Inflation – ILANA MERCER

One Nation Under Inflation

Ilana Mercer — Fri, 02 Dec 2011 08:00:00 +0000

The EU Commission president, a chap called Jose Manuel Barroso, told PBS’s Jeffrey Brown, on November 28, that the European suprastate is not quite up to American statist standards. Barroso lamented that the EU lacks America’s level of “convergence”: “We have a common currency, but not, for instance, a common treasury,” said this slick operator. Fiscal discipline (one wonders what our commissar means by that) can only come about with more “pooling of sovereignty.”

The Commission’s president certainly sees the US as a model “fiscal union,” with a high degree of “fiscal policy” “integration” throughout; and is almost envious of the fact that the US federal government possesses “the instruments” that have allowed it to accumulate enormous liabilities: Evidently, America’s debt-to-GDP ratio is larger than the European Union’s.

In a nutshell: Barroso longs for Brussels to be able to do the necessary tinkering to keep the PIIGS of the Eurozone —Portugal, Ireland, Italy, Greece, and Spain—living at the expense of their more industrious, austere neighbors to the north. (Presiding European bureaucrats like himself live-it-up no matter where they reside.) The EU, complained its Capo di tutti capi, needs to create those “instruments.”

When it comes to Newspeak, Barroso still beats Obama.

In any event, when it grows up, the EU wants to be just like the US. That was Jose Manuel Barroso’s message to his host at the US Public Broadcasting Service. So successfully has the Unites States government submerged the sovereignty of its states that a top European technocrat longs to be like us. We must be in worse shape than we imagined.

Barroso’s aim is for Europe to fuse more completely together so that a central government and bank can manipulate compliant countries with ease. Alas, in his assessment, Europe has a long way to go if it wishes to approximate the degree of economic and legal harmonization accomplished by Uncle Sam, and to become one nation under inflation.

Aping America’s Federal Reserve Bank, the European Central Bank’s goal is to monetize the debt of the moocher member-states. Standing in its way—and in the way of just about any American president and Federal Reserve Bank chair—is Germany.

Germany poses the only serious opposition to the issuance by the ECB of euro bonds which, in contravention of European-Union treaties, would rope the Germans into working to keep the borrowing costs of the PIIGS down. For its part, the US is pushing Germany to bail out the PIIGS.

German Chancellor Angela Merkel has resolutely opposed Obama’s monetary putsch. Her arguments are foolproof: she’d like to avoid the hyperinflation and the moral hazard inherent in enabling spenders and slackers. Just how badly do Barack and his banker want to cow Germany into servicing the rest’s debt?

On her way to the bank something embarrassing and unexpected happened to Chancellor Merkel. Mrs. Merkel’s country, which enjoys an AAA credit rating, and is expected to underwrite the Eurozone’s debt, failed last week to raise funds in a government bond auction.

The workhorse of Europe is an industrial dynamo whose highly-skilled workforce produces technology in the first rank. Germans have already exported more than a €1 trillion worth of goods this year. At 5.9 percent, unemployment there is low.

Asked columnist Paul Craig Roberts: “Why would Germany, the only member of the EU with financial rectitude, not be able to sell 35 percent of its offerings of 10-year bonds? Germany has no debt problems, and its economy is expected by EU and US authorities to bear the lion’s share of the bailout of the EU member countries that do lack financial rectitude.”

And Roberts replied: “I suspect that the answer to this question is that the failure of the German government’s bond auction was orchestrated by the US, by EU authorities, especially the European Central Bank, and private banks in order to punish Germany for obstructing the purchase of EU member countries’ sovereign debt by the European Central Bank.”

Roberts published his column before the disclosure of the latest scandal involving the Empire’s bank. According to information obtained by Bloomberg News, under the Freedom of Information Act, the Fed issued $7.7 trillion in secret loans between August of 2007 and April 2010. One of the beneficiaries was America’s Big Six Bank cartel.

I hazard that the failure of the German government to “raise funds in a government bond auction last week” is probably the doing of Barack Obama and Ben Bernanke. The boss of all bosses at 1600 Pennsylvania Avenue promised Europeans that he would stand ready to do his part to help them weather the Eurozone crisis. Although White House Press Secretary Jay Carney has denied that there would be any “bail out of foreign governments,” even CNN’s Erin Burnett knows better: Bernanke has been given the authority to buy the debt of foreign governments, confirmed Burnett. “The U.S. Treasury could be out there buying bonds to keep Europe from crashing,” and we’d be none the wiser.

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Be Afraid: The Proof is in the Putin

Ilana Mercer — Fri, 05 Aug 2011 07:00:00 +0000

Left and right, the cable commentariat is currently engaged in a cut-and-thrust over the use of strong words in politics. In particular, does “terrorism” describe the initial reluctance of some tea partiers to support the US government’s set-in stone spending?

Lost in this silly squabble is the following: “the second coming of the Republican revolution,” as Politico.com dubbed the tea party contingent on Capitol Hill, failed to defuse the threat of the debt. Only 28 tea-party freshmen voted against the ballyhooed “Budget Control Act Amendment.”

Listen to the words of one wily politician whose country’s central bank holds almost 40 percent of dollars as reserve currency. Vladimir Putin’s response to the debt compromise was pitch-perfect, given the stakes stateside and beyond. This via RT and Press TV, respectively:

“The current deal struck by US lawmakers will not solve the underlying issues. This colossal debt, $14 trillion or more, means that the country has been living on credit, which is really bad for one of the world’s leading economies. They live beyond their means, and put a part of their burden on the entire world’s economy. … The country is … shifting the weight of responsibility on other countries and in a way acting as a parasite.”

