When the government pumps trillions of dollars into the economy, they’re not actually printing the money. It enters as digital entries in banks across the country. It’s made the system fast, responsive, and, unfortunately, vulnerable. Now our money is no longer something we hold in our hands, but something that exists on a very susceptible network.
The so-called recovery is only built on debt and printed cash declares our own Byron King. In the long term, the only option for the government to continue financing it's operations is to print too many dollars. Money printing has it's limits, however. It's Byron's opinion that at some point, perhaps very soon, the government will have to turn to more desperate measures. Namely, capital controls. In the following featured essay, Byron outlines 4 probably ways the government will take your cash and one play you can buy through your broker to prepare today. Read on...
Americans expatriate because they want to get out of the country. Corporations expatriate for similar reasons. Clem Chambers explains...
In a 2009 article, the Huffington Post went into considerable detail about the number of people with PhD degrees in economics employed by the Board of Governors of the Federal Reserve System. This is the government’s branch of the Federal Reserve. It is not one of the 12 regional Federal Reserve banks, all of which […]
The U.S. dollar is the dominant global reserve currency. All markets, including stocks, bonds, commodities, and foreign exchange are affected by the value of the dollar.The value of the dollar, in effect, its “price” is determined by interest rates. When the Federal Reserve manipulates interest rates, it is manipulating, and therefore distorting, every market in […]
The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance or the get-rich-quick adventurer. They will die poor.– Jesse Livermore, How to Trade in StocksThe trouble with capitalism’s guardians is that they have no […]
John Foust, a Democrat running for the 10th congressional seat in Northern Virginia, is — like Gov. Terry McAuliffe and other state Democrats — gung-ho to expand Medicaid. His wife’s position is, shall we say, a bit more nuanced.Foust has slammed his opponent, Republican Del. Barbara Comstock, for her opposition to expansion. He has spoken […]
The midterm election season is upon us, and it’s a tossup whether the Republicans will win the Senate, or if President Obama, seemingly oblivious as conflict flares up around the world, will, through his continuous campaigning, keep Harry Reid in his majority leader seat.The only thing we know for sure is that sociopaths will be […]
Alexander Hamilton was America’s first Secretary of Treasury under President George Washington. When he first entered office in 1789, America was an agricultural nation of just 4 million still broke from its financially costly victory over the British Empire in the Revolutionary War.The states had accumulated relatively massive debts to finance that war, which mostly […]
A great technology solves a problem that we didn’t know we had. It makes us aware of deprivations we didn’t know existed until we discover the new thing. Once discovered, we can’t go back.People in the 1950s, for example, never missed the smart phone. They were pleased to have a phone at all. But today, […]
Fifty years after the 1929 crash, a group of money managers and investment thinkers put together a collection of essays looking back at that experience. The result was a distillation of some pretty fine investment wisdom. Timely, I think, to review now.One of the contributors was Arthur Zeikel, then with Merrill Lynch. The title of […]
Although the mainstream media have turned its attention away from the wreckage of Obamacare, don’t think for a second that all is well.As the politicos in D.C. focus their attention on the midterm elections in November, now is a great time to study, prepare, and seek out the most affordable, accessible, and highest quality options […]
Turn on the tube and economic ignorance seems to be everywhere. There is constant shilling for more government. Business is demonized. Man is said to be trashing the environment. “Workers and women are oppressed” is the constant mantra.And members of the clueless media nod their heads in unison.Only John Stossel has provided the fresh air […]
In early July 1944, delegates from 44 countries gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire. A three-week summit took place, at which a new system was agreed to regulate the international monetary and financial order after the Second World War.The U.S. was already the world’s commercial powerhouse, having eclipsed the British […]
In the minds of many people around the world, including in the United States, the term “capitalism” carries the idea of unfairness, exploitation, undeserved privilege and power, and immoral profit making. What is often difficult to get people to understand is that this misplaced conception of “capitalism” has nothing to do with real free markets […]
