Pre-P. S.: Note please that as stated last year, I have been blogging at The Daily Capitalist. As that is a WordPress site and this site uses Blogger, there are interoperability problems with dual posting. I will continue posting here on various topics and in the future will place links here to those posts.
Now to today's effort. Barack Obama looks to me like a warlike Jimmy Carter, floundering at home and aborad.
Gone are the days when his critics called him 'Bambi'. Now he sends his Defense Secretary to posture, his strategy in Afghanistan having failed so far. Here is Robert Gates' latest:
KABUL, Afghanistan – In a last farewell to US and international forces in Afghanistan, Defense Secretary Robert Gates says they are on track to deliver a decisive blow against the Taliban.
Sorry, it was over a year ago that we heard that the victory in the non-city of Marjah was a prelude to a major, successful takeover of Kandahar city. What Gates and his boss should have done is what corporations learned to do years ago: underpromise and overdeliver. First rout them, then everyone will see the victory and you can be modest. Assuming the reporting is correct, Gates was engaging in puffery. Unattractive.
Not that I favor this effort at all. My sense is that 'Bambi' is in league with the neocons. I prefer the Reagan years. The only foreign military aggression I remember US troops performing was the minor thing in Grenada. Peace through strength. The last decade of all war, all the time with the latest, Libya, being an obvious war of choice.
Anyway . . . as with the ongoing military effort in Afghanistan, so with the economy. It's not yet falling off a cliff, and let's hope it does not, but as with Afghanistan, the administration has overpromised and underdelivered. And as the economic course was set in 2009 and 2010 with no Republican support, it was the Dems who were the lone wolf party and their president whose electoral fate is likely going to be decided next year based on the choices they unilaterally made one and two years ago.
It's time to let freedom (economic) ring. That's the solution. As we saw in 2009, the administration had no creative ideas for the economy, and so they ran up a multi-trillion dollar debt for little if any lasting benefit. At least FDR had the CCC and built some structures that are still in use today.
When the latest round of "Keynesianism" fails, which people will start to notice by this fall at the latest, there will be that many more adherents to the historical American position that that government is best that governs least.
BTW I put 'Keynesianism' in quotes because we are in a post gold-standard world with deficits so profound that it is impossible to know what John Maynard himself would be advocating were he around today. We have moved to an economic Extremistan that is sui generis in American history.
Copyright (C) Long Lake LLC 2011
Showing posts with label FDR. Show all posts
Showing posts with label FDR. Show all posts
Thursday, June 9, 2011
Wednesday, June 3, 2009
Food For Thought
From a mass Email today from David Kotok of Cumberland Advisors, traveling in Zimbabwe. Dr. Kotok appears to be a reasonable, middle-of-the-road sort of guy. Food for thought:
At dinner we discussed how regimes alter policy and how Zimbabwe is the extreme example of a sequence that was summarized by LSU professor Joe Mason as political change leading to socialization and industrial policy followed by inflation, as the government dominates or controls the financial engine. In Zim's case, Joe noted that the politics were those of “a "ruthless dictatorship.” The target of the industrial policy in Zim is agriculture, and property seizure, corrupted courts, and painfully inflicted police power have also been characteristics of this regime change.
That led us to a discussion of the present evolution underway in the United States. We do see major political change in the massive repudiation of the Bush Administration and with the now overwhelming majority in the House and the Senate of a single party that also includes the president. Add only one or two Democrat senators, and the US will be operating under a full one-party rule.
There is a trend toward growing socialization, which will accelerate when the proposed Obama tax structure becomes law. By then, less than half the wage earners in America will be paying income taxes; hence, the funding of government will fall on the minority.
We already see an industrial policy in banking. And we have one in housing finance now that most residential mortgage lending is done by government agencies. We are also evolving an industrial policy with autos. We've had one in agriculture for years; federally subsidized ethanol policy was one of the worst results.
Will this lead to inflation? Our central bank claims vigilance while expanding its balance sheet in ways without precedent. Clearly markets see an inflation risk and are raising interest rates. Foreigners worry about the US dollar and evidence their views in the foreign-exchange market. The jury is still out on an eventual large inflation while the US economy remains in recession, but one must certainly admit that the inflation risk is high. The political influence on the central bank by our Congress doesn’t lessen this longer-term inflation fear.
