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?

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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. :(

Republican Party Bones Up?

Now we’re talking:

EXCLUSIVE: RNC draft rips Bush’s bailouts
Ralph Z. Hallow (Contact)

Republican Party officials say they will try next month to pass a resolution accusing President Bush and congressional Republican leaders of embracing “socialism,” underscoring deep dissension within the party at the end of Mr. Bush’s administration.

Those pushing the resolution, which will come before the Republican National Committee at its January meeting, say elected leaders need to be reminded of core principles. They said the RNC must take the dramatic step of wading into policy debates, which traditionally have been left to lawmakers.

“We can’t be a party of small government, free markets and low taxes while supporting bailouts and nationalizing industries, which lead to big government, socialism and high taxes at the expense of individual liberty and freedoms,” said Solomon Yue, an Oregon member and co-sponsor of a resolution that criticizes the U.S. government bailouts of the financial and auto industries. Republican National Committee Vice Chairman James Bopp Jr. wrote the resolution and asked the rest of the 168 voting members to sign it.

I hope this resolution passes. It would be a clear sign (to me) that the Republican party is worth saving.

The Current Economic Crisis: A Case Against the Fed

I missed another Liberty Book Club meeting this week, but I have been reading the books. This month’s book was Murray Rothbard’s The Case Against the Fed, which you can buy from Amazon, The Ludwig von Mises Institute, or download for free (MP3s).

Anyone who wants to really understand the underlying causes of our dangerous boom and bust cycles really needs to read the The Case Against the Fed to understand how the Federal Reserve (and other similar central banks) manipulate our money supply. The Case Against the Fed does an excellent job of explaining how fractional reserve banking, “legalized counterfeiting”, and other other inflationary policies really do rob the poor to feed the rich. The book explains how our monetary policy, controlled exclusively by the Federal Reserve with almost no congressional oversight, is a direct cause of economic bubbles and ensuing recessions (or depressions). It even addresses how and why credit crunches occur.

I wish this book weren’t so painfully relevant, but it is. The Federal Reserve’s manipulation of our money supply has been an underlying cause of so much evil in our time –so much so that most of us have never known anything different. It’s like America suffers from battered-wife syndrome, and we’ve lived with it so long that we really don’t know anything else. The problem is hard to identify (our schools teach almost nothing about economics, let alone monetary policy), and possibly harder to admit. It’s like the whole world groans and doesn’t know why.

The current recession was caused by Federal Reserve. Sure, there were lots of other factors, but the Fed was the great enabler of them all. And now they come on their white horses to save us all. How? By consolidating even more wealth into even fewer hands, meanwhile continuing to destroy our currency.

And what do we get out of it? All we get is more debts and more taxes, “known instruments for bringing the many under the domination of the few…” This whole thing bailout thing is a complete farce.

How much has it cost America to be “rich”? It may well cost us everything.

We are apt to shut our eyes against a painful truth… Is this the part of wise men, engaged in a great and arduous struggle for liberty? Are we disposed to be of the number of those who, having eyes, see not, and having ears, hear not…? For my part, whatever anguish of spirit it may cost, I am willing to know the whole truth. —Patrick Henry

Please read The Case Against the Fed so you can begin to understand the real truth, and what to do about it. (Yes, the book actually recommends a sane remedy that doesn’t involve guns and pitchforks.) And if you’re interested in joining the Liberty Book Club, contact me and I can put you in touch with the folks that run it.

Also of note, Tomorrow (November 22nd) is End the Fed day. There will be rallies outside 39 Federal Reserve banks around the country, including Salt Lake City. What a great way to raise awareness about a terrible evil! Too long have private bankers manipulated and abused America!

Auto Bailouts

From yesterday’s excellent Campaign for Liberty mailer:

After the Paulson $700 billion bailout package passed in early October, we knew it was only a matter of time before Congress moved to use your money yet again to bail out a struggling industry.

Now, a vote to give funds to the “Big 3″ auto manufactures, GM, Ford, and Chrysler, is likely to come up in the Senate tomorrow [today].

Call your Senators today and ask them to oppose bailing out the auto industry, whether with funds from TARP, revisions of previous loans, or any new grants. To find the information for your Senators, click on our “States” page and look for your state. Phone numbers and links to contact forms can be found near the bottom of each state’s page. We have included recommended letters at the end of this email to send your Senator.

Who knew when we started giving out “free money” with no strings attached that other people might want some as well? This whole thing is absolutely scandalous and inexcusable. Bailouts are nothing more than legalized theft.

Please sign up for Campaign for Liberty if you haven’t yet. Hopefully enough people will rally to the cause of liberty that we can put a stop to this kind of crap.

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.

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.

America is Bankrupt

My brothers are such big Mitt Romney fans that they drove to Iowa to help get out the vote. I like Romney and even made a substantial donation to his campaign, but these days I’m a Ron Paul man, through and through.

I’ve actually been meaning to post about why I support Ron Paul for a long time, but who has time for that long of a blog post? Luckily, Chris Knudsen posted a series of videos that sum up the main reason I support the Ron Paul campaign. In them Glenn Beck interviews Ron Paul and US Comptroller General David Walker about how the United States government is basically bankrupt after mortgaging our future to pay for unnecessary programs. Basically, the money is gone, but the US government keeps spending like it’s going out of style –and nobody is acknowledging that the crap has to hit the fan sometime.

Anyway, please watch the videos. You will be amazed (disgusted) at the extent to which our government has sold us out.

Here are some other excellent posts Chris has on the subject:

• Fiscal Cancer
• David Walker is my Hero
• More from David Walker
• US Government Fails its Financial Audit for 11th Strait Year
• Subprime Nation

And finally, a brilliant quote from David Walker:

“We are mortgaging the future of our children and grandchildren at record rates, and that is not only an issue of fiscal irresponsibility – it’s an issue of immorality.”

It seems to me that Ron Paul gets this more than any other candidate, and that’s the main reason he has my vote.