Category Archives: Economic planning

Economic planning in market economies is sometimes considered to be a form of intervention when it intervenes in the setting of prices and the distribution of goods determined by the market.

Economic planning tends to be associated with the political left, while economic interventionism is often associated with centrism, which believes that certain market outcomes are undesirable or ineffective and ought to be mitigated. Economic interventionism and planning are sometimes practiced by national conservative, fascist, economic nationalist and right-wing parties with the thinking that the free market can damage national traditions, social order, or the authority of the state itself.

The Birth Of Cultural Marxism: How The “Frankfurt School” Changed America

Aug 12, 2016

The 1950s were a simple, romantic, and golden time in America.

California beaches, suburbia, and style. Atlas Shrugged was published, NASA was formed, and Elvis rocked the nation. Every year from 1950–1959 saw over 4 million babies born. The nation stood atop the world in every field.

It was an era of great economic prosperity in The Land of the Free.

So, what happened to the American traits of confidence, pride, and accountability?

The roots of Western cultural decay are very deep, having first sprouted a century ago. It began with a loose clan of ideologues inside Europe’s communist movement. Today, it is known as the Frankfurt School, and its ideals have perverted American society.

When Outcomes Fail, Just Change the Theory

Before WWI, Marxist theory held that if war broke out in Europe, the working classes would rise up against the bourgeoisie and create a communist revolution.

Well, as is the case with much of Marxist theory, things didn’t go too well. When war broke out in 1914, instead of starting a revolution, the proletariat put on their uniforms and went off to war.

After the war ended, Marxist theorists were left to ask, “What went wrong?”

Two very prominent Marxists thinkers of the day were Antonio Gramsci and Georg Lukács. Each man, on his own, concluded that the working class of Europe had been blinded by the success of Western democracy and capitalism. They reasoned that until both had been destroyed, a communist revolution was not possible.

Gramsci and Lukács were both active in the Communist party, but their lives took very different paths.

Gramsci was jailed by Mussolini in Italy where he died in 1937 due to poor health.

In 1918, Lukács became minister of culture in Bolshevik Hungary. During this time, Lukács realized that if the family unit and sexual morals were eroded, society could be broken down.

Lukács implemented a policy he titled “cultural terrorism,” which focused on these two objectives. A major part of the policy was to target children’s minds through lectures that encouraged them to deride and reject Christian ethics.

In these lectures, graphic sexual matter was presented to children, and they were taught about loose sexual conduct.

Here again, a Marxist theory had failed to take hold in the real world. The people were outraged at Lukács’ program, and he fled Hungary when Romania invaded in 1919.

The Birth of Cultural Marxism

All was quiet on the Marxist front until 1923 when the cultural terrorist turned up for a “Marxist study week” in Frankfurt, Germany. There, Lukács met a young, wealthy Marxist named Felix Weil.

Until Lukács showed up, classical Marxist theory was based solely on the economic changes needed to overthrow class conflict. Weil was enthused by Lukács’ cultural angle on Marxism.

Weil’s interest led him to fund a new Marxist think tank—the Institute for Social Research. It would later come to be known as simply The Frankfurt School.

In 1930, the school changed course under new director Max Horkheimer. The team began mixing the ideas of Sigmund Freud with those of Marx, and cultural Marxism was born.

In classical Marxism, the workers of the world were oppressed by the ruling classes. The new theory was that everyone in society was psychologically oppressed by the institutions of Western culture. The school concluded that this new focus would need new vanguards to spur the change. The workers were not able to rise up on their own.

As fate would have it, the National Socialists came to power in Germany in 1933. It was a bad time and place to be a Jewish Marxist, as most of the school’s faculty was. So, the school moved to New York City, the bastion of Western culture at the time.

Coming to America

In 1934, the school was reborn at Columbia University. Its members began to exert their ideas on American culture.

It was at Columbia University that the school honed the tool it would use to destroy Western culture: the printed word.

The school published a lot of popular material. The first of these was Critical Theory.

Critical Theory is a play on semantics. The theory was simple: criticize every pillar of Western culture—family, democracy, common law, freedom of speech, and others. The hope was that these pillars would crumble under the pressure.

Next was a book Theodor Adorno co-authored, The Authoritarian Personality. It redefined traditional American views on gender roles and sexual mores as “prejudice.” Adorno compared them to the traditions that led to the rise of fascism in Europe.

Is it just a coincidence that the go-to slur for the politically correct today is “fascist”?

The school pushed its shift away from economics and toward Freud by publishing works on psychological repression.

Their works split society into two main groups: the oppressors and the victims. They argued that history and reality were shaped by those groups who controlled traditional institutions. At the time, that was code for males of European descent.

From there, they argued that the social roles of men and women were due to gender differences defined by the “oppressors.” In other words, gender did not exist in reality but was merely a “social construct.”

A Coalition of Victims

Adorno and Horkheimer returned to Germany when WWII ended. Herbert Marcuse, another member of the school, stayed in America. In 1955, he published Eros and Civilization.

In the book, Marcuse argued that Western culture was inherently repressive because it gave up happiness for social progress.

The book called for “polymorphous perversity,” a concept crafted by Freud. It posed the idea of sexual pleasure outside the traditional norms. Eros and Civilization would become very influential in shaping the sexual revolution of the 1960s.

Marcuse would be the one to answer Horkheimer’s question from the 1930s: Who would replace the working class as the new vanguards of the Marxist revolution?

Marcuse believed that it would be a victim coalition of minorities—blacks, women, and homosexuals.

The social movements of the 1960s—black power, feminism, gay rights, sexual liberation—gave Marcuse a unique vehicle to release cultural Marxist ideas into the mainstream. Railing against all things “establishment,” The Frankfurt School’s ideals caught on like wildfire across American universities.

Marcuse then published Repressive Tolerance in 1965 as the various social movements in America were in full swing. In it, he argued that tolerance of all values and ideas meant the repression of “correct” ideas.