Having impressed themselves no end, the lawmakers who came up with the “Budget Control Act Amendment” don’t impress Putin much. So what was the deceptive deal that was endorsed by 59 of the already stale tea-party freshmen, and got enthusiastic whoops from many among mainstream media’s menagerie of morons?

The budgetary ruse will be executed in two stages. Right away, in 2011, the limit on the country’s statutory authority to borrow will be raised by $900 billion. The budget will be cut by the same magical number—over the course of 10 years. As lamented on CNN: Fifty percent of the first round of staggered cuts will come, by this network’s accounting, from the state’s security spending. These cuts will include the military, intelligence, the department of home-grown terrorism (DHS), and the likes. Non-security spending may entail fewer workplace inspections, a little less Environmental Protection Agency enforcement, and some nips and tucks to the obese Health and Human Services. (Covert expressions of grief as on CNN were not for Lawrence O’Donnell and Chris Matthews, in whom the debt deal elicited grand mal seizures on MSNBC.)

The second stage of the deal duplicates the first. The game of smoke-and-mirrors continues through January of 2012 until January 2013, during which time the debt ceiling will be raised by between 1.2 to 1.5 trillion dollars. Totaling the same amount, cuts will be effected, again, only over the course of a decade. As our financial custodians raise the country’s credit card limit, they then reduce expenditure incrementally by the same amount.

In the best case scenario, you could call this deal a wash, these respective amounts having cancelled each other out. This, however, would be Pollyannaish. All that the colluding quislings in both chambers have undertaken is a “decrease in the rate of increase in government spending to just equal the increase in the government’s debt …”

So writes Prof. Richard M. Ebeling, at Northwood University’s blog, “In Defense of Capitalism & Human Progress.” Ebeling has assessed the 2012 leg of the deal to dupe America:

“[A]ssuming what has been agreed to by the Congress and the president is actually adhered to … The U.S. Treasury is being given the authority to borrow and spend an additional $2.4 trillion dollars over the next 18 months. But the $2.4 trillion spending reduction over ten years represents, on average, a ‘savings’ of $240 billion a year. Another way of thinking about this is that the government now has the authority to spend, on average, an additional $133 billion per month of borrowed money over the next year and a half. ‘Matching’ this, the government is supposed to spend $20 billion less every month over the next ten years.”

You’ve been had. What’s new?

Last month, Putin raged over the second plague of quantitative easing, QE2, unleashed by the Federal Reserve Bank, lambasting the Unites States for acting “as if they were ‘hooligans’ because they ‘flood’ the entire world with dollars … They start the money printing presses and throw dollars throughout the world in order to solve their immediate responsibilities. They say monopolies are bad but only if they are foreign – their monopolies are perfect. So they use their monopoly to print money until the whole world is flooded.”

This once-avowed communist congratulated his fellow Russians for not being like the Americans: “Good for us that we do not print reserve money.”

Putin is right. And, you’re likelier to get the goods on your government from the Russian Prime Minister than from the bobbleheads who help inflate the Beltway bubble. The cable commentariat is a cog in the sprawling American comitatus. They all feed off Rome.

As inevitably as water whirls down a plughole, the US economy will worsen. Be worried: The proof is in the Putin.

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Dead-End Debt Debate

Ilana Mercer — Fri, 22 Jul 2011 07:00:00 +0000

What a balanced budget requirement implies is that the government has the right to spend as much as it can take in ~ilana

The economy is in advanced stages of decrepitude due to debt: public and private. Nevertheless, a just-released ABC News/Washington Post poll revealed that 58 percent of self-identified Republicans believe that if their government doesn’t continue to borrow apace, things will get worse.

In legislative language, our wily political pitch men have been granted license to lift the debt-ceiling! Quick-fix quacks in both chambers can now proceed to borrow by further inflating the country’s fiat money supply. Duly, two broad plans have been hatched. These schemes are aimed at saving financial face, more than slashing spending or trimming America’s gargantuan government. To listen to this school of scoundrels—represented by statists from different corners of the political boxing ring, from Fox News’ Stuart Varney to MSNBC’s Rachel Maddow—not to raise the debt ceiling is plain unpatriotic.

The Gang of Six is a bipartisan group. Cross-party consensus results when political expediency trumps principle. No wonder the Gang has President Barack Obama’s stout support. The Gang’s plan, such as it is, is predicated on letting the Obama administration continue its currency counterfeiting and borrowing operations. Their target: to bring “the country’s publicly held debt down to roughly 70 percent of GDP By 2021, which is the level it’s approaching this year.” Billed as a “spending cut,” the Gang’s master plan does not dent government programs so much as it endeavors to diminish the debt (namely money already spent). At a laughable $500 billion over 10 years—$50 billion per annum—the Gang of Six’s Lilliputian gesture won’t cover interest payments owed on the debt, which stand at about $9 billion a day.

Obviously Obama is in his element. Said the president: “The framework that they put forward is broadly consistent with what we’ve been working on here in the White House and with the presentations that I have made to the leadership when they have come over here.”

Did you know that a government worker is more likely to die than get fired? (The data are here.) Supported by serfs in the private sector, oink sector slackers not only earn more on average than the stiffs who finance their life style, but, consequently, live less stressful lives. To maintain these gains in (probable) longevity, the Gang plans to do no more than freeze Congressional pay.

Sounding a similar bum note, the Reid-McConnell duo put on its own debt side-show. True to type, Senate Minority Leader Mitch McConnell (R-Ky.) partnered with Senate Majority Leader Harry Reid (D-Nev). Their solution to leadership’s profligacy? Empower the imperial president to raise the debt ceiling unilaterally.

