Socialism In Extremis: Greek Economy, Newsweek Head for Hades

In February 2009 Newsweek claimed that "we are all socialists now."  Prime Minister George Papandreou and the Greek government could not help but agree.  Now Newsweek is following Greece to socialist Hades.

Big Journalism.com reports that socialist Newsweek, following socialist Greece, is headed for bankruptcy:

"Despite staff cuts, Newsweek has remained a drag on its parent company (The Washington Post), which is also struggling with ad declines at its namesake newspaper...Newsweek is pretty much dead, and now the only question is who’s going to rouge the corpse for a few more years, if anybody, to keep its collection of Morning Joe talking heads with at least the fig leaf of meaningful employment before the final axe falls...At $5.95 per issue, Newsweek is hardly a bargain. Newsweek is your father’s magazine, and no amount of reinvention could fix that..."  

I disagree.  Were the editors of Newsweek more imaginative, they could have found a way to survive.  Newsweek's unimaginative socialist ideology is matched by its unimaginative marketing strategy.  Just as new media is re-conceptualizing the news, so might have the Democrats at Newsweek.  Back in February 2009 I urged Newsweek to move to France.  Perhaps Hades would have been a better bet.

Tax Increase or Gold Standard?

The Midas Letter (h/t Kitco) predicts that there will a bi-partisan consensus as to a massive tax increase following the midterm election this fall. This will harm the United States economy.   Midas writes:

"Washington's elites are quietly preparing a post-election fiscal compromise that will fund much of President Barack Obama's domestic spending agenda with huge tax increases. They aim to create a value-added tax and will argue that there is no alternative even though doing so will leave the United States resembling the stagnant, bureaucratic nations of Western Europe."

This is only a prediction, of course, but would this scenario differ much from the history of the past 40 years?  Ever since Richard M. Nixon abolished the gold standard and Ronald Reagan adopted Keynesian monetary expansion, both New-Deal policies, the Republicans have largely adopted a strategy of "Democratic Party light."  Under Reagan the GOP held the line on domestic spending as a percentage of real gdp but did not begin to reduce total government spending until the end of the Cold War, following Reagan's departure.  Thereafter, there was a small drop in total federal spending, which remained in the 16-18% of real gdp range until the end of the Bush II administration.  In 2009, the Democrats once again proved to be the leaders in government bloat and expanded real spending by more than ten percent, to 20% of real gdp. President Obama should be renamed the Emperor of Bloat.

The 20% expansion of government spending as a percentage of real gdp directly followed the largest expansion of monetary reserves in living memory in 2008.  Perhaps the expansion of the Continental during the Revolutionary War was comparable to the expansion of the monetary base two years ago.  Obama then increased real domestic spending, in part through a painfully nonsensical "stimulus" plan.  Although the Democratic Party's media has downplayed this, as of this month the unemployment rate is higher than it was last year on a non-seasonally adjusted basis. In other words, government has expanded, it has failed to reduce unemployment, and now new investment will be crowded out if the spending increases are validated through tax increases next year.

If the GOP goes along with any sort of tax increase now, and does not demand sharp spending reductions, it does not warrant any further support.  A third party will be needed. Hopefully, this scenario will not play out. If the GOP stops further increases in government and proves that it aims to reduce government, it can redeem itself.  But any sort of bi-partisanship with the pigs in the Democratic Party ought to spell the end of the GOP.  A replacement party will be needed just as the GOP replaced the Whigs in the 1850s.

The Midas Letter suggests an alternative to a tax increase:

"The U.S. could return to a gold standard, a system that would not only prevent the government from running chronic budget deficits but would also curb attempts to manipulate the value of the dollar for political reasons... The first step...is an American commitment to a dollar convertible to gold on a date certain. The second step is allowing the market, in the run-up to that date, to find and fix a dollar price of gold that would encourage other nations to replace dollar reserves with gold holdings as their new monetary base, whether or not they choose initially to join the new international gold standard...Legislation restoring dollar-gold convertibility should be accompanied by passage of a constitutional amendment guaranteeing the American people a right to conduct their economic affairs in gold, regardless of the future status of gold as the official money of the United States."

Which would you prefer--a massive tax increase, or a return to the gold standard?  Write your Congressman, even if they're as incompetent and corrupt as mine. 

Could Mayor Michael Bloomberg Have Set the Times Square Bomb?

Prison Planet.com notes that Mayor Michael Bloomberg felt few compunctions about psychopathic-style lying with respect to the recent Times Square bomb.  Knowing that the bomber is a Pakastani, Faisal Shahzad, Bloomberg told Katie Curic:

“If I had to guess 25 cents, this would be exactly that, somebody who’s homegrown, maybe a mentally deranged person or someone with a political agenda that doesn’t like the health care bill or something, it could be anything,”

Lying comes easily to Mayor Bloomberg.  For example, he claimed that scores on student achievement exams improved, overlooking falsification of exam results.  In one egregious case, Bloomberg played up the academic success of a particular high school, and when it was revealed that the achievement scores had involved cheating, Mr. Bloomberg never recanted his praise. 