It was here that Marcuse coined the term “liberating tolerance.” It called for tolerance of any ideas coming from the left but intolerance of those from the right. One of the overarching themes of the Frankfurt School was total intolerance for any viewpoint but its own. That is also a basic trait of today’s political-correctness believers.

To quote Max Horkheimer, “Logic is not independent of content.”

Recalling the Words of Winston (Not That One)

The Frankfurt School’s work has had a deep impact on American culture. It has recast the homogenous America of the 1950s into today’s divided, animosity-filled nation.

In turn, this has contributed to the undeniable breakdown of the family unit, as well as identity politics, radical feminism, and racial polarization in America.

It’s hard to decide if today’s culture is more like Orwell’s 1984 or Huxley’s Brave New World.

Never one to buck a populist trend, the political establishment in America has fully embraced the ideas of the Frankfurt School and has pushed them on American society through public miseducation.

Barack Obama and Hillary Clinton, the beacons of progressivism, are both disciples of Saul Alinsky, a devoted cultural Marxist.

And so we now live in a hyper-sensitive society in which social memes and feelings have overtaken biological and objective reality as the main determinants of right and wrong.

Political correctness is a war on logic and reason.

To quote Winston, the protagonist in Orwell’s dystopia, “Freedom is the freedom to say that 2+2=4.”

Today, America is not free.

Source

Citadel’s Ken Griffin: Poster Child for Americans Anger in this Election

By Pam Martens and Russ Martens: April 1, 2016

According to Forbes, Ken Griffin, CEO and founder of the hedge fund, Citadel, has a net worth of $7.6 billion. But unbeknownst to most Americans, Citadel received a windfall boost from the taxpayers’ pocketbook sometime between September 18 to December 12, 2008. That was during the Wall Street crash when the U.S. government had taken over the big insurer, AIG, and decided to pay 100 cents on the dollar on AIG’s obligations to Wall Street banks and hedge funds.

Did the U.S. government have to pay 100 cents on the dollar when AIG was unable to pay what it owed. Absolutely not. It could have negotiated prudently on behalf of the taxpayer. Instead, it doled out at least $93.2 billion as payment in full to banks and hedge funds, of which Citadel received at least $200 million. We say, at least, because all U.S. taxpayers are allowed to know in this matter by their government is what happened during that brief window of September 18 to December 12, 2008.

When it comes to Citadel, there is plenty more the government won’t tell the public.  In 2014 the Securities and Exchange Commission refused our Freedom of Information Act request to learn how the dark pool operated by Citadel functions. What we did learn during our investigation is that Citadel has a history of fines over charges of serious trading violations. Read our in-depth report here.

We also know from media reports that in 2006, two years before Citadel got $200 million of what was effectively a taxpayer bailout, Griffin and his former wife paid $80 million for a Jasper Johns painting titled “False Start.” We also know that as of this past January, courtesy of the Chicago Tribune, Griffin cashed out one of his full-floor condominiums in the Waldorf Astoria in Chicago for $16 million but still owns another full-floor condo there. The newspaper also reveals that Griffin additionally owns: “two full-floor units in the Park Tower [Chicago] — both the 67th floor and the full-floor, 66th-floor unit, which Griffin bought in 2012 for $15 million. He also owns homes in Aspen, Colo., Hawaii and Florida. Topping all of this is his recently reported, $200 million purchase of three full floors of a luxury condo tower under construction at 220 Central Park South in midtown Manhattan.”

Ken Griffin has bounced back nicely from the 2008 crash on Wall Street – unlike millions of other Americans who did not get a bailout and lost the single home they owned to foreclosure and robo-signed fake documents.

One of the reasons that Ken Griffin’s net worth has more than doubled from $3.7 billion in 2008 to today’s $7.6 billion, is that he pays taxes on his hedge fund winnings at a tax rate lower than that paid by plumbers and nurses. The tax dodge is respectably called “carried interest.” Economist Dean Baker has written an understandable article on the topic at Huffington Post, in which he crystallizes the tax dodge as follows:

“Many issues in tax law are complicated; the fund managers’ tax break is not. It’s just a good old-fashioned rip-off of ordinary taxpayers for the benefit of the wealthy. The basic point is very simple. The fund managers’ tax break allows managers of hedge funds, private equity funds, and various other investment funds to have much of their pay taxed at the capital gains tax rate rather than the tax rate applied to wage income.”

How does such a tax ripoff continue in an economy that can’t get out of a subpar two percent or less growth rate and a nation crippled under a $19 trillion debt load, which in no small part results from the 2008 Wall Street crash, bailouts and stimulus packages? When you’re a billionaire, subsidized by the wage-earning taxpayer, you have lots of money to throw around in the world of politics.

According to Mother Jones, Ken Griffin’s name appeared on the 2014 list of the movers and shakers that had private meetings scheduled with the Koch brothers to plot how to make sure the 2014 midterm elections came out to their liking.

And, of course, it also helps to have the quintessential bailout king on your payroll just in case another crisis occurs. Last April, Citadel issued a press release announcing that former Fed Chairman, Ben Bernanke, would move to the payroll of Citadel as an outside Senior Advisor. Bernanke presided over the largest secret bailout of Wall Street and foreign banks in U.S. history, requiring Bloomberg News to fight for years in court to uncover at least some of the truth.

Fortune Magazine had previously reported that Citadel was holding secret meetings with the Federal Reserve during the Wall Street crisis, writing on December 9, 2008 that “Then there was the most damaging rumor of all: Griffin had been holding ‘secret meetings’ with the Federal Reserve, looking for a bailout.”

We wanted to find out just whom it was that Bernanke had met with during the crisis. We filed a Freedom of Information Act request and waited. When we received Bernanke’s daily appointment calendar in 2014, six long years after the peak of the crisis, it was still heavily redacted, with a whopping 84 meetings between January 1, 2007 and the collapse of Bear Stearns on the weekend of March 15-16, 2008 blacked out.

The anger of the American voter, reflected in their antipathy to anything and anyone considered “establishment,” has been fueled in no small part by an increasingly secret government and a one percent class that has been able to keep it that way.