Some political history. The last three times the U. S. had this sort of one-party rule were first under FDR. Coming into the utter devastation of the end of the Great Crash, he brought some inflation and initially soaring stock prices, but ultimately unemployment never declined a lot or consistently. Carter had 4 years of one-party rule. The first two years had very poor stock markets and the second two years had soaring inflation and in year 4, a dollar crisis. Clinton, in a time of the strong Perot balanced-budget movement, had only two years of one-party rule, got none of his agenda through (think quasi-socialized medicine); when he and the Party were repudiated, the great Bull (-sh*t) market of the second half of the '90s got going. We are still enduring the hangover from that and the associated ascendancy of Big Finance that suited both Clinton's and Gingrich's purposes.
While the above data is necessarily of statistically poor power, I believe that it should be kept in mind in interpreting the markets.
Big Government is bigger than Big Finance.
Copyright (C) Long Lake LLC 2009
At dinner we discussed how regimes alter policy and how Zimbabwe is the extreme example of a sequence that was summarized by LSU professor Joe Mason as political change leading to socialization and industrial policy followed by inflation, as the government dominates or controls the financial engine. In Zim's case, Joe noted that the politics were those of “a "ruthless dictatorship.” The target of the industrial policy in Zim is agriculture, and property seizure, corrupted courts, and painfully inflicted police power have also been characteristics of this regime change.
That led us to a discussion of the present evolution underway in the United States. We do see major political change in the massive repudiation of the Bush Administration and with the now overwhelming majority in the House and the Senate of a single party that also includes the president. Add only one or two Democrat senators, and the US will be operating under a full one-party rule.
There is a trend toward growing socialization, which will accelerate when the proposed Obama tax structure becomes law. By then, less than half the wage earners in America will be paying income taxes; hence, the funding of government will fall on the minority.
We already see an industrial policy in banking. And we have one in housing finance now that most residential mortgage lending is done by government agencies. We are also evolving an industrial policy with autos. We've had one in agriculture for years; federally subsidized ethanol policy was one of the worst results.
Will this lead to inflation? Our central bank claims vigilance while expanding its balance sheet in ways without precedent. Clearly markets see an inflation risk and are raising interest rates. Foreigners worry about the US dollar and evidence their views in the foreign-exchange market. The jury is still out on an eventual large inflation while the US economy remains in recession, but one must certainly admit that the inflation risk is high. The political influence on the central bank by our Congress doesn’t lessen this longer-term inflation fear.
Some political history. The last three times the U. S. had this sort of one-party rule were first under FDR. Coming into the utter devastation of the end of the Great Crash, he brought some inflation and initially soaring stock prices, but ultimately unemployment never declined a lot or consistently. Carter had 4 years of one-party rule. The first two years had very poor stock markets and the second two years had soaring inflation and in year 4, a dollar crisis. Clinton, in a time of the strong Perot balanced-budget movement, had only two years of one-party rule, got none of his agenda through (think quasi-socialized medicine); when he and the Party were repudiated, the great Bull (-sh*t) market of the second half of the '90s got going. We are still enduring the hangover from that and the associated ascendancy of Big Finance that suited both Clinton's and Gingrich's purposes.
While the above data is necessarily of statistically poor power, I believe that it should be kept in mind in interpreting the markets.
Big Government is bigger than Big Finance.
Copyright (C) Long Lake LLC 2009
Saturday, February 28, 2009
Rendezvous With Bankruptcy
At times of crisis, countries turn to their leaders to learn the truth and what needs to be done based on the facts. Thus, FDR, the crippled man leading a crippled country, didn't sugar-coat matters. In what sadly was a prophetic speech in 1936, he said:
There is a mysterious cycle in human events. To some generations much is given. Of other generations much is expected. This generation of Americans has a rendezvous with destiny.
As a Boomer, much was given to my generation. The generation of Boomers' children is inheriting an America of bankruptcies of the largest and previously best-respected companies, and something other than the truth, the whole truth and nothing but the truth out of our business and political leaders.
These young adults are scared and depressed. They voted heavily for Barack Obama because they wanted real change. They don't want the same-old same-old out of Washington. Unfortunately, that is exactly what they are getting from the new boss, same as the old boss (from Jake Tapper at ABC News) in an article today called, if you can believe it:
Obama Will Restore Fiscal Discipline
The article describes the comments of Peter Orszag, director of the Office of Management & Budget, who pointed to the current budget deficit (created by a Democratic Congress, which authorizes all Federal spending and revenue measures):
The first step in addressing this very deep fiscal hole is honesty.
Our truth-meter comes out whenever a member of any administration has to promise that he (she) is going to be honest. He went on:
This budget will not play the games that are typically played . . .
Double uh-oh. Will they play atypical games, play the old games (perhaps under different names), or both?
