Saturday, February 6, 2010
George Phillips for Congress
George Phillips was sensational this afternoon at the Kingston Tea Party in Lake Katrine, NY. He will make a great congressman.
Americans Become Poorer as Our Money Flows to Banks
I was standing on line in Hannaford's supermarket on route 9W in Kingston, New York yesterday when I overheard two elderly women talking. One told the other that she had less money than in years and that she was starting a garden in order to provide herself with food, something that she hadn't done since her childhood during World War II. I suspect part of the reason is the freezing of the social security increase this year. The town in which I live, Olive, NY, raised taxes by six percent even as the social security administration claims that there is no inflation.
The ongoing transfer of wealth to money center banks and Wall Street has intensified under the Bush-Obama administration, with the claim that America desperately needs financial firms to stay in business despite ongoing abuse and mismanagement. In fact, the Fed heavily subsidizes money center banks and Wall Street even in good years.
In basic economics, the notion of a firm is that a good or service is provided in exchange for payment. The reason people pay firms is that they produce a valuable product. Numerous firms compete and price is driven to approximate long run total costs, eliminating excess profits.
In the case of Wall Street and the money center banks, there is no product produced. Trading stocks or borrowing money from banks to purchase securities in other currencies is not of value to anyone except the beneficiaries of the loans. But when they lose money, the federal government claims that the loss of investment banks would be harmful to the public.
This, of course, is nonsense. Firms that produce value do not need subsidies. The trillions that have been donated to the Wall Street Welfare mothers are proof that Wall Street produces no value and ought not to exist.
The Fed has been printing large amounts of money, and handing it to money center banks who in turn lend it to Wall Street for speculative purposes. This has been going on since the Fed began. The increase in the money supply reduces the financial holdings of non-loan beneficiaries. Lower and middle income retirees with certificates of deposit become poorer as the Fed cheapens the value of their assets. Wealthy people with stocks and extensive leveraged real estate holdings become wealthier.
In recent decades this process has resulted in misallocation of resources. Since World War II there has been over-construction of private houses at the expense of inner cities and investment in manufacturing and risky start ups. As a result, the best jobs have left the country as massive numbers of useless, super-sized houses have been constructed. In turn, the same party, the Democratic, that has pushed for massive subsidization of unnecessary construction of large, expensive-to-heat houses cries about "sustainability" and "global warming".
Now, wealth is being transferred from middle class bank account holders and workers simply to subsidize investment in the carry trade, borrowing at zero interest rates to invest at higher rates overseas. The welfare mothers on Wall Street have become increasingly brazen.
The grandma on line in the supermarket is seeing taxes and other prices rise while her income is stagnant. But hedge funds and Goldman Sachs are lent billions. This has become an economy managed largely for the benefit of a financial elite at the expense of the average American. America increasingly becomes a poor country to subsidize non-valuing creating investment concerns and government looters.
The ongoing transfer of wealth to money center banks and Wall Street has intensified under the Bush-Obama administration, with the claim that America desperately needs financial firms to stay in business despite ongoing abuse and mismanagement. In fact, the Fed heavily subsidizes money center banks and Wall Street even in good years.
In basic economics, the notion of a firm is that a good or service is provided in exchange for payment. The reason people pay firms is that they produce a valuable product. Numerous firms compete and price is driven to approximate long run total costs, eliminating excess profits.
In the case of Wall Street and the money center banks, there is no product produced. Trading stocks or borrowing money from banks to purchase securities in other currencies is not of value to anyone except the beneficiaries of the loans. But when they lose money, the federal government claims that the loss of investment banks would be harmful to the public.
This, of course, is nonsense. Firms that produce value do not need subsidies. The trillions that have been donated to the Wall Street Welfare mothers are proof that Wall Street produces no value and ought not to exist.
The Fed has been printing large amounts of money, and handing it to money center banks who in turn lend it to Wall Street for speculative purposes. This has been going on since the Fed began. The increase in the money supply reduces the financial holdings of non-loan beneficiaries. Lower and middle income retirees with certificates of deposit become poorer as the Fed cheapens the value of their assets. Wealthy people with stocks and extensive leveraged real estate holdings become wealthier.
In recent decades this process has resulted in misallocation of resources. Since World War II there has been over-construction of private houses at the expense of inner cities and investment in manufacturing and risky start ups. As a result, the best jobs have left the country as massive numbers of useless, super-sized houses have been constructed. In turn, the same party, the Democratic, that has pushed for massive subsidization of unnecessary construction of large, expensive-to-heat houses cries about "sustainability" and "global warming".
Now, wealth is being transferred from middle class bank account holders and workers simply to subsidize investment in the carry trade, borrowing at zero interest rates to invest at higher rates overseas. The welfare mothers on Wall Street have become increasingly brazen.
The grandma on line in the supermarket is seeing taxes and other prices rise while her income is stagnant. But hedge funds and Goldman Sachs are lent billions. This has become an economy managed largely for the benefit of a financial elite at the expense of the average American. America increasingly becomes a poor country to subsidize non-valuing creating investment concerns and government looters.
Friday, February 5, 2010
Letter from Student
I just received an e-mail from a student of 10 years ago. It is nice to know that my courses are remembered this far out.
Hello Professor Langbert,
Thank you.
I took your “Managing Organization and Behavior” class in Summer 2000 at NYU. I would not believe you if you said you remembered me, but I remember how much fun you made that class. I hadn’t thought about it for ages until this past weekend when I ran across the “Informational Interview” paper I wrote for the class.
I had interviewed a portfolio manager at Oppenheimer funds as my goal at the time was to be an analyst at a small investment firm. You will be happy to know that I am a healthcare analyst at Palisade Capital management.
While there were a lot of steps between that paper I wrote 10 years ago and where I am today, I don’t discount the value of the informational interview exercise. Thanks for that.
Hope you are well and still enjoying teaching.
Hello Professor Langbert,
Thank you.
I took your “Managing Organization and Behavior” class in Summer 2000 at NYU. I would not believe you if you said you remembered me, but I remember how much fun you made that class. I hadn’t thought about it for ages until this past weekend when I ran across the “Informational Interview” paper I wrote for the class.
I had interviewed a portfolio manager at Oppenheimer funds as my goal at the time was to be an analyst at a small investment firm. You will be happy to know that I am a healthcare analyst at Palisade Capital management.
While there were a lot of steps between that paper I wrote 10 years ago and where I am today, I don’t discount the value of the informational interview exercise. Thanks for that.
Hope you are well and still enjoying teaching.
Where Do Markets Bottom?