Then there is the cutely dubbed “Cut, Cap and Balance” proposal, issued by House Republicans. Wise to the tricks of his fellow congressmen, the man who ought to be president, the quixotic Ron Paul, has exposed “Cut, Cap and Balance” for the fraud it is.The plan authorizes “a $2.4 trillion rise in the debt limit,” and puts forth a $1 trillion budget deficit.” In as much as “Cut, Cap and Balance” promises to balance the budget, without “cutting military spending, Social Security, or Medicare,” it is plain pie-in-the-sky.

“These three budget items,” Paul points out, “already cost nearly $1 trillion apiece annually. This means we can cut every other area of federal spending to zero and still have a $3 trillion budget. Since annual federal tax revenues almost certainly will not exceed $2.5 trillion for several years, this Act cannot balance the budget under any plausible scenario.” The answer to cutting the size of government, rather than just denting its debt, is not simply to balance the budget, but to pass “a constitutional amendment to limit taxes and spending.”

At bottom, what a balanced-budget requirement implies is that the state should be permitted to squander however much revenue—now there’s a nice word for taxes—it can extract from its enslaved wealth producers. What a balanced budget requirement stipulates is that the government has the right to spend as much as it can take in.

The “historical average of government outlays as a percent of GDP” is another calibration alluded to by members of the gangs mentioned. Yet more obfuscation. An optimal ratio of OPD (Outstanding Public Debt) to GDP (Gross Domestic Product) gets us away from confining the government to its constitutional mandates. The debt to GDP ratio is a utilitarian, not a constitutional, concept.

The politicians are posturing about living within the confines of the constitution. Alas, like a yeti or unicorn, a constitutional government is a mythical creature that is unlikely to materialize anytime soon. The political poseurs should be reminded that there is nothing constitutional (or just) about fine-tuning—increasing or decreasing—state spending to coincide with a supposed sovereign people’s acquisitive abilities and economic energies.

In their agreement to “change the trajectory of our debt”—the words of Democratic gang member Sen. Kent Conrad—the gangs and their gimmicks are like bank robbers who’ve planned a string of bank heists, but then decided, charitably, to spare one or two.

* Debt-Screen-Pic-Courtesy-GettyImages.

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Land of Moussaka, Moochers and Looters

Ilana Mercer — Fri, 07 May 2010 00:00:00 +0000

Who are the Greeks rioting on the streets of Athens?

Some of them are murderers, that we know. Contrary to press reports, “violent riots” did not trap workers in a bank and set it ablaze killing three; violent rioters did. And contrary to assorted Associated Press captions, riot police officers did not spontaneously combust, or attach themselves to Molotov cocktails like limpet mines. Mobs lobbed bombs at them.

The media is in the habit of using the passive voice to palliate crimes perpetrated by a class of criminals they’re rooting for. That’s what they imbibe in Group (by which I mean the newsroom). Back to the Greeks running amok on the streets of Athens: They are first and foremost members of the “non-productive” sector.

According to the Wall Street Journal, Greek “union officials said union-affiliated protesters alone totaled more than 60,000. Others put the number higher still. ‘This rally was double the size of the largest rally that has ever been held in Greece,’ said Spyros Papaspyros, president of Adedy, a civil-service umbrella union. ‘If the government doesn’t listen, there will be more strike action next week.'”Yes, this sector makes a forceful case for its demands, which are that distribution take the place of production, and that the pigs outnumber the productive.

True to form, tens of thousands of members of the oink sector “marched through Athens in the largest and most violent protests since the country’s budget crisis began last fall. Angry youths rampaged through the center of Athens, torching several businesses and vehicles and smashing shop windows. Protesters and police clashed in front of parliament and fought running street battles around the city.”

Their compadres in the US ─ workers whose employment is not contingent on their productivity; whose pay, pension packages, and conditions of employment are a function, not of their worth, but of a negotiated settlement with labor unions ─ have grown in numbers all through the economic downturn.

And why not? The occupants of state-run institutions have all the tools to capture wealth they don’t create. Greek-style deficits and debt have not dented the American federal government’s growth. Gallup’s Job Creation Index has declared the federal government a growth industry.

Indebtedness has done nothing to change the habits of an organization that has a line of credit with the Creator of Money on Mount Olympus: The Federal Reserve Bank. The public sector and its syndicates will collapse a country before they accept “austerity measures” ─ the focus of disaffection among our gritty street fighters is the requirement that they begin to exercise frugality.

Against the better judgment of the people in member EU states, the Eurocrats have committed to rescuing the profligate Greeks. The International Monetary Fund (for which Americans are liable too) will assist. In exchange, the slackers striking out on city-streets and against their compatriots will have to watch their public-sector wages slashed, pensions cut, pay frozen. And, horrors, Greeks will have to live with “liberalized labor laws,” in other words, allow some economic freedoms to the few workers who carry the welfariat.

Anyone beavering in the American competitive, voluntary, productive economy knows that raises have not happened for quite some time; that there’s no such thing as pay for “overtime,” and that when deadlines loom, the Dagny Taggarts and Hank Reardens of the world slog into the night to best the competition.

The defaulting Dionysians, on the other hand, are fueled with the righteousness of the wronged. From the janitor to the journalist, they blame their politicians who, in exchange for power, only gave the demos what they demanded at the time.

In answer to my opening question: Honest men these Greeks are not. For “an honest man,” wrote Ayn Rand in “Atlas Shrugged,” “is one who knows that he can’t consume more than he has produced.”

Moochers these Greeks are not, for the moocher “will claim your product by tears” and manipulation.

The rioters on Greece’s streets are the looters, “who take [your product] from you by force.”

The Grecian wilding is a minor event compared to the events that’ll unfold should China quit funding our federal behemoth’s bacchanalia, and the Moody’s credit-rating agency downgrade U.S. Treasuries to junk bond status, befitting a banana republic.

The sound and fury of Andy Stern’s Service Employees International Union, in it millions, will be like Tyrannosaurus (T-Rex) tearing through Jurassic Park.

