The Stock Market's Curious Decline

The Wall Street Journal reports that stocks fell dramatically today. The S&P 500, an index of large stocks, fell by 2.56%, or $32.89. In the same issue, The Journal reports Obama's signing of the bill to increase the already massively distended debt ceiling.  The Journal writes:

President Barack Obama on Tuesday signed into law a bill raising the nation's debt ceiling, capping what he called an "unsettling" debate for the economy and helping the U.S. avoid default just 10 hours before the government would have run out of money to pay its bills.The move came after the Senate voted 74-26 to approve the legislation to raise the country's $14.29 trillion debt ceiling and cut the budget deficit by at least $2.1 trillion over the next decade, a major victory for Republicans who have long battled to shrink the size of the U.S. government.

The market had fallen last week and yesterday. Now, after the signing, the market fell even further.  This presents an interesting hypothesis:  The stock market does not reflect the well being of the economy. Rather, it reflects the short-term profitability of listed firms, many of whose existence harm the economy by keeping out smaller, more entrepreneurial firms that can outperform them. They do this through big government and regulation.  In other words, the market fell because the debt ceiling bill reduced the amount of government waste and overspending that goes to big business. An increasing stock market and America's welfare are at odds.

Americans need to rethink their love affair with Wall Street.  The average American's wage has been stagnant for 40 years while Wall Street has dramatically expanded. Might this latest evidence of a conflict between the nation's economic health and the stock market give one pause about the confusion between the two?

Obama's Impeachable Social Security Threat

For the past two weeks President Obama's veiled threat to withhold social security checks on August 3 has influenced the debt ceiling debate. On July 12 CBS quoted the President as saying, "I cannot guarantee that those checks go out on August 3rd if we haven't resolved this issue. Because there may simply not be the money in the coffers to do it." In fact, there are many alternatives to withholding Social Security such as furloughing employees in non-essential bureaucracies, such as the Departments of Labor, Education and Energy. Obama's use of Social Security for partisan purposes is fraudulent.

Social Security involved fraud from day one. In the 1930s, in order to convince Americans to accept it, the Democrats made two mutually contradictory claims, expressed by Professor J. Douglas Brown of  Princeton University.  The first claim was that Social Security is an insurance plan, secured through a trust fund, that will return a fair benefit to participants.  The second claim was that Social Security was a welfare benefit that subsidizes lower-wage Americans.  It did this by using a formula that provided proportionately higher benefits to the lowest salary levels.  It established pay bands, and the highest percentages were paid to the lowest salary bands.  Unless participants took the time to review the benefit structure, they could be easily defrauded into believing that Social Security was not a welfare plan but rather an insurance plan.  Fraud was the Democrats' marketing strategy.


The public was told that there is a trust fund. In fact, Social Security was designed as a pay-as-you-go plan, essentially a pyramid scheme that depended on consistent demographic growth.  But there was a depression followed by a baby boom that was followed by a baby bust.  Rather than hold good on its claim that there was a trust fund, Congress proceeded to steal the funds in the Social Security trust and used them for other purposes, chiefly to win votes.  Moreover, despite the lack of actuarial soundness, Congress raised benefits in the 1970s but could not fund the increased benefits.  Then, it decreased benefits in 1983 for people in their twenties and younger who were scrambling to make ends meet in a permanently declining and increasingly socialist economy.

In other words, Social Security was a fraud from day one; Congress has acted in ways that would put private sector benefit sponsors into prison; indeed, it has stolen the already insufficient funds about which it has consistently lied to the public.


Now President Obama commits an additional fraud.  Having scammed the American public into establishing a fraudulent program, having lied about the program's nature, having promised benefits it could not pay, having stolen the money that was put into the fund, Obama now threatens to openly breach the most elementary standard of fiduciary and moral duty to trust beneficiaries. He aims to use the fund as a partisan football.   If Obama were a private pension fund manager even threatening to use pension money for purposes other than designated by the trust would be a breach of fiduciary duty.

Obama's threat to use Social Security as a partisan football is a criminal act and an impeachable one.

What Would Hamilton Say about Congress's Debt Limit Debate?

