Jordy Blog

Economic Woes: Understanding the Cause and the Cure

Robert Lefevre observed that “Government is a disease that masquerades as its own cure.“

Obama’s “Economic Stimulus” package, like Bush’s and Bernanke’s banking bailouts, typify this statement. No sooner is the economic knife twisted in on our belly than our haggardly assailant disappears into the night. Immediately our saviour appears, riding on his white horse and swearing revenge. But how did he get here so fast?

Obama’s Economic Stimulus Package

Let’s just look at the Obama’s so called “economic stimulus” package logically.

Was our current economic situation really caused by a lack of green energy? Did we really just not have enough STD prevention education? Was it all this really because we didn’t have enough high speed internet in rural areas? Was it because our current highway system is inadequate? Did we just not have enough food stamps?

If none of these problems were part of the underlying problem, how does fixing them constitute a solution? Yet that’s literally what we’re being billed. Government simply changes out the labels in its pork processing plant, and all-of-a-sudden we can’t get enough. In government, just re-brand whatever your selling as “Economic Relief”, “Stimulus Package”, or “Cure to Whatever Happens to Ail You Today”, and it’s bound to sail right through.

Sure, there’s much more to Obama’s “Economic Stimulus” plan than funding STD prevention education, but it’s all crap because it all ignores the recessions’ underlying causes. Even the tax cuts are crap because, just like the Bush tax cuts, there is no associated cut in spending. In fact, to say that we’re getting quite the opposite of spending cuts is a remarkable understatement.

Cutting taxes without cutting spending requires either inflation or debt. The former (like taxation) steals from current citizens, while the latter steals from future citizens. Both payment vehicles are immoral. Should income taxes be decreased or even eliminated? Absolutely. But the only lasting way that government can stop stealing the wealth of its citizenry is to stop spending it!

Our Current Recession: the Cause and the Cure

If we really want to fix our economic problems, we need to fix them at the cause. But remarkably few people understand the cause –and that’s what makes us so vulnerable to government deception.

To understand the cause and the cure of our current recession, shouldn’t we look to the people with proven track records –you know, the people that actually foresaw the current crisis before it happened? Remarkably, the solutions offered by people like Peter Schiff and Ron Paul –people who were dead right about the economy even before the bubble burst– are still being relatively ignored. The alternative approach: what our economy really needs is more people teaching kids how to use condoms. Good grief!

If you want to understand the cause of recession, as well as its cure, Ron Paul says it pretty succinctly:

Cures for Our Economic Disease

I have recently had several opportunities on various news programs to discuss the economy and what is wrong with the so-called economic stimulus package. I have said over and over what we shouldn’t be doing, and now I’d like to explain what we should be doing.

But to improve the situation, you must first have a solid grasp of how we got here. Government policies and central planning created the housing bubble, now going bust. About a decade ago the government made expanded homeownership and affordable housing a public goal. Through Fannie Mae, Freddie Mac and the secondary mortgage market the government incentivized creative, low down-payment, more widely available mortgage products, and discouraged the market-proven lending standards of the past. The Federal Reserve kept interest rates artificially low, which added more fuel to this fire. Many related sectors temporarily flourished because of this, and many people got into homes they otherwise could not have afforded. The increased demand for housing sent prices soaring until in many markets housing became even more unaffordable, necessitating even more creative mortgages, and impossibly leveraging homeowners. Many risky investment vehicles such as mortgage-backed securities, derivatives, credit default swaps grew out of this unsustainable situation. As the foreclosures began, the house of cards started to tumble. Too many people have confused the symptoms and the pain of the bust with the problematic policies that caused the bubble, which is really what needs to be treated.

First of all, just as the best cure for a hangover is not to drink so much, the best cure for a recession is a recession. It is time to sober up and return to free market sanity, risk and reward, supply and demand, without political intervention. Politicians are good at catering to the needs of special interests, but very bad at determining what needs to take place in the market. Government should stick to punishing fraud and enforcing contracts. When they use the tax code, bureaucratic departments and their manipulative rules and regulations to dictate social and economic behavior, we end up with distortions and malinvestments. Bailing out banks, continuing failed Fed policies and strapping the taxpayer with toxic debt will worsen the pain, and punish the innocent.

If Congress really wanted to do something helpful, it would cut taxes. Ideally, we would repeal the income tax altogether and get the IRS off the economy’s back, which would be a huge boon. We should also cut spending. Cut every unconstitutional department and program, every wasteful governmental encroachment on the people’s liberty and money, starting with our massive overseas empire. The cost of our empire is bringing us to our knees, just as the Soviets’ empire did to them. Congress should also abolish the Federal Reserve and take back its responsibilities to ensure sound money, safe from the manipulations of powerful banking interests.

These things would constitute real change, real economic stimulus. The plans being bandied about Washington are just more of the same. As long as no one seriously considers the cure, we are unfortunately destined to prolong the disease.

There it is, refreshingly simple.