Five Year Gold Price courtesy Kitco.com
The above is a chart of the gold price over the last five years. The steep falls of the past week are tiny blips. But while one experiences them they are significant. The question is: where does gold bottom? The current decline like the one in fall 2008 is due to concern about financial problems, this time one in Greece and Spain that threatens the Euro; and the possibility of future Fed tightening. It is paradoxical that despite long term ill prospects for the dollar, in the short term it is viewed as a safe haven from risk assets, including gold. In fact, gold is much safer, but the short term psychology of Wall Street Keynesians leads to that thinking.
Gold has further to fall, according to my coin flip test, but not so far as in 2008. Maybe to $950, which came up heads.
Thursday, February 4, 2010
Multiple Choice Test
1. America Needs More:
(a) Politicians
(b) Welfare Mothers
(c) Wall Street Investment Bankers
(d) Auto Mechanics
(e) All of the Above
(f) a, b and c only
2. The chief problem facing America today:
(a) There are not enough hedge fund managers
(b) There are not enough people scheming to get a handout from Uncle Sam
(c) Journalists are just too honest
(d) More than half of the nation's income is diverted into government sponsored waste
3. I fear for the future because:
(a) Wall Street may not survive
(b) Government is impoverished; private affluence public squalor
(c) George Soros says that the US debt load is too low
(d) All of the above
(e) Government is spending, spending, spending and the way they're going to pay it back is an inflation that subsidizes George Soros
You have 15 minutes to complete the test. Please do not forget to sign your name.
(a) Politicians
(b) Welfare Mothers
(c) Wall Street Investment Bankers
(d) Auto Mechanics
(e) All of the Above
(f) a, b and c only
2. The chief problem facing America today:
(a) There are not enough hedge fund managers
(b) There are not enough people scheming to get a handout from Uncle Sam
(c) Journalists are just too honest
(d) More than half of the nation's income is diverted into government sponsored waste
3. I fear for the future because:
(a) Wall Street may not survive
(b) Government is impoverished; private affluence public squalor
(c) George Soros says that the US debt load is too low
(d) All of the above
(e) Government is spending, spending, spending and the way they're going to pay it back is an inflation that subsidizes George Soros
You have 15 minutes to complete the test. Please do not forget to sign your name.
China Crash?
John Derbyshire of National Review.com has an interesting post (h/t Larwyn) concerning the possibility of a China crash. Derbyshire notes that two previous times in modern history have nations run up large foreign reserve balances:
>"The first time occurred in the late 1920s when, after a decade of record-beating trade and capital account surpluses, the United States had accumulated what John Maynard Keynes worriedly described as "all the bullion in the world." . . . The second time occurred in the late 1980s, when it was Japan’s turn to combine huge trade surpluses, along with more moderate surpluses on the capital account, to accumulate a stockpile of foreign reserves only a little less than the equivalent of 5-6% of global GDP"
In May 2008 I noted that a Chinese tragedy is in the making despite the major strides that the Chinese economy has made. Like the political leadership of all managed economies, the Chinese government is subject to massive errors and missteps that are far worse than would occur under laissez-faire. I wrote then:
"Tragically, the Chinese perceived the spectacular image of large-scale development and have attempted to emulate Robert Moses's approach with large construction projects, continuing to limit the intellectual and economic freedom on which economic development depends. Equally sadly, Americans lost sight of the reason for their success, and passed laws and regulations, and imposed punitive taxes, that have inhibited entrepreneurship, slowing American economic progress, even as they have increasingly provided welfare payments to incompetent bankers, real estate developers, academics and Wall Street stock jobbers who do not produce wealth.
"This country and China have squandered resources in stupid ways. The bubble will burst as all credit bubbles do. America may have enough resources to reassess its errors. The Chinese likely do not, and many there will be hurt."
>"The first time occurred in the late 1920s when, after a decade of record-beating trade and capital account surpluses, the United States had accumulated what John Maynard Keynes worriedly described as "all the bullion in the world." . . . The second time occurred in the late 1980s, when it was Japan’s turn to combine huge trade surpluses, along with more moderate surpluses on the capital account, to accumulate a stockpile of foreign reserves only a little less than the equivalent of 5-6% of global GDP"
In May 2008 I noted that a Chinese tragedy is in the making despite the major strides that the Chinese economy has made. Like the political leadership of all managed economies, the Chinese government is subject to massive errors and missteps that are far worse than would occur under laissez-faire. I wrote then:
"Tragically, the Chinese perceived the spectacular image of large-scale development and have attempted to emulate Robert Moses's approach with large construction projects, continuing to limit the intellectual and economic freedom on which economic development depends. Equally sadly, Americans lost sight of the reason for their success, and passed laws and regulations, and imposed punitive taxes, that have inhibited entrepreneurship, slowing American economic progress, even as they have increasingly provided welfare payments to incompetent bankers, real estate developers, academics and Wall Street stock jobbers who do not produce wealth.
"This country and China have squandered resources in stupid ways. The bubble will burst as all credit bubbles do. America may have enough resources to reassess its errors. The Chinese likely do not, and many there will be hurt."
Firewall Needed: Google and the NSA
The Washington Post reports that Google and the National Security Agency are teaming up to identify the hackers who penetrated Google's China system. The article points out the need to balance privacy and security. That is a key libertarian problem that has become increasingly intricate with the advance of technology. Phone tapping posed issues that were unknown when the founding fathers wrote the Constitution, and now Internet technology poses ever more complex privacy problems. Here in the eastern Catskills, "hippies" will not get onto a computer because of fear of government. I'm not sure if this correlates with illegal behavior, but I know two people with good educations who will not get on any computer and never have. The article says that:
"collaboration is not easy, in part because private companies do not trust the government to keep their secrets and in part because of concerns that collaboration can lead to continuous government monitoring of private communications. Privacy advocates, concerned about a repeat of the NSA's warrantless interception of Americans' phone calls and e-mails after the Sept. 11, 2001, terrorist attacks, say information-sharing must be limited and closely overseen."
Another aspect of an arrangement between US spook agencies and information services is the potential for international tension. It is likely that agents of the communist government were in involved in the hacking. Might pressure from the NSA create tensions with China?
The article quotes Matthew Aid, author of "The Secret Sentry":
"I'm a little uncomfortable with Google cooperating this closely with the nation's largest intelligence agency, even if it's strictly for defensive purposes."
Given that the collaboration between Google and NSA is primarily one involving sharing of information about the hackers' techniques and code, it would seem that the collaboration maximizes freedom. But given that Google has a lot of potentially embarrassing information about a large swathe of the American public, it needs to have NSA-proof systems philosophies in place to ensure a firewall between its data and the potentially suppressive activities of the government.
