 trillion. Bernanke smirks as inflation robs the American people.
You won’t find coverage of this in the mainstream media. Even the business press ignores it. Why?
Obama helped cause the housing crisis
Obama is a corporate shill, a lackey for the banks.
One chapter in this story took place in July 2005, when the Senate Banking Committee, then controlled by the Republicans, adopted tough regulatory legislation for the GSEs on a party-line vote—all Republicans in favor, all Democrats opposed. The bill would have established a new regulator for Fannie and Freddie and given it authority to ensure that they maintained adequate capital, properly managed their interest rate risk, had adequate liquidity and reserves, and controlled their asset and investment portfolio growth.
These authorities were necessary to control the GSEs’ risk-taking, but opposition by Fannie and Freddie—then the most politically powerful firms in the country—had consistently prevented reform.
The date of the Senate Banking Committee’s action is important. It was in 2005 that the GSEs—which had been acquiring increasing numbers of subprime and Alt-A loans for many years in order to meet their HUD-imposed affordable housing requirements—accelerated the purchases that led to their 2008 insolvency. If legislation along the lines of the Senate committee’s bill had been enacted in that year, many if not all the losses that Fannie and Freddie have suffered, and will suffer in the future, might have been avoided.
Why was there no action in the full Senate? As most Americans know today, it takes 60 votes to cut off debate in the Senate, and the Republicans had only 55. To close debate and proceed to the enactment of the committee-passed bill, the Republicans needed five Democrats to vote with them. But in a 45 member Democratic caucus that included Barack Obama and the current Senate Banking Chairman Christopher Dodd (D., Conn.), these votes could not be found.
Recently, President Obama has taken to accusing others of representing “special interests.” In an April radio address he stated that his financial regulatory proposals were struggling in the Senate because “the financial industry and its powerful lobby have opposed modest safeguards against the kinds of reckless risks and bad practices that led to this very crisis.”
He should know. As a senator, he was the third largest recipient of campaign contributions from Fannie Mae and Freddie Mac, behind only Sens. Chris Dodd and John Kerry.
Read the whole thing.
(h/t RSM)
Outsourcing is bad. Innovation is not the solution.
Outsourcing is double plus ungood.
It’s obvious. It’s directly observed. The faith-based economists still deny it. As Ralph Gomory explains, it’ll impoverish us.
Unfortunately, among the sheep [who think they understand comparative advantage] are some who tell us that it doesn’t matter if we lose one industry after another to our rapidly developing trading partners. We will just do something else that is in accord with comparative advantage in the new economic situation.
I have suffered through too many discussions of this sort to view this with anything approaching equanimity. One of these I remember particularly vividly came at an economics meeting during a panel discussion on trade. An audience member asked a university professor on the panel how he would feel if most of the professor’s courses were delivered from India by someone else and at a lower price. His reply, delivered with perfect confidence, was that it would not matter; he and his peers would rather just teach graduate students anyway. [...]
Ignored in all these discussions is the obvious fact that when you don’t make for yourself the things you need, you will have to trade for them. If you have to import cars and all sorts of manufactured goods, you will be importing on a large scale; to trade for them you will need to create additional goods or services that you can export on an equally large scale.
[...] Similarly, you simply cannot pay for large-scale imported education by teaching smaller numbers of graduate students, even if they were all visiting foreigners so that all the teaching you did counted as export.
If you give up large things and specialize in exporting small-scale things for which the demand is limited, you will not be able to buy many of the things that are needed on a large scale. If the things you are going to export don’t add up to something big, you will be neither making nor importing what you need. You will simply not have them. You will be a poor nation.
How long will faux-free-trade advocates duck the issue? How long will they claim that innovation is the answer? It’s just not true.
Friedman is only the latest to assume that we can avoid this fate by emphasizing designs, ideas, and R&D and trading them for the items we need. This is an attractive idea; we often hear about innovation parks and university research centers and often their work is both exciting and good.
But the chasm-sized flaw in this otherwise alluring proposition is scale. Balancing trade on ideas and R&D simply cannot be done. The most elementary analysis shows that the scale is entirely wrong. As one who spent many years as the head of research of a large corporation, I know how much R&D matters; I also know how small it is. Eight percent is a very large percent of revenue to spend on R&D. Even in manufacturing, which is relatively R&D intensive, 4 to 5 percent is typical. It is really wrong to think that you can scale up R&D to be big enough so we can trade it for the huge quantity of things we need but don’t make in this country.
It’s time to wake up.
