Southern History, American Freedom, Christian Liberty
I was listening to the Lew Rockwell show from back in September the other day where Peter Schiff is describing the un-winnable position the Fed is now in. I don’t think people understand just how bad things are right now. Here’s the audio:
It gets real interesting starting around the 10:19 mark. He compares the recession of 1980 to the recession we have now. In 1980 the Fed had enough room to raise interest rates to bring inflation back down and protect the dollar. This is confirmed by the Fed’s historical stat page:
|Year: Averaged Rate|
|–FederalReserve.gov, Historical Rates|
So, why did the Fed raise rates so high? Well, here’s an article from that time period explaining:
Top officials at the Federal Reserve Board, including its chairman, Paul A. Volcker, say that their policy of reducing the expansion of money and credit will mean little or no economic growth in 1981 and continuing high interest rates. In a series of interviews, the officials said that the lack of improvement in the prospects for curbing inflation had renewed their conviction that the Federal Reserve should maintain a tight monetary policy in the absence of a dramatic shift in the economic outlook.
This is exactly what Schiff is talking about. To combat surging inflation, the Fed raised the rates in order to tighten the money supply. Higher rates mean less borrowing, more savings and thus less money in circulation. They had to raise rates high enough to induce savings by even the super wealthy as much as possible. Nothing will curb your enthusiasm for that new business expansion like a 20% interest rate on a construction loan. Ouch.
Their tactic was mostly successful(as much as possible considering it’s central planning) and inflation did come down. They essentially bought the economy some time so that wages and savings could start to catch up a little bit to surging consumer prices. We’re facing essentially the same problem now. Consumer prices are starting to rise as all of that quantitative easing (i.e., money printing) of the last two years is now working its inflationary magic. So why has the Fed lowered rates to an all-time low this time when they raised them to an all time high last time? The answer is multi-faceted, but Schiff pointed out that the national debt is key.
With the national debt as high as it is, the only way the government can pay the interest on it’s debt is to keep rates low. Most of the debt our government has is now in the form of short-term debt, because the rates on short-term treasury bonds are the cheapest:
Since 2000, the interest rate on the 10-year Treasury note has fallen from 6 percent to 3 percent. The U.S. Treasury has lowered its interest costs further by shifting toward cheaper short-term debt. Thus, nearly half of government debt will need to be refinanced in the next 12 months, and nearly two-thirds will require refinancing within 36 months. So even though the national debt has surged since 2000, the annual net interest costs have actually declined from $223 billion to $209 billion.
Schiff likens it to being leveraged up on a short-term adjustable rate mortgage. Sure, those 3-5 year ARM’s have awesome, low rates. And, because the rate is so low, you can afford a bigger house. But if the rate ever goes up you’ll be in a world of hurt. So, because the government is now leveraged up with debt that has to be re-purchased every 12-36 months, if the Fed raised rates to something like 9 percent, the government would literally default almost overnight. That’s the catch-22 we’re in. Raising rates is the only way to fight the coming inflation, but that’s the one thing they can’t do because it would bankrupt the government. The only out left for them is to devalue the currency by printing more money, so that they can stay ahead of the debt payments. That’s why we keep hearing Bernanke talk about the need for more quantitative easing. Folks, this is bad.
I don’t care about staged politics like what we get in the media. But, a story I linked over to from Drudge this morning really struck me. It wasn’t what they were talking about that stood out. It was how they were talking. The story is about some recent conversation between Governor Haley of South Carolina and Obama at the White House. Look at how the conversation went:
“I appreciated his openness and his willingness to spend time with us and to really listen to what our concerns were and to address our concerns,” Haley told McClatchy.
In the most dramatic moment, Haley asked Obama to repeal the landmark health insurance bill he signed into law
When Obama ruled out repeal, Haley tried a different tack.
“I asked him if the state of South Carolina gave solutions, so we’re not just saying no, would he allow us to opt out or allow any other state to opt out should they choose,” Haley said. “He said that he would consider an opt-out provision if it contained three clauses.”
Haley’s exchange with Obama on the Yucca Mountain nuclear waste dump was less complicated.
“I asked him if he would consider honoring the federal commitment and allow waste to go to Yucca Mountain. His answer was no.
I really could care less about the specific issues being addressed here. What’s so disturbing is the fact that you have a governor of a state literally begging the president to let her do what she wants to do in her own state. Folks, the Executive branch has literally swallowed up the rest of the government. That’s never been more evident than it is right now. Name me one thing that goes on in D.C. that doesn’t have to go through the Executive branch. You seriously can’t find one anymore.
A full Executive branch takeover has been coming for decades, but Bush literally put it into overdrive. He set everything up for Obama to take the wheel and stomp on the gas. He even hung an air freshener from the mirror.
Ah, you just have to love the executive royalty on display for all to see:
Secretary of State Hillary Rodham Clinton expressed concern Thursday over the pat-down of India’s sari-clad ambassador to the U.S. at the airport here over the weekend, an incident that has prompted calls for an apology from Washington.
Ummm. I can think of a few million other people that would like an apology also.