Now that we’ve identified our assailants as big government and central banking, maybe we can go after them! Or wait, here come a couple brave knights who seems more than willing to do that for us. Hold on a second… Don’t we know you?

If you liked this post, you may want to subscribe to my RSS feed. Thanks for visiting!

Debauching the Currency

I really like Glenn Beck when it comes to the economy:

This uncontrolled spending (and it’s underlying debasement of the currency) may well destroy us.

Inflation, as a means of overthrowing the free market:

Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens … Lenin was certainly right. There is no subtler, no surer means of over-turning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose. – John Maynard Keynes (via quoty)

Inflation, as a means of overthrowing our nation and our liberties:

I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs. – Thomas Jefferson (via quoty)

Sadly the “change” mantra was nothing more than a seductive lie, because when it comes to the policies of spending and inflation, Comrades Obama and Bush (not mention McCain) are exactly the same.

Meet the new boss. Same as the old boss. :(

Peter Schiff on the Collapse of the Dollar

It’s End-the-Fed day today. I thought I’d commemorate it by posting a video featuring Peter Schiff (Ron Paul’s campaign finance advisor), who accurately predicted the sub-prime meltdown and the ensuing recession.

Some great quotes (emphasis added):

Our markets are going lower. This is not just a financial crisis; this is an economic collapse. Our entire phony economy is collapsing around us. There’s nothing the government can do to stop it; they should get out of the way and let it happen.

—-

Look, you have to understand: for the past several years everybody thought we had a real economy. We didn’t. We had a bubble. All we did was borrow trillions of dollars from the rest of the world, and we blew all the money on consumption. We can’t pay the bills. The asset bubbles that were inflated by reckless monetary policy are deflating around us, and we’re going to have to rebuild a viable economy; and it’s not going to be easy. A lot of companies are going to go bankrupt during the process. A lot of people are going to lose their jobs, but this has to happen: we have to go back to a sane economy where we save our money and actually make stuff.

—-

I’d be … getting out of the dollar because it’s a bottomless pit. When this dollar stops rallying, it’s going to fall like a stone. That is the next major economic crisis we are a setting up, a major major run on the dollar, and that’s going to have tremendous repercussions for our economy and our markets.

—-

We manufactured our way into becoming the wealthiest economy country in the world, and now we’ve consumed our way into bankruptcy.

—-

It’s time Americans take a long, hard look at the flawed monetary policy that’s behind all of this funny business; and that means understanding the history, operations, and goals of the Federal Reserve. If we don’t figure this out and get back to system of sound money, we may well “wake-up homeless on the continent their fathers conquered“.

It’s frustrating that the only major party presidential candidate that was talking about these issues in any substantial way was written off from the very beginning. But you wanted empty platitudes? Well, you got ‘em.

I.O.U.S.A.

UVU is showing an important (although significantly flawed) documentary tonight. “I.O.U.S.A.” is important because it highlights just how bankrupt we are as a country. It describes how our current debt and obligations (unless significantly curtailed) will enslave future generations for years to come, essentially charging the cost of our glut to our children’s and grandchildren’s credit cards.

“I.O.U.S.A” is seriously flawed because it entirely ignores the very central role the Federal Reserve has played in enabling this glut. But it’s still important to see nonetheless. Here are the details:

OREM, UTAH — UVU Student Government, many UVU clubs, and the Concord Coalition are hosting a screening of the free full-length featured documentary titled “I.O.U.S.A.” The critically-acclaimed “I.O.U.S.A.” documentary, directed by Patrick Creadon (“Wordplay”), follows The Concord Coalition’s “Fiscal Wake-Up Tour” and tells the story of America’s four key deficits — budget, savings, balance of payments and leadership — and their implications for the nation and U.S. citizens. The movie, an official selection of the 2008 Sundance Film Festival, features Concord Coalition Executive Director Robert Bixby and Fiscal Wake-Up Tour keynote speaker, former Comptroller General of the U.S. David Walker. It contains interviews with Concord Coalition President Peter G. Peterson and Concord Board members Robert Rubin and Paul Volcker.

Democrats, Republicans, Independents, and Third Party members all agree that something must be done about the nation’s growing deficits and accumulating national debt. The topic of debt is too often ignored by the media and misunderstood by citizens. However, the national debt affects us all. This movie will leave you stunned and wondering why nobody is doing anything about it. The movie will cover the debts’ history and what can happen if we don’t immediately address the issue. The will be shown on November 3rd and held at the UVU Ragan Theater in the Student Center and is movie is free and open to the public. UVU is located at 800 West University Parkway Way, in Orem, UT. Doors open at 6:30 pm and the movie will begin promptly at 7:00 pm. For more information please visit www.iousathemovie.com or email Tyler at petersty[at]uvu.edu.

You can also view the condensed version of I.O.U.S.A. online.

On this election day eve, it’s important that we understand the fiscal crises facing Americal so we can take the steps necessary to correct our “leadership deficit” and get ourselves out of this mess before it’s too late. There is an alarming silence in Washington on the precient issues of over-spending and inflationary debt. I hope you watch this film so we can correct those issues before the price of our glut tears our country and families and apart.