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Your Godless Government At Work

Ilana Mercer — Fri, 28 Nov 2008 00:00:00 +0000

The macroeconomic and microeconomic solitudes are governed by separate codes of morality. Whereas you’ll pay dearly for your profligacy; the government’s recklessness will be rewarded. Whereas your debt will wipe you out; government debt will lift us all up. The latter is ‘stimulating’; the former sapping. Hopefully you won’t buy this ~ilana

The problem of moral hazard is tackled in the Torah and Talmud too: ‘When an individual, a firm or an institution is insured, or bailed out, there is an incentive to act recklessly’ ~ilana

A sound credit market and a continuous flow of loans to those who would honor them is predicated on creditors being able to collect loans ~ilana

Politicians and theoreticians who claim the natural laws of economics can be violated with impunity are proffering politics, not economics ~ilana

The laws of economics are natural, universal laws. One cannot violate them without repercussions ~ilana

Your government is not just dipping into deficit spending; it is bankrupt.

On top of the “unfunded liabilities of Medicare, pension, and Social Security programs,” Bush has piled a national debt of $10 trillion. A complicit Congress and the incoming Cabinet have authorized the outgoing administration’s bailouts—to the tune of a staggering $7 trillion. All told, the government’s debt is likely close to $80 trillion.

This is more than the combined costs of the Marshall Plan ($12.7 billion), Louisiana Purchase ($15 million), the Race to the Moon ($36.4 billion), the S&L Crisis ($153 billion), the Korean War ($54 billion), The New Deal ($32 billion), the Invasion of Iraq ($551 billion), the Vietnam War ($111 billion), and NASA ($416.7 billion). [Via LRC.com]

Whether you’re a Democrat or a Republican; your instincts tell you that such promiscuous spending is criminal. Your gut tells you that your government is not only economically bankrupt, but morally bankrupt too—detached from any ethical moorings.

Alas, “figures don’t lie, but liars can figure”:

The experts say the complete opposite: The values and virtues ordinary mortals hold themselves to don’t apply to government. The macroeconomic and microeconomic solitudes are governed by separate codes of morality. Never the twain shall meet—or so the money mavens claim.

Whereas you’ll pay dearly for your profligacy; the government’s recklessness will be rewarded. Whereas your debt will wipe you out; government debt will lift us all up. The latter is “stimulating”; the former sapping. Hopefully you won’t buy this—nor should you. Reason and decency dictate that your government is up to no-good.

The Torah and the Talmud concur. In line with its efforts to educate about Judaism’s philosophical affinity with the free market, The Jerusalem Institute for Market Studies has inaugurated the Center for the Study of Judaism and Economics. Delivering the inaugural lecture was no other than the recipient of the 2005 Nobel Prize in Economics, Professor Robert (Yisrael) Aumann.

Professor Aumann received the coveted prize for his “work on conflict and cooperation through game-theory analysis.” (Source: Wikipedia) In his lecture, Aumann addressed the role ascribed to economic incentives in the Torah and Talmud:

“Economics,” explained Aumann, “is based on incentives, and only when people and firms have the right incentives to work and produce can the economy grow and prosper.” Aumann illustrated the many examples in the Torah and the Talmud acknowledging the importance of economic incentives within a competitive market economy:

“[O]ne example of fundamental market-oriented principles inherent in Judaism …is the support in the Talmud for unfettered price competition. …The Talmud preceded Adam Smith’s groundbreaking ideas on price competition by hundreds of years. In the Talmud, there is absolutely no room for price fixing; only support for ensuring the use of honest weights and measures. In a competitive market economy, the firm selling at the highest price will either go out of business or be forced to decrease its price in order to survive.”

Of course, these principles are studiously disregarded by the monopoly-fostering Israeli government, of which, incidentally, Aumann is no fan. (For handing over Gaza to Hamas the deeply religious Aumann accused the Israeli government of perpetrating a crime against the evacuees of Gush Katif. The “Peace Process”—where Israel gives and the Palestinians take and then retaliate—is not Aumann’s idea of conflict resolution.)

Aumann spoke of the Hebrew sage Hillel, who lifted the restrictions that creditors had been subjected to in collecting loans. This was the Talmudic scholar’s way of ensuring a sound credit market and a continuous flow of loans to those who would honor them. This wisdom Washington wastrels have worked to subvert by legislatively reducing the risks of borrowing. And, now, with the aid of a massive credit expansion.

On the topic of disincentives: The problem of moral hazard is tackled in the Torah and Talmud too: “When an individual, a firm or an institution is ‘insured,'” or bailed out, there is an incentive to act recklessly. “Moral hazard,” contends Aumann, “is at the heart of the faulty proposals being offered to solve the current financial crisis.”

The laws of economics are natural, universal laws. One cannot violate them without repercussions. It follows from this that to adhere to the economic laws of nature is to be faithful to truth and justice. The centrality of immutable economic laws in Jewish law is, therefore, no more surprising than the centrality of justice in the Jewish tradition. As it is written in “Devarim”: “Justice, justice shall you pursue.” (16:20)

Politicians and theoreticians who claim the natural laws of economics can be violated with impunity are proffering politics, not economics.

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Politicians: Stop ‘Stimulating’ In Public

Ilana Mercer — Fri, 25 Jan 2008 00:00:00 +0000

Solvency is a virtue; insolvency a vice ~ilana

To revive flaccid financial markets, American politicians are now groping obscenely for their “stimulus packages.” It’s an ugly image. It’s also worse than useless. They might as well be gesturing lewdly like crotch-grabbing rappers, because that’s as likely as their economic package is to get the country out of economic straits.