Proof: we live in a police state
You don’t have habeas corpus rights. You can be imprisoned indefinitely without charge. You are a slave. Here’s proof.
A 70 year old Political Prisoner in Los Angeles is going to have his day in court, when the United States Supreme Court holds a conference hearing on the matter of Richard I. Fine vs L.A. County Sheriff Leroy D. Baca. Fine, an anti-trust attorney, submitted an application for a “Stay of Execution” even though he has never been charged with or convicted of a crime, yet has been held in solitary “coercive confinement” in the Los Angeles Central Men’s Jail for more than a year.
Representing himself, Fine has filed petitions, motions and writs in all the California and U.S. Courts, without success until now. Justice Ruth Bader Ginsberg found enough support among her colleagues to warrant serious consideration of Fine’s plea for a “Stay of Execution”. The Execution being the punishment inflicted by L.A. Superior Court Judge David P. Yaffe for Fine having publicly exposed the corrupt practices of the Judges, the Sheriff and the County.
This is happening all over the United States. For example,
In one of the most shocking cases of courtroom graft on record, two Pennsylvania judges have been charged with taking millions of dollars in kickbacks to send teenagers to two privately run youth detention centers.
For years, the juvenile court system in Wilkes-Barre operated like a conveyor belt: Youngsters were brought before judges without a lawyer, given hearings that lasted only a minute or two, and then sent off to juvenile prison for months for minor offenses.
Guillory, who practices in nearby Nacogdoches, Texas, estimates authorities in Tenaha seized $3 million between 2006 and 2008, and in about 150 cases — virtually all of which involved African-American or Latino motorists — the seizures were improper.
“They are disproportionately going after racial minorities,” he said. “My take on the matter is that the police in Tenaha, Texas, were picking on and preying on people that were least likely to fight back.”
Daniels told CNN that one of the officers who stopped him tried on some of his jewelry in front of him.
“They asked me, ‘What you are doing with this ring on?’ I said I had bought that ring. I paid good money for that ring,” Daniels said. “He took the ring off my finger and put it on his finger and told me how did it look. He put on my jewelry.”
Texas law states that the proceeds of any seizures can be used only for “official purposes” of district attorney offices and “for law-enforcement purposes” by police departments. According to public records obtained by CNN using open-records laws, an account funded by property forfeitures in Russell’s office included $524 for a popcorn machine, $195 for candy for a poultry festival, and $400 for catering.
In addition, Russell donated money to the local chamber of commerce and a youth baseball league. A local Baptist church received two checks totaling $6,000.
And one check for $10,000 went to Barry Washington, a Tenaha police officer whose name has come up in several complaints by stopped motorists. The money was paid for “investigative costs,” the records state.
It’s your government. It’s oppressing your fellow citizens.
Peaceful political solutions are out there. What are you going to do?
Baby ducks and unemployment
Hot Air’s Ed Morrissey has an excellent takedown of the mainstream media’s coverage of the growing unemployment crisis. He links to Uncommon Misconception with an interesting chart.
Uncommom Misconception says,
The data are oscillating about a slowly increasing value, indicating that, if anything, unemployment claims are increasing. That means that for the past 5 1/2 months, every time the administration has told us that the unemployment situation is slowly recovering, and that the data show “the right trend,” they have been absolutely mistaken.
The media has been doing their typical baby duck analysis: every day is a brand new day, every unemployment claims report is the first one they’ve ever seen. So we get headlines like, “job situation improving” when the number of claims drops, and “unexpected increase” when the number rises.
For half a year the claims data has just been oscillating – going nowhere. And nobody seems to have noticed.
It’s getting worse. No recovery is underway.
Romney and Palin are wrong for the Republican Party
Romney has no street credibility when it comes to repeal of Obamacare.
As it is, achieving a full repeal of the recently-passed health care law will be extremely difficult. Given that Obama would veto any bill to undo his signature legislative accomplishment, it means that to get rid of the law, Republicans will have to not only take back Congress, but capture the White House. It also means that conservatives will have to relentlessly campaign against ObamaCare during the next two elections and keep public outrage at an elevated level for at least the next three years. And even if they achieve all of this, they will have a short window to repeal the bill in 2013, because by 2014 the federal government will begin to dole out hundreds of billions of dollars in subsidies, which will create a whole new constituency to preserve the law.
If Romney were the Republican presidential nominee in 2012, it would make this already challenging fight even harder. Romney’s role in creating a health care program quite similar to the one that just passed nationally would allow Obama to neutralize the issue during an election that would otherwise be a prime opportunity to make the case for repeal.