Utah Primaries Today – A Vote for Chaffetz

I had the opportunity to see the Cannon, Leavitt, and Chaffetz campaign speeches at both the Utah County and Utah State Republican Conventions.  When it became clear through successive rounds of voting at the state convention that David Leavitt wasn’t going to win and that even Cannon would probably lose outright to Chaffetz at convention, all sorts of funny business started happening. It was like watching a large wounded animal give its last throws of life before submitting to defeat.

So what did Cannon do?  He colluded with Leavitt to get the votes of Leavitt delegates, which by itself is fine; but in order to get the message to Leavitt supporters, Cannon and Leavitt broke party rules against signage in the conference center twice: the first time by having Leavitt volunteers march right through the convention holding giant Cannon signs, and second by hanging a large handwritten sign that said “Leavitt supports Cannon” at the top of the stadium.  Both acts received tremendous booing from the audience and calls from the Chairman to maintain order and cease the disruptive behavior.

It struck me to see how unprincipled and disparate the two losing major republican candidates really were.  But in the end they got their message across.  The final vote after Leavitt was eliminated was 59% for Chaffetz and 41% for Cannon, with Chaffetz lacking only 9 votes from the 60% required to win the republican nomination outright.

And so, the vote went to primaries, where money and name recognition generally give a major boost to incumbents.  Those primaries are today, and polling suggests that the nomination could go either way.  I’m going to vote for Chaffetz, and if you’re a registered Republican in Utah Congressional District 3, I hope you do too.

Although I didn’t agree with the whole thing, here are some gems from the Chaffetz speech (video):

I believe the best hope for our people, for our families, is to return to those core conservative principles of fiscal discipline, limited government, accountability, and a strong national defense.  We’ve abandoned those principles…  Republicans had the house, the senate, and the presidency, and quite frankly, we blew it.  We did not do the heavy lifting on the issues that matter most.

When Mr. Cannon took office, the budget was $1.5 trillion.  Today it’s $2.9 trillion.  That’s unacceptable, and we cannot sustain that.  We have a $9.3 trillion debt.  Last year alone we paid $429 billion of interest on that debt.  That cannot stand.

Mr. Cannon voted in favor of No Child Left Behind.  I want to repeal No Child Left Behind; there should be no Department of Education.

Here’s my favorite misleading statement from the Cannon campaign video:

[Chris Cannon]  has told the Federal Government to stay out of our schools.

Well, Cannon may have told the Federal Government to stay out of our schools, but that’s certainly not how he voted.  No Child Left Behind meddles with our schools in unprecedented ways.

If you want to do a last minute check on the issues, here is the Chaffetz platform.

Incidentally, you are also allowed to vote between Mark Walker and Richard Ellis for as the Republican nomination for State Treasurer.  See their campaign speeches here and here.

Get out and vote!

Party Differences in Taxation and Spending

I love this quote from Ron Paul’s most recent installment of his weekly column “Texas Straight Talk“.

While Democrats propose to tax and spend, many Republicans aim to borrow and spend, which hurts the taxpayer just as much in the long run.

Republicans who are concerned about increased taxation should be up in arms about the present value of future taxation that we make inevitable by letting the government live outside its means. You can’t lower taxes without lowering spending; you can only defer them –and deferring them to a future generation through debt is, in my opinion, even more immoral then overtaxing the current generation.

What is needed (for both parties) is to lower spending. That can be politically tricky since everything government does costs money, and no leader wants to be seen as doing nothing; but nothing is precisely what should be done at least 90% of the time. That’s one of the reasons the Founding Fathers, through a delicate system of checks and balances, made it so hard to get anything done. Yet we often, as voters, reward candidates who campaign on all kinds of ridiculous, expensive plans. (Yes we can! Yes we can! Yes we can!)

Lowering spending, and in turn taxation, requires both that we mind our own business internationally and let people solve the own problems with their own money domestically. Right now neither major party as a whole can agree to do both, so Americans will have to pay the hefty price until we can bring about serious and meaningful change in American politics.

Indulgence to Inflation to Poverty to Slavery

If you think not being able to flip your house in a shrinking housing market is bad, you ain’t seen nothin’ yet.

Our government’s epidemic overspending and the Federal Reserve’s willingness to devalue your money by simpling printing more will eventually leave the American middle class impoverished as compounding interest drives taxpayers to their knees. The longer we glut, the more we’ll have to pay, and the more socialized we’ll have to become when the bills come due.

This is one of the most important issues of our day because the very freedom we enjoy depends on our ability to make good on our exponentially increasing debts.

“The fostering of full economic freedom lies at the base of our liberties. Only in perpetuating economic freedom can our social, political and religious liberties be preserved.”

Author: David O. McKay, Source: Church News, 3/12/52 via Quoty

Want more? Watch this video, courtesy (again) of the Chris Knudsen blog.