Ask a D.C. insider what’s the best way to solve the debt crisis. Nine times out of ten, they’ll recommend taking on more debt. That’s how things operate in the Potomac swamp. Up is down, right is left, digging yourself into more debt is the best way to get out of it. But it wasn’t always like this. In fact, there used to be common sense when it came to the economy. So where did it all go wrong?
Politicians talk about the uninsured. Special interests argue on behalf of those with pre-existing conditions. But why is no one wondering how doctors are affected by the new law? They’re the ones on the frontlines dealing directly with new patients, as well as the red tape that makes bureaucracies go round.
Politicians proclaim the benefits of small business while on the campaign trail. But when they meet in the seedy halls of Congress, they have no problem doing whatever they can to stifle, regulate, and subdue their progress. Instead of siding with entrepreneurs, these politicians often side with political allies and cronies that helped put them into office.
Just because you’re retired doesn’t mean you have to stop working. Especially now that you have all the time in the world to do what you really want. Entrepreneurs don’t only come out of Silicon Valley. They come from all walks of life, from all different ages. If you’re retired and want to stay active while you relax, then find out the steps you need to take in order to start, manage, and grow your next small business.
Technology brought the world together. But has it gone too far? Decades ago, mail was delivered by hand. Now it’s delivered in seconds. How has that changed the way you live your life? How has it changed the way people act with each other? These are just some of the questions we need to ask.
The U.S. dollar has been the world's reserve currency for almost a century, and already there are signs it may be in decline. But that doesn't mean it's not still valuable. On the contrary... As Chris Mayer explains, there are many reasons the U.S. dollar will remain relevant on the world stage for years to come. Read on...
Gun control isn’t a modern idea. The rise of gun control laws and limits on your 2nd Amendment freedom go hand in hand with the increase in the size and scope of government. Politicians want you to think the only people who can keep you safe are government forces. But as one renown libertarian economist and thinker will show you, their misguided laws do nothing but take away your freedoms and leave you less safe.
The government will do whatever it takes to make sure it has enough of your money to fund itself. On the surface you might think that means enduring a grueling audit. But the IRS and the government is more than willing to ignore your privacy in the cold relentless pursuit of the money they think they deserve. As they get bigger and bigger every year, the smaller and smaller your paycheck becomes as they leach off it.
The Congressional Budget Office said the government needed to reach 7 million people by the end of March. They claim to have reached the goal and now the debate about Obamacare is over. But what does this milestone really mean in the ongoing healthcare discussion? And more importantly, how will it affect reforms going forward?
If you’re good at something should you be penalized so others have a chance at success? Should award winning actors and actresses be barred from future Oscar ceremonies to give other men and women the chance to succeed? Success should always be rewarded and encouraged. But what happens when you have a government that wants to even the playing field and take away the spoils of success. Gregory Bresiger finds out...
In an effort to cut costs and keep track of patients' records, governments could institute a medical guideline cookbook. Bureaucrats might think they have the best of intentions in mind, but these new rules would drag down the medical process and destroy whatever quality is left in our current system.
Practical people often pooh-pooh fiction reading as a time wasting dalliance, dominated by a Marxist coloring of the world. However, fiction readers were given a scientific reason recently for spending hours absorbing fanciful figments of someone’s imagination.
Argentina is suffering the ravages of government debasement of the currency -- i.e., inflation, the process by which government pays for its ever-increasing debts and bills by simply printing more paper currency. The expanded money supply results in a lower value of everyone’s money, which is reflected in the rising prices of the things that money buys.
When government expansion is allowed to continue unabated or when it casts a heavy regulatory shadow on America’s entrepreneurial spirit, the freedoms that we’ve come to know, and perhaps take for granted, slowly begin to slip away.
The saga of All Saints could soon be coming to a community near you. Thanks partly to the scandal surrounding the IRS’ targeting of conservative groups, the agency has proposed a new set of rules for a huge number of social-welfare groups that claim tax exemption under Section 501(c)4 of the tax code.
