Is the Inertia Greater Than the Momentum ? August 2, 2012
Posted by Dr. Robert Owens in Uncategorized.Tags: 2012 election, boom and bust, Dr. Robert Owens, Federal Reserve, Government spending, inflating bubbles, inflation, tax and spend
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The causes of our problems are not hard to see. Americans aren’t obese because evil restauranteers are forcing them to eat fried butter on a stick. We are bulging at the seams because we eat too much and exercise too little. Americans aren’t trapped in upside down mortgages because evil bankers waylaid us and forced us to sign up for a house that was too big and cost too much. We’re living in homes we can’t afford because we wanted them and thought we deserved them even though we didn’t have an income that could support them. Americans aren’t buried in personal debt because credit card companies mailed us credit cards. We carry an average of $14,517 household debt because we wanted what we wanted when we wanted it and couldn’t wait until we could pay for it. And America isn’t drowning in national debt because we did anything more difficult to understand than electing people who bought our votes with entitlements we didn’t need and couldn’t afford.
The problem isn’t that we don’t know the answers. Instead it’s that we don’t want to face up to the fact that the free ride has to stop if we’re going to get off before we land in Athens. America’s economy is beginning to resemble one of those increasingly ridiculous action movies where the hero gets blown up, shot, stabbed, and hit with a brick only to jump up ready to roll. Every time a bubble bursts instead of allowing the economy to bottom out and correct itself the Government spends as it borrows from foreign countries and the Fed creates money out of thin air to pay for it. It’s time our leaders learn we have learned that blowing up a bubble to take the place of the last burst bubble is not building an economy.
As boom and bust turned into boom to boom to boom we have inevitably made our way to KABOOM!!!
The coming crash in this double dip dilemma is going to be a double whammy. We are currently blowing up a new financial bubble providing Fed funds at near zero % that the banks then loan out at 3-4% pumping more and more money into the system. And in a reprise of the 2000 dot.com crash the social media bubble is once again giving us billion dollar companies that aren’t making any money for anyone except the gamblers in the stock market casino.
The Federal Government keeps inflating bubbles to avoid the real crash so they can continue to buy votes with entitlements and pay for them with funny money. This postpones paying the piper, but it increase the bill when it finally comes.
Today the government Leviathan is devouring America’s income. In 2012 it’s estimated that the central government will consume 24 % of GDP kicking back 4% to the States and localities, the States will swallow 10% of GDP, and the local entities will inhale 11%. Subtracting the 4% Federal to State shell game and the governance of America is today costing us 40% of America’s production. On top of that the regulatory burden grows heavier every day until everyone everywhere is in violation of something. And we wonder why industry isn’t expanding? When you eat your seed corn and make impossible to follow guidelines for planting you can’t expect a bumper crop.
With money pouring out of a 5” hose how can anyone take the politicians promises to cut the deficit and reduce the debt seriously? The most draconian plans suggested so far, such as Representative Ryan’s doesn’t balance until 2040 and that is only if future politicians decide to play nice and not buy votes with free goodies which is about as likely as a dog with fleas not scratching.
That’s the problem: a dysfunctional government made up of kleptomaniacs writing phony checks on the future and a population addicted to easy money and unfunded entitlements.
What’s the solution? We as a people must kick the entitlement habit. Like any addiction our national addiction to freebees has debilitated us. It has made us dependent on the outside stimulus. Where once families and churches took care of the needy we have been taught for generations that Uncle Sugar will do it, so we have let Uncle Sugar do it. How has that worked out? Ever since the government bureaucrats have stepped between the givers and the receivers welfare hasn’t been well and it isn’t fair. Many of us know people who need help who are denied and people who should be helping themselves who are riding in their Cadillacs to spend their food stamps.
After more than 15 trillion dollars and four decades of a war on poverty the percentage of Americans below the poverty line is higher than it was when we started. There are more people on food stamps, more on disability and more that have just dropped out of the work force than ever before, and the only answer Washington seems to have is we haven’t spent enough yet. That’s like telling the heroin addict who almost died last night of an overdose that the problem was he didn’t shoot up enough junk.
How do we stop spending? How do we balance the budget? This is like the question the backslider always asks, “How do I get back to God?” The answer to the backslider is, “You get back to God.” The answer for the nation is, “we stop spending more than we bring in.” The politicians have a way to make that solution work: raise taxes until income matches outgo. This brings up another problem: we can’t eat the goose that lays the golden egg and expect to collect more eggs tomorrow. In any country that robs Peter to pay Paul eventually everyone changes their name to Paul. Case in point, we now have more people qualifying for disability each month than people finding jobs.