"collaboration is not easy, in part because private companies do not trust the government to keep their secrets and in part because of concerns that collaboration can lead to continuous government monitoring of private communications. Privacy advocates, concerned about a repeat of the NSA's warrantless interception of Americans' phone calls and e-mails after the Sept. 11, 2001, terrorist attacks, say information-sharing must be limited and closely overseen."
Another aspect of an arrangement between US spook agencies and information services is the potential for international tension. It is likely that agents of the communist government were in involved in the hacking. Might pressure from the NSA create tensions with China?
The article quotes Matthew Aid, author of "The Secret Sentry":
"I'm a little uncomfortable with Google cooperating this closely with the nation's largest intelligence agency, even if it's strictly for defensive purposes."
Given that the collaboration between Google and NSA is primarily one involving sharing of information about the hackers' techniques and code, it would seem that the collaboration maximizes freedom. But given that Google has a lot of potentially embarrassing information about a large swathe of the American public, it needs to have NSA-proof systems philosophies in place to ensure a firewall between its data and the potentially suppressive activities of the government.
Blood in the Streets
Kitco reports that gold prices have fallen 4 percent today to 1066, nearing the 1030 mark that Jon Nadler mentioned as a near term support several days ago. Morgan Stanley Smith Barney's ticker says that the Dow is down nearly 200 points and the S&P 500 is about 1074, a 23 point drop. These declines are related to a strengthening dollar.
How far will the Fed allow markets to fall before it prints more money? Like an obsese food addict, the Fed reaches into its candy bag at the slightest impulse. Bernanke and his associates like to see gold fall. But the effects of a stronger dollar and weaker gold include bankruptcies and unemployment. More importantly to the Fed, hedge funds' carry trade and the hundreds of billions loaned to Wall Street each week will be threatened by higher interest rates.
Based on my coin flip test, I am betting $950 gold. Unless the Fed decides to change its philosophy, I doubt the S&P will go below 850. But when inflation kicks in, then the Fed will need to tighten. At that point we could see more dramatic stock market declines. Gold would continue to be fueled by speculation for a while, until raising interest rates mutes the price increase trend. Then gold will fall again.
How far will the Fed allow markets to fall before it prints more money? Like an obsese food addict, the Fed reaches into its candy bag at the slightest impulse. Bernanke and his associates like to see gold fall. But the effects of a stronger dollar and weaker gold include bankruptcies and unemployment. More importantly to the Fed, hedge funds' carry trade and the hundreds of billions loaned to Wall Street each week will be threatened by higher interest rates.
Based on my coin flip test, I am betting $950 gold. Unless the Fed decides to change its philosophy, I doubt the S&P will go below 850. But when inflation kicks in, then the Fed will need to tighten. At that point we could see more dramatic stock market declines. Gold would continue to be fueled by speculation for a while, until raising interest rates mutes the price increase trend. Then gold will fall again.
Confiscation of Pensions Would End the Democratic Party
A number of people are concerned about the nationalization of pensions. Americans will not accept direct confiscation of that sort. The Tea Party suggests that the tension has begun. If the Democrats proceed with health demolition and cap and trade, the public sentiment will be intense. Nationalization of pensions, well, I think we can say that could finally result in a long overdue libertarian revolution. The stripping of the federal government of most of the powers it has accrued since 1930 will be a painful process but one that will repay the American people a thousandfold. I do not think its occurrence is improbable. But I'm not convinced that the Democrats are going ahead with their program. They're first and foremost selfish politicians.
Tuesday, February 2, 2010
Aristotle on the Limitations of Rationality in Ethics
"Our discussion will be adequate if its clarity matches the subject matter. For we should not seek exactness in all accounts alike...And fine and just actions, which political theory investigates, exhibit difference and fluctuation, so that it seems they exist only by convention, and not by nature. And goods also exhibit a similar sort of fluctuation because they cause harm to many people. For it has happened that some have been destroyed because of their wealth, and others because of their bravery. Thus we must be content, in speaking about and from such things, to indicate the truth roughly and in outline, and we must be content in speaking about things that hold for the most part and in drawing conclusions of the same sort from such things."
---Aristotle, circa 325 BC, Nicomachean Ethics. Translated by N. Sherman in N. Sherman "Making a Necessity of Virtue: Aristotle and Kant on Virtue", p.268.
Solution to Health Coverage Crisis: Free Health Zones
Like many of the issues publicized in the Democratic media, the "health care crisis" is just a government failure, little more. The government has meddled with the health system for over a century. The first regulation of life insurance occurred in New York State when Met Life claimed that a now illegal concept called Tontine Insurance was immoral and therefore should be illegalized and regulated. Met's newly founded competitor, Equitable, invented Tontine Insurance. It was a form of gambling based on survival plus life insurance. There were two elements, life insurance plus a lottery instead of a cash value. The lottery proceeds were paid to the last survivors of a given cohort. So if you entered the Tontine in 1865, probably by 1910 or 1920 the last survivors in your age bracket would be left and if you were one of them you collected a big windfall, like a million bucks or something (today's million bucks was worth $80,000 back then).
Anyway, Met Life didn't like the competition and the popularity of Tontines and so had them illegalized. Thus began regulation of life insurance, of which health insurance is derivative.
Regulation inevitably serves producer interests and insurance is no exception. Health insurance also is influenced by provider lobbies, which are many. So the health coverage crisis is a product of provider and insurance industry influence on the regulation of coverage.
To solve the problem that the pro-regulation Republicans and Democrats create:
1. Eliminate all mandates on coverage
2. Deregulate providers
3. Provide tax credits for purchase of individual health insurance
4. Legalize ultra-high deductible policies, with deductibles as high as $20,000
5. Permit tax credit individual retirement accounts so that individuals can easily save for the difference between the deductible and their losses
6. Legalize free health zones whereby foreign providers can operate in partnership with but free of interference from US providers
With regard to number 6, a large range of elective operations are now being performed overseas for as little as 10 percent of the cost of the same operation in the US. US firms ought to partner with foreign ones in the globalization of health care. Quality standards that exceed US levels can be established by talented providers, much as Japanese auto companies found ways to significantly exceed US quality standards in the automotive field.
Currently, globalized health care depends on travel to a foreign country. If the US establishes free health zones exempt from provider-driven regulation, then low-cost foreign providers can set up shop here, much as Japanese auto companies have.
De regulation and ending of health care socialism, rather than increasing it, will end the government-induced health care coverage crisis.
Anyway, Met Life didn't like the competition and the popularity of Tontines and so had them illegalized. Thus began regulation of life insurance, of which health insurance is derivative.
Regulation inevitably serves producer interests and insurance is no exception. Health insurance also is influenced by provider lobbies, which are many. So the health coverage crisis is a product of provider and insurance industry influence on the regulation of coverage.