The first stage on the road to recovery is to pinpoint the problem and take responsibility for it. You’ve spent more than you’ve produced and have switched to living on credit. Having exhausted your creditor’s good will, but not your insatiable appetites, you turn to counterfeiting cash in the basement—that’s where the U.S. finds itself today.

A debased dollar, price inflation, dwindling availability of seed capital, malinvestment and speculation (bubbles)—these are some of the consequences of the government’s promiscuous spending and inflationary practices.

The second stage in getting solvent is to quit spending and borrowing, live within your means, and start paying down what you owe. But not according to some very bad people. The late Henry Hazlitt, a brilliant libertarian philosopher and economist—which is why he’d be unemployed today—warned of bad economists who present their errors to the public better than the good economists. A gentleman, Hazlitt hesitated to call the “bad economists,” who offer up half-truths, wholesale liars.

So I will.

The aforementioned wholesale liars would agree on how to remedy personal indebtedness. When it comes to macroeconomics, however, the nation’s money mavens change their tune. Kudlow and Company crowed at the increase in easy credit brought about by Ben Bernanke’s cut in the Federal Funds rate. By sanctioning surpluses in the reserves that banks can lend out, Bernanke has signaled for the band to play on.

Passengers in the ship of fools steering toward bankruptcy can sally forth.

Problems brought on by government profligacy, the liars aim to correct by encouraging yet more spending and credit expansion. The “stimulus package” takes care of the spending element in this cretin’s cure-all. While tax cuts must always be welcomed—they are a return of stolen property—cutting cheques for those who’ve fallen on hard time should not. That’s tantamount to taking from some to give to others. By passing this obscene package, the government is seen to be doing something. That something, however, amounts to no more than moving money around: usually from the disfavored (taxpayers) to the favored constituency of the day (tax consumers).

Even if you believe government can “turn the economy around,” as do many pointy heads and their ditto heads, the fact remains that this government can’t because it’s broke; having unflinchingly fleeced the people over the years, it’s now insolvent. The proposed “tax rebates” to be dispensed by the misspeaker (Bush) and the speaker (Pelosi) will be hastily printed by the barnacle (Bernanke), or borrowed from Hu Jintao (the Chinese president). Tax kickbacks to the indebted will, moreover, only encourage what must be discouraged—spending—and discourage what must be encouraged—saving.

Sound money, not funny money, will make for a sustainable economic recovery. Ask the Chinese. As nosy American politicians keep reminding them, the Chinese have a democracy deficit. Unlike wastrel Americans, though, they don’t believe in debt, personal or national. China is growing at the annual rate of 17 percent. And according to Wing Thye Woo, professor of economics, the Chinese save up to 40 percent of their Gross Domestic Product.

The Chinese save as individuals in a truly free-market would—like there is no tomorrow. Or, more precisely, as individuals who know Uncle Hu has nothing to hand-out. (Neither does Uncle Sam, but Americans have yet to figure that out.)

That the Chinese plan their economic lives has incensed American central planners Social programs in China, apparently, fail the exacting standards of American socialism. Thus during President Hu Jintao’s visit to the US two years ago, the ubiquitous bunch of rugged individualists who hog the airwaves delivered a stern message to the amused leader.

The “poor” Chinese, they announced, save so energetically because they’re bereft of adequate social services. Bully Bush was forthwith instructed to bug Hu Jintao to ensnare his citizens in a safety net. He was to “level the playing field.” (Translated that means making our formidable rivals resemble us—sapped of vitality and prone to spending someone else’s salary.)

In Economics in One Lesson, that good guy, Henry Hazlitt, reminded us that “the rational saver, in making provision for his future, was not hurting, but helping, the whole community.” Money isn’t stored under the proverbial mattress, it is invested either directly (by buying securities) or indirectly (via the bank, which lends deposits out), thus creating steady, sustainable growth.

It should be news to no one that the degree to which its people discount the future in favor of immediate gratification can make or break a society. The Chinese economy is booming because the Chinese grasp that savings, capital accumulation, and investment are the lifeblood of a healthy economy.

It’s high time Americans, who never tire of cramming their values down gagging gullets, remember that solvency is a virtue; insolvency a vice.

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Dubya The Devaluer

Ilana Mercer — Fri, 05 Oct 2007 00:00:00 +0000

When it comes to our personal finances, we understand how and why a poor credit rating and history influence the way we’re treated in the market place. Max out your credit card and businesses and banks will turn you away. But when a government runs up the sort of tab that plunges a country’s currency into a crisis, economists take to talking in tongues.

“It’s driven by the fact that U.S. data is continuing to deteriorate,” one expert prattled, according to WND. Others habitually frame effects as causes: The housing bubble is to blame. Financial reporter Diane Francis of the neoconservative National Post has concocted a currency conspiracy. “There is a Currency Cold War being waged by Russia, Iran and various allies such as Venezuela,” she fulminated.

Back on terra firma dollars are being dumped. Consumers generally dump stuff they don’t want. The global currency market isn’t exempt from the immutable laws of supply and demand. Another immutable economic truism is that, if profitable, people will do business with those they dislike. Markets, money markets too, reflect a bias toward profit. If the dollar were good for it, it would still be king of all currencies, irrespective of how the world feels about the US.

For the first time since 1976, the Canadian dollar is worth more than the US dollar. The Australian dollar is predicted to soon reach parity with ours. And the euro is at an impressive $1.4283. According to His Holiness Alan Greenspan, a third of all foreign exchange reserves are now held in euros.

Foreigners—governments and individuals—simply don’t have faith in the American currency. Back-to-front thinking ignores that the dollar’s depreciation preceded its dumping.

The devaluation of the dollar is Dubya’s doing. The slide began in early 2002, confirms the Cato Institute’s James A. Dorn, commensurate with the debt Bush began to amass, when 9/11 fell into his lap. The national debt—the total amount of money owed by the government—is now well over $9 trillion. It increases on average by $1.50 billion per day, by the Debt Clock’s math. Every American (bar politicians, illegal immigrants, and other tax consumers) is on the hook to the tune of $29,893.82.