The new reality of Obamacare’s tax credits has left finance reporters to pen articles warning readers to “take care” when considering a tax credit and providing strategies for how best to “protect yourself.” So what do finance reporters know that the White House doesn’t?
Nihilo ex nihilo fit. Out of nothing, nothing comes. First put forward by ancient Greek philosopher Parmenides in the fifth century B.C., Thomas Aquinas and St. Augustine later used this axiom to prove that the universe needed a “first mover” to get things going. Even if the whole thing began with some kind of “Big Bang” moment, it still needed a banger to bang it. Who? God, of course.
What positive steps can we take? The energy that is now expended by well intentioned, freedom-seeking individuals on the destructive course of politics can be turned into powerful steps that will have a positive effect on the future. All are moral, right and just. None require aggressing. Consider the following...
The Affordable Care Act creates a new health insurance marketplace (the exchange). But because of the great uncertainty about what buyers will enter the market and who will buy what product, the law creates three vehicles to reduce insurance company risk.
Politicians and bureaucrats are notorious for manufacturing euphemisms -- clever but deceptive substitutes for what they really mean but don’t want to admit. That’s how the phrase “revenue enhancement” entered the vocabulary. Some of our courageous friends in government couldn’t bring themselves to say “tax hike.”
“It is difficult to make predictions, especially about the future,” says a proverb often attributed to Yogi Berra. Imagine the world of freedom, or lack of it. Who could foresee the technologies that make our lives so rewarding and convenient? The same technologies have us all under the government’s giant microscope. Thankfully, the brave have turned the microscope around.
In the months since Edward Snowden revealed the nature and extent of the spying that the National Security Agency (NSA) has been perpetrating upon Americans and foreigners, some of the NSA's most troublesome behavior has not been a part of the public debate.
National Treasury Union President Colleen M. Kelly recently described the 2014 IRS budget allocation as “woefully inadequate.” But the agency has not proven itself to be an efficient steward of taxpayer dollars. Here are ten ways the IRS lost the trust of the American people.
It’s easy to be negative about the U.S. economy these days. Find a glint of silver, and folks come running to point out all of the dark clouds looming about. This, of course, is what we got last week when the monthly jobs report was released from the U.S. Department of Labor (DOL). Folks pooh-poohed the number of jobs and whining that they’re not enough or that it’s less than a bunch of economists thought that it might be. But you know what? Stuff ’em.
Given how poorly states like California and Illinois have funded the pension funds for their own employees, one would think that this would stop dead in its tracks any plan to have the government assist in managing private sector funds too. The spate of recent activity, however, suggests otherwise.
Facts are easy. You can check facts. What supporters of the Affordable Care Act are doing, on the other hand, transcends factual bungling. It’s far more advanced: a warping of reality so debauched it looks like something out of a tale by H.P. Lovecraft.
The problem for NSA apologist is that when guys like Snowden disclose that the government conducts comprehensive surveillance in ways that would have made 1984’s O’Brien drool, it puts the entire progressive agenda in jeopardy.
All government-directed economic activity grows at the expense of the private sector. And the election suggests that government coercion will drive even more U.S. economic activity in the future. This is a shame, because freely adjusting prices, competition, and innovation elevate living standards. Mandates, price controls, and subsidies — coercive actions — depress living standards. Quality falls. Shortages develop and persist.
Americans are in the midst of a destructive, self-reinforcing political cycle — a cycle that might conclude in a nightmare scenario. A sloppy diagnosis of the financial crisis lies at the root of the destructive cycle.
The free market did not cause the financial crisis; political meddling with interest rates and credit allocation caused it. Without a proper diagnosis, the medicine can be worse than the disease. In this destructive cycle, the popular response to a financial crisis caused by too much government and central bank influence is “Give us more government and crazier central banks!”
President Obama’s health care law provides an example of how government dipping its toe into a market can start a destructive cycle that ends in even more government control: Years after its passage, many of Obamacare’s details remain unknown. But we know it will demand insurance companies not charge premiums that vary too much for people with different health risks. The insurance companies will receive millions of new (but unprofitable) customers.