To solve the problem that the pro-regulation Republicans and Democrats create:
1. Eliminate all mandates on coverage
2. Deregulate providers
3. Provide tax credits for purchase of individual health insurance
4. Legalize ultra-high deductible policies, with deductibles as high as $20,000
5. Permit tax credit individual retirement accounts so that individuals can easily save for the difference between the deductible and their losses
6. Legalize free health zones whereby foreign providers can operate in partnership with but free of interference from US providers
With regard to number 6, a large range of elective operations are now being performed overseas for as little as 10 percent of the cost of the same operation in the US. US firms ought to partner with foreign ones in the globalization of health care. Quality standards that exceed US levels can be established by talented providers, much as Japanese auto companies found ways to significantly exceed US quality standards in the automotive field.
Currently, globalized health care depends on travel to a foreign country. If the US establishes free health zones exempt from provider-driven regulation, then low-cost foreign providers can set up shop here, much as Japanese auto companies have.
De regulation and ending of health care socialism, rather than increasing it, will end the government-induced health care coverage crisis.
Hamlet is Us
When the market is down in January, don't expect a good year. In 2008, I noticed that the market was down in January and I went ahead and invested in gold stocks anyway. I was hammered that fall. Marketwatch quotes S&P's Sam Stovall as saying that this "barometer's track record is dicey, as it often fails to identify the start of new bull markets, such as the market-turnaround years of 1982 and 2003."
At 11:01 The Street noted that gold broke 1100 (I like that kind of symmetry, 11:00, 1101, it goes with my coin flipping method of investing). I'm not convinced that gold will remain firm in the short term just yet, although I've been wrong plenty of times before. Kitco today indicates that the 30 day change in the gold price has been slightly positive.
Jon Nadler of Kitco concludes his report today with this remark:
"If you are in the short-term end of the spectrum of players, excitement will not be lacking, on an hourly basis, even. The bigger picture remains unconvincing on several levels for medium-term speculators."
Also on Kitco, Roger Wiegand has a summary of the derivatives blow up over the past ten years.
Here are some of Wiegand's points:
"USA and other nations’ central bankers pumped currencies and bonds to the moon...TARP money was stolen from taxpayers and funneled through conduit AIG to crooked, failed bankers to reliquify their balance sheets with free money. They are supposed to lend some out for growth but are holding it tight earning free interest from the government; taking no risks...Crooked bankers discovered they are “Too Big To Fail” and are doing it all over again with a tacit “no penalty” understanding. Estimated derivative balances today are $204 Trillion Dollars. No one will stop them until everything collapses in one final crashing swoon."
I have a Hamlet problem. I fear the further fall of gold and rise of dollars in light of the likelihood of dollar demand in case of a global issue such as defaults by Greece or Spain (logically that should not happen but the big investors insist on the safety of the dollar). But I also fear the long term prospects for the dollar given the fragility of the banking system and the likelihood of further inflationary movement.
At 11:01 The Street noted that gold broke 1100 (I like that kind of symmetry, 11:00, 1101, it goes with my coin flipping method of investing). I'm not convinced that gold will remain firm in the short term just yet, although I've been wrong plenty of times before. Kitco today indicates that the 30 day change in the gold price has been slightly positive.
Jon Nadler of Kitco concludes his report today with this remark:
"If you are in the short-term end of the spectrum of players, excitement will not be lacking, on an hourly basis, even. The bigger picture remains unconvincing on several levels for medium-term speculators."
Also on Kitco, Roger Wiegand has a summary of the derivatives blow up over the past ten years.
Here are some of Wiegand's points:
"USA and other nations’ central bankers pumped currencies and bonds to the moon...TARP money was stolen from taxpayers and funneled through conduit AIG to crooked, failed bankers to reliquify their balance sheets with free money. They are supposed to lend some out for growth but are holding it tight earning free interest from the government; taking no risks...Crooked bankers discovered they are “Too Big To Fail” and are doing it all over again with a tacit “no penalty” understanding. Estimated derivative balances today are $204 Trillion Dollars. No one will stop them until everything collapses in one final crashing swoon."
I have a Hamlet problem. I fear the further fall of gold and rise of dollars in light of the likelihood of dollar demand in case of a global issue such as defaults by Greece or Spain (logically that should not happen but the big investors insist on the safety of the dollar). But I also fear the long term prospects for the dollar given the fragility of the banking system and the likelihood of further inflationary movement.
Prepare Now to Escape Obama's Retirement Trap
Jim Crum and Chris Johansen both forwarded an e-mail containing Ron Holland's article "Prepare Now to Escape Obama's Retirement Trap." Holland offers a nightmare scenario for the private employee benefit system. While I don't think it will happen, it very well could. I was interested that Theresa Ghilarducci and Alicia Munnell, two pension researchers from academia, figure in this scenario.
My reaction to this scenario is that while it is certainly possible, there are three stumbling blocks: the political power of plan sponsors, the lack of value added to the government of confiscation of plan assets in the event of a crash (there will be little to confiscate) and the potential aggravation of middle class voters.
First, the political power of corporate America and labor unions combined, both of which interests have heavy investments in the current employee benefit system, will likely forestall attacks on the system as now constituted. Nothing has ever been done to the US pension system that was completely unpalatable to either of these two interests. Note that the recent health care proposal met with some labor union resistance. If health reform ever passes, the limits on rich union health plans will be deleted. Perhaps more so for pensions, which have advocates on Wall Street and in the banking and insurance industries as well as big labor and corporate America generally. While politicians are greedy fools, they respond quickly to their corporate bosses.
Munnell and Ghilarducci can devise plenty of benefit schemes, but when big business calls and calls heavily, Congress listens carefully.
Holland notes that the dollar's days are numbered because of federal debt. He writes that the US government is thrashing about, looking for additional revenue. All true. Holland argues that "wealth confiscation" is a realistic likelihood, that there is $15 trillion in retirement assets, and Congress might well tax or otherwise confiscate this money. Holland states that Alicia Munnell proposed a mandatory federal retirement system that would be financed by taxing existing pension assets.
Teresa Ghilarducci, another pension researcher now at the New School, advocates putting $600 up to $12,000 plus 5% of your compensation above $12,000 into a "Guaranteed Retirement Account". This would be accompanied by a cap of $5,000 on contributions to 401(k) plans and a tax on retirement plans' income. Also, there would be a prohibition on international investments (I'll bet commodities too, but that's just a guess).