Some people are saying it is just what the doctor ordered. Others are saying that the cure is worse than the disease.The Affordable Care Act? Reengagement in Iraq? Tea Party bullying in the GOP?Not this time. Just as protracted in the corridors of Congress and the White House is the debate over the proposed reform […]
In 2012, money mandarins running the European Union chose stagnation over restructuring. Here’s a consequence of that choice: expectations for a self-sustaining economic recovery keep getting crushed.Two years ago, European Central Bank (ECB) chief Mario Draghi promised to do “whatever it takes” to hold the eurozone together. He bluffed nervous investors into believing in a […]
People jacked up about income inequality can find a new hobby. The 1% are victims of a doomsday machine, and the countdown is ticking. Machine, thy name is “family.”This came to mind as I was reading a preview of Columbia Professor Andrew Ang’s forthcoming, must-read book on Asset Management. Ang is that oxymoron, an exciting […]
It might sound like the latest new product from Apple, but IPAB is actually the newest major legal challenge to Obamacare.Recently, a three-judge panel in the 9th Circuit Court of Appeals in San Francisco heard arguments about the Independent Payment Advisory Board, or IPAB, a 15-member panel created by the Affordable Care Act and empowered […]
Americans have come to believe that the IRS and the income tax are inevitable parts of our lives. After all, most everyone alive today has lived his entire life under federal income taxation.It wasn’t always that way. For some 125 years, the American people lived without having any tax imposed upon their income.The obvious question […]
Here’s a fun fact: Although we all hate the U.S. dollar, as it continues to hemorrhage wealth, its foothold as the world’s reserve currency isn’t going to disappear overnight.A Russian gas deal with China won’t change that — as we’ll highlight below.But before we get to the nitty-gritty, let’s dive into a story that’s right […]
Franklin Delano Roosevelt famously used the term “forgotten man” in a 1932 speech to describe those at the bottom of the economic pyramid who, he felt, government should aid.But the originator of the phrase “forgotten man” had a whole different meaning in mind. He aimed to expose the seeming good intentions of government to reveal […]
The Keynesian disaster recovery plan has been to lower rates, force people to take more risk in search of yield, and entice others to borrow and spend and, magically, more jobs will be created. If people won’t buy stocks, central banks will.Back in 2011, Ben Bernanke, when asked if QE2 was driving up stock prices, […]
I want to share some insight and give you a front-row seat to America’s next big shale play.Let’s get to it…Over the past 10 years, the U.S. has turned the ship around, quite literally.We’ve gone from a country that was expecting to import massive amounts of oil and gas — to a country that’s sitting […]
Whatever your views on the role of government, one thing is clear: There will be no way to pay for it if the economy doesn’t grow. And I’m not talking by a measly percentage point or two. If we can’t find our way back to 5% annual economic growth or above soon, America’s accumulated federal […]
According to the Bureau of Labor Statistics, consumer prices are rising at a 2.1% annual rate. This suggests to us that the current stock market boom will die with a bang, rather than a whimper.Fed economists say they don’t think inflation rates are rising. They think the most recent reading is a fluke. But why […]
Politicians love raising the minimum wage because they don’t have to ask voters to pay more in taxes. They just dump the costs onto shop owners. But they don’t act like politicians and go into debt to pretend like they have all the money in the world. They face real world situations. And sometimes that means replacing workers with more affordable options...
Easy prediction: Congress will not cut spending. The hysteria in Washington is for naught, as usual. There will be no “austerity,” at least not the kind brought on by cuts in government. Nor will there be curbs on the Fed. Our credit-drenched, phoney-money culture would never stand for it.
But let’s just pretend that this fantasy did come true, for once. What would happen?
Try not to be intimidated by what the supposed experts say; rather, think about the following sentence using logic and critical intelligence: “Cutbacks in government spending… will eat into growth.” This statement of seeming ironclad truth was pushed in an editorial in The New York Times. It is without argument or evidence, but it presumes the truth of the “fiscal multiplier effect.”
Let us see. Incontrovertible truth: government has no resources of its own. Everything it has it takes from you and me or borrows. How does forcible extraction of private resources in the service of bigger bureaucracies and transfer payments cause new kinds of prosperity to come into existence? What you take, you have, but there is no turning stones into bread here.