Source

Janet Yellen Is Freaking Out About “Audit The Fed” :: Here Are 100 Reasons Why She Should Be

By Michael Snyder, on February 24th, 2015

Janet Yellen is very alarmed that some members of Congress want to conduct a comprehensive audit of the Federal Reserve for the first time since it was created.  If the Fed is doing everything correctly, why should Yellen be alarmed?  What does she have to hide?  During testimony before Congress on Tuesday, she made “central bank independence” sound like it was the holy grail.  Even though every other government function is debated politically in this country, Yellen insists that what the Federal Reserve does is “too important” to be influenced by the American people.  Does any other government agency ever dare to make that claim?  But of course the Federal Reserve is not a government agency.  It is a private banking cartel that has far more power over our money and our economy than anyone else does.  And later on in this article I am going to share with you dozens of reasons why Congress should shut it down.

The immense power wielded by the Federal Reserve is clearly demonstrated whenever Janet Yellen speaks publicly.  On Tuesday, her comments about interest rates sent stocks to brand new record highs

Yellen, in her semi-annual testimony before the Senate banking committee, used a word familiar to investors when she reiterated that the central bank will be “patient” on raising interest rates for the first time since the 2008 financial crisis. Traders took that as a sign that interest rates would remain unchanged until autumn.

The Dow Jones Industrial Average rose 92.35 points (0.5%) to 18,209.19, while the Standard & Poors 500 gained 5.82 points (0.3%) to 2,115.48, both eclipsing Friday’s record closes.

But Yellen was also unusually defensive on Tuesday.  The “Audit the Fed” bill that is being sponsored by Rand Paul (among others) has her really freaked out.  The following comes from the Hill

Appearing before the Senate Banking Committee, Yellen was on the defensive, as Republicans questioned how the Fed conducts monetary policy and Democrats put forward ideas for getting tougher on Wall Street.

In the midst of all of it, Yellen generally argued the Fed was designed as an independent entity for a reason — and it would be best not to change it.

“Central bank independence in conducting monetary policy is considered a best practice for central banks around the world,” she said. “Academic studies, I think, establish beyond the shadow of a doubt that independent central banks perform better.”

In fact, she went so far as to mention the “Audit the Fed” bill by name

A GOP-controlled Congress has given the bill its best chances yet of passage, and that renewed interest led Yellen to deliver her most spirited opposition yet.

“I want to be completely clear,” she said. “I strongly oppose Audit the Fed.”

Yellen argued the audit measure would allow politicians to second-guess the Fed’s decisions, which, in turn, would weaken the central bank. And the ultimate victim of that process, she said, would be the U.S. economy.

So what is she so concerned about?

We are all accountable to someone.

What is so wrong about the Federal Reserve being accountable to Congress?

Why can’t we find out what is really going on inside the Fed?

And of course it isn’t just Yellen that is freaking out.  Just consider these comments from Richard Fisher, the president of the Federal Reserve Bank of Dallas…

“It is always politically convenient to make something sound mysterious, if not malevolent, by claiming it is opaque,” Fisher said in a speech to the Economic Club of New York that is part of an effort by Fed officials to fight the legislation.

“My suspicion is that many of those in Congress calling for ‘auditing’ the Fed are really sheep in wolves’ clothing,” he said. “Having proven themselves unable to cobble together with colleagues a working fiscal policy or to construct a regulatory regime that incentivizes rather than discourages investment and job creation — in other words, failed at their own job — they simply find it convenient to create a bogeyman out of an entity that does its job efficiently.”

Obviously this is a very, very touchy subject over at the Fed.

It is quite clear that they do not want the rest of us to be able to see what they are really up to.

And the truth is that if the American people really did know how the Federal Reserve works and what it has been doing behind closed doors, most Americans would want it shut down tomorrow.

At the end of the day, the reality of the matter is that we don’t even need a Federal Reserve.  I really like how David Stockman made this point the other day…

At the end of the day, American capitalism does not need recycled political hacks like Jerome H. Powell or clueless school marms like Janet Yellen to thrive. If we need a Fed at all, it is the one designed by Carter Glass 100 years ago. That is, a “bankers bank” that was intended to provide standby liquidity at a penalty spread above the free market interest rate in consideration for good collateral originating from inventory and receivables in the real economy.

Under that arrangement, there would be no monetary central planning or pointless attempts to manage the level of GDP, the number of new jobs, the rate of housing starts, the fluctuations of the CPI or the amplitudes of the business cycle. There would also be no pegging of the money market rate, no helping hand for Wall Street gamblers, no cheap debt to enable profligate politicians to kick-the-can down the road indefinitely.

In short, what the nation really needs is not an “independent” Fed, but one that is shackled to a narrow and market-driven liquidity function. The rest of its current remit is nothing more than the self-serving aggrandizement of the apparatchiks who run it; and who have now managed to turn the nation’s vital money and capital markets into dangerous, unstable casinos, and the nations savers into indentured servants of a bloated and wasteful banking system.

The Federal Reserve has been around for just over a hundred years, and it has done an absolutely abysmal job for the American people.

I want to share with you some facts and figures that I have shared before, but they bear repeating.  Please share this list of 100 reasons why the Federal Reserve should be shut down with everyone that you know…

#1 We like to think that we have a government “of the people, by the people, for the people”, but the truth is that an unelected, unaccountable group of central planners has far more power over our economy than anyone else in our society does.

#2 The Federal Reserve is actually “independent” of the government.  In fact, the Federal Reserve has argued vehemently in federal court that it is “not an agency” of the federal government and therefore not subject to the Freedom of Information Act.

#3 The Federal Reserve openly admits that the 12 regional Federal Reserve banks are organized “much like private corporations“.

#4 The regional Federal Reserve banks issue shares of stock to the “member banks” that own them.

#5 100% of the shareholders of the Federal Reserve are private banks.  The U.S. government owns zero shares.

#6 The Federal Reserve is not an agency of the federal government, but it has been given power to regulate our banks and financial institutions.  This should not be happening.