The article continues:
Orszag pointed out four ways the deficit will be reduced:
1- The recovery act and "normal business cycles" will cause the economy to eventually recover.
DoctoRx responses to Mr. Orszag:
It's past time for real change.
Copyright (C) Long Lake LLC 2009
There is a mysterious cycle in human events. To some generations much is given. Of other generations much is expected. This generation of Americans has a rendezvous with destiny.
As a Boomer, much was given to my generation. The generation of Boomers' children is inheriting an America of bankruptcies of the largest and previously best-respected companies, and something other than the truth, the whole truth and nothing but the truth out of our business and political leaders.
These young adults are scared and depressed. They voted heavily for Barack Obama because they wanted real change. They don't want the same-old same-old out of Washington. Unfortunately, that is exactly what they are getting from the new boss, same as the old boss (from Jake Tapper at ABC News) in an article today called, if you can believe it:
Obama Will Restore Fiscal Discipline
The article describes the comments of Peter Orszag, director of the Office of Management & Budget, who pointed to the current budget deficit (created by a Democratic Congress, which authorizes all Federal spending and revenue measures):
The first step in addressing this very deep fiscal hole is honesty.
Our truth-meter comes out whenever a member of any administration has to promise that he (she) is going to be honest. He went on:
This budget will not play the games that are typically played . . .
Double uh-oh. Will they play atypical games, play the old games (perhaps under different names), or both?
The article continues:
Orszag pointed out four ways the deficit will be reduced:
1- The recovery act and "normal business cycles" will cause the economy to eventually recover.
DoctoRx responses to Mr. Orszag:
A. The "recovery act" (ARRA, aka the "stimulus" bill) is a gigantic budget-buster.
B. What is normal about the current business cycle?
2- Allowing "high income tax provisions to expire when they are scheduled to expire, at the end of 2010" and closing tax loopholes.
A. Fair enough.
B. "Closing tax loopholes" is an old canard. Close one loophole, open two, that's how it works in D.C.
3- "Winding down the war" in Iraq.No new news there. The Obama policy is a direct continuation of the Bush policy. The war has already wound down. But what about the unknown costs of escalation of the war in Afghanistan and Pakistan?
4- Making government more efficient.
The President spoke afterwards on that topic:
Obama promised that when the full budget is developed in the spring that the administration will “go through our books, page by page, line by line, to eliminate waste and inefficiency," and promised that no part of the budget will be free from scrutiny or untouched by reform.
Ha! Double ha! We've heard that one before from Jimmy Carter, Ronald Reagan, etc.
Optimistic economic projections are made, as usual out of the White House:
Christina Romer, chairman of the President's Council of Economic Advisors, predicted negative 1.2 percent GDP growth for 2009 but expected it to grow by 3.2 percent in 2010 and 4 percent in 2011.
The best economic seer this cycle has been Nouriel Roubini, previously an adviser to the Clinton Treasury Department. His projections are for more like a 3% GDP decline this year and at best 1% growth in 2010 and 2011.
President Obama -- flanked by his economic team -- acknowledged that in terms of his budget released today, that additions need (to be) made to the deficit in the short term to provide relief over the long run.
When Roosevelt gave his rendezvous with destiny speech in 1936, he foresaw general war a few years hence. We don't have a few years; our economic and financial war is here. Flash from the front line: we are losing. A change in strategy is needed.
Promising to be fiscally responsible in the future while proposing deficits unheard of since WW II is like my alcoholic patients promising to stop drinking someday. Trotting out optimistic economic projections and promising to make the Government more efficient via a line-by-line review of something or other is not change anyone can believe in, even my children.
The President needs to utilize the gloomy economic projections of Dr. Roubini, not the politically-motivated ones of Dr. Romer. If he's too gloomy, great- he can either retire some debt or spend more. But let the upside surprise happen first! The President needs to drop the cant about making government more efficient. He needs to tell us that we can't keep borrowing massive amounts of money from overseas forever. He needs to tell us that individuals can't borrow their way to prosperity, and neither can the Government on our behalf.
In other worlds, he needs to channel FDR or the best parts of JFK and inspire us while keeping the focus on how difficult our problems are, not how a "normal" business cycle will rescue us.
Unfortunately, as predicted here consistently, Barack Obama is continuing the essential Bush-Bernanke policies to spend money we don't have and to give massive amounts of this borrowed or printed money to stupid lying corrupt large financial companies while not preparing America for worst-case scenarios about which the public is rightly terrified.
Do you wonder why the stock market has gone down for six straight months?It's past time for real change.
Copyright (C) Long Lake LLC 2009
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