When they’re not borrowing to feed their appetite for our assets, Bush and his brigands press the Federal Reserve and the printing press into service. Day and night they flood the market with paper money unbacked by gold or real assets. (You gotta “fund” those unwinnable wars, the laptop bombardiers scold.) This increase in the money supply is inflation.

Republican Party partisans swell the chorus—and state the obvious—by warning us that Democrats will raise taxes. As horrible as a tax hike would be, it is nothing compared to what Dubya’s dilution of the dollar has done to American assets.

Inflation is a hidden tax. We’re being taxed surreptitiously in lieu of the debt. More fiat paper money in the system means that every unit depreciates. “Any substantial increase in the quantity of money,” explained Henry Hazlitt, in Economics in One Lesson, “will reduce the purchasing power of each individual monetary unit—in other words, that will lead to an increase in commodity prices.”

Depreciation of the dollar spells higher prices and hardship for those of us who are removed from power and from the new money.

Unlike present-day Republican Party boosters, Ronald Reagan understood this: “The truth is that inflation is caused by government,” he observed. “It’s caused by government spending more than it takes in, and it will go away just as soon as government stops doing that.”

The fate of the dollar is in the grubby paws of the parasitic class, not Russia, Iran, Venezuela, or even China. The much-maligned Chinese act as our creditors by funding our debt. But rather than indict the real currency counterfeiters—and compel them to stop stealing America’s future—Americans make China a repository of their anger. Consequently, a Demopublican contingent of protectionists (and vote procurers) demanded not long ago that Bush muscle China to change its monetary policy.

Again, that’ll hurt ordinary Americans, not politicians or parties to the Military-Media-Industrial-Congressional-Complex. (Economist Robert Higgs has pegged all “defense-related” spending alone at “approximately $1 trillion per year.”) China’s artificial devaluation of the yuan benefits the American consumer, who, consequently, enjoys cheap goods. Uncompetitive American rent-seekers (and a few rabid pet owners) are the only ones complaining about cheap Chinese goods.

Given the debasing of the greenback, hastened by Ben Bernanke’s lowering of the interest rates, dollar-denominated assets are no longer as attractive to our foreign creditors. Their yields are declining as well. Hording dollars could very well contribute to inflation in China, forcing it to act out of national self-interest and discard dollars.

The upside? China will get both barrels for what Dubya has done to the dollar.

WorldNetDaily.com

October 5

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Inflation 101 For Women Pundits & Other Tyrants

Ilana Mercer — Fri, 09 Feb 2007 00:00:00 +0000

Libertarians have a keen appreciation of how governments monkey with the money supply. This is but one of the reasons principled libertarians abhor the optional war pursued in Iraq. The war accounts for a good chunk of the $9 trillion in national debt. It’s a debt that has been increasing “an average of $1.47 billion per day since September 29, 2006.” At the time of writing, every one of us owed $28,921.

Yet, never once have the war harpies and their hombres in the ideological trenches indicated they comprehend how and who is paying for all this. I know they believe we’re not being taxed in lieu of the debt, a faith they base on Bush’s promise not to raise taxes.

Pro-war pundits, women especially, think that government can spend what it doesn’t have without any economic repercussions. They’re a lot like babies prior to acquiring object permanence: what isn’t visible doesn’t exist. However, government spending more than it collects in revenues is the cause of the deficit.

And ultimately of inflation.

When he’s not borrowing, Bush supports the national debt by pressing the Federal Reserve and the printing press into service. Inflation is an increase in the money supply. It acts like a hidden tax. More fiat paper money in the system means that every unit depreciates, or has less purchasing power. “The money that people have saved,” explains economist Thomas Sowell, “is robbed of part of its purchasing power, which is quietly transferred to the government that issues the new money.”

This legalized counterfeiting—inflation—raises prices; the new money generates price hikes throughout the economy. However, it reaches the politically connected first. They get fat checks well before the general price increases caused by all the new money affect their purchasing power.

What if those whooping it up for this wanton waste of blood and treasure understood all this? Would they be less inclined to can-can for the moral and Constitutional corruption that is this war? Come to think of it, far too many pundits posing as populists have benefited handsomely from turning folks onto war—pornographically so. Besides, even if they’re not guilty of war profiteering, the distaff side of the commentariat won’t get it; women don’t understand money. They think more paper money in their pocketbooks means they’re richer.

Ditto Robert Mugabe. The New York Times, ever the obfuscator, has declared that Zimbabwe is in its final economic death throes due to… hyperinflation. Not because of Mugabe, the thug and Thief-in-Chief, mind you, but due to this hydra-headed beast: “[h]yperinflation has bankrupted the government, left 8 in 10 citizens destitute and decimated the country’s factories and farms.”

Mugabe, Zimbabwe’s Leader for Life, turned Africa’s breadbasket into an economic basket case. He did this by instituting a Soviet style command economy. That stroke of genius, which went down well in the leftist West, entailed abolishing private property and distributing commercial, white-owned farms to rabble, who looted them and then let them fall into disrepair.

Like a house of cards, farm-dependent industries soon collapsed and famine ensued. The Marxist Mugabe has responded by fixing prices, which (as we’ll discover when Hillary does the same for medical services) caused severe shortages, and (in this case) starvation. The natural laws of economics cannot be suspended by man. Our torqued-up tyrant bolstered his economic planning with the attendant massacres, slaughtering his political opponents, which included free traders. Rigging elections was another pastime. (The UN-led civilized world responded by… condemning Israel.)

