Austerity is not the answer. Austerity just means lower standards of living in the future and political chaos. Does anyone think things look bright for Cyprus, Greece, Portugal, Spain or Italy? These unpayable debts should have been moved into default negotiations. That is the only answer. Increasing sovereign debt in all of these countries is madness and brings Germany and France into the same boat.
Bureaucrats and naive politicians (think Obama) always believe that there is some simple "political" solution to every problem. There isn't. They are wrong. The only way to deal with too much debt is to reduce it. Period. Nothing else helps.
The ECB is on the wrong track. It is long past time for "workouts," but better late than never.
Otherwise the center-right and center-left political parties will be completely discredited and radical alternatives, already emerging, will move into prominence.
Politicians never learn. The only way to a higher standard living is free enterprise. Having the government responsible for old age security and health is a huge mistake. Government can play a role as a backstop, but if government is the major provider, the only outcome will be waste and mismanagement and improper funding, which is what we are observing.
Obama's biggest problem is that he thinks of everything in terms of "justice," which, to him, means equalizing the outcomes of the economic process. If you do that, the economy will grind to a halt. That was the experiment in Russia, China and Cuba. It doesn't work. The sluggish and stagnant growth of the American economy is living testament to the outcomes that the Obama economic policies will lead to. Things will get worse.
What is needed is an economic environment where individuals are free to pursue their dreams and achieve success or failure on their own terms. You can't guarantee everyone success. That just means that everyone fails.
Wednesday, April 10, 2013
Sunday, April 7, 2013
The President's Budget Proposal -- More of the Same
If you want people to save less, increase the tax on their savings. So, the President now threatens to pull the rug out from under IRAs. The President's defenders say that he is only going after very wealthy IRA users, but we know where it ends -- the average American will find his savings threatened by this increasingly autocratic regime in Washington.
How do you help poor people? Increase their taxes. So, the President proposes to increase the tax on cigarettes. Who are the smokers amongst us? The country club set? Or those without jobs and working at the lowest paid jobs in the country? Everyone knows the answer to that, including the President. He knows that smoking is mainly a habit indulged in by the poor, so he wacks the poor with one more tax hike. Smoking is almost unheard of among upper middle income folks. Obama has his sights set on socking it to the poorest demographic in the country.
What about entitlements? The President proposes cutting medicare reimbursements. He seems to think this will mean that medicare services will simply cost less with no reduction in services. Why not simply eliminate reimbursements entirely. Then everyone could get health care free! This is the logic of the President's medicare savings. We've seen it all before. There are now several states where a majority of doctors will not take medicare patients and that chorus of opt-outers is growing everyday. The President's plan is that health care will ultimately be free, unless you need a doctor or a hospital, in which case it will be unavailable.
As for cost-of-living adjustments on social security, that is merely a technical adjustment of limited significance in a world where people increasing live on social security far beyond our society's ability to provide the resources to support it.
Meanwhile the new budget continues to subsidize Obama's cronies where the losses continue to pile up in failed "green industry" activities, though Obama's cronies never seem to lose any of their own money in these ventures -- just taxpayer money.
So, tax thrift, reward those with uneconomic schemes and dreams that cannot make it in the market place, let the entitlements grow on to infinity, and sock it to the poor. Continue the same economic policies that have produced the worst economic recovery since the 1930s (the last time these kinds of policies were tried). Meanwhile, let the national debt soar on to infinity.
That's the President's new proposal. Not much of a surprise, given the last five years.
How do you help poor people? Increase their taxes. So, the President proposes to increase the tax on cigarettes. Who are the smokers amongst us? The country club set? Or those without jobs and working at the lowest paid jobs in the country? Everyone knows the answer to that, including the President. He knows that smoking is mainly a habit indulged in by the poor, so he wacks the poor with one more tax hike. Smoking is almost unheard of among upper middle income folks. Obama has his sights set on socking it to the poorest demographic in the country.
What about entitlements? The President proposes cutting medicare reimbursements. He seems to think this will mean that medicare services will simply cost less with no reduction in services. Why not simply eliminate reimbursements entirely. Then everyone could get health care free! This is the logic of the President's medicare savings. We've seen it all before. There are now several states where a majority of doctors will not take medicare patients and that chorus of opt-outers is growing everyday. The President's plan is that health care will ultimately be free, unless you need a doctor or a hospital, in which case it will be unavailable.
As for cost-of-living adjustments on social security, that is merely a technical adjustment of limited significance in a world where people increasing live on social security far beyond our society's ability to provide the resources to support it.
Meanwhile the new budget continues to subsidize Obama's cronies where the losses continue to pile up in failed "green industry" activities, though Obama's cronies never seem to lose any of their own money in these ventures -- just taxpayer money.