I am reading Ron Chernow's excellent biography Alexander Hamilton. On page 300 he discusses Hamilton's first Report on Public Credit which he wrote as the first Secretary of the Treasury:

In the report's final section, Hamilton reiterated that a well-funded debt would be a 'national blessing' that would protect American prosperity.  He feared this statement would be misconstrued as a call for a perpetual public debt--and that is exactly what happened.  For the rest of his life, he was to express dismay at what he saw as a deliberate distortion of his views.  His opponents, he claimed, neglected a critical passage of his report in which he wrote that he 'ardently wishes to see it incorporated as a fundamental maxim in the system of public credit of the United States that the creation of debt should always be accompanied with the means of extinguishment.' The secretary regarded this 'as the true secret for rendering public credit immortal.'  Three years later Hamilton testily reminded the public that he had advocated extinguishing the debt 'in the very first communication' which he 'ever made on the subject of the public debt, in that very report which contains the expressions [now] tortured into an advocation [sic] of the doctrine that public debts are public blessings.'  Indeed, in Hamilton's writings his warnings about oppressive debt vastly outnumber his pens to public debt as a source of liquid capital. Five years after his fist report, still fuming, he warned that progressive accumulation of debt 'is perhaps the NATURAL DISEASE of all Governments.  And it is not easy to conceive anything more likely than this to lead to great and convulsive revolutions of Empire.'

And, of course, Robert Rubin and Timothy Geithner are no Alexander Hamiltons.  They are more Madoff and Ponzi than Hamilton.

Debt Ceiling Crisis? A Mazda Miata in Denmark.

Obama's Debt Mess is Bigger than Bush's. And this doesn't include the Bush/Obama Fed's 2009-11 400% monetary expansion. Chart Courtesy of US Government Spending.com.

In looking at the recent discussion of the so-called "debt ceiling crisis," I am surprised that no one in the legacy media unravels the cost of government operations and atavistic military strategy.  There are discussions of costs of failed but supposedly sacrosanct programs such as Medicare and Social Security, but no one seems to have asked that the federal government provide information about what percentage of these programs goes to administration, capital costs, personnel costs, and other service costs, such as consultants.  For instance, an organization called the Center on Budget and Policy Priorities points out that $705 billion go to defense, but does not clarify how much of that goes to colonels in the Pentagon sending memos to each other and how much goes to keeping America safe.

Anyone who has worked in a bureaucracy knows that empire building and waste are rules, not exceptions. As well, it is evident that numerous federal departments are complete failures and should be terminated. These include the Departments of Education, Labor and Energy.  

As well, we currently maintain more than twenty military bases in Germany.  What, exactly, are we defending Germany from?  Vladimir Putin? Fidel Castro?  Why can't Japan defend itself?  It seems to me that the Japanese, Taiwanese and South Koreans can either pay us for maintaining bases in Guam, South Korea  and elsewhere in Asia or, better yet, do it themselves.  A list of US military bases around the world is here. There are over 1,000 that cost us over $100 billion per year. Do we really need so many bases?  Our main opponents now are terrorists who are mobile, incognito, work in microscopic units and are not susceptible to orthodox warfare.  I appreciate the importance of security, but do bases in Denmark and Spain really contribute to our or to Denmark's and Spain's defense?  Are they relevant to post-modern warfare? It seems that something is rotten in Denmark, and in Washington, if  the President and Congress view a debt ceiling of $14 trillion as a "crisis" but view 1,000 military bases, including many in Germany and Denmark, as sacrosanct.

The Washington crew, including Boehner, Obama and Reid, remind me of my ex-wife who, with a $30,000 credit card balance in 1991, considered her lack of   Mazda Miata a "crisis" and went out and bought one for an additional then-$26,000 in debt.  American politicians have a multitude of Mazda Miatas: dole programs, bridges to nowhere, failed educational systems, failed energy policies and bloat in the military.