When it comes to their own, Republicans are a trusting lot. It’s time for Republican voters to grow up. Politics isn’t Us Magazine with a vote. Republicans must look at issues not image. Issues not image.
Romney advocates government healthcare that’s angered the people and brewed the Tea Parties. Palin has a similar problem. She supports the policies of John McCain. His policies boil the blood of Tea Partiers faster than Obamacare.
If you favor limited government, if you look at issues and not image – then you cannot reasonably support Romney, and you cannot reasonably support Palin.
12 reasons the people are pissed off
#1) There simply are not enough jobs for everyone. The number of unemployed Americans per job opening has started to increase again, hitting 5.5 in February. Even many of those who are able to get some work find themselves only able to obtain part-time employment. Gallup’s underemployment measure hit 20.0% on March 15th. This was up from 19.7% two weeks earlier and 19.5% at the start of the year.
#2) More Americans than ever find themselves having to rely on the U.S. government just to survive. According to the U.S. Department of Agriculture, about 39.4 million Americans, a new all-time record, received food stamps in January. This was up 22% from a year earlier. In fact, the number of Americans on food stamps has hit all-time records for 14 consecutive months [...]
#7) Meanwhile, corruption in the financial system is running rampant. The CEOs of bailed-out regional banks are actually getting big raises. The guy who helped bring down AIG is going to get off scott-free and will be able to keep the millions in profits that he made in the process.
#8) But the biggest fraud is being committed by the boys at the top of the food chain. A whistle blower has come forward with “smoking gun” evidence of price manipulation by major financial institutions in the precious metals markets. The scope of this fraud is in the trillions of dollars. The American people can’t stomach much more of this type of thing [...]
#11) In addition, the new health care law that was supposed to give all of us much better health care is actually going to force the cancellation of at least 60 doctor-owned hospitals that were scheduled to be opened according to the executive director of Physician Hospitals of America. Why? Well, it turns out that the new law singles out physician-owned hospitals, making new physician-owned projects ineligible to receive payments for Medicare and Medicaid patients.
In a fight, anger is as good as courage.
Republicans are pussies
Losing their nerve? They’ve already lost their balls.
Pussy Galore: less pussy than Republicans
[...] today some Republicans are losing their nerve on repeal. Rep. Mark Kirk, who is running for the Senate in Illinois, signed the repeal pledge and even vowed to “lead the effort” for repeal, but has since backed off, declaring “I voted against it, but we lost.” Sen. Richard Burr of North Carolina , who is running for reelection, has said that “total repeal” is unlikely. And Sen. Lamar Alexander of Tennessee, who is in charge of messaging for the Republican Senate leadership, says that instead of repeal, Republicans should promise “at least big changes” to the bill.
Spineless. Weak.
The government hates you. Hate it back.
Hating the government finally goes mainstream,
But there’s no doubt that hating the government and the powerful interests that pull Washington’s strings has gone from the radical precincts of the Right and Left to the mainstream.
It turns out that watching Goldman Sachs, the United Auto Workers, public employee unions and a raft of other vampires drain the treasury at America’s weakest moment in a generation will make a person pretty hacked off.
(h/t Drudge)
Uh, yeah. I’m all for hatred of big government.
But some people think we shouldn’t hate the government but limit it and make it better.
“I don’t want to make government work better, I want it to go away” is the typical response [of libertarians]. Government, in their view, is the enemy.
This way of thinking is deeply misguided, a troubling blind spot that keeps libertarians on the fringe of many policy debates. If you reflect only scorn for government, it’s hard to get anyone who hasn’t already drunk the Kool-Aid to take your opinions on the topic seriously.
This is not to disparage the argument that government is too large, for which the case is strong. But holding government in sneering contempt is a misinformed corruption of that sentiment.
Well true. Many libertarians are crypto-anarchists. Many Austrian School economists are crypto-anarchists. That’s bad.
Big Brother government is even worse.
On the meaning of ‘recovery’
re·cov·er·y – (1) return to an original state; “the recovery of the forest after the fire was surprisingly rapid;” (2) convalescence: gradual healing (through rest) after sickness or injury; (3) the act of regaining or saving something lost (or in danger of becoming lost).
Now read this,
The long-awaited recovery is now under way, but it’s a slow, painful slog that’s short on animal spirits and long on a drumbeat of numbers that mostly shift from dreadful to less depressing.