Yes, this is a call for austerity. Yes, this will cause major dislocations. Yes, when drug addicts quit taking the poison their bodies have come to crave they get sick. In time drug addicts recover and once again becomes normal people able to stand on their own without the chemical prop of a debilitating drug. In time if we as a nation will kick the habit of cheap money and government handouts we will once again learn to stand on our own two feet, hold our head up high, and proudly say, “This is America the land of the free and the home of the brave.”
If we will do this the last half of the twentieth century will be but a prelude to the American Century. If we don’t, the sun will set on the American dream as we devour ourselves in an orgy of hedonism and self-gratification.
The election is coming fast. Survey your choices and find people who have the courage to lead us in a return to fiscal responsibility before we face the coming collapse of the world we have known. For if we cast our bread upon the water it will return to us after many days, but if we sow the wind we will reap the whirlwind.
Dr. Owens teaches History, Political Science, and Religion for Southside Virginia Community College. He is the Historian of the Future @ http://drrobertowens.com © 2012 Robert R. Owens drrobertowens@hotmail.com Follow Dr. Robert Owens on Facebook or Twitter @ Drrobertowens
Not Worth a Continental June 15, 2012
Posted by Dr. Robert Owens in Politics.Tags: Dr. Robert Owens, Helicopter Ben, inflation, Obama redistribution, spread the wealth around
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The Federal Reserve System (the Fed) was established in 1913 as one of the cornerstones of the Progressive agenda. They said it was a way to stop the boom and bust cycle which has always been a fixture of capitalist economies. The Fed is America’s third Central Bank. The First and Second Banks of the United States were born out of Alexander Hamilton’s ideas as expressed in his famous Second Report on Public Credit in 1790. The first bank was allowed to expire and the last was ultimately killed by Andrew Jackson in 1833. Jackson believed the Bank had too great an influence politically and economically.
The United States grew to become the greatest industrial power on earth in the next eighty years without a central bank.
Established in 1913, the Federal Reserve is America’s central bank. It is semi-independent/semi-public depending on which role is needed to justify its actions. It is run by a board of seven Governors. These Governors are nominated by the president and confirmed by the Senate. Led by a Chairman who is also appointed by the president and confirmed by the Senate these eight people control a system of twelve Regional Federal Reserve Banks which have numerous branches throughout the United States. The Fed can expand or contract the money supply in many ways. They print money both physically and digitally, they set interest rates, they can loosen or tighten the regulations for lending, and they can purchase debt from the Treasury. Most of these measures are neither understood nor noticed by the general public. This helps build and maintain the impression of a mysterious institution behind a curtain pulling levers and pressing buttons secretly controlling the economy. In many ways this impression is correct
Ben Bernanke is the current Chairman of the Federal Reserve. Some believe that this is the most important post in the United States because the Federal Reserve controls our economy through its control of the money supply. Mr. Bernanke acquired the nickname Helicopter Ben from a speech he delivered in 2002 entitled, “Deflation: Making Sure “It” Doesn’t Happen Here.”
In this famous speech he said, “The sources of deflation are not a mystery. Deflation is in almost all cases a side effect of a collapse of aggregate demand – a drop in spending so severe that producers must cut prices on an ongoing basis in order to find buyers. Likewise, the economic effects of a deflationary episode, for the most part, are similar to those of any other sharp decline in aggregate spending–namely, recession, rising unemployment, and financial stress.” This is a well stated summation of the problem of deflation.
As a defense against the ravages of deflation the future Chairman of the Federal Reserve never actually said he would drop money from a helicopter. What he said was, “The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost.” Which was coupled by later analysts and pundits with the statement, “A money-financed tax cut is essentially equivalent to Milton Friedman’s famous ‘helicopter drop’ of money.”
In the popular imagination this has been shortened into the oft misquoted belief that he said he would get in a helicopter and drop bales of money to combat deflation.
The collapse of the Housing Bubble in 2008 brought the American economy to a standstill and threatened to escalate into a systemic collapse of major banks and other financial institutions. To stop the wheels from coming off the commercial cart the politicians reacted with unusual speed and vigor. George Bush famously said, “I’ve abandoned free market principles to save the free market system” when he advocated and passed the Troubled Asset Relief Program (TARP) which was designed to buy mortgage backed securities in an effort to inject money into the American banking system and thus restart the economy. This 700 Billion dollar fund (later resized to 475 Billion) was eventually used instead to bailout major banks, AIG, and buy GM and Chrysler with only 22 billion ever going to buy toxic assets.