Holland suggests that a "crisis" such as a downgrade of US treasuries or a run on the dollar could trigger a move like this. He notes:
"At some time during the next decade, a global run on treasury debt and the dollar will also likely take the American stock market down past lows not seen since the financial meltdown crisis in 2008 and 2009. The 50% to 75% stock market pullback during the actual bankruptcy of the Washington debt and paper dollar will send shock waves through retirees and current plan participants as their private retirement plan balances plummet." Upon the stock market crash, argues Holland, the American public will be bamboozled into switching to Ghilarducci's retirement concept, a new federal plan.
I agree that the stock market is capable of falling by 75%. However, confiscation of the $15 trillion in retirement assets is unlikely to be very helpful. To retire Baby Boomers in an acceptable way will cost $15 trillion. Let's say there are 50 million boomers earning an average of $40,000. If each retires at age 67 and receives an annuity of $30,000, the cost will be (not really but an order of this magnitude): $30,000 x 10 x 50 million = $15,000,000,000,000, $15 trillion. So I'm not sure what the Federal government would gain by taking the $15 trillion from the retirement funds and putting it into a government plan. It's a wash.
Of course, the current allocation of the 15 trillion on deposit is skewed heavily toward the higher income earners. But do you believe that this massive number of potential higher-income retirees, with tremendous voting power (much more than the people who don't have assets) will quietly watch the government take its assets, even given an emotional crash? And if the stock market falls so that the pension assets are worth half that, how would the government benefit?
This scenario assumes that the chief goal of the US government is to impoverish the affluent. While I do believe that the government is in the process of impoverishing us, rich and moderate income, I do not believe that they will do this in a heavy handed way. They can destroy the nation simply through the Fed and inflation.
Thus, I think the more realistic scenario is inflation. Inflation was invented to limit tax revolts. It slams people on pensions the hardest, and Americans have docilely accepted bankers' propaganda via university academics and media sources that inflation helps them. Since Americans have behaved like drooling idiots about inflation since World War II, it seems a safe bet that they will continue to do so.
It is the duty of the Federal Reserve Bank to extract wealth from the hard working and give it to the non-working, both as welfare for the poor and mostly welfare for the rich, especially stock holders and derivatives investors. Why bother with directly confiscating pension money when all the Fed needs to do is print money, hand it to commercial banks, who in turn lend it to government, hedge funds and investment bankers, who then repay the loans in depreciated dollars as everyone else in the country sees their savings and wages decimated? I think something like that is more likely than confiscation of pension assets. Confiscation is too messy and too controversial. Inflation is a good way to get the suckers to thank you for stealing from them.
Nothing beats a nice healthy inflation to feed government and Wall Street snakes.
My reaction to this scenario is that while it is certainly possible, there are three stumbling blocks: the political power of plan sponsors, the lack of value added to the government of confiscation of plan assets in the event of a crash (there will be little to confiscate) and the potential aggravation of middle class voters.
First, the political power of corporate America and labor unions combined, both of which interests have heavy investments in the current employee benefit system, will likely forestall attacks on the system as now constituted. Nothing has ever been done to the US pension system that was completely unpalatable to either of these two interests. Note that the recent health care proposal met with some labor union resistance. If health reform ever passes, the limits on rich union health plans will be deleted. Perhaps more so for pensions, which have advocates on Wall Street and in the banking and insurance industries as well as big labor and corporate America generally. While politicians are greedy fools, they respond quickly to their corporate bosses.
Munnell and Ghilarducci can devise plenty of benefit schemes, but when big business calls and calls heavily, Congress listens carefully.
Holland notes that the dollar's days are numbered because of federal debt. He writes that the US government is thrashing about, looking for additional revenue. All true. Holland argues that "wealth confiscation" is a realistic likelihood, that there is $15 trillion in retirement assets, and Congress might well tax or otherwise confiscate this money. Holland states that Alicia Munnell proposed a mandatory federal retirement system that would be financed by taxing existing pension assets.
Teresa Ghilarducci, another pension researcher now at the New School, advocates putting $600 up to $12,000 plus 5% of your compensation above $12,000 into a "Guaranteed Retirement Account". This would be accompanied by a cap of $5,000 on contributions to 401(k) plans and a tax on retirement plans' income. Also, there would be a prohibition on international investments (I'll bet commodities too, but that's just a guess).
Holland suggests that a "crisis" such as a downgrade of US treasuries or a run on the dollar could trigger a move like this. He notes:
"At some time during the next decade, a global run on treasury debt and the dollar will also likely take the American stock market down past lows not seen since the financial meltdown crisis in 2008 and 2009. The 50% to 75% stock market pullback during the actual bankruptcy of the Washington debt and paper dollar will send shock waves through retirees and current plan participants as their private retirement plan balances plummet." Upon the stock market crash, argues Holland, the American public will be bamboozled into switching to Ghilarducci's retirement concept, a new federal plan.
I agree that the stock market is capable of falling by 75%. However, confiscation of the $15 trillion in retirement assets is unlikely to be very helpful. To retire Baby Boomers in an acceptable way will cost $15 trillion. Let's say there are 50 million boomers earning an average of $40,000. If each retires at age 67 and receives an annuity of $30,000, the cost will be (not really but an order of this magnitude): $30,000 x 10 x 50 million = $15,000,000,000,000, $15 trillion. So I'm not sure what the Federal government would gain by taking the $15 trillion from the retirement funds and putting it into a government plan. It's a wash.
Of course, the current allocation of the 15 trillion on deposit is skewed heavily toward the higher income earners. But do you believe that this massive number of potential higher-income retirees, with tremendous voting power (much more than the people who don't have assets) will quietly watch the government take its assets, even given an emotional crash? And if the stock market falls so that the pension assets are worth half that, how would the government benefit?
This scenario assumes that the chief goal of the US government is to impoverish the affluent. While I do believe that the government is in the process of impoverishing us, rich and moderate income, I do not believe that they will do this in a heavy handed way. They can destroy the nation simply through the Fed and inflation.
Thus, I think the more realistic scenario is inflation. Inflation was invented to limit tax revolts. It slams people on pensions the hardest, and Americans have docilely accepted bankers' propaganda via university academics and media sources that inflation helps them. Since Americans have behaved like drooling idiots about inflation since World War II, it seems a safe bet that they will continue to do so.
It is the duty of the Federal Reserve Bank to extract wealth from the hard working and give it to the non-working, both as welfare for the poor and mostly welfare for the rich, especially stock holders and derivatives investors. Why bother with directly confiscating pension money when all the Fed needs to do is print money, hand it to commercial banks, who in turn lend it to government, hedge funds and investment bankers, who then repay the loans in depreciated dollars as everyone else in the country sees their savings and wages decimated? I think something like that is more likely than confiscation of pension assets. Confiscation is too messy and too controversial. Inflation is a good way to get the suckers to thank you for stealing from them.