#7 According to Article I, Section 8 of the U.S. Constitution, the U.S. Congress is the one that is supposed to have the authority to “coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures”.  So why is the Federal Reserve doing it?

#8 If you look at a “U.S. dollar”, it actually says “Federal Reserve note” at the top.  In the financial world, a “note” is an instrument of debt.

#9 In 1963, President John F. Kennedy issued Executive Order 11110 which authorized the U.S. Treasury to issue “United States notes” which were created by the U.S. government directly and not by the Federal Reserve.  He was assassinated shortly thereafter.

#10 Many of the debt-free United States notes issued under President Kennedy are still in circulation today.

#11 The Federal Reserve determines what levels some of the most important interest rates in our system are going to be set at.  In a free market system, the free market would determine those interest rates.

#12 The Federal Reserve has become so powerful that it is now known as “the fourth branch of government“.

#13 The greatest period of economic growth in U.S. history was when there was no central bank.

#14 The Federal Reserve was designed to be a perpetual debt machine.  The bankers that designed it intended to trap the U.S. government in a perpetual debt spiral from which it could never possibly escape.  Since the Federal Reserve was established 100 years ago, the U.S. national debt has gotten more than 5000 times larger.

#15 A permanent federal income tax was established the exact same year that the Federal Reserve was created.  This was not a coincidence.  In order to pay for all of the government debt that the Federal Reserve would create, a federal income tax was necessary.  The whole idea was to transfer wealth from our pockets to the federal government and from the federal government to the bankers.

#16 The period prior to 1913 (when there was no income tax) was the greatest period of economic growth in U.S. history.

#17 Today, the U.S. tax code is about 13 miles long.

#18 From the time that the Federal Reserve was created until now, the U.S. dollar has lost 98 percent of its value.

#19 From the time that President Nixon took us off the gold standard until now, the U.S. dollar has lost 83 percent of its value.

#20 During the 100 years before the Federal Reserve was created, the U.S. economy rarely had any problems with inflation.  But since the Federal Reserve was established, the U.S. economy has experienced constant and never ending inflation.

#21 In the century before the Federal Reserve was created, the average annual rate of inflation was about half a percent.  In the century since the Federal Reserve was created, the average annual rate of inflation has been about 3.5 percent.

#22 The Federal Reserve has stripped the middle class of trillions of dollars of wealth through the hidden tax of inflation.

#23 The size of M1 has nearly doubled since 2008 thanks to the reckless money printing that the Federal Reserve has been doing.

#24 The Federal Reserve has been starting to behave like the Weimar Republic, and we all remember how that ended.

#25 The Federal Reserve has been consistently lying to us about the level of inflation in our economy.  If the inflation rate was still calculated the same way that it was back when Jimmy Carter was president, the official rate of inflation would be somewhere between 8 and 10 percent today.

#26 Since the Federal Reserve was created, there have been 18 distinct recessions or depressions: 1918, 1920, 1923, 1926, 1929, 1937, 1945, 1949, 1953, 1958, 1960, 1969, 1973, 1980, 1981, 1990, 2001, 2008.

#27 Within 20 years of the creation of the Federal Reserve, the U.S. economy was plunged into the Great Depression.

#28 The Federal Reserve created the conditions that caused the stock market crash of 1929, and even Ben Bernanke admits that the response by the Fed to that crisis made the Great Depression even worse than it should have been.

#29 The “easy money” policies of former Fed Chairman Alan Greenspan set the stage for the great financial crisis of 2008.

#30 Without the Federal Reserve, the “subprime mortgage meltdown” would probably never have happened.

#31 If you can believe it, there have been 10 different economic recessions since 1950.  The Federal Reserve created the “dotcom bubble”, the Federal Reserve created the “housing bubble” and now it has created the largest bond bubble in the history of the planet.

#32 According to an official government report, the Federal Reserve made 16.1 trillion dollars in secret loans to the big banks during the last financial crisis.  The following is a list of loan recipients that was taken directly from page 131 of the report…

Citigroup – $2.513 trillion
Morgan Stanley – $2.041 trillion
Merrill Lynch – $1.949 trillion
Bank of America – $1.344 trillion
Barclays PLC – $868 billion
Bear Sterns – $853 billion
Goldman Sachs – $814 billion
Royal Bank of Scotland – $541 billion
JP Morgan Chase – $391 billion
Deutsche Bank – $354 billion
UBS – $287 billion
Credit Suisse – $262 billion
Lehman Brothers – $183 billion
Bank of Scotland – $181 billion
BNP Paribas – $175 billion
Wells Fargo – $159 billion
Dexia – $159 billion
Wachovia – $142 billion
Dresdner Bank – $135 billion
Societe Generale – $124 billion
“All Other Borrowers” – $2.639 trillion

#33 The Federal Reserve also paid those big banks $659.4 million in “fees” to help “administer” those secret loans.

#34 During the last financial crisis, big European banks were allowed to borrow an “unlimited” amount of money from the Federal Reserve at ultra-low interest rates.

#35 The “easy money” policies of Federal Reserve Chairman Ben Bernanke have created the largest financial bubble this nation has ever seen, and this has set the stage for the great financial crisis that we are rapidly approaching.

#36 Since late 2008, the size of the Federal Reserve balance sheet has grown from less than a trillion dollars to more than 4 trillion dollars.  This is complete and utter insanity.

#37 During the quantitative easing era, the value of the financial securities that the Fed has accumulated is greater than the total amount of publicly held debt that the U.S. government accumulated from the presidency of George Washington through the end of the presidency of Bill Clinton.

#38 Overall, the Federal Reserve now holds more than 32 percent of all 10 year equivalents.

#39 Quantitative easing creates financial bubbles, and when quantitative easing ends those bubbles tend to deflate rapidly.

#40 Most of the new money created by quantitative easing has ended up in the hands of the very wealthy.

#41 According to a prominent Federal Reserve insider, quantitative easing has been one giant “subsidy” for Wall Street banks.

#42 As one CNBC article stated, we are seeing absolutely rampant inflation in “stocks and bonds and art and Ferraris“.