This was followed by President Obama’s stimulus bill which cost another 800 billion and was supposedly designed to kick start the economy by providing jobs. The Congressional Budget Office eventually evaluated that these shovel-ready jobs cost 4.1 million each. But then again as our President later joked, “Shovel-ready was not as shovel-ready as we expected.”
Spending government money to prime the economic pump cannot work. The government doesn’t produce anything. It must either take the money out of the economy through taxation taking from the productive for the benefit of the unproductive or print the money thus causing inflation. All the government can do is redistribute wealth; it does not create it. And when the government is in the business of picking winners and losers we all lose freedom, liberty, and opportunity.
Inflation is a rise in the general level of prices related to an increase in the volume of money and the resulting loss of value of currency. The Progressives didn’t invent inflation. The Obama Administration isn’t the first to resort to inflation to keep the ball rolling without the pain of tax increases. America was born in inflation. During the Revolution one of the greatest problems was how to finance the war. America was effectively blockaded by the massive British fleet and unable to trade with the rest of the world. So the government printed the money they needed, and printed and printed and printed until the money was effectively worthless coining instead of wealth the shameful saying, “Not worth a Continental.” These early ancestors to our dollar were eventually redeemed at 100 to 1.
Helicopter Ben has already overseen two rounds of monetary inflation referred to by the mysterious name of Quantitative Easing (QE) which is a fancy way of saying the Fed floods the banks with money. The staggering size of these have only now begun to come to light showing that since the 2008 collapse the Fed has flushed more than 16 trillion dollars out of the pockets of taxpayers and into the hands of banks and corporations both foreign and domestic designated by the Federal Government as too big to fail. That is more money in four years than the entire national debt which has taken 236 years to accumulate and QE 3 is on the way.
While running for office and telegraphing his distributive goals Mr. Obama said we need to spread the wealth around. Chairman Bernanke has said the government can produce as many U.S. dollars as it wishes at no cost. However, no matter what these two wannabe puppet masters may believe there is no free lunch. In their insolated ivory-tower gated community world they may never have to pay the tab for their misguided attempts to create wealth with the wave of their hand. Those of us who work for a living who live in the world of family budgets will. The money we earn will be worth less and less and less until it is worthless. The money we have saved will lose value day by day. Someday people may not say, “It’s not worth a Continental.” They may instead say, “It’s not worth a dollar.”
The problem with getting older is you can remember when what we now pay at the pump was a car payment, and what we now pay for groceries was a house payment. The central-planers behind the curtain in OZ may tell us there is no inflation, but our eyes and our wallets tell us something else: the truth.
Dr. Owens teaches History, Political Science, and Religion for Southside Virginia Community College. He is the Historian of the Future @ http://drrobertowens.com © 2012 Robert R. Owens drrobertowens@hotmail.com Follow Dr. Robert Owens on Facebook or Twitter @ Drrobertowens
What’s a Widget Worth? April 29, 2011
Posted by Dr. Robert Owens in Uncategorized.Tags: Dr. Robert Owens, Federal Reserve, Gasoline prices, inflation, oil prices, QE 2
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What’s a widget worth? Who determines the price of widgets? Is there an answer to the escalating cost of widgets?
How much is a widget worth if there is only one widget? What about if there are on hundred widgets? Or one million? What if there are trillions upon trillions and they are being produced at the rate of 514 million per day? The obvious answers to these questions aren’t lost on a normal four year old. Observe such a child in the sand box. If there’s only one shovel they’ll kick and scream to keep it. If there are 1,928 billion of them the child probably wouldn’t notice if someone else used a few billion here or a few billion there. Unfortunately the wisdom that’s normal for any four year old doesn’t seem to exist in Washington.
President Obama publicly laments the rise in fuel prices. Of course when the teleprompter isn’t guiding his every word and he doesn’t realize his every public word is public he says that high gas prices really aren’t a problem they’ve just happened too quickly.
Could this precipitous rise in energy prices be tied to the precipitous fall in the value of the dollar? The devaluing of the dollar appears to be a policy that shows no sign of slowing. Even pro-administration sources such as MSNBC say the dollar is approaching record lows as compared to other currencies. There is a real possibility of a credit downgrade due to the inability of Washington to address the ever-growing debt. A leading Hedge fund manager says panic has set in and people are beginning to dump their holdings in dollars.