Nothing beats a nice healthy inflation to feed government and Wall Street snakes.
Pelosi's Children Illegally Use Military Jets for Personal Travel
Legendary blogger Doug Ross wrote a blog on January 31 (h/t Larwyn) about Nancy Pelosi's children using military jets to travel illegally. Ross writes:
>"Is it a legitimate use of military jets to transport the Speaker of the House and her favored Congressional coterie for routine travel? Even if you believe it is -- and, personally, I do not -- any rational taxpayer would admit that it is monumental waste of money. Military flights cost between $5,000 and $20,000 per hour to operate. The Speaker and her passengers routinely reimburse the Air Force $120 to $400 for each flight.
"Since Nancy Pelosi took over as Speaker in 2006, she's rung up millions in military travel expenses to commute between San Francisco and Washington.
"Worse still, she also appears to have liberally requisitioned entire flights for the personal use of her used these flights to shuttle her children and grandchildren back and forth to DC. That is, unaccompanied by any member of Congress, her kids, in-laws and grandchildren are utilizing entire using military passenger jets for their route."
Ross provides extensive documentation. Quoting Ross's conclusion:
"Pelosi must resign. Or she should be forcibly removed out of office. These activities, if not outright criminal, smell to high heaven."
>"Is it a legitimate use of military jets to transport the Speaker of the House and her favored Congressional coterie for routine travel? Even if you believe it is -- and, personally, I do not -- any rational taxpayer would admit that it is monumental waste of money. Military flights cost between $5,000 and $20,000 per hour to operate. The Speaker and her passengers routinely reimburse the Air Force $120 to $400 for each flight.
"Since Nancy Pelosi took over as Speaker in 2006, she's rung up millions in military travel expenses to commute between San Francisco and Washington.
"Worse still, she also appears to have liberally requisitioned entire flights for the personal use of her used these flights to shuttle her children and grandchildren back and forth to DC. That is, unaccompanied by any member of Congress, her kids, in-laws and grandchildren are utilizing entire using military passenger jets for their route."
Ross provides extensive documentation. Quoting Ross's conclusion:
"Pelosi must resign. Or she should be forcibly removed out of office. These activities, if not outright criminal, smell to high heaven."
Obama's Bow to Tampa's Mayor
I thought it was weird when Obama bowed to a Saudi prince. Now he's bowed to Pam Iorio, mayor of Tampa.
Terresa Monroe-Hamilton of Noisy Room.net (h/t Larwyn) asks the question pro-Wall Street news sources like MSNBC won't:
"What is Obama going to do, bow to every person in America who is part Asian? How about fist-bumping anyone who is African American? I thought his bowing was reserved for totalitarian dictators and groveling before foreign leaders whatever their stature…"
Me too.
Monday, February 1, 2010
$980 or $1200 Gold?
Jon Nadler of Kitco argues the bear case:
"On the technical side of things, as was expected, the break below the $1,015 (he means $1,115) price marker elicited a fairly heavy subsequent decline in values. At this time, near-term support has held up at the $1,073-1,075 levels, despite such support being fairly moderate in terms of bargain hunting. Thus, a deeper decline towards the $1,055 and ultimately the $980 level now appears more plausible, even if we can expect a bounce from current levels in upcoming sessions. Overhead resistance appears to be in the $1,095-1,097 area, and the metal needs to rise to above the $1,117 mark to get the bulls excited again."
Also of Kitco, Frank Holmes argues:
We believe that the secular bull market for commodities and natural resources stocks that began in 2000 is far from over. The International Monetary Fund believes that commodity prices will rise further in 2010 as a result of global economic recovery and escalating demand from fast-growing emerging markets.
"The expanding middle class in China, Brazil and the other biggest emerging economies want more of the material goods taken for granted in the developed world. They are laying claim to a bigger share of the world’s commodities, many of which could face future supply constraints.
"History shows that commodity supercycles typically last 20 to 25 years, though not without periods of volatility. If the current cycle follows the historic pattern, we could be just starting the second half of a prolonged upward trend."
"To favor the bear case long term you need to believe in the competence of the Fed and the US Congress. Also, you need to overlook the long term trend of dollar depreciation over the past century. To favor the bull case short term you need to overlook the power of the central banks and Wall Street and the dollar mythology.
"On the technical side of things, as was expected, the break below the $1,015 (he means $1,115) price marker elicited a fairly heavy subsequent decline in values. At this time, near-term support has held up at the $1,073-1,075 levels, despite such support being fairly moderate in terms of bargain hunting. Thus, a deeper decline towards the $1,055 and ultimately the $980 level now appears more plausible, even if we can expect a bounce from current levels in upcoming sessions. Overhead resistance appears to be in the $1,095-1,097 area, and the metal needs to rise to above the $1,117 mark to get the bulls excited again."
Also of Kitco, Frank Holmes argues:
We believe that the secular bull market for commodities and natural resources stocks that began in 2000 is far from over. The International Monetary Fund believes that commodity prices will rise further in 2010 as a result of global economic recovery and escalating demand from fast-growing emerging markets.
"The expanding middle class in China, Brazil and the other biggest emerging economies want more of the material goods taken for granted in the developed world. They are laying claim to a bigger share of the world’s commodities, many of which could face future supply constraints.
"History shows that commodity supercycles typically last 20 to 25 years, though not without periods of volatility. If the current cycle follows the historic pattern, we could be just starting the second half of a prolonged upward trend."
"To favor the bear case long term you need to believe in the competence of the Fed and the US Congress. Also, you need to overlook the long term trend of dollar depreciation over the past century. To favor the bull case short term you need to overlook the power of the central banks and Wall Street and the dollar mythology.
Obama Outsources the Presidency
Doug Ross's Larwyn's Lynx (see icon to right) carries a piece by Frank Miehle of northwest Montana's Daily Inter Lake in which Miehle argues that Obama's aim has been to radically transform America in a globalist and fascistic direction. Miehle writes:
>"With little fanfare and virtually no explanation, President Obama issued an executive order on Dec. 17 granting Interpol, the international police force, full diplomatic immunity to operate in the United States without accountability to our laws and courts. Why would he do so?...
>"Then there was the attempted Christmas Day bombing incident aboard a jet bound for Detroit. We discovered, as a result of the Justice Department’s handling of this case, that foreign combatants have the right to remain silent...
>"This month, it was announced that the president had signed another executive order creating yet another “new idea” in governance. This one has gotten very little attention. According to the official press release on Jan. 11, “The President today signed an Executive Order establishing a Council of Governors to strengthen further the partnership between the Federal Government and State Governments to protect our Nation against all types of hazards. When appointed, the Council will be reviewing such matters as involving the National Guard..."