#43 Donald Trump once made the following statement about quantitative easing: “People like me will benefit from this.

#44 Most people have never heard about this, but a very interesting study conducted for the Bank of England shows that quantitative easing actually increases the gap between the wealthy and the poor.

#45 The gap between the top one percent and the rest of the country is now the greatest that it has been since the 1920s.

#46 The mainstream media has sold quantitative easing to the American public as an “economic stimulus program”, but the truth is that the percentage of Americans that have a job has actually gone down since quantitative easing first began.

#47 The Federal Reserve is supposed to be able to guide the nation toward “full employment”, but the reality of the matter is that an all-time record 102 million working age Americans do not have a job right now.  That number has risen by about 27 million since the year 2000.

#48 For years, the projections of economic growth by the Federal Reserve have consistently overstated the strength of the U.S. economy.  But every single time, the mainstream media continues to report that these numbers are “reliable” even though all they actually represent is wishful thinking.

#49 The Federal Reserve system fuels the growth of government, and the growth of government fuels the growth of the Federal Reserve system.  Since 1970, federal spending has grown nearly 12 times as rapidly as median household income has.

#50 The Federal Reserve is supposed to look out for the health of all U.S. banks, but the truth is that they only seem to be concerned about the big ones.  In 1985, there were more than 18,000 banks in the United States.  Today, there are only 6,891 left.

#51 The six largest banks in the United States (JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley) have collectively gotten 37 percent larger over the past five years.

#52 The U.S. banking system has 14.4 trillion dollars in total assets.  The six largest banks now account for 67 percent of those assets and all of the other banks account for only 33 percent of those assets.

#53 The five largest banks now account for 42 percent of all loans in the United States.

#54 We were told that the purpose of quantitative easing is to help “stimulate the economy”, but today the Federal Reserve is actually paying the big banks not to lend out 1.8 trillion dollars in “excess reserves” that they have parked at the Fed.

#55 The Federal Reserve has allowed an absolutely gigantic derivatives bubble to inflate which could destroy our financial system at any moment.  Right now, four of the “too big to fail” banks each have total exposure to derivatives that is well in excess of 40 trillion dollars.

#56 The total exposure that Goldman Sachs has to derivatives contracts is more than 381 times greater than their total assets.

#57 Federal Reserve Chairman Ben Bernanke has a track record of failure that would make the Chicago Cubs look good.

#58 The secret November 1910 gathering at Jekyll Island, Georgia during which the plan for the Federal Reserve was hatched was attended by U.S. Senator Nelson W. Aldrich, Assistant Secretary of the Treasury Department A.P. Andrews and a whole host of representatives from the upper crust of the Wall Street banking establishment.

#59 The Federal Reserve was created by the big Wall Street banks and for the benefit of the big Wall Street banks.

#60 In 1913, Congress was promised that if the Federal Reserve Act was passed that it would eliminate the business cycle.

#61 There has never been a true comprehensive audit of the Federal Reserve since it was created back in 1913.

#62 The Federal Reserve system has been described as “the biggest Ponzi scheme in the history of the world“.

#63 The following comes directly from the Fed’s official mission statement: “To provide the nation with a safer, more flexible, and more stable monetary and financial system.”  Without a doubt, the Federal Reserve has failed in those tasks dramatically.

#64 The Fed decides what the target rate of inflation should be, what the target rate of unemployment should be and what the size of the money supply is going to be.  This is quite similar to the “central planning” that goes on in communist nations, but very few people in our government seem upset by this.

#65 A couple of years ago, Federal Reserve officials walked into one bank in Oklahoma and demanded that they take down all the Bible verses and all the Christmas buttons that the bank had been displaying.

#66 The Federal Reserve has taken some other very frightening steps in recent years.  For example, back in 2011 the Federal Reserve announced plans to identify “key bloggers” and to monitor “billions of conversations” about the Fed on Facebook, Twitter, forums and blogs.  Someone at the Fed will almost certainly end up reading this article.

#67 Thanks to this endless debt spiral that we are trapped in, a massive amount of money is transferred out of our pockets and into the pockets of the ultra-wealthy each year.  Incredibly, the U.S. government spent more than 415 billion dollars just on interest on the national debt in 2013.

#68 In January 2000, the average rate of interest on the government’s marketable debt was 6.620 percent.  If we got back to that level today, we would be paying more than a trillion dollars a year just in interest on the national debt and it would collapse our entire financial system.

#69 The American people are being killed by compound interest but most of them don’t even understand what it is.  Albert Einstein once made the following statement about compound interest…

Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”

#70 Most Americans have absolutely no idea where money comes from.  The truth is that the Federal Reserve just creates it out of thin air.  The following is how I have previously described how money is normally created by the Fed in our system…

When the U.S. government decides that it wants to spend another billion dollars that it does not have, it does not print up a billion dollars.

Rather, the U.S. government creates a bunch of U.S. Treasury bonds (debt) and takes them over to the Federal Reserve.

The Federal Reserve creates a billion dollars out of thin air and exchanges them for the U.S. Treasury bonds.

#71 What does the Federal Reserve do with those U.S. Treasury bonds?  They end up getting auctioned off to the highest bidder.  But this entire process actually creates more debt than it does money…

The U.S. Treasury bonds that the Federal Reserve receives in exchange for the money it has created out of nothing are auctioned off through the Federal Reserve system.

But wait.

There is a problem.

Because the U.S. government must pay interest on the Treasury bonds, the amount of debt that has been created by this transaction is greater than the amount of money that has been created.

So where will the U.S. government get the money to pay that debt?

Well, the theory is that we can get money to circulate through the economy really, really fast and tax it at a high enough rate that the government will be able to collect enough taxes to pay the debt.

But that never actually happens, does it?

And the creators of the Federal Reserve understood this as well.  They understood that the U.S. government would not have enough money to both run the government and service the national debt.  They knew that the U.S. government would have to keep borrowing even more money in an attempt to keep up with the game.

#72 Of course the U.S. government could actually create money and spend it directly into the economy without the Federal Reserve being involved at all.  But then we wouldn’t be 17 trillion dollars in debt and that wouldn’t serve the interests of the bankers at all.