Twenty-seven months after the recession began, unemployment is stuck at 9.7%.
Nevermind the fact that real unemployment is more like 22%. While there are massive job losses, Fortune reports the “recovery is underway.”
Hmm. How can that be? Let’s see. From that Fortune article again,
Amazingly, as consumers struggle, U.S. corporations are staging a nearly unprecedented comeback that’s largely escaping notice. The gargantuan, dispiriting job cuts that seem to dominate the news have also been the spur for an epic resurgence in profits.
Jobs are down and profits are up. This third group gets mentioned, consumers. These people continue to struggle. Consumers have lost their jobs. Even in the short run, companies cannot sustain profits when their customers are “struggling” to afford goods. Forbes can’t really call this a recovery. But even this is beside the point.
‘Recovery’ now means ‘profits for large corporate interests and banks.’ Since large business interests and banks use the government to extort rents, we aren’t talking free-market profits here. We’re talking monopoly profits.
Large businesses and banks have “comeback” profits only at the expense of consumers. That’s what ‘recovery’ means today: you’re out of work, but fat cats get their corporate bonuses.
See, it’s a recovery. War is peace. Slavery is freedom. Ignorance is strength.
Don’t make me tell you twice. You’ll go to Room 101.
Update: Rising jobless claims add worries about recovery. Whoda thunkit?
The Fed spends your money in secret
Since it’s establishment in 1913, the Fed has never been audited.
Continued legal appeals will delay or block the first public look at details of the central bank’s $2 trillion in emergency lending during the 2008 financial crisis. The Clearing House Association LLC, a group that includes Bank of America Corp. and JPMorgan Chase & Co., joined the Fed in defense of a lawsuit brought by Bloomberg LP, the parent company of Bloomberg News, seeking release of records related to four Fed lending programs.
The U.S. Court of Appeals in Manhattan ruled March 19 that the central bank must release the documents. A three-judge panel of the appellate court rejected the Fed’s argument that disclosure would stigmatize borrowers and discourage banks from seeking emergency help.
The biggest U.S. commercial banks will take their fight against disclosure of Federal Reserve lending in 2008 to the Supreme Court if necessary, the top lawyer for an industry-owned group said.
Meanwhile, Ron Paul’s bill to audit the Fed has passed the House, and it quietly gathers momentum in the Senate.
What is Bernanke hiding?
Now they outsource grading in school
Lori Whisenant knows that one way to improve the writing skills of undergraduates is to make them write more. But as each student in her course in business law and ethics at the University of Houston began to crank out—often awkwardly—nearly 5,000 words a semester, it became clear to her that what would really help them was consistent, detailed feedback.
Her seven teaching assistants, some of whom did not have much experience, couldn’t deliver. Their workload was staggering: About 1,000 juniors and seniors enroll in the course each year. “Our graders were great,” she says, “but they were not experts in providing feedback.”
That shortcoming led Ms. Whisenant, director of business law and ethics studies at Houston, to a novel solution last fall. She outsourced assignment grading to a company whose employees are mostly in Asia.
The founder of Edumetry, Mr. Rajam, says
“People need to get past thinking that grading must be done by the people who are teaching,” says Mr. Rajam, who is director of assurance of learning at George Washington University’s School of Business. “Sometimes people get so caught up in the mousetrap that they forget about the mouse.”
Ah yes, mouse and mousetrap. I think Mr. Rajam confuses trap for mouse.
The trap is the outsourced system itself. Part-time, unverified people in third world countries, operating in dingy sweatshops, with no knowledge of the classroom context – these people will decide the grades and academic future of American college students.
The mouse is the duped American student who pays $1,500+ for a class taught by a git like Ms. Whisenant.
According to some free market advocates, everyone benefits from this trade.
Other free trade advocates think not.
Economic theory assumes that capitalists pursuing their individual interests are led to benefit the general welfare of their society by an invisible hand. But offshoring, or the pursuit of absolute advantage, breaks the connection between the profit motive and the general welfare. The beneficiaries of offshoring are the corporations’ shareholders and top executives and the foreign country, the GDP of which rises when its labor is substituted for the corporations’ home labor. Every time a corporation offshores its production, it converts domestic GDP into imports. The home economy loses GDP to the foreign country which gains it [...]
The more US corporations prosper by offshoring, the greater the US trade deficit will grow and the more unbearable the pressure will be on the dollar’s role as reserve currency.
At some point crisis will force Congress, economists and think tanks to deal with the real issues.
