Eye Eye Eye!

February 13, 2009

A friend at work forwarded this photo of the Speaker of the House with the caption: “Look in her eyes and tell me she’s not off her rocker!”

Look in her eyes and tell me she's not off her rocker!

 

 

 

 

 

 

 

 

 

 

 

 

 

Reserving judgment on this 66-year old woman’s mental state, it’s fairly certain she’s undergone extensive plastic surgery. Her eyes look clamped open like a lab rabbit’s at a perfume testing facility.

If there was any justice in this world, that would be her next career after she and Harry Reid are finished destroying the country.

Hat tip: Lisa S.


Economicile Dysfunction

February 8, 2009

Because all economies have “performance issues.”

The Reason Foundation has the answer:


First Do No Harm

February 5, 2009

David Freddoso has an insightful article on The Corner on National Review titled The Case for No Stimulus, which includes a thought-provoking interview with budget analyst Brian Riedl of the Heritage Foundation. This piece is worth careful study as it refutes several economic fallacies that have become fashionable once again in our brave new economic Dark Ages.

Riedl explains why Keynesian government spending efforts to end recession is not only ineffective in the short-run, but harmful in the long run:

NRO: In this stimulus debate, no one is answering or even discussing an important question: Where is the money coming from? Can you stimulate the economy by spending money that you must first remove from the economy by borrowing?

Riedl: That is a great question. The grand Keynesian myth is that you can spend money and thereby increase demand. And it’s a myth because Congress does not have a vault of money to distribute in the economy. Every dollar Congress injects into the economy must first be taxed or borrowed out of the economy. You’re not creating new demand, you’re just transferring it from one group of people to another. If Washington borrows the money from domestic lenders, then investment spending falls, dollar for dollar. If they borrow the money from foreigners, say from China, then net exports drop dollar for dollar, because the balance of payments must adjust. Therefore, again, there is no net increase in aggregate demand. It just means that one group of people has $800 billion less to spend, and the government has $800 billion more to spend.

A particularly egregious yet ubiquitous fallacy these days is the idea that increased consumer spending is good for the economy while saving and investment are bad. This idea is not simply wrong-headed, but mind-bogglingly so, yet if you turn on the evening news or read a newspaper, you’ll encounter myriad variations on this theme.

Riedl explains:

There is this notion that the redistribution of money from savers to spenders creates new spending. But that assumes that people store their savings in their mattresses. That may have been true in the 1930s, but today, people use their savings to pay down debts or invest. Or they put it into the bank, who in turn lends it to others to spend. Therefore, savings circulate through the investment side of the economy, which counts just as much in the GDP as the consumption side of the economy. So even the saving versus spending distinction doesn’t make any sense.

The simple fact is that the only way to create economic growth is to increase productivity. Redistributing money from one group of people to another doesn’t create productivity or economic growth.

The Keynesian myth persists in spite of numerous spectacular failures. I recently read that when President Obama met with Congressional Republicans, he privately acknowledged that the New Deal failed to end the Great Depression, but concluded that the reason it failed was because the New Deal programs cost too little.

Obama apparently believes, in spite of overwhelming empirical evidence to the contrary, that Keynesian prescriptions for government spending should work, so when they fail as they always have, he assumes that they failed because the government didn’t spend more. This is an example of magical thinking that one pundit described as “ideological addictions to economically counterproductive programs.” Is there a better definition of communism than this?

The price tag for the October surprise, er bank bailout was $700 billion. That’s a seven followed by 11 zeros in front of the decimal point, or $700,000,000,000.00 of debt on top of what we already owe. It didn’t work. The price tag on the so-called stimulus bill is in excess of $1 trillion. That’s a one followed by 12 zeros, or $1,000,000,000,000.00 of borrowing on top of our already massive national debt. If this stimulus plan doesn’t work, then what?

Obama and other true believers in failed Keynesian policies will never renounce their faith because their core beliefs are ultimately non-falsifiable. No matter how often or how spectacularly massive government spending plans fail, the True Believers will say it was because the government didn’t spend enough.