So, tax thrift, reward those with uneconomic schemes and dreams that cannot make it in the market place, let the entitlements grow on to infinity, and sock it to the poor. Continue the same economic policies that have produced the worst economic recovery since the 1930s (the last time these kinds of policies were tried). Meanwhile, let the national debt soar on to infinity.
That's the President's new proposal. Not much of a surprise, given the last five years.
Saturday, April 6, 2013
Portugal Waffles on Austerity
Promised 78 billion Euros by the ECB, Portugal had agreed to limit it's budget deficit to 3 percent of GDP. Forget that promise. It won't happen.
The high court in Portugal said "no" yesterday to a plan to trim government employees compensation and that is the end of the 3 percent plan. Back to plan B. Portugal now says 5 percent is doable. Not that it matters.
Portugal's debt was 124 percent of GDP before the ECB stepped in. It will be 150 percent within two more years on its way, no doubt, to over 200 percent within a decade. This, of course, assumes there is someone out there willing to buy this worthless stuff.
All the other Eurozone countries are on a similar trajectory, including France and Germany. The US is on a similar path, perhaps as a sympathetic show of unity.
The ECB magic elixir is that the cure for too much debt is more debt. Austerity is thrown into the mix, one supposes, for comic relief.
Ridiculous economic policies in the US and in the Eurozone are bearing fruit. Their economies are stagnant at best and collapsing at worst, while their sovereign debt levels continue to explode.
The high court in Portugal said "no" yesterday to a plan to trim government employees compensation and that is the end of the 3 percent plan. Back to plan B. Portugal now says 5 percent is doable. Not that it matters.
Portugal's debt was 124 percent of GDP before the ECB stepped in. It will be 150 percent within two more years on its way, no doubt, to over 200 percent within a decade. This, of course, assumes there is someone out there willing to buy this worthless stuff.
All the other Eurozone countries are on a similar trajectory, including France and Germany. The US is on a similar path, perhaps as a sympathetic show of unity.
The ECB magic elixir is that the cure for too much debt is more debt. Austerity is thrown into the mix, one supposes, for comic relief.
Ridiculous economic policies in the US and in the Eurozone are bearing fruit. Their economies are stagnant at best and collapsing at worst, while their sovereign debt levels continue to explode.
The Obama Hunt for Revenues
The Wall Street Journal reports today that the Obama Administration is now planning on major new taxes on: 1) cigarettes; and 2) IRA accounts.
Increasing the taxes on cigarettes goes after the poorest demographic in America. In his continuing war on the lower middle income Americans, Obama plans to raise what is probably the most regressive tax in existence -- the cigarette tax.
For balance, one supposes, Obama intends to break the long standing promises of IRA accounts. IRA accounts are a special target of the Obama Administration, because IRA's are the main avenue that individuals use to provide savings for their retirement. Not content to let social security run out of money in the next generation, Obama now plans to steal the private savings that individuals have accumulated by abstaining from consumption and saving for their future.
There are no limits to the duplicity and meanness that characterizes the Obama Administration. These proposals are just more of the same. Just as the minimum wage laws make it a criminal offense to provide jobs for the poorest amongst us, the cigarette tax punishes the poorest Americans and the attack on IRA's is an assault on individual thrift.
Meanwhile another "green jobs" project funded with $ 200 million in Obama Administration funds is going belly up. Fisker, a maker of electric cars, with a huge credit line from the US Government, is laying off 150 of its employees (60 percent of its workforce) in order to conserve cash for Obama-friendly wealthy shareholders. The company still has the ability to draw another $370 million from government coffers as it slides into bankruptcy. Another transfer from the poor and from the savers to Obama's wealthy friends.
Increasing the taxes on cigarettes goes after the poorest demographic in America. In his continuing war on the lower middle income Americans, Obama plans to raise what is probably the most regressive tax in existence -- the cigarette tax.
For balance, one supposes, Obama intends to break the long standing promises of IRA accounts. IRA accounts are a special target of the Obama Administration, because IRA's are the main avenue that individuals use to provide savings for their retirement. Not content to let social security run out of money in the next generation, Obama now plans to steal the private savings that individuals have accumulated by abstaining from consumption and saving for their future.
There are no limits to the duplicity and meanness that characterizes the Obama Administration. These proposals are just more of the same. Just as the minimum wage laws make it a criminal offense to provide jobs for the poorest amongst us, the cigarette tax punishes the poorest Americans and the attack on IRA's is an assault on individual thrift.
Meanwhile another "green jobs" project funded with $ 200 million in Obama Administration funds is going belly up. Fisker, a maker of electric cars, with a huge credit line from the US Government, is laying off 150 of its employees (60 percent of its workforce) in order to conserve cash for Obama-friendly wealthy shareholders. The company still has the ability to draw another $370 million from government coffers as it slides into bankruptcy. Another transfer from the poor and from the savers to Obama's wealthy friends.