#73 The following is what Thomas Edison once had to say about our absolutely insane debt-based financial system…

That is to say, under the old way any time we wish to add to the national wealth we are compelled to add to the national debt.

Now, that is what Henry Ford wants to prevent. He thinks it is stupid, and so do I, that for the loan of $30,000,000 of their own money the people of the United States should be compelled to pay $66,000,000 — that is what it amounts to, with interest. People who will not turn a shovelful of dirt nor contribute a pound of material will collect more money from the United States than will the people who supply the material and do the work. That is the terrible thing about interest. In all our great bond issues the interest is always greater than the principal. All of the great public works cost more than twice the actual cost, on that account. Under the present system of doing business we simply add 120 to 150 per cent, to the stated cost.

But here is the point: If our nation can issue a dollar bond, it can issue a dollar bill. The element that makes the bond good makes the bill good.

#74 The United States now has the largest national debt in the history of the world, and we are stealing roughly 100 million dollars from our children and our grandchildren every single hour of every single day in a desperate attempt to keep the debt spiral going.

#75 Thomas Jefferson once stated that if he could add just one more amendment to the U.S. Constitution it would be a ban on all government borrowing

I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our government to the genuine principles of its Constitution; I mean an additional article, taking from the federal government the power of borrowing.

#76 At this moment, the U.S. national debt is sitting at $18,141,409,083,212.36.  If we had followed the advice of Thomas Jefferson, it would be sitting at zero.

#77 When the Federal Reserve was first established, the U.S. national debt was sitting at about 2.9 billion dollars.  On average, we have been adding more than that to the national debt every single day since Obama has been in the White House.

#78 We are on pace to accumulate more new debt under the 8 years of the Obama administration than we did under all of the other presidents in all of U.S. history combined.

#79 If all of the new debt that has been accumulated since John Boehner became Speaker of the House had been given directly to the American people instead, every household in America would have been able to buy a new truck.

#80 Between 2008 and 2012, U.S. government debt grew by 60.7 percent, but U.S. GDP only grew by a total of about 8.5 percent during that entire time period.

#81 Since 2007, the U.S. debt to GDP ratio has increased from 66.6 percent to 101.6 percent.

#82 According to the U.S. Treasury, foreigners hold approximately 5.6 trillion dollars of our debt.

#83 The amount of U.S. government debt held by foreigners is about 5 times larger than it was just a decade ago.

#84 As I have written about previously, if the U.S. national debt was reduced to a stack of one dollar bills it would circle the earth at the equator 45 times.

#85 If Bill Gates gave every single penny of his entire fortune to the U.S. government, it would only cover the U.S. budget deficit for 15 days.

#86 Sometimes we forget just how much money a trillion dollars is.  If you were alive when Jesus Christ was born and you spent one million dollars every single day since that point, you still would not have spent one trillion dollars by now.

#87 If right this moment you went out and started spending one dollar every single second, it would take you more than 31,000 years to spend one trillion dollars.

#88 In addition to all of our debt, the U.S. government has also accumulated more than 200 trillion dollars in unfunded liabilities.  So where in the world will all of that money come from?

#89 The greatest damage that quantitative easing has been causing to our economy is the fact that it is destroying worldwide faith in the U.S. dollar and in U.S. debt.  If the rest of the world stops using our dollars and stops buying our debt, we are going to be in a massive amount of trouble.

#90 Over the past several years, the Federal Reserve has been monetizing a staggering amount of U.S. government debt even though Ben Bernanke once promised that he would never do this.

#91 China recently announced that they are going to quit stockpiling more U.S. dollars.  If the Federal Reserve was not recklessly printing money, this would probably not have happened.

#92 Most Americans have no idea that one of our most famous presidents was absolutely obsessed with getting rid of central banking in the United States.  The following is a February 1834 quote by President Andrew Jackson about the evils of central banking…

I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the Bank. You tell me that if I take the deposits from the Bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out and, by the Eternal, (bringing his fist down on the table) I will rout you out.

#93 There are plenty of possible alternative financial systems, but at this point all 187 nations that belong to the IMF have a central bank.  Are we supposed to believe that this is just some sort of a bizarre coincidence?

#94 The capstone of the global central banking system is an organization known as the Bank for International Settlements.  The following is how I described this organization in a previous article

An immensely powerful international organization that most people have never even heard of secretly controls the money supply of the entire globe.  It is called the Bank for International Settlements, and it is the central bank of central banks.  It is located in Basel, Switzerland, but it also has branches in Hong Kong and Mexico City.  It is essentially an unelected, unaccountable central bank of the world that has complete immunity from taxation and from national laws.  Even Wikipedia admits that “it is not accountable to any single national government.”  The Bank for International Settlements was used to launder money for the Nazis during World War II, but these days the main purpose of the BIS is to guide and direct the centrally-planned global financial system.  Today, 58 global central banks belong to the BIS, and it has far more power over how the U.S. economy (or any other economy for that matter) will perform over the course of the next year than any politician does.  Every two months, the central bankers of the world gather in Basel for another “Global Economy Meeting”.  During those meetings, decisions are made which affect every man, woman and child on the planet, and yet none of us have any say in what goes on.  The Bank for International Settlements is an organization that was founded by the global elite and it operates for the benefit of the global elite, and it is intended to be one of the key cornerstones of the emerging one world economic system.

#95 The borrower is the servant of the lender, and the Federal Reserve has turned all of us into debt slaves.

#96 Debt is a form of social control, and the global elite use all of this debt to dominate all the rest of us.  40 years ago, the total amount of debt in our system (all government debt, all business debt, all consumer debt, etc.) was sitting at about 2 trillion dollars.  Today, the grand total exceeds 56 trillion dollars.

#97 Unless something dramatic is done, our children and our grandchildren will be debt slaves for their entire lives as they service our debts and pay for our mistakes.

#98 Now that you know this information, you are responsible for doing something about it.