Could this escalating rise in energy costs be government policy? Mr. Obama’s Energy Secretary Steven Chu believes that Americans should pay for gas at the same rate as Europeans which at the time of his statement was seven to nine dollars a gallon. Consequently to the central planning enthusiasts who’re working to transform America it isn’t the current high prices that are the problem it was our previously lower prices which were an impediment to the accomplishment of their goal. What we must realize is that their goals are not our goals. Looking at our current leaders it appears as if they see their mission as managing the decline of the United States and everything they’ve done since gaining power has furthered the reality of their vision.
Why is the price spiking ever higher? This isn’t a supply problem. In the face of a spiraling price rise the Saudis who usually boost production to stabilize markets have instead cut production because there is currently a worldwide surplus. The main reason for the current spike is that the dollar is worth less every day. And as the debt ceiling approaches the vultures are circling. Articles and commentaries constantly equate a refusal to raise the debt limit with a default. But the two are not synonymous.
While Federal officials cry the sky is falling Senator Pat Toomey (R PA) proposes to protect the “full faith and credit” of the United States by legislatively making interest payments the Federal government’s top priority. In an opinion piece Senator Toomey shows that the necessity of a default is shown to be instead a choice by the reality that “if Congress refuses to raise the debt ceiling, the federal government will still have far more than enough money to fully service our debt. Next year, for instance, about 6.5% of all projected federal government expenditures will go to interest on our debt, and tax revenue is projected to cover about 67% of all government expenditures. With roughly 10 times more income than needed to honor our debt obligations, why would we ever default?”
Yet administration spokesman such as Treasury Secretary Timothy F. Geithner continue to use scare tactics predicting that if the debt ceiling isn’t raised the government will default and our credit will be ruined. In addition, the largest banks using the default straw man are pressuring the perpetually elected to raise the debt ceiling lest they miss a moment at the Federal trough.
All these theatrics about raising the debt limit is reminiscent of the weekly re-runs of the Continuing Resolution Show that we endured earlier this year. The spendthrifts in Washington cannot conceive of their ability to mortgage our great grandchildren’s future to pay for whatever it takes to buy enough votes to stay in power forever. Whenever anything appears on the horizon that threatens to rain on their perpetual parade to penury they begin chanting their mantra spend, spend, spend, elect, elect, elect.
What can we do about this problem which is causing prices to rise? How can we possibly avert the looming insolvency? How can we end this mad rush to fiscal collapse?
Stop the presses! Stop the deficit spending, balance the budget, and pay off the debt. Don’t raise the debt limit and force the Federal government to live within its means. It makes no sense for us to tighten our belts so that our leaders can continue their spending binge.
What’s a Widget worth? Ultimately everything is worth what you can get someone to pay for it. If you’re paying in U. S. dollars the price just went up.
Dr. Owens teaches History, Political Science, and Religion for Southside Virginia Community College. He is the author of the History of the Future @ http://drrobertowens.com View the trailer for Dr. Owens’ latest book @ http://www.youtube.com/watch?v=_ypkoS0gGn8 © 2011 Robert R. Owens dr.owens@comcast.net Follow Dr. Robert Owens on Facebook.
Are We On Our Way To Gettysburg? March 18, 2011
Posted by Dr. Robert Owens in Uncategorized.Tags: Dr. Robert Owens, energy policy, free trade, inflation, National Debt
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The nightly newsreel rolls and we watch in fascination as our friend and ally Japan struggles to regain its bearings after nature’s devastating one-two-punch seems to have set them up for a potential nuclear knock-out. Boosting the ratings of the wall-to-wall news channels we sit for hours glued to the scenes of devastation waiting to be amazed by the most recently discovered views of water overtaking land in a world where every phone is a video camera. The destruction of this latest mega-tragedy is reminiscent of World War II after America paid back Pearl Harbor in spades and today’s situation even has an atomic twist at the end. One major difference is that this time we are all praying that our partners in the land of the rising sun won’t have to surrender.
Today America faces an economic earthquake and a social tsunami. Our leaders have spent us into the poor house. Our melting pot has become a smelting pot. Our social glue consists of eating at the same fast food restaurants and watching the same game shows. Reality shows are more popular than reality. Our President fiddles while Rome burns more concerned about b-ball brackets then about a 14 trillion dollar debt, two wars, and a world aimed at meltdown. The only event able to hold the administration’s interest is the 2012 election and their obsession to maintain their grasp on power.
The lack of a Historical perspective may well prove to be the undoing of our nation. Once a people are divorced from their past they live in the Eternal Now and those who set the agenda can always change now. The study of History not only provides context it also provides an endless number of lessons, illustrations, and warnings.
