Saturday, August 20, 2011

The Focus on Jackson Hole

Once again all eyes are pointed in the wrong direction. The Federal Reserve's annual conclave is this coming week in Jackson Hole, Wyoming. Nothing of any significance can possibly emerge from this gathering.

But for the media, this is the big event. The media can pretend that somehow, someway it matters what happens and what gets said in Jackson Hole. This is complete nonsense.

The American economy's problems cannot be fixed by applying any strategies from the Federal Reserve. The Fed has done enormous damage to the American economy in the last three years, in part because it was handmaiden to an Administration and a Congress intent upon destroying the private sector economy. Ben Bernanke has only one goal -- getting himself reappointed by Obama as Fed chairman. Nothing else really matters to Bernanke at this point. Greenspan behaved in a similar fashion when Clinton was President. There is nothing new about a Fed Chairman playing the politics of survival.

But fixing the economy is an entirely different matter, unrelated to anything that might transpire in Jackson Hole. What the economy needs is breathing space. It won't get that breathing space. What it will get is more regulation, more litigation, more taxes and more demonizing rhetoric about millionaires, billionaires, special interests, etc. This Administration is all about finding the enemy and exposing the enemy to its political base. This Administration has little or no interest in economic recovery. Economic recovery shows the triumph of capitalism, not an outcome that this President shows much interest in.

So, forget the politics. Take a course on microeconomics. Learn why business hire employees. Ponder why raising the minimum wage does not create jobs. (If you think raising minimum wages is a good thing, why not raise it to a $ 1,000 per hour. That ought to make everyone wealthy!). Ponder why Obamacare and its mandates make business lose interest in having US employees and even US facilities. Ponder why litigation to protect the rights of virtually every group one can find a definition for saps the energy of businesses who might otherwise wish to grow and expand. Ponder why Sarbanes-Oxley and Dodd-Frank are destroying the American financial institutions so that they can be replaced by their equivalents in Asia. If you wanted to destroy the American economic engine, you could not dream up a better set of government policies than these. And, they are working. Capitalism is being annhilated in the US economy and is being replaced by government bureaucracy. We are switching places with China in every respect.

Outsourcing and replacing labor with capital is the sensible business policy when faced with the politics of big government interference in free markets. This is the future.

It is worth repeating that stocks can do fine in this environment. The main impact of Obama policies is to dramatically increase the inequality of opportunity, the inequality of income and the inequality of wealth. Buffett should like that.