#99 Congress has the power to shut down the Federal Reserve any time that it would like.  But right now most of our politicians fully endorse the current system, and nothing is ever going to happen until the American people start demanding change.

#100 The design of the Federal Reserve system was flawed from the very beginning.  If something is not done very rapidly, it is inevitable that our entire financial system is going to suffer an absolutely nightmarish collapse.

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Ebola Czar :: President Obama Already Has An Ebola Czar. Where Is She?

By Mollie Hemingway
October 14, 2014

As the Ebola situation in West Africa continues to deteriorate, some U.S. officials are claiming that they would have been able to better deal with the public health threat if only they had more money.

Dr. Francis Collins, who heads the National Institutes of Health (NIH), told The Huffington Post, “Frankly, if we had not gone through our 10-year slide in research support, we probably would have had a vaccine in time for this that would’ve gone through clinical trials and would have been ready.” Hillary Clinton also claimed that funding restrictions were to blame for inability to combat Ebola.

Conservative critics have pointed out that the federal government has spent billions upon billions of dollars on unnecessary programs promoting a political agenda rather than targeting those funds to the fight against health threats.

Other limited government types point to the Progressive utopian foolishness seen in opposing political factions, both sides of which seem to agree humanity could somehow escape calamity if only we had a properly functioning government. People who don’t want an all-powerful government shouldn’t blame it for not having competence when crisis strikes.

What’s particularly interesting about this discussion, then, is that nobody has even discussed the fact that the federal government not ten years ago created and funded a brand new office in the Health and Human Services Department specifically to coordinate preparation for and response to public health threats like Ebola. The woman who heads that office, and reports directly to the HHS secretary, has been mysteriously invisible from the public handling of this threat. And she’s still on the job even though three years ago she was embroiled in a huge scandal of funneling a major stream of funding to a company with ties to a Democratic donor—and away from a company that was developing a treatment now being used on Ebola patients.

Before the media swallow implausible claims of funding problems, perhaps they could be more skeptical of the idea that government is responsible for solving all of humanity’s problems. Barring that, perhaps the media could at least look at the roles that waste, fraud, mismanagement, and general incompetence play in the repeated failures to solve the problems the feds unrealistically claim they will address. In a world where a $12.5 billion slush fund at the Centers for Disease Control and Prevention is used to fight the privatization of liquor stores, perhaps we should complain more about mission creep and Progressive faith in the habitually unrealized magic of increased government funding.

Lay of the Land

Collins’ NIH is part of the Health and Human Services Department. Real spending at that agency has increased nine-fold since 1970 and now tops $900 billion. Oh, if we could all endure such “funding slides,” eh?

Whether or not Dr. Collins’ effort to get more funding for NIH will be successful—if the past is prologue, we’ll throw more money at him—the fact is that Congress passed legislation with billions of dollars in funding specifically to coordinate preparation for public health threats like Ebola not 10 years ago. And yet the results of such funding have been hard to evaluate.

See, in 2004, Congress passed The Project Bioshield Act. The text of that legislation authorized up to $5,593,000,000 in new spending by NIH for the purpose of purchasing vaccines that would be used in the event of a bioterrorist attack. A major part of the plan was to allow stockpiling and distribution of vaccines.

Just two years later, Congress passed the Pandemic and All-Hazards Preparedness Act, which created a new assistant secretary for preparedness and response to oversee medical efforts and called for a National Health Security Strategy. The Act established Biomedical Advanced Research and Development Authority as the focal point within HHS for medical efforts to protect the American civilian population against naturally occurring threats to public health. It specifically says this authority was established to give “an integrated, systematic approach to the development and purchase of the necessary vaccines, drugs, therapies, and diagnostic tools for public health medical emergencies.”

Last year, Congress passed the Pandemic and All-Hazards Preparedness Reauthorization Act of 2013 which keep the programs in effect for another five years.

If you look at any of the information about these pieces of legislation or the office and authorities that were created, this brand new expansion of the federal government was sold to us specifically as a means to fight public health threats like Ebola. That was the entire point of why the office and authorities were created.

In fact, when Sen. Bob Casey was asked if he agreed the U.S. needed an Ebola czar, which some legislators are demanding, he responded: “I don’t, because under the bill we have such a person in HHS already.”

The Invisible Dr. Lurie

So, we have an office for public health threat preparedness and response. And one of HHS’ eight assistant secretaries is the assistant secretary for preparedness and response, whose job it is to “lead the nation in preventing, responding to and recovering from the adverse health effects of public health emergencies and disasters, ranging from hurricanes to bioterrorism.”

In the video below, the woman who heads that office, Dr. Nicole Lurie, explains that the responsibilities of her office are “to help our country prepare for, respond to and recover from public health threats.” She says her major priority is to help the country prepare for emergencies and to “have the countermeasures—the medicines or vaccines that people might need to use in a public health emergency. So a large part of my office also is responsible for developing those countermeasures.”

Or, as National Journal rather glowingly puts it, “Lurie’s job is to plan for the unthinkable. A global flu pandemic? She has a plan. A bioterror attack? She’s on it. Massive earthquake? Yep. Her responsibilities as assistant secretary span public health, global health, and homeland security.” A profile of Lurie quoted her as saying, “I have responsibility for getting the nation prepared for public health emergencies—whether naturally occurring disasters or man-made, as well as for helping it respond and recover. It’s a pretty significant undertaking.” Still another refers to her as “the highest-ranking federal official in charge of preparing the nation to face such health crises as earthquakes, hurricanes, terrorist attacks, and pandemic influenza.”

Now, you might be wondering why the person in charge of all this is a name you’re not familiar with. Apart from a discussion of Casey’s comments on how we don’t need an Ebola czar because we already have one, a Google News search for Lurie’s name at the time of writing brings up nothing in the last hour, the last 24 hours, not even the last week! You have to get back to mid-September for a few brief mentions of her name in minor publications. Not a single one of those links is confidence building.