Friday, April 5, 2013
Half a Million Americans Give Up Looking
This morning's job report was notable mainly for the number of Americans who have simply given up any hope of employment and have exited from the workforce. Another half a million Americans quit looking for work in March. The percentage of American adults that now make any effort at all to find work is at the lowest point since 1979 (when Jimmy Carter was president).
If more people continue to quit looking for work, the unemployment rate will continue to fall. Eventually, if everyone out of work just gives up looking, America's unemployment rate can fall to zero. That seems to be the only way to get the unemployment rate down in the new Obama world.
In a culture that is becoming increasingly a "where's mine?" culture, it is hard to see how the American economy that we used to know (in the bad old days) is ever going to return.
How many private sector jobs were created in March? A laughable 85,000. That's almost a rounding error to the Reagan era 1.2 million jobs that were created in September of 1982.
Watching the pundits was interesting this morning? They seemed puzzled. Was it the sequester, they pondered? They ignored the implementation of Obamacare, the $ 600 billion tax increase imposed at the beginning of 2013, the ceaseless barrage of new regulations designed mainly to strangle American business and the continued war against free enterprise that is waged daily by the White House.
The American culture is changing. We are becoming more like Greece every day in every way. There is a sense of entitlement in the air and in every part of life. McDonald employees in NYC demanding a 107 percent immediate wage increase in the midst of a sea of unemployed Americans is a great example of the modern cultural disconnect.
The idea that you have to work and save to provide for yourself is so Reagan-like. Why do that when government can generously provide everything?
Well now we know one thing that the government cannot provide -- private sectors jobs. Stay tuned. There is more coming. Wait until you experience the implementation of Obamacare. You haven't seen anything yet. You might read up on pre-1990 Soviet Russia to get a good glimpse of where we are headed.
If more people continue to quit looking for work, the unemployment rate will continue to fall. Eventually, if everyone out of work just gives up looking, America's unemployment rate can fall to zero. That seems to be the only way to get the unemployment rate down in the new Obama world.
In a culture that is becoming increasingly a "where's mine?" culture, it is hard to see how the American economy that we used to know (in the bad old days) is ever going to return.
How many private sector jobs were created in March? A laughable 85,000. That's almost a rounding error to the Reagan era 1.2 million jobs that were created in September of 1982.
Watching the pundits was interesting this morning? They seemed puzzled. Was it the sequester, they pondered? They ignored the implementation of Obamacare, the $ 600 billion tax increase imposed at the beginning of 2013, the ceaseless barrage of new regulations designed mainly to strangle American business and the continued war against free enterprise that is waged daily by the White House.
The American culture is changing. We are becoming more like Greece every day in every way. There is a sense of entitlement in the air and in every part of life. McDonald employees in NYC demanding a 107 percent immediate wage increase in the midst of a sea of unemployed Americans is a great example of the modern cultural disconnect.
The idea that you have to work and save to provide for yourself is so Reagan-like. Why do that when government can generously provide everything?
Well now we know one thing that the government cannot provide -- private sectors jobs. Stay tuned. There is more coming. Wait until you experience the implementation of Obamacare. You haven't seen anything yet. You might read up on pre-1990 Soviet Russia to get a good glimpse of where we are headed.
Thursday, April 4, 2013
Obama Calls for the Return of Predatory Lending
After excoriating the banking community for the past five years for making loans to Americans with less than stellar credit, Obama has now reversed course. This week, Obama has now called for banks to return to the bad old days -- lending to people of modest means.
What has been considered a crime by the Obama folks for the last five years is now their latest policy initiative. With the taxpayer, of course and as usual, as the guarantor.
Instead of letting the free market decide who gets to borrow and at what rates, which would avoid the booms and busts of the past, Obama is following his tried and true instincts. Only he knows what is best -- not the markets.
But banks have learned their lesson. Why loan to folks that might not pay you back, regardless of who the guarantor is? The banks now know that they will be accused of predatory lending when these loans go sour. By that time, Obama will be resting comfortably with his millions in Hawaii. What does he care?
Once again, an administration with nothing but contempt for free markets, has demonstrated their ignorance and their duplicity. At least, finally, they appear to realize that strangling the financial community has consequences. Witness the stagnant economy of the Obama years.
Don't expect banks to rush forward to put their neck in the noose once more.
What has been considered a crime by the Obama folks for the last five years is now their latest policy initiative. With the taxpayer, of course and as usual, as the guarantor.
Instead of letting the free market decide who gets to borrow and at what rates, which would avoid the booms and busts of the past, Obama is following his tried and true instincts. Only he knows what is best -- not the markets.