The magnitude of the calamities currently assaulting Japan cannot help but bring to mind the terrors of total war. In all our wars only one ever visited such destruction on our homeland. In the Civil War the North adopted a policy of total war to destroy the South’s will and ability to fight. After the South under a string of brilliant generals culminating in Robert E. Lee handed the Union defeat after defeat Grant and Sherman were able to convince Lincoln of the necessity of wonton destruction of civilian as well as military targets.
Flush with victory Lee launched his first invasion of the North in 1862. He marched into Maryland, a slave state which stayed loyal to the Union more because of an occupying army then because of popular sentiment. Lee’s goal was to defeat the Union Army and lead Maryland into the Confederacy thus surrounding Washington DC, probably winning foreign recognition, and possibly winning the war.
The previously invincible Army of Northern Virginia led by arguably the greatest tactician America has ever produced met General George McClellan and the Army of the Potomac at the Battle of Antietam for the bloodiest day in American combat history. More than twice as many Americans were killed or mortally wounded at Antietam on that one day than in the War of 1812, the Mexican War, and the Spanish-American War combined.
After twelve hours of savage combat more than 23,000 soldiers were killed, wounded or missing. The fighting ended in a stalemate with combat stopping due to the sheer exhaustion of the armies not because one side had triumphed over the other. However, Lee and his men were at the end of a precarious line of supply through enemy territory with no hope for reinforcement and more Union forces were arriving all the time. Therefore, even though the Union sustained more casualties than the South, Lee was forced to withdraw. This was a tactical victory for the South but a strategic victory for the North opening the door for Lincoln to issue the Emancipation Proclamation thus seizing the moral high ground in the war and precluding any recognition of the South by the European powers.
One year later after fresh victories at Spotsylvania Courthouse, in the Wilderness, and Chancellorsville Lee once again sought to end the war with a second invasion of the North. This time he crossed the Potomac at Harper’s Ferry and marched into the heart of Pennsylvania hoping to destroy the North’s will to fight by bringing the war to them.
This time he met the Union Army under General George Meade a career officer and civil engineer. In this pivotal battle of the war the great bold tactician met the plodding bureaucrat. On the first day of the battle General Lee moved uncharacteristically slow and Meade moved uncharacteristically fast allowing the North to gain the high ground. This set the stage for the battle as the South wasted itself attacking strong positions culminating in the fruitless slaughter of Pickett’s charge. Bled white and facing a Union army that was constantly growing Lee turned around and carried the Confederacy’s last hope of victory from the field of honor.
But it didn’t have to end that way. Instead of attacking against fortified positions either uphill or over open ground Lee could have turned to the east to march towards Washington. Meade and the Union army would have had to follow him doing their best to move around him to shield the capitol. Lee could then have chosen his ground and allowed the North to waste itself against a fixed position as they had so many times before. A victory here would have left Lee with an unopposed road to Washington and possible victory.
Hindsight is 20/20 and at this distance without the hazard of battle and the gamble of combat it’s easy for an armchair general to improve upon the real life experience of one of the greatest generals in history.
What we need now is not hindsight but foresight. Domestically, America is facing the perfect storm of crushing debt, dwindling industrial capacity, high unemployment, and creeping inflation. Internationally we’re engaged in two hot wars, a desultory campaign against international terrorists, pirates on the high seas, and collapsing prestige.
Are we boldly marching towards our Gettysburg? Are we blindly relying on our past glories expecting them to propel us to future triumphs? Will we waste ourselves assailing massive debt with paltry cuts? Are we marching over open ground against the fixed positions of free trade agreements that are free in only one direction? Are we hamstringing ourselves with an energy policy designed to keep the earth green by devastating our pockets for the benefit of our enemies?
Before it’s too late we should turn and march towards victory! Stop the over spending. Renegotiate all our trade deals, and make them equitable for all sides. Put the welfare genie back in its lamp before Ali Baba and his 535 thieves pass another budget, loot the treasury, and we end up sitting in the dirt eating leaves.
Dr. Owens teaches History, Political Science, and Religion for Southside Virginia Community College. He is the author of the History of the Future @ http://drrobertowens.com View the trailer for Dr. Owens’ latest book @ http://www.youtube.com/watch?v=_ypkoS0gGn8 © 2011 Robert R. Owens dr.owens@comcast.net Follow Dr. Robert Owens on Facebook.
Dr. Robert Owens Chronicles the History of the Future 