Obama's position that there needs to be a brown shirt-style civilian para-military force is familiar. To understand this and the internationalist proposals we need to refer to the liberal (in the Enlightenment sense) philosopher Karl Popper. Popper argued that totalitarian socialism, in both its left wing (communist) and right wing (Nazi) forms is a reversion to tribalism. In other words, socialism is profoundly conservative and reactionary. In comparison, most members of the Tea Parties, whose ideas derive from the 17th and 18th centuries, are radicals. The first intellectual tribalist reactionary was, in Popper's view, Plato. He was reacting to the rule of law, democracy and freedom that the Athenians had created and resulted in the creation of western civilization. The most recent is, of course, Obama and his brown shirt-style youth cult. In the first month of the Obama presidency his aide, Rahm Emanuel, was talking about adoption of compulsory youth service, much like the Red Guard under Mao.
Obama is part of the tribalist camp. Today's tribalists argue not for a forgotten, pre-historic past that Plato remembered in part because nearby Sparta had retained many of the socialist elements of tribalism, but for a reconstituted medieval world order which they term "progressive". The medieval world order retained elements of the primitive tribalism because it reflected barbarians' conquest of the Roman empire, which had retained some elements of the Athenian culture. The barbarians envied Rome but were largely illiterate. They did their best to copy Rome (the Habsburgs called their core holdings "the holy Roman Empire", for example) but inevitably re-instituted elements of the tribalism that they had continued to practice. This included the common field. Each member of the medieval social order had an appropriate place under feudalism, and in many instances serfdom. Those who did not fit, like Jews, might be tolerated and harassed, but were mostly on the fringes. Crucial to the medieval world order was the world government, the Church, which oversaw welfare programs in each locality through local parishes.
In the Occident there were three major world governments, all of which were associated with religion: the eastern Christianity of Greece and Turkey (then Constantinople); the Islamic world; and western Christianity. Today's tribalists aim to replace the religious world government of medieval times with a secular humanist world government governed by financial power and a university-based priesthood.
Bob Robbins forwarded the above cartoon that appeared on Steady John's Steady Habits blog. Lockean liberals need to redouble their efforts to forestall Obama's socialist reaction. This will be a pitched battle for three more years. We need to destabilize the administration until the forces of freedom can triumph.
Thirty Year Bear Market
An economic forecaster once told a class I attended that he loved to make thirty year forecasts because no one would remember his forecast when the events actually occurred. So he could collect his fee without fear of request for a refund. I will make a thirty year forecast, nonetheless. We are in for soft and declining markets for the rest of my life.
The unfolding of the banking problems in the past two years and the ongoing subsidization of the housing and stock markets via low-to-negative real interest rates will have predictable effects. The current situation is complicated by the de facto pegging of the dollar by international central banks. The real effects of the subsidization are wealth transfers from productive to unproductive factors of production. The chief beneficiaries of the transfers are beneficiaries of government (both employees and welfare recipients), investors and speculators in assets, including stocks, currency, bonds, commodities and real estate. The chief losers are savers in cash and productive workers.
The debt of the US government is growing in absolute numbers to an extent unparalleled in history. Generally, large government debt increases have been associated with monetary expansion and inflation. This time, central bank dollar pegging has limited inflation in the US. The pegging is a form of international inflation. That is, the nations that are supporting the dollar are making their citizens poorer in order to keep them working.
Ultimately, the complex deception becomes untenable. The public starts to question why harder work is met with ever lower rewards. Larger and larger transfers to asset holders are required to keep markets steady, and workers will become poorer and poorer, driving increasing numbers out of the labor market. Democrats and collectivist altruists will say that the deprivation of the productive is in the public interest.
It has become apparent that the US government will not allow the stock and real estate markets to fall. As well, it cannot afford to pay off its massive, ever-increasing debts. So it will depreciate the dollar.
The alternative to stock markets that are soft and retain value only because of government subsidy and dollar holdings that are vulnerable to hyper inflation is commodities. But there is no reason to trust the stability of commodity markets. The pegging system coupled with carry trade and hedge fund activity ensures support for the dollar when it weakens.
The forces for inflation and dollar (and international currency) depreciation are far more powerful than the forces for stability, for the debt is growing too quickly to ever be repaid; the Fed is creating a bubble in US Treasury debt; and the Fed has shown that it will not permit real estate or stock markets to fall. So in the long run, over thirty years, commodities will be better than dollars. But it will be a bumpy road.
Given the uncertainty, firms cannot think long term in the new world socialist order and so sustainable economic growth is out of the question for the foreseeable future. Likewise, the growth absorbing power of government will ensure a declining economy. Innovation in the US once powered the world's advancement, but unless the Asian nations more aggressively permit entrepreneurship, there is no longer a growth engine. It certainly is not the United Socialist States of America. As George Soros pushes for an American society ever more closed and totalitarian, opportunities for shorting and going long on commodities and currency become greater.
Do not expect the highs of the early 2000s to be significantly surpassed in real dollars. But there will be plenty of inflation to confuse everyone.
The unfolding of the banking problems in the past two years and the ongoing subsidization of the housing and stock markets via low-to-negative real interest rates will have predictable effects. The current situation is complicated by the de facto pegging of the dollar by international central banks. The real effects of the subsidization are wealth transfers from productive to unproductive factors of production. The chief beneficiaries of the transfers are beneficiaries of government (both employees and welfare recipients), investors and speculators in assets, including stocks, currency, bonds, commodities and real estate. The chief losers are savers in cash and productive workers.
The debt of the US government is growing in absolute numbers to an extent unparalleled in history. Generally, large government debt increases have been associated with monetary expansion and inflation. This time, central bank dollar pegging has limited inflation in the US. The pegging is a form of international inflation. That is, the nations that are supporting the dollar are making their citizens poorer in order to keep them working.
Ultimately, the complex deception becomes untenable. The public starts to question why harder work is met with ever lower rewards. Larger and larger transfers to asset holders are required to keep markets steady, and workers will become poorer and poorer, driving increasing numbers out of the labor market. Democrats and collectivist altruists will say that the deprivation of the productive is in the public interest.
It has become apparent that the US government will not allow the stock and real estate markets to fall. As well, it cannot afford to pay off its massive, ever-increasing debts. So it will depreciate the dollar.
The alternative to stock markets that are soft and retain value only because of government subsidy and dollar holdings that are vulnerable to hyper inflation is commodities. But there is no reason to trust the stability of commodity markets. The pegging system coupled with carry trade and hedge fund activity ensures support for the dollar when it weakens.