It’s that multiple equilibria thing again. And it’s in the classroom.
The great con: how the Fed stole your money
A simple explanation of how you lost your wealth.
The Fed is utterly, fundamentally, intentionally corrupted. The entire money and credit system of the US is utterly corrupted, turned to plunder of the people by inflation and deflation.
As Andrew Jackson said of the Second Bank of America which he eradicated,
The bold effort the present (central) bank had made to control the government … are but premonitions of the fate that await the American people should they be deluded into a perpetuation of this institution or the establishment of another like it.
It’s worth a read of his letter explaining why the Second Bank of America was closed.
Is there no danger to our liberty and independence in a Bank that in its nature has so little to bind it to our country. The president of the Bank has told us that most of the State banks exist by its forbearance. Should its influence become concentered, as it may under the operation of such an act as this, in the hands of a self-elected directory, whose interests are identified with those of the foreign stockholders, will there not be cause to tremble for the purity of our elections in peace, and for the independence of our country in war. Their power would be great whenever they might choose to exert it; but if this monopoly were regularly renewed every fifteen or twenty years, on terms proposed by themselves, they might seldom in peace put forth their strength to influence elections or control the affairs of the nation. But if any private citizen or public functionary should interpose to curtail its powers, or prevent a renewal of its privileges, it cannot be doubted that he would be made to feel its influence.
Should the stock of the Bank principally pass into the hands of the subjects of a foreign country, and we should unfortunately become involved in a war with that country, what would be our condition? Of the course which would be pursued by a bank almost wholly owned by the subjects of a foreign power, and managed by those whose interests, if not affections, would run in the same direction, there can be no doubt. All its operations within would be in aid of the hostile fleets and armies without. Controlling our currency, receiving our public moneys, and holding thousands of our citizens in dependence, it would be more formidable and dangerous than the naval and military power of the enemy [...]
Experience should teach us wisdom. Most of the difficulties our Government now encounters and most of the dangers which impend over our Union have sprung from an abandonment of the legitimate objects of Government by our national legislation, and the adoption of such principles as are embodied in this act. Many of our rich men have not been content with equal protection and equal benefits, but have besought us to make them richer by act of Congress. By attempting to gratify their desires we have in the results of our legislation arrayed section against section, interest against interest, and man against man, in a fearful commotion which threatens to shake the foundations of our Union.
Think about the second paragraph. Now think about World War I.
How well did the Federal Reserve use its original powers? During World War I it abandoned penalty rates for “easy” money, and then began buying Liberty Bonds to support the government’s war effort. Those actions helped hoist the inflation rate from close to zero in 1915 to almost 20 percent in 1920 — a level not seen since the Civil War. When the war ended the Fed reversed course, triggering the severe (though mercifully brief) plunge of 1920-1921.
Instead of learning a lesson, in the later 1920s the Fed turned to easy money again. But bankers had learned a lesson, and so refused to borrow from it even at low rates. Consequently the Fed, taking advantage of some fine print in the Federal Reserve Act, started buying large quantities of U.S. securities on the open market. The result was an unprecedented stock bubble, which the Fed only managed to prick, in late 1929, by choking-off normal business credit. During the ensuing panic the Fed, pleading impotence, stood by while the U.S. money stock lost a third of its pre-crash value. The “great contraction” — the worst credit-crunch in U.S. history — culminated in the national bank holiday of March 6th through March 12th, 1933, during which the domestic gold standard, which the Fed was supposed to preserve, was permanently disabled.
There’s more here. The Fed funded the war. Did the Fed go beyond funding to influence war policy itself?
Click through to YouTube. Watch the whole playlist.
Now, what do you think? Now, what do you think of the third paragraph excerpted from Jackson’s letter?
And what are you going to do about it?
UK: immigration killing prosperity
In the last 13 years, almost all new UK jobs have gone to foreigners.
Immigration was at the centre of the election campaign today as it emerged that virtually every extra job created under Labour has gone to a foreign worker.
Figures suggested an extraordinary 98.5 per cent of 1.67million new posts were taken by immigrants [...]
Arguably, the most damaging charge of them all. New Labour’s election manifestos made little or no mention of immigration policy.
But according to a draft report by the Cabinet Office, written in 2000, ministers had a secret plan to ‘maximise the contribution’ of migrants to the Government’s ‘social objectives’.
Former Labour advisor Andrew Neather, who worked on the report, said the aim was to ‘rub the Right’s nose in diversity and render their arguments out of date.’
It’s nothing to do with free trade.
