America Going to Hell in A Handbasket: Stimulus A Fraud

Cortes de Russy has an excellent article in Pajamas Media about the nonsesensical economic stimulus that our economic experts, who are rather our economic illiterates, have been advocating on the half-witted media outlets.

De Russy notes that:

"We now find ourselves informed by 'leading' economists and politicians that the solution to our current economic malaise is for government to embark on a gigantic spending spree. This spending, we are assured by one of the leading securities rating organizations, Moody’s Economy — whose recent history of ratings brings into question its judgment for quality analysis — that these expenditures will generate 'multiples' of growth in GDP in magnitudes exceeding 1.5 times the amount spent."

What a laugh. If I print $10 and spend it on a baseball, then prices go up because baseballs become scarcer. Any additional production due to the spending is offset by higher prices. Only cranks would make Moody's argument. And, of course, Moody's is one of the firms that was giving Enron an "A" rating in the weeks prior to its collapse. Now, they feel qualified to dispense dumb economic advice.

De Russy notes:

"Lest we forget, capital formation is the seed corn of wealth and job creation, and since wealth creation is the driver of economic progress, one must ask if government spending increases or enhances capital formation."

Government spending does not enhance capital formation--it demolishes it.

De Russy concludes that:

"The history of economic progress throughout the world provides irrefutable evidence that the economic well-being of ordinary citizens is closely correlated to the relative degree of freedom in markets and the relative lack of government planning and spending. To argue that government direction and allocation of resources will produce better results is to ignore history and the general understanding of how markets function."

A conclusion with which I have to agree.

Looking over the comments on de Russy's articles on Pajamasmedia, some are of better quality than others. This one from Sara for America caught my attention:

"The stimulus is like the treasure found in a mummy’s tomb. It excites at first, but then everyone who touches it starts dying."

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.

Lipset on The New York Times, Republicans and Fidel Castro

"...True, the United States worked with Batista before he was overthrown, as did the Cuban Communist party. But Castro's rise was made possible by American help and sympathy. The New York Times, the paper with closest connection with the State Department, was the first to bring Castro's struggle to the attention of the American people and world public opinion in a highly sympathetic series of articles, published at a time when his armed supporters numbered in the hundreds. Although the American military co-operated with Batista until his fall, Castro was able to secure arms from America, and the State Department clearly opposed Batista long before he left Cuba, and demanded he hold genuinely free elections and give up office. Right wing senators and organs of opinion in the United States have, in fact, blamed State Department policy for Castro's rise to power. American officials, including then Vice-President Nixon have reported that they sought to discuss financial aid to Castro during his first tour of the United States, but that he refused, a contention that has been confirmed by Castro's former finance minister and others of his entourage before they broke with him."

---Seymour Martin Lipset, Political Man: the Social Bases of Politics.

Fidel Castro can truly say, "I got my job through the New York Times." And what of the difference between Republicans and Democrats? It would seem that international relations and the State Department reflect a field dominated by quacks.

E-mail to Radio Announcer Mark Simone

Dear Mark--I was listening to you on my way to NYC from Woodstock, NY. I teach at Brooklyn College. I heard a caller call in somewhat stridently claiming the need for stimulus. You did not question him. His claims about the Great Depression having been resolved by the heavy borrowing of World War II went unrefuted. This is bad.

You cannot cure America's addiction to socialism if you accept socialist monetary and business cycle theory, i.e., Keynesian economic theory. There is no reason to. Keynesian theory was refuted in the 1970s by Milton Friedman. Your caller, and today's economists, and the media, and all advocates of stimulus, the bail out and the recent inflationary monetary expansion by the socialist Bernanke Fed and Ol' Hammer and Sickle George W. Bush (not to mention his Comintern follower, Goosestepping Socialist Barack Obama) are all ignorant fools.

There is no need for stimulus. Stimulus is not the solution. It is the problem. Unemployment did not become a major problem until AFTER the creation of the Fed and stimulus. In a system of free banking and a gold standard business cycles would be muted. They only exist because of the banking system and stimulus. Trying to cure today's problems with government spending, inflation and stimulus is like trying to cure cancer by drinking a bottle of chlorine.

You might consider inviting a guest from the Cato Institute or my old friend Howard S. Katz at (http://www.thegoldbug.net and http://www.thegoldbugnet.com) to educate your listeners about a more realistic approach to the business cycle than the socialist crap that has become a single chorus Democratic and Republican Hammer and Sickle version of L'Internationale.