The forces for inflation and dollar (and international currency) depreciation are far more powerful than the forces for stability, for the debt is growing too quickly to ever be repaid; the Fed is creating a bubble in US Treasury debt; and the Fed has shown that it will not permit real estate or stock markets to fall. So in the long run, over thirty years, commodities will be better than dollars. But it will be a bumpy road.
Given the uncertainty, firms cannot think long term in the new world socialist order and so sustainable economic growth is out of the question for the foreseeable future. Likewise, the growth absorbing power of government will ensure a declining economy. Innovation in the US once powered the world's advancement, but unless the Asian nations more aggressively permit entrepreneurship, there is no longer a growth engine. It certainly is not the United Socialist States of America. As George Soros pushes for an American society ever more closed and totalitarian, opportunities for shorting and going long on commodities and currency become greater.
Do not expect the highs of the early 2000s to be significantly surpassed in real dollars. But there will be plenty of inflation to confuse everyone.
Sunday, January 31, 2010
Marco Rubio, the Obama Stimulus and the Bush Bailout
Gary Fineout is a journalist who works in Florida. In October he blogged about the conservative senatorial candidate Marco Rubio's stand on the Obama stimulus. He wrote:
"Rubio has been highly critical of the $787 billion stimulus package for months, repeating that government spending can't create prosperity. In his latest pitch to donors, Rubio's campaign states that Crist's 'enthusiastic support for a big government spending policy' has failed to halt the rise in unemployment while adding to the deficit."
However, it is important to recognize that although the stimulus package was a nonsensical blunder, a much bigger subsidy has been bestowed upon Wall Street. That includes the Bush/Obama/McCain-supported bailout of Wall Street as well as considerable hidden subsidies to the street via the Federal Reserve Bank. Some experts estimate that the actual subsidies to the street have been as high as $14 trillion, 14 times what Obama said in his state of the union address.
There are various kinds of Republicans. One way of classifying them is big versus small government supporters. Small government supporters oppose the Wall Street subsidies. Big government supporters support the Bush/Paulson bailout. It is a sign of the failure of the majority of rank-and-file, small government Republicans that they have allowed big government types to dominate their party nationally.
Marco Rubio claims to be a small government type and so representative of the Tea Party. But did he support or oppose the Paulson bailout, which is the chief reason Obama was elected with such heavy support from the street and the mass media it finances?
In a Miami Herald/St. Petersburg Times article Adam C. Smith and Alex Leary quote National Rifle Association lobbyist Marion Hammer:
"He was a big disappointment to us when he was the speaker...He talked the talk, but he didn't walk the walk."
The article adds:
"The 38-year-old campaigning as an authentic, from-the-gut conservative is the same person who spent tens of thousands of dollars to test political messages on focus groups, gave out big staff salaries and, like Crist, favored a $60 million subsidy for a new Florida Marlins stadium...The candidate Rubio rails against big-government spending and assures voters that as a senator he won't slip earmarks into the federal budget. As speaker, however, he didn't mind a state budget with $800,000 tucked away for artificial turf on Miami-Dade fields where he played flag football."
There is no reason to trust the Miami Herald any more than there is reason to trust Rubio or anyone else that MSNBC or other big media sources tout, as in the video below. But it is imperative that Republicans question Rubio as to his position, not on the partisan Obama "stimulus" issue, which Republicans have used as cover for the massive government spending bloat of the Bush era, but on the Bush/Paulson/Obama/McCain bailout of October 2008, which was a far more damaging, far reaching and larger subsidy.
If you favor small government, the bigger problem is the Fed subsidies, not the stimulus. Where does Rubio stand on this issue, which is orders of magnitude larger than the stimulus?
People need to ask Rubio this question. Then ask it again. And again.
"Rubio has been highly critical of the $787 billion stimulus package for months, repeating that government spending can't create prosperity. In his latest pitch to donors, Rubio's campaign states that Crist's 'enthusiastic support for a big government spending policy' has failed to halt the rise in unemployment while adding to the deficit."
However, it is important to recognize that although the stimulus package was a nonsensical blunder, a much bigger subsidy has been bestowed upon Wall Street. That includes the Bush/Obama/McCain-supported bailout of Wall Street as well as considerable hidden subsidies to the street via the Federal Reserve Bank. Some experts estimate that the actual subsidies to the street have been as high as $14 trillion, 14 times what Obama said in his state of the union address.
There are various kinds of Republicans. One way of classifying them is big versus small government supporters. Small government supporters oppose the Wall Street subsidies. Big government supporters support the Bush/Paulson bailout. It is a sign of the failure of the majority of rank-and-file, small government Republicans that they have allowed big government types to dominate their party nationally.
Marco Rubio claims to be a small government type and so representative of the Tea Party. But did he support or oppose the Paulson bailout, which is the chief reason Obama was elected with such heavy support from the street and the mass media it finances?
In a Miami Herald/St. Petersburg Times article Adam C. Smith and Alex Leary quote National Rifle Association lobbyist Marion Hammer:
"He was a big disappointment to us when he was the speaker...He talked the talk, but he didn't walk the walk."
The article adds:
"The 38-year-old campaigning as an authentic, from-the-gut conservative is the same person who spent tens of thousands of dollars to test political messages on focus groups, gave out big staff salaries and, like Crist, favored a $60 million subsidy for a new Florida Marlins stadium...The candidate Rubio rails against big-government spending and assures voters that as a senator he won't slip earmarks into the federal budget. As speaker, however, he didn't mind a state budget with $800,000 tucked away for artificial turf on Miami-Dade fields where he played flag football."
There is no reason to trust the Miami Herald any more than there is reason to trust Rubio or anyone else that MSNBC or other big media sources tout, as in the video below. But it is imperative that Republicans question Rubio as to his position, not on the partisan Obama "stimulus" issue, which Republicans have used as cover for the massive government spending bloat of the Bush era, but on the Bush/Paulson/Obama/McCain bailout of October 2008, which was a far more damaging, far reaching and larger subsidy.
If you favor small government, the bigger problem is the Fed subsidies, not the stimulus. Where does Rubio stand on this issue, which is orders of magnitude larger than the stimulus?
People need to ask Rubio this question. Then ask it again. And again.
CPAC in Three Weeks
The Conservative Political Action Conference (CPAC) meeting is in three weeks. I will not attend for various practical reasons. Glenn Beck will be the keynote speaker and makes some useful comments in this video:
What CPAC ought to be asking of candidates is two things:
1. Did you support the Wall Street bailout? Will you support a future bailout?
2. What is your specific plan for overcoming bureaucratic resistance to cutting waste and incompetence?
What CPAC ought to be asking of candidates is two things:
1. Did you support the Wall Street bailout? Will you support a future bailout?
2. What is your specific plan for overcoming bureaucratic resistance to cutting waste and incompetence?
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