The NYT and “free trade” economists haven’t caught on, because they mistakenly think that offshoring is trade. In fact, offshoring is labor arbitrage. US labor is simply removed from production functions that produce goods and services for US markets and replaced with foreign labor. No trade is involved. Instead of being produced in America, US brand names sold in America are produced in China [...]
The messy details of multiple equilibria don’t have the ideological elegance of faith-based free trade theories.
There is no evidence that consumer prices fall by more than incomes so that US citizens can be said to benefit materially. The psychological experience of a citizen losing his career to a foreigner is alienating.
The free market economists ignore that a country that offshores its production also offshores its jobs. It becomes dependent on goods and services made in foreign countries, but lacks sufficient export earnings with which to pay for them. A country whose workforce is being reallocated, under pressure of offshoring, to domestic services has nothing to trade for its imports. That is why the US trade deficit has exploded to over $800 billion annually.
Among all the countries of the world, only the US can get away with exploding trade deficits. The reason is that the US inherited from Great Britain, exhausted by two world wars, the reserve currency role. To be the reserve currency country means that your currency is the accepted means of payment to settle international accounts. Countries pay their oil import bills in dollars and settle the deficits in their trade accounts in dollars.
Faith-based free trade advocates claim that prices will fall offsetting the loss of income caused by outsourcing.
When I ask for evidence of that claim all I get are exasperated non sequuntur.
I explain that real prices are subject to fiat control through the money system. That the same people who benefit from fiat money also benefit from inflation. That inflation means real prices rise. That we actually have real declining income from outsourcing and real increases in prices.
It’s like talking physics with an Aristotelian who denies the evidence before his very eyes. Whatever.
This exploitative situation cannot continue indefinitely. As Roberts wrote,
When free market economists align, as they have done, with foreigners against American citizens, they destroy their credibility and the future of economic freedom. Recently, the Independent Institute, with which I am associated, stressed that free market associations “have defended completely open immigration and free markets in labor,” emphasizing that 500 economists signed the Independent Institute’s Open Letter on Immigration in behalf of open immigration.
Such a policy is satisfying to some in its ideological purity. But what it means in practice is that the Americans, who are displaced in their professional and manufacturing jobs by offshoring and work visas for foreigners, also cannot find work in the unskilled and semi-skilled jobs taken over by illegal immigrants. A free market policy that gives the bird to American labor is not going to win acceptance by the population. Such a policy serves only the owners of capital and its senior managers.
The cat is out of the bag. The people know the bailouts were a theft from the middle class to the bankers. The people know that outsourcing and unfettered immigration hurt them.
Unlike the faith-based economists, the average person can plainly see that wages are down, prices are up, and that owners of capital loot the wealth of the people.
It’s too late. People know,
[..] why in the world should an employer pay an American $50,000-$100,000 a year, plus benefits including health care, social security, disability, retirement, worker’s comp, 12 weeks unpaid (and some in the Obama Administration want it to be paid leave.) unemployment insurance, fear of wrongful termination suits, etc., etc.? Increasingly, employers are choosing to get work done by automation, part-time/temp workers, and offshoring. The latter is becoming ever more prevalent even for the previously thought-to-be-immune knowledge work, as Asian universities are revamping their curriculum to emphasize creativity, entrepreneurship, etc. And all those Asian workers can be hired for a fraction of the cost of an American.
Too, the uncontrolled inflow of illegal immigrants exerts downward pressure on salaries. The average illegal immigrant has little education and poor English skills and so is willing to do low-level jobs, on which they pay little or no tax. That floods the market of applicants for higher level jobs thus driving their salaries down, and making it harder to land a job at all [...]
For the foreseeable future, ever more Americans will have to settle for $10-an-hour jobs, living very modestly, paycheck to paycheck, with little or nothing saved for retirement. We’ll work ’til we drop…if we’re lucky enough to have a job. It’s part of the decline and fall of the American empire.
Sweet irony: arrested militia member is a Democrat
The latest in the slow-motion explosion of the liberal narrative.
Most of the indicted militia members accused of being anti-government extremists have active voting records, a check with area voter registration offices showed yesterday.
One is a registered Democrat, and the party affiliations of the rest could not be determined.
Jacob J. Ward, 33, of Huron, Ohio, voted as a Democrat in the 2004 and 2008 primary elections, and in 10 other elections since 2000. Voters’ political affiliations in Ohio are determined by which party’s ballot they request during even-year primary elections.
(h/t Insty)