Common sense tells us otherwise. All of us know people who always seem to live beyond their means. Sometimes we wonder if these people have discovered some magical financial secret formula that the rest of us missed. They have found a trick all right, but only the cheap trick of using other people’s money to create the illusion of wealth. It only works as long as you can avoid paying the money back.

Riedl sums it up:

Keynesian economics offers the promise of a free lunch. It offers the idea that government can wave a magic wand, spend money, and make the recession end in a pain-free way. It’s just not that easy.


Money for Nothing

February 2, 2009

Here’s an interesting piece from the Intellectual Conservative that explains why we can expect Obama’s so-called stimulus plan to make things worse:

Japan learned to like eating humble pie during the 1990s. They endured economic free-fall for the better portion of that decade, following their cleaning of America’s economic clock during much of the post-WWII era. Those who follow the theories of J.M. Keynes explain the bumps and bruises of normal business cycles as “a change in aggregate demand.” Their solution? Prop up flagging investment, since consumption is described as “relatively stable.” Keynes could never fully identify the reason for the lapse in investment. He usually put the thumb on some nebulous culprit, such as “animal spirits in the business community” or some similar jargon. Keynesian theory has long been described as “socialism lite,” therefore, it’s not hard to figure out why Keynes endorsed interventionist measures during periods of economic difficulty. Japan nearly spent itself into fiscal oblivion in trying to escape its hardships in the ’90s. Ultimately, Japan employed ten fiscal stimulus packages, equaling a total of 100-trillion yen. The lone accomplishment of such a mind-numbing expenditure was causing public debt to exceed the country’s total GDP. The best lesson to learn here was that in free market societies, governments do not create any real wealth, so how can increasing government outlays revive the economy?

We can safely see that it isn’t mere spending that eases business slumps. It’s the adequate flow of final goods and services that is most important. Money is simply a medium of exchange – a commodity. Its presence does not alter its essential nature. Without a tangible asset to tie to the flow of dollars (such as gold, for instance), the willy-nilly pumping of cash into circulation has a darker effect most often, and that’s inflation – too many dollars chasing after too few goods. Barack Obama’s stimulus plan may easily exceed two trillion dollars and open the door for inflation during the back half of this year. When you couple that bit of good news with the announced intent to raise taxes (to “pay for it all”, we’re told), Obama is certain to weaken the wealth-generation process and torpedo the prospects for an economic turnaround.

Full article here.

President Obama was elected in large part by people who do not understand the difference between printing money and creating wealth. (In fact, when I explain to Obama supporters that increasing the money supply simply takes away existing wealth from people who worked to create it in order to benefit those who did not, they relish the idea even more.) But if printing money and creating wealth were the same thing, then we would be richer than ever, thanks to the Fed’s drastic efforts to stave off the current recession:

Adjusted Monetary Base

As the above graph shows, the money supply has tripled since Y2K with no end in sight. In theory, we should be richer than this guy:

 

 

 

 

 

 

 

 

In reality, we are heading here:

Weimar Republic

 

 

 

 

 

 

 

 

 

The post-war German government’s experiment with hyperinflation initially created the illusion of easy wealth. In 1921, while the rest of Europe was in a severe post-war recession, Germans, flush with new money straight from the printing presses, were buying consumer goods in record number. Manufacturers expanded factories to keep up with rising demand for products.

By 1922, the economic house of cards came crashing down as prices skyrocketed. By late 1923, a loaf of bread cost over 200 billion marks. Think about the woman in the photo as you salivate over your unearned “tax cut” stimulus check from Obama.

My friend Luis at Boiling Frogs posted an article last week titled $10,520 that explains how much the latest House stimulus package will cost each American family. That’s $10,520 on top of all the other debt we’ve added in recent months.

As Luis points out, if massive increases in government spending was the remedy for recessions, then there would never be any recessions. It’s a simple idea, yet one that eludes many allegedly smart people who are continually befuddled when socialism always fails.


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