It’s even worse than pure redistribution of wealth. It is actually destruction of wealth for government to rob and spend. This is because it is taking resources from highly valued uses to channel them into less-valuable uses. We know this because it would not happen absent the use of force. People’s preferences for the use of resources are being overridden.
How does that create or sustain prosperity? Of course, it doesn’t. If it did, there would be no economic problem to solve, no need for savings and investment, no need for risk taking or economic calculation of profit and loss. To create prosperity, you would need only unleash the looter state. Absurd.
In fact, the opposite is true. Cuts in government spending release resources from less-valued uses into more-valued uses. It puts wealth back into the hands of private parties, in which it can be saved and invested with economic rationality. The Keynesians have it exactly backward. Defunding bureaucracies and transfer payments provides new and productive funding for entrepreneurs and wealth creation in the private sector.
And hey, this isn’t just speculation. This is precisely what happened after World War II. FDR died and the political system went into full-scale upheaval. His successor, President Harry Truman, didn’t have his stride, a congressional election produced unexpected results, many wartime controls were allowed to expire and, for a variety of reasons, the wartime leviathan began to melt away.
David Henderson beautifully illustrates the point:
“In the four years from peak World War II spending in 1944 to 1948, the U.S. government cut spending by $72 billion — a 75% reduction. It brought federal spending down from a peak of 44% of gross national product (GNP) in 1944 to only 8.9% in 1948, a drop of over 35 percentage points of GNP.
“While government spending fell like a stone, federal tax revenues fell only a little, from a peak of $44.4 billion in 1945 to $39.7 billion in 1947 and $41.4 billion in 1948. In other words, from peak to trough, tax revenues fell by only $4.7 billion, or 10.6%. Yet the economy boomed. The unemployment rate, which was artificially low at the end of the war because many millions of workers had been drafted into the U.S. armed services, did increase. But during the years from 1945-48, it reached its peak at only 3.9% in 1946, and for the months from September 1945 to December 1948, the average unemployment rate was only 3.5%.”
I was just yesterday listening to Paul Krugman (debating Ron Paul) explain that it was Keynesian economics that gave rise to the economic boom in the United States following the Second World War. This is the kind of claim that causes the jaw to drop to the floor. Ron correctly responded that it was the spending and tax cuts, with the release of controls, that did that. In fact, the Keynesians at the time predicted complete disaster just when the very opposite happened.
Paul Samuelson, the leading American Keynesian, warned against dismantling wartime planning. He wrote in 1943 that such a plan would usher “in the greatest period of unemployment and industrial dislocation which any economy has ever faced.”
This was his prediction. Of course, the exact opposite occurred!
The most-spectacular thing concerns the reabsorption of military workers into civilian life. More than 10 million people who might have been unemployed found work. This was a readjustment that hardly anyone expected, and a fantastic tribute to the capacity of the market economy to deliver seeming miracles that defy all the predictions of disaster.
Again, Henderson writes:
“Indeed, in just the 11-month period between August 1945 and July 1946, the number of people in the U.S. military fell from 12 million to 2.7 million, a drop of 9.3 million. Over those same 11 months, civilian employment grew from 53.6 million to 57.8 million, an increase of 4.2 million people. The number of unemployed people did increase, rising from 0.8 million to 2.3 million, but with a civilian labor force of 60.1 million, the 2.3 million unemployed people implied an unemployment rate of only 3.8%.”
Remarkable, isn’t it? Look at our current labor problems. They are incomparable. And we are living through an astounding technological boom that should have created a brilliant market for workers in all sectors. Instead, with the Keynesians in charge, we have persistent unemployment and falling labor participation! They keep being shown wrong, and yet they have no shame and continue to claim to have been right.
Given this history, the prescription for our current troubles reverses all the conventional wisdom. Cut government spending dramatically. Cut taxes. Get rid of regulations and controls. In sum, free the economy! You can say it and prove it ten thousand times, but it makes no difference. A convinced Keynesian is a tough nut to crack.