Given Mayor Bloomberg's recividist lying, one cannot help but suspect other kinds of deranged behavior.   In particular, I can't help but wonder if it was Mayor Bloomberg who left the bomb.  He is more associated with the tendency to tell whoppers than any opponent of the health care bill I know.  As my friend used to say, "he who smelt 'er dealt 'er."

Symmetry of Waste: Why Aren't Big Government Advocates Pragmatic?

For much of its history, proponents of "state activist liberalism," have claimed that expansion of government is "pragmatic."  This claim was set against three historical patterns.   First, the American ideology until the early twentieth century was freedom.  Expansion of the state could be posed as a more modern alternative.  Second, the pragmatism of William James and Charles Sanders Pierce was popular in the early twentieth century and state activist liberals used its rhetoric.  Third, the public became alarmed at economic developments in the late 19th century, specifically the development of large railroads and trusts that seemed to have economic power.   The large businesses claimed to exercise the right of free contract and laissez-faire in a tone that reflected social Darwinism.  In fact, the railroads and Standard Oil depended on government support.

The response to concerns about big business was big government. This meant legislation like the Sherman Anti-trust Act and the Interstate Commerce Act which aimed to regulate trusts and railroads.  These steps were extended during the Progressive era, when Theodore Roosevelt proposed the Federal Trade Commission and the regulation of trusts.  In his speeches, Roosevelt proposed most of the social legislation that was subsequently adopted during the New Deal.

However, the claim of pragmatism is that what works will be maintained and what fails will be terminated.  One of the earliest laws, the Sherman Anti-trust Act, did not work.  In fact, the Sherman Anti-trust Act resulted in firms growing larger each decade because it illegalized collusion among small firms, providing an incentive for mergers and takeovers. 

Without tracing the ensuing history, government was repeatedly extended, especially in the 1930s, 1960s and 1970s.  Yet, no one ever asked whether any of the programs worked or not.  No one asked whether the Fed was responsible for the greater economic instability and higher unemployment of the twentieth century than of the 19th century.  No one asked why welfare programs induced rather than reduced poverty and dependency.  No one asked why only three percent of government programs are terminated but 80 percent of businesses fail in their first five years.  Failure is an essential component of innovation.  Most ideas fail, and to find a good, workable idea many prototypes must be tried. But government programs never fail, hence they are not tested by reality.  They are not pragmatic.

It is not just that advocates of big government do not reject programs that fail.  Advocates of big government do not even QUESTION whether or not the programs that they advocate work.  There are no mechanisms in place to test whether social security, for example, works better than another alternative; or whether the post office is the optimal mode of mail delivery.  Not only is the information not known, the questions are scrupulously avoided.  To ask pragmatic questions is heresy to "state activist liberals."

In order to understand the reason why questions about program efficacy are avoided one needs to follow the money.  Government functions by borrowing money.  Banks make a profit off the lending.  The Federal Reserve Bank exists to expand the money supply so that the banks can profit by lending to the state. 

Banks do not care if the reasons for their lending work.  They want bigger government because they can lend more. Moreover, expansion of the state leads to monetary expansion and monetary expansion further subsidizes banks' profit margins.  This is so because increased government borrowing leads to crowding out of private sector borrowers.  Interest rates rise, the economy slows and the Fed can justify expansion of the money supply (lowering interest rates) to "stimulate" the economy to "help small business."  The result is that the Fed purchases treasury bonds from banks, and the monetary base expands.  The banks create a multiple of the reserves out of thin air, and business borrows.  Banks collect interest.  Much of the expanded money is diverted to privileged hedge funds, Wall Street and corporations.

In order to create the non-pragmatic version of "state activist liberalism" the government relies on two institutions: the media and the public schools.  The public schools fail to educate children, causing the majority to lack the basic cognitive skills needed to read, write, do basic math or follow a news story.  The graduates of American public schools are sub-literate, sub-numerate and lacking in basic reasoning skills.  At the same time, the graduates are ideologically trained to believe in government; in socialism and in state expansion. "Social justice education" is one of the fundamental goals of the banker-oriented education system.

The more capable, elite students are taught to scrupulously obey direction.  They are trained that the opinions of information sources such as newspapers and television are authentic while the opinions of friends or one's self are invalid.  They are trained to trust mass media rather than common sense.  The "other direction" that David Riesman described in the 1950s was a function of the financification of the US economy.

I've rarely met a "liberal" or left winger who was capable of thinking for him or herself. Rather, they parrot a newspaper or television station.   Many conservatives parrot radio and television talk shows.  Naturally, the newspapers and television stations are financially responsive to or owned by banks or other Fed-related institutions. 

There is a complete absence of pragmatism among both "conservatives" and "liberals".  "Conservatives" applauded the absurd Bush prescription drug plan and the Iraqi and Afghanistan Wars while "liberals" applauded the bailout, the stimulus and the absurdly designed Obama health care law.  Neither ends the other's programs.  The "liberals" have not ended the wars, which they claimed to oppose, and the "conservatives" have not cut back on the massive waste in Washington.  There is a perfect symmetry of waste.  The interest paid to the banking system mounts.