But banks have learned their lesson. Why loan to folks that might not pay you back, regardless of who the guarantor is? The banks now know that they will be accused of predatory lending when these loans go sour. By that time, Obama will be resting comfortably with his millions in Hawaii. What does he care?
Once again, an administration with nothing but contempt for free markets, has demonstrated their ignorance and their duplicity. At least, finally, they appear to realize that strangling the financial community has consequences. Witness the stagnant economy of the Obama years.
Don't expect banks to rush forward to put their neck in the noose once more.
Saturday, March 30, 2013
The Next Step in Europe's Implosion
Rome wasn't built in a day and the Eurozone will not collapse in a day. But, the Eurozone will collapse. It's just a matter of time.
Consider the stronger countries in the Eurozone -- Germany and France. Both economies are now contracting. Meanwhile their debt levels, acknowledged and unacknowledged, have exploded to new levels. Both countries are now in the situation that faced Greece four years ago. So, how is their future going to be any different that what is now taking place in Cyprus, Greece, Spain and Italy?
The ECB ministers are a group of political hacks who know little or nothing about economics (something they share with the Obama advising team). Their idea of improving the economic plight of the Eurozone is to increase the level of debt, continue to implicitly guarantee profligate spending and bureaucratic regulations, and plunge the Eurozone into the economic dark ages.
GDP is falling, debt is rising, unemployment is rising, and recriminations are flying. The Eurozone is coming apart at the seams. Civil society has broken down in Greece and is in the process of breaking down in parts of Spain and Italy. Cyprus is entering a dark period. Nothing good lies ahead for the Eurozone.
So, what happens next?
Deposits will begin to seep out of the Eurozone -- most notably from Spanish and Italian banks -- but from other Eurozone countries as well. After all, the ECB bureaucracy has changed the rules. Deposits are now legitimate targets for the bureaucrats. It wasn't the ECB that decided not to confiscate insured depositors in Cyprus, it was the Cypriot parliament who refused to ratify the ECB and IMF policy of confiscating insured depositors. The confiscation of government insured deposits is now a legitimate policy weapon in the Eurozone, overturning a long past history of FDIC-like guarantees in the Eurozone. Nothing is sacred to the bureaucrats.
The genie cannot be put back in the bottle. The European banking sector cannot recover from this bureaucratic policy blunder. Deposits in the Eurozone can never be considered secure, even in circumstances where the bank that houses them is secure. The government can confiscate deposits wherever they may be. This is now a legitimate Eurozone policy weapon. It is also an IMF (read USA) policy tool as well. Even US FDIC-guaranteed deposits may be fair game to the bureaucrats when US debt woes become a front page crisis. An eventuality that must come in time.
Consider the stronger countries in the Eurozone -- Germany and France. Both economies are now contracting. Meanwhile their debt levels, acknowledged and unacknowledged, have exploded to new levels. Both countries are now in the situation that faced Greece four years ago. So, how is their future going to be any different that what is now taking place in Cyprus, Greece, Spain and Italy?
The ECB ministers are a group of political hacks who know little or nothing about economics (something they share with the Obama advising team). Their idea of improving the economic plight of the Eurozone is to increase the level of debt, continue to implicitly guarantee profligate spending and bureaucratic regulations, and plunge the Eurozone into the economic dark ages.
GDP is falling, debt is rising, unemployment is rising, and recriminations are flying. The Eurozone is coming apart at the seams. Civil society has broken down in Greece and is in the process of breaking down in parts of Spain and Italy. Cyprus is entering a dark period. Nothing good lies ahead for the Eurozone.
So, what happens next?
Deposits will begin to seep out of the Eurozone -- most notably from Spanish and Italian banks -- but from other Eurozone countries as well. After all, the ECB bureaucracy has changed the rules. Deposits are now legitimate targets for the bureaucrats. It wasn't the ECB that decided not to confiscate insured depositors in Cyprus, it was the Cypriot parliament who refused to ratify the ECB and IMF policy of confiscating insured depositors. The confiscation of government insured deposits is now a legitimate policy weapon in the Eurozone, overturning a long past history of FDIC-like guarantees in the Eurozone. Nothing is sacred to the bureaucrats.
The genie cannot be put back in the bottle. The European banking sector cannot recover from this bureaucratic policy blunder. Deposits in the Eurozone can never be considered secure, even in circumstances where the bank that houses them is secure. The government can confiscate deposits wherever they may be. This is now a legitimate Eurozone policy weapon. It is also an IMF (read USA) policy tool as well. Even US FDIC-guaranteed deposits may be fair game to the bureaucrats when US debt woes become a front page crisis. An eventuality that must come in time.
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