Can Paul and Johnson Save the GOP?

In recent days Congressman Ron Paul (R-T) announced that he is establishing an exploratory committee for his presidential bid and Governor Gary Johnson (R-NM) announced his own candidacy. These two reformers, who advocate elimination of Fed power or its reduction, have to contend with Wall Street Progressivism, which is likely to defeat them within the GOP.

Two days ago, The Wall Street Journal carried a front page story announcing "Financiers Switch to GOP." Three years ago I had suspected that Wall Street, which had heavily supported Obama, would dump Obama after his granting them trillions in subsidies and his supporting Fed policies that will, over time, cause inflation and ever greater transfers of wealth from people who work and are on retirement pensions to hedge fund managers and America's non-productive financial class. During 2008, Wall Street supported Obama because a Republican could not have achieved the massive wealth transfers that they required, for the Republicans by then had been associated with excessive support for the super-rich. To obtain the massive subsidization Wall Street required the left's support. Obama presented the image of a Black activist, a "progressive" socialist who would fight the rich. Many Republicans naively believed this. In fact, Wall Street had contributed to Obama two to one over McCain, who was associated with Bush.

Obama's supporters, New York Times readers and college students, believed that Obama would redistribute wealth from the wealthy to the poor. Obama's opponents believed that Obama would redistribute wealth from the middle class to the poor. In fact, Obama has redistributed wealth from the poor and middle class to the wealthy.

He has done his job well. During Obama's administration the transfers from the Federal Reserve and the US Treasury to banks and global financial institutions amounted to $12.8 trillion according to Bloomberg, but are likely much more. Three years ago I predicted that by now Wall Street would have thrown Obama under the bus because he would no longer be needed. His alliance with the left is inconvenient to Wall Street. The progressive left will continue to attack Wall Street while Republican Progressives will not. Thus, The Wall Street Journal reports that hedge fund managers, "who made a big bet on Barack Obama...have turned their backs...and are actively supporting Republicans." The article cites Daniel Loeb, who had raised $200,000 for Obama and who, Democratic Underground.com reports, earned $250 million in 2007 alone. The Journal reports that Loeb is a long time Democratic Party supporter, but he has switched to the GOP this year.

The Journal reported a few weeks ago that Mitt Romney had met with 100 Wall Street bigwigs to obtain financing and to offer to do their bidding. Clearly, Wall Street will aim to push for a Progressive GOP in 2012. If rank-and-file GOP members go along with it, they will elect another George W. Bush, probably worse.

There are three strategies for pro-freedom Republicans. The first is to vote for Paul or Johnson in the primaries. If they lose, option two is to support a third party. Option three would be to support Obama as the lesser of two evils in 2012.

Wall Street's $16 Million Job Offer to Robert McNamara

In his memoirs, In Retrospect, Democrat Robert McNamara reports (p. 312) that in 1967, at the height of the Vietnam War that McNamara helped oversee on behalf of President Lyndon Baines Johnson, he received an offer for a  Wall Street partnership that would have paid $2.5 million in 1967 dollars. In 2010 dollars that translates into $16,322,000.  It seems that the government-bailout street is two way.  Wall Street bails out failed government officials like McNamara and then failed politicians like Barack Obama bail out Wall Street.  Of course, both the incompetent fools who run Wall Street and their equally incompetent friends in Washington could not pay each other a cent, because neither produces anything of value, if the Federal Reserve Bank did not finance their failed ideas.

If You Are Profiting from Wall Street's Current Merger Boom, Then the US Government Works for You

The Democrats claim to be the party of the poor, but if you have been following my blog you know that is pap.  Since November 2008 the economy has done poorly for the average American.  According to the Bureau of Labor Statistics, unemployment is 9.6 percent. Americans on Social Security saw no increase but local taxes increased, leaving them short.  Inflation, at 1.1 percent, has been modest, but people are beginning to suspect inaccuracies in the BLS numbers.  I hear complaints about food prices' going up.  In any case, there is no reason to think that anything will reduce the unemployment rate in the near future.

Thus, the stimulus and the bailout have failed to produce significant results.  This is not surprising. Keynesian policies failed during the Great Depression as well.  Pundits assert that as a result of the recent failure of the Bush-Obama policies (failure on paper, not in their intent, which is to help Wall Street, not to reduce unemployment), Larry Summers and Rahm Emanuel have handed in their resignations.

One of the Bush-Obama strategies has been to massively expand the monetary base and the money supply.   The argument for this policy is monetarist, and the monetarists don't differ much from Keynesians. Both believe that printing money can beneficially stabilize the economy.  Neither accedes that the new money is a wealth transfer device to Wall Street.

Forbes reports that the wealthiest Americans have gotten wealthier this year.  The wealthiest among them are Warren Buffett and Bill Gates, both of whom are Democrats.  According to the Los Angeles Times mergers and acquisitions are at an all time high.  A guest on Bloomberg radio today was saying that Wall Street has never had a better year.  Although this is never stated in the Wall Street-controlled media, Wall Street's economic flourishing depends entirely on the Federal Reserve Bank. It is not attributable to free markets and it is not capitalist.

The Wall Street investment banks and law firms are profiting handsomely due to the Fed's monetary creation and the Bush-Obama administration. The merger activity is directly due to the administration's new money.  It has had no hand in reducing unemployment, in improving the economy or making the public better off.  Rather, it serves to harm the economy by reducing competition and paying commissions to bankers and Wall Street lawyers for destroying rather than creating wealth.

If you have seen a commission check or have a salary that depends on the recent expansion of merger activity, the US government is working for you.  If not, you are its patsy.

President Obama's Buy Signal on Stocks

The major indices' bad showing in January suggests a bad year for stocks. But there are two mitigating factors. (1) The hyper-inflation of the money supply last fall means that there is hyper-octane fuel in the stock market's gas tank and a newly built turbo charged sports car engine that will do 200 in 2 seconds. (2) President Obama announced that he would not be giving bailout money to investment banks that pay salaries over $500,000, a piddling sum that is paid to first-level supervisors. I have students in the MBA program who make more than that. Not a lot of them, but there are a few in the class.

Both Goldman Sachs and Morgan Stanley contributed heavily to Obama, 2 to 1 over McCain. Obama would not establish a pay limit if the investment banks were going to need it.

Obama and the I-banks both believe the market is going to soar because of the high octane fuel. This is a good time to buy stocks and gold and to borrow. When the market starts running into inflation, get out of the stocks and into the gold.

Keep borrowing. Dollars are monopoly money.