It’s easy to imagine price controls and mandates bankrupting many health insurance companies. All the while, politicians would blame the insurers for poor customer service and putting “profits over people.” Before you know it, the political door for a single-payer health care system would be pushed wide open — all because politicians are not interested in honestly discussing the impact of price controls and mandates on markets.
This is not meant to be a political screed. After a year or two of political theater and propaganda, you must be exhausted. But whether we like it or not, politics are an important part of the investing equation. And after this week, it is clearer than ever that the economy will continue getting mauled in a self-reinforcing cycle of more government leading to market failures leading to even more government.
Some of you are disappointed with the results of the U.S. election, some are happy, and some (including those with libertarian views) wonder why any individual or political party would want to preside over a country whose challenges dwarf its opportunities.
Call me a grumpy cynic, but it helps to be a realist when examining this situation. Here’s why: You can’t argue, after thinking about the following four points, that America’s challenges (ignoring individual families or companies) do not outweigh America’s opportunities:
First, the “nondiscretionary” federal budget is set on autopilot, driven by demographics. Political inertia will not allow meaningful reforms. We don’t “have the votes,” as they say in Congress, to reform insolvent entitlement programs.
Second, a critical mass of voters demand government services, including health care — health care that remains waiting for bureaucrats to define. Here is a guess, based on government intrusion into markets: The health care system will become as popular as your local Department of Motor Vehicles within five years. Tuesday’s exit polls revealed that the popular American characteristic of self-reliance is not so popular anymore. Many voters see a European-style welfare state not as a bankrupting failure, but as a model for the U.S. They’re trading their freedom for the illusion of economic security.
Why is government-provided economic security an illusion? Simple: There is no way to pay for these benefits without raising tax rates to a degree that would destroy both the economy and the financial markets or annihilate the value of the dollar. Confiscating the income and assets of the “rich” (ignoring the fact that this would put countless people out of work) would make an unnoticeable dent in the budget deficit. This is a fact, not an opinion. Unfortunately, rather than start a factual conversation about the deficit, politicians choose to inflame the toxic emotion of envy.
Third, the next recession — and we are due for one in the not-too-distant future — would push the federal deficit well beyond expectations. Tax receipts would fall, along with incomes, capital gains, and economic activity. Spending on unemployment programs would rise again. The Obama administration’s predictable response to a recession would be another stimulus plan in which Democrats get more spending and Republicans get more tax cuts.
So in the end, a recession leads to wider deficits, which in turn lead to policies that widen deficits yet again. Paul Krugman and most other economics professors would love it. Krugman would consider this a worthwhile effort to fill some mythical, immeasurable “output gap,” while people with common sense would consider this going down the road to hyperinflation.
Fourth and finally, the Federal Reserve has boxed itself into a corner. Quantitative easing (QE) is a one-way proposition; there is no practical reversal from QE, as newly printed money has boosted the price level above where it otherwise would have been. Reversing QE would bring about dreaded “deflation.” Any exit strategy from QE exists purely in academic models. In reality, reversing QE (selling bonds and draining cash from the financial system) would crash all of today’s manipulated financial markets simultaneously.
The Fed’s goals early on in the crisis focused on supporting the banking system at the expense of savers. Now the Fed will be pressured, threatened, and eventually forced to monetize ever more U.S. government debt — all to finance a government budget that the private sector cannot afford.
As a proponent of small, affordable, sustainable — there is a nice buzzword — government, I lament that voters have chosen a government stuck in a destructive, self-reinforcing cycle. Time will tell if this cycle (more government, market failure, more government, market failure…) can be stopped.
The future political environment will multiply the risks facing investors. But there will always be opportunities for contrarian investors on both the long and short sides of the market…
On the long side, look at the best-managed gold and silver mining companies, and companies providing “shale fracking” services and equipment for the American oil boom.
On the short side, look at overindebted companies that, in order to survive, need consumers to continue overspending. Also, look to short companies that pay high prices for raw commodities and resell processed goods into a depressed economy.
Dan Amoss, CFA