My buddy sent me a link to Wayne Grudem’s book Politics – According to the Bible. After skimming through the book I see, what I would argue are, errors in his reasoning on many different topics. That’s not to say that he doesn’t have some good stuff in this book. I’m sure he does. And, I’m admitting up front that I haven’t read it. But, some of his points just jumped out at me immediately as being poorly argued. This post could have easily been titled “Grudem on Money” or “Grudem on Public Choice” or “Grudem on” any number of other things. This is the first one that jumped out at me though, so I’ll address it. He says:
All modern societies have come to agree that we need some government regulations to prevent fraud and injustice in business transactions. It is necessary, for example, for government to enforce contracts(so that people have to keep the agreements they make). And it is necessary for governments to impose some health and safety standards on the sale of medicines and foods or other products such as bicycles and cars. It is necessary for government to enforce health and cleanliness regulations on public restaurants. And some government regulation is necessary for weights and measures, so that the gasoline pump really does put one gallon of gasoline in my car when one gallon registers on the dial, and so that a gallon of milk really does contain one gallon of milk. Such regulations and others like them are necessary because it would simply be impractical, if not impossible, for individuals to attempt to check all such things for themselves before buying an item.
So that’s Grudem’s argument in favor of certain government regulation as “necessary.” Let’s analyze his main position first, and then we’ll dive into those specific examples he gave next time.
“All modern societies have come to agree that we need some government regulations to prevent fraud and injustice in business transactions.”
There are a few problems with this statement in the way he means it. Firstly, just because lots of people agree on something doesn’t mean it’s true, or accurate. This should be more clear now than ever before in light of the global warming “consensus” that ended up being a total fraud. And, isn’t that the constant cry of the atheist: “everyone agrees that macro-evolution is true, so you’re crazy not to accept it.” Consensus on any topic isn’t an argument. It’s just a state of affairs.
But, even in light of that, it isn’t clear to me that there is a general consensus on the necessity of government regulation anyway. Just because a certain state of affairs exists(in this case government regulations exist in almost all developed countries), it doesn’t mean that there is a corresponding agreement among those that are subject to it that it’s the best state of affairs. In fact, if you interviewed individual businesses within each sector of the economy, I bet you’d find that every one would say the regulations they fall under are unnecessary. Talk to any businessman you know and listen to how they rail against burdensome government oversight. The “agreement” that Grudem speaks of seems only to exist within the realm of those doing the regulating.
This leads into the second problem with Grudem’s statement. He says that government regulation is necessary to “prevent fraud and injustice in business transactions.” Again, if you talk to business owners about their respective business sectors you will hear them complain about how ineffective the regulations they face are. They would argue that it’s not regulations that ensure a quality product. It’s their customers and competition. In other words, it’s the market, not the government that keeps constant pressure on businesses to ensure product quality. Grudem even ascents to this later in the same section:
(a) A free market is better than government control at producing goods and services. The economic “goods” that the free market produces are of better quality, at a lower price, and are the goods that people actually want rather than the goods that some government agency tells them they should want. This can be seen by numerous examples in recent history.
So his position appears to be that the market, as opposed to government, provides superior products at superior prices, but also would cheat their customers with low quality products at unsatisfactory prices without government control. Huh?
And the other side of that is the assumption that government regulations actually do what they say they will do. The old axiom that “ought” implies “can” comes in to play here. If government regulation is necessary, then it seems one of the prerequisites for that necessity is that those regulations are actually capable of achieving the intended results. In fact, this is rarely the case. Any person on the street can cite you multiple examples of how government regulation has failed. Whether its Bernie Madoff, Enron or any one of a hundred more small scale examples, the government routinely shows that it’s inherently incapable of acting as an appropriate check on market fraud.
We’ll go into more detail tomorrow.
Who is he a “preacher” for exactly? Does he preach Christ or is he a preacher for the State? My Lord said “blessed are the peacemakers.” Huckabee evidently has a different idea in mind:
“Whoever in our government leaked that information is guilty of treason and I think anything less than execution is too kind a penalty,” stated Huckabee matter-of-factly, saying that person has “blood” on their hands and would be “personally responsible” for any lives they put in danger.
But, hold up. Let’s not let Sarah Palin off the hook:
His sentiment echoes that of Sarah Palin, who labeled the document deluge a “treasonous act” that the U.S. needed to use “all necessary means” to defeat.
Hey conservatives. Here are your “small government” candidates for 2012. I’m not sure how you have “small government” when you also want to empower that government with the right to kill you for speaking things it doesn’t like.
From Obama’s first press conference in January of 2009:
“The way to make government responsible is to hold it accountable. And the way to make government accountable is make it transparent so that the American people can know exactly what decisions are being made, how they’re being made, and whether their interests are being well served.
…For a long time now, there’s been too much secrecy in this city…That era is now over. Starting today, every agency and department should know that this administration stands on the side not of those who seek to withhold information but those who seek to make it known.”
Obama from 2 days ago (11/29/2010):
Striking back, the Obama administration branded the WikiLeaks release of more than a quarter-million sensitive files an attack on the United States Monday and raised the prospect of criminal prosecutions in connection with the exposure. The Pentagon detailed new security safeguards, including restraints on small computer flash drives, to make it harder for any one person to copy and reveal so many secrets.
Who knew that when he said “change” he meant himself? All you main street liberals out there, please remember that those Democrat leaders you think are on your side aren’t. They will always side with the state. You don’t have “a guy” in office that represents you. Nobody does.
[H.T. David Kramer at LRC]