Back to inflation and hyperinflation. As the American national debt stands, we would not be admitted into the company of socialists: The European Union. The EU expects member nations to hold debt below 60 percent of GDP. Instead of opening new markets, Bush has inaugurated theatres of war. These will drain the private economy for decades to come.

While America’s $12.98-trillion economy groans under the weight of the federal debt, it is still fabulously robust. The private productive sector is just too driven and ingenious to crush. To be charitable to Mr. Bush, he has no desire to pulverize the economy, however bloody-minded he is (both in the British and American sense of the word).

The same cannot be said of Mugabe. (Or for his greatest supporter, South Africa’s Thabo Mbeki.)

There is only one way for a nation to become richer, and that is for its people to be free to produce, trade, and consume goods. Mugabe confiscated the assets of Zim’s productive, 300,000-strong white minority. Those who remain—fewer than 25,000—have become targets of crime and yet more oppressive economic policies. At the same time, Zimbabwe’s government has kept the printing presses running, spitting out worthless paper, so as to pacify the unproductive deadwood of the engorged public sector. These employees, however, can’t understand why a recent 300 percent raise has failed to compensate them for inflation: a 9000 percent increase will do the job…for a day, maybe.

Since few Zimbabweans are now capable of substantial production, the amount of goods in the Zimbabwean economy keeps decreasing. At the same time, the money supply keeps increasing, hence hyperinflation.

Here’s hoping that the lessons of how Mugabe hollowed out Zimbabwe’s economy and left a husk in its place help hollow heads at home to understand more about the importance of the money supply. (That includes you, Michael Wines of the Times.)

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EXPORTING’ HIGH-TECH JOBS II: THE TIPPING POINT

Ilana Mercer — Fri, 19 Dec 2003 00:00:00 +0000

For at least 4,730 IBM computer programmers, the Christmas and New Year holiday will not be too festive. According to the Wall Street Journal, IBM plans on “moving their work” to India, China and “elsewhere.”

It’s not alone. High-tech companies like Microsoft, Oracle, Sun and others have similar plans. Citing research by International Data Corp., the Journal estimates that by 2007, 23 percent of all information-technology services jobs will move to “emerging markets.”

If the trend continues, we may see a dramatic shift in the labor landscape: more retail jobs, fewer knowledge jobs.

Understanding this impetus begins with a recognition that we do not have a free market. Like the Aliens in the Sigourney Weaver sci-fi films, the tentacles of the interventionist state innervate and enervate everything.

Because we live and work ensnared in a seamless web of statism, market solutions are often circuitous responses to the government’s laws and wars. These statist assaults on our prosperity ought to be the proper focus of the fight.

Unarguably, high-tech customers drive each company’s need to stay competitive. The message IBM consumers convey through their buying patterns is: “Keep those prices where we want them or else we’ll purchase our software from Hewlett-Packard or EMC Corp.” Indisputably, offshoring or “exporting jobs” is a market efficiency. These companies must meet the challenge of competition by making their products more appealing to buyers. And in the current commerce-averse climate, this challenge necessitates moving operations to where highly skilled labor is infinitely cheaper: China, India, Russia.

Furthermore, it is far preferable that IBM “export jobs” to retain a competitive edge and stay in the game, than lose market share and be forced to fold up and fire all its employees. High-tech companies increasingly must offshore or eventually risk going belly up.

If what I’ve delineated is a healthy, consumer-dictated, competitive response, what then of my claim that offshoring in the high-tech industry is a response to a shackled and not a free market? Aren’t we, after all, as free as can be? At least, that’s an inanity this administration has hammered into a good many hollow heads.

Inflation is one good gauge of the degree of freedom we enjoy. Observe how American high-tech firms are accused of taking advantage of “cheap” foreign labor. This implies that the “cheap” wage price is the incorrect or “unfair” price, and that the American salary approximates the right remuneration (whatever that means).

However, an Indian technology worker lives very nicely on his “cheap” $6,000 annual wage, while an American with a similar skill-set needs 10 times as much to make do. In 1960, the average annual salary of an American was about what it is today for our Indian “techie,” and – to paraphrase the song – the living was just as easy.

Without belaboring how government spending and the Federal Reserve System brought about this state of affairs, suffice it to say that if not for the inflation caused by their money-printing, credit-creating profligacy, U.S. wages and domestic prices would probably be falling now, making offshoring far less attractive.

How else does the American state benefit China and India?

As I wrote previously, “To the cost of the assorted alphabet soup of regulatory agencies a corporation must pay off [in the U.S.], add exorbitant corporate taxes and expenses like workers compensation insurance … as well as the cost of a government rape known as Social Security.”

“Buried under regulation” is how business ethicist Tibor Machan describes the plight of companies: “One license after the other, one permit after the other … [and] zillions of forms” to fill in daily. What with the legal obligation to give an employee practically a lifetime of benefits, who can afford to start a business? he asks.

If the ratio of lawyers to engineers in an economy is a measure of statism, then the preponderance of lawyers we suffer gives our competitors yet another edge. When indicting culprits who gum up the economy and drive business offshore, please find against tort lawyers.

There is something to be said about the concept of a “tipping point.” It’s not one thing that causes a rivet to pop in an economy, but many (although the state is invariably involved) – and it’s not their added effects that bring about a fundamental change, but their synergistic workings over time.

Clearly, foreign investors in China and India are not subject to more than 180 federal labor laws; to an Equal Employment Opportunity Commission, an Occupational Safety and Health Administration, an IRS and an EPA; or to a work force where merit is marred by affirmative action.

Our competitors might not have been certified “free” on the various indexes of economic freedom, but they haven’t yet reached the tipping point.

Other tilting factors: We spend more than any other nation on the military, and the nation’s culture reflects this. While we hound and scorn self-made productive individuals like Rush Limbaugh and Martha Stewart, we promote and lionize the parasitic, wealth-destroying stooges of the state – politicians, bureaucrats and their assorted foot soldiers.

As we continue to hone a global advantage in the use of state force, other nations – free of such drains on their economies – can concentrate on prosperity-generating market activities and begin to chip away at America’s economic armor.

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WARTIME SOCIALISM

Ilana Mercer — Wed, 30 Apr 2003 00:00:00 +0000

War, especially a gratuitous one, always destroys individually owned real assets and capital ~ilana

“It is often sadly remarked,” wrote Henry Hazlitt, the distinguished free market writer, “that the bad economists present their errors to the public better than the good economists present their truths.” This, ventured Hazlitt, comes about because the bad economists are presenting half-truths. A consummate gentleman, Hazlitt did not explicitly spell out that propagating half-truths still makes someone a wholesale liar. Or that these economists owe their perpetual popularity to the intellectual legitimacy they provide to the plundering class, the politicians.

For what politician would not warmly welcome an economist who, with the aid of indecipherable econometrics, legitimizes immoral power and property grabs? This is why the anti-free market central planning advocated by the late John Maynard Keynes has been embraced with renewed verve by George Bush. Like any good Keynesian, Bush sees big government—huge public works—and big deficits (especially during depressions), not as a bane but as a blessing, to be embraced as the key to economic boom.

Hazlitt (drawing on Frederic Bastiat, the 19th century French economist and statesman) further hammered home that “the art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”

When the Hazlitt prescription is followed, it becomes abundantly clear why a war, especially a gratuitous one, always destroys individually owned real assets and capital. And why, in the short term, the war against Iraq will benefit some at the expense of others; in the long run, it will benefit none.

Keynesians, however, stand by the absurdity that war is good for the economy. And while you won’t find these economists suggesting that, in order to create jobs in their own communities, people should set fire to their homes, and so help spur economic activity among local builders, landscapers, plumbers, and electricians, the very same “experts” have no qualms touting the economic benefits that accrue from taking a wrecking ball to an entire country.

According to figures provided by Yale professor William Nordhaus and the Council of Foreign Relations, the eventual costs of the war on Iraq will be roughly $1.2 trillion. Mr. Bush, however, proudly presides over a budget deficit, the official upbeat estimate of which is $455 billion. Since this figure doesn’t include off-budget spending, and since estimates of the preliminary costs of the war run to $200 billion, the deficit is more likely to be upward of $600 billion.

And since there’s no free lunch, who is going to pay for the debauchery?

The finances for the war, of course, will come from the private economy. For every dollar the government spends, a dollar is suctioned from you and me. For every new smiling military recruit sitting pretty with a home, a porch, and a pension, some poor sod will join the army of (nine million) unemployed.

Given its debt, the U.S. government is fast becoming a bad risk as a borrower. To finance the war, then, it’ll have to steal over and above the usual call of duty. Unlike “The Shrub” currently in power, Ronald Reagan understood a thing or two. He said this: “The truth is that inflation is caused by government. It’s caused by government spending more than it takes in, and it will go away just as soon as government stops doing that.”

More precisely, inflation is an increase in the money supply by the government. Having adopted deficit spending as an article of faith, Bush will call on the Federal Reserve and the printing press to print money to pay the costs of the war. The endemic price hikes and economic distortions that’ll follow are but a by-product of this legalized counterfeiting.

Reports of freshly minted dollars making their way from the Federal Reserve Bank to millions of Iraqis, now on the U.S. payroll, suggest that the money market is already being flooded. The first counterfeit down payment on the war will soon be wending its way into the coffers of the selected war contractors and their employees.

So why is this so bad? Doesn’t more paper money make us all richer?

No, it doesn’t. Real wealth is created only by the production and consumption not of paper money, but of products. An abundance of goods, not money income, is what makes for an increase in wealth. When the initial $1 billion worth of new money is given to corporate cronies like Kellogg Brown & Root, the construction arm of Cheney’s Halliburton, and the Bechtel Corporation, it will immediately spur an artificially created demand, causing their suppliers to raise their prices. It’ll take time, but the new money will generate price hikes throughout the economy.

Rest assured though that Bechtel’s George Schultz, the former Secretary of State, who is also the chairman of the Committee for the Liberation of Iraq, will get his honey well before you taste any, unless, of course, you work for said company or for the Parsons Corp, or the Louis Berger Group, or any other of the corporations involved in war profiteering.

Rest assured too that another Bechtel senior vice president by the name of Jack Sheehan, who, according to the British Observer, is also “a retired general who sits on the Defense Policy Board which advises the Pentagon,” will enjoy a fat cheque well before the general price increases caused by all the new money affect his purchasing power. Jack will get to spend the new wads before counterfeit coinage spreads across the economy, causing prices to rise.

By the time you and I, politically unconnected suckers that we are, experience a meager rise in money income (but not in tangible wealth), rising prices will have obliterated the tiny gain.

If civil society is the sphere in which people accomplish things by engaging in productive, peaceful, and voluntary exchanges, the state is the sphere where domination is achieved legally by force and destruction. And of late, the state has been encroaching on ever-larger portions of civil society. Under Bush, the shift of resources from the productive, private sector to the inherently unproductive bureaucracy and military-industrial complex hasn’t been equaled in decades.

At the same time, the wasteful, wealth-destroying political and military might involved in exporting democracy is nudging Americans into cultivating a comparative—even an absolute—advantage in violence and force, at the risk of losing their edge in productive innovation.

Last but not least, the process of forcibly creating a demand for certain wartime products and shifting production away from others also skews a consumer-driven production pattern. Since there are no freebies, those working for this centrally planned command economy will benefit while others foot the bill.

* Image courtesy of the Mises Institute.

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