The American people have not gone brain dead.  They do not agree that indebtedness nearly equal to the nation's gross domestic product of almost $15 trillion is desirable. According to Rasmussen, fifty-five percent of likely voters believe that cuts in government will help the economy. As well, according to Rasmussen:


Just 24% of Likely U.S. Voters think tax increases help the economy. Fifty-four percent (54%) disagree and believe tax hikes hurt the economy...Most voters have said tax increases hurt the economy in every survey but one since July 2008.

If so, why do Americans continue to elect profligates like Boehner, Obama and Reid,  who think every military base is a Mazda Miata?  My guess is that the legacy media, pawns of Wall Street, bamboozle the public.

Social Security provides a benefit that is a tiny percentage of the average contributor's future value of lifetime contributions.  There are specific reasons, including its welfare component and the 21st century workers' subsidization of 20th century retirees as well as Congress's use of Social Security funds for other purposes.  But given Social Security's failure, why do 21st century Americans want it?   Why is there no discussion of voluntarization?  If Social Security is  20% of the federal budget, even authoritarians like America's Progressives should be glad to allow citizens to opt out of the failed program. But they aren't.  Every opportunity for authoritarian compulsion, badly designed programs and ignorant violence is a Progressive Mazda Miata.

Moreover, if few Americans believe that tax increases help the economy, why is John Boehner ready to capitulate to the Miata-loving Progressives in the debt ceiling discussions? 

The debt ceiling crisis is an opportunity to propose voluntarization of Social Security, the elimination of the Departments of Education, Labor, and Energy, the elimination of half of the military bases and the elimination of one third of government operations costs, including in the Pentagon. If Boehner does not take advantage of it, the Republicans need to go.

John Boehner and the Secession Party

 John Tate from the Campaign for Liberty has e-mailed that Republicrat Congressman John Boehner is thumbing his nose at the Tea Party and "planning to cave in to Barack Obama's demands for a trillion dollars in tax increases in exchange for mostly phony spending and tax cuts in order to raise the debt ceiling." The federal government is a value-destruction machine that does not contribute to our welfare. It should be slashed by 80%.

Tate adds:

Senator Rand Paul has joined over 100 representatives and a handful of other senators in signing the "Cut, Cap, and Balance" pledge to demand that any effort to raise the debt ceiling be rejected unless the federal government is forced to change its ways.

I want to urge you to complete your "Cut, Cap and Balance" pledge that Campaign for Liberty will fax to your representative and senators today before the critical showdown in Congress on raising the debt ceiling takes place in a few short weeks. 

Factoring in the Big Government programs and social welfare spending already "locked in," the average American is on the hook for nearly $800,000.

Friends, it is time to join the Secession Party.

Debt Limit Debate on Networks a Joke

I was in the gym on Wednesday and someone had turned on one of the television news channels. I usually watch Turner Classic Movies when on the treadmill; TCM is more informative.  The news story of the hour is the debt limit debate. The Democrats want to raise taxes so that they can pay more interest to bondholders, and the Republicans say that they don't want to raise taxes but that just enough of them are planning to vote for higher taxes that, well, they might as well be Democrats.  The network reporters don't know about government operations so that their reporting is uninformed.

When I worked in Albany, the Democratic speaker of the assembly, Mell Miller, who was later indicted, said in an assembly ways and means committee meeting that I attended that there was no fat.  Even some of the extreme left wingers with whom I worked on the Democratic WAM staff laughed privately.   The government of New York State was and is pure fat. There is nothing but fat. Even my friend, a Maoist working full time as a Democratic staffer, showed me a fictional line item that had been charged by the Department of Social Services simply to provide itself with some additional fat when Mario Cuomo had transferred a block grant program to it.  Experienced in state government, it took him two minutes to identify the increase in spending; to an outsider, it would have been next to impossible to identify it.  Another friend, also a left-winger, laughed uncontrollably when I told him that Miller had said that there was no fat.

The incompetent television coverage of the debt limit debate is grounded on the claim that government operations are efficient.  They are efficient at one thing: waste.  Even private firms waste money. Government is amateurish and deliberately wasteful. It would not hard to reduce spending by 30% for someone interested in efficiency. 

Watching news about the debt limit should make you certain of one thing: watching television news is a waste of time.