So why has the top official for public health threats been sidelined in the midst of the Ebola crisis? Only the not-known-for-transparency Obama administration knows for sure. But maybe taxpayers and voters should force Congress to do a better job with its oversight rather than get away with the far easier passing of legislation that grants additional funds before finding out what we got for all that money we allocated to this task over the last decade. And then maybe taxpayers should begin to puzzle out whether their really bad return on tax investment dollars is related to some sort of inherent problem with the administrative state.

The Ron Perelman Scandal

There are a few interesting things about the scandal Lurie was embroiled in years ago. You can—and should—read all about it in the Los Angeles Times‘ excellent front-page expose from November 2011, headlined: “Cost, need questioned in $433-million smallpox drug deal: A company controlled by a longtime political donor gets a no-bid contract to supply an experimental remedy for a threat that may not exist.” This Forbes piece is also interesting.

The donor is billionaire Ron Perelman, who was controlling shareholder of Siga. He’s a huge Democratic donor but he also gets Republicans to play for his team, of course. Siga was under scrutiny even back in October 2010 when The Huffington Post reported that it had named labor leader Andy Stern to its board and “compensated him with stock options that would become dramatically more valuable if the company managed to win the contract it sought with HHS—an agency where Stern has deep connections, having helped lead the year-plus fight for health care reform as then head of the Service Employees International Union.”

The award was controversial from almost every angle—including disputes about need, efficacy, and extremely high costs. There were also complaints about awarding a company of its size and structure a small business award as well as the negotiations involved in granting the award. It was so controversial that even Democrats in tight election races were calling for investigations.

Last month, Siga filed for bankruptcy after it was found liable for breaching a licensing contract. The drug it’s been trying to develop, which was projected to have limited utility, has not really panned out—yet the feds have continued to give valuable funds to the company even though the law would permit them to recoup some of their costs or to simply stop any further funding.

The Los Angeles Times revealed that, during the fight over the grant, Lurie wrote to Siga’s chief executive, Dr. Eric A. Rose, to tell him that someone new would be taking over the negotiations with the company. She wrote, “I trust this will be satisfactory to you.” Later she denied that she’d had any contact with Rose regarding the contract, saying such contact would have been inappropriate.

The company that most fought the peculiar sole-source contract award to Siga was Chimerix, which argued that its drug had far more promise than Siga’s. And, in fact, Chimerix’s Brincidofovir is an antiviral medication being developed for treatment of smallpox but also Ebola and adenovirus. In animal trials, it’s shown some success against adenoviruses, smallpox, and herpes—and preliminary tests show some promise against Ebola. On Oct. 6, the FDA authorized its use for some Ebola patients.

It was given to Ebola patient Thomas Eric Duncan, who died, and Ashoka Mukpo, who doctors said had improved. Mukpo even tweeted that he was on the road to recovery.

Back to that Budget

Consider again how The Huffington Post parroted Collins’ claims:

Money, or rather the lack of it, is a big part of the problem. NIH’s purchasing power is down 23 percent from what it was a decade ago, and its budget has remained almost static. In fiscal year 2004, the agency’s budget was $28.03 billion. In FY 2013, it was $29.31 billion—barely a change, even before adjusting for inflation.

Of course, between the fiscal years 2000 and 2004, NIH’s budget jumped a whopping 58 percent. HHS’s 70,000 workers will spend a total of $958 billion this year, or about $7,789 for every U.S. household. A 2012 report on federal spending including the following nuggets about how NIH spends its supposedly tight funds:

  • a $702,558 grant for the study of the impact of televisions and gas generators on villages in Vietnam.
  • $175,587 to the University of Kentucky to study the impact of cocaine on the sex drive of Japanese quail.
  • $55,382 to study hookah smoking in Jordan.
  • $592,527 to study why chimpanzees throw objects.

Last year there were news reports about a $509,840 grant from NIH to pay for a study that will send text messages in “gay lingo” to meth-heads. There are many other shake-your-head examples of misguided spending that are easy to find.

And we’re not even getting into the problems at the CDC or the confusing mixed messages on Ebola from the administration. CDC director Tom Frieden noted: more here

Indeed. The Progressive belief that a powerful government can stop all calamity is misguided. In the last 10 years we passed multiple pieces of legislation to create funding streams, offices, and management authorities precisely for this moment. That we have nothing to show for it is not good reason to put even more faith in government without learning anything from our repeated mistakes. Responding to the missing Ebola Czar and her office’s corruption by throwing still more money, more management changes, and more bureaucratic complexity in her general direction is madness.

The Country Is Over

Monty Pelerin April 5, 2013

Data are hard to deal with when your vision is on the wrong side of it. Those wanting to claim there is a recovery underway are having just this problem. These people either have no understanding of economics or they believe falsely that they can inflate “animal spirits” with their hyped reports and that will initiate a recovery.

There will not be an economic recovery given the economic policies of this country. A recovery is not unlikely, I would argue it is closer to impossible if not impossible. The reasons for this position are not complicated. In short, the nation has become an out-of-control welfare state that is rapidly destroying the incentives to work or create jobs. Government policies appear designed toward this end. One doesn’t need a high IQ or  an advanced degree in economics to understand the problems.

There are innumerable factors responsible for the decline of the US. Only three important ones will convey why the economy is dying:

1. The rule of law and property rights are under attack.

What do you really own? The depositors in Cyprus believed they owned what was in their bank accounts. They found out otherwise. Bondholders of General Motors believed they were protected by bankruptcy laws when GM was bankrupted by the government. They found out otherwise. Do you own your pension plans and IRAs. Well you always believed you did except now there is talk about confiscating a portion or all of these funds.

How much of your income do you own? For those doing well, let’s say 60%. But that portion is under attack with the “need” for higher taxes and “fair share” gobbledegook. What about Social Security? Although the government sold it as a retirement policy and told you it is yours, the government says in fine print it is not. That is their excuse for not treating it as a liability on their balance sheet.

The fact is that the rules are being changed at will by the side who has lots of guns. The number of rules and laws that have been changed or ignored in the past several years makes one wonder what laws will remain. We are  approaching the point where there are no rules which means there can be no society. Without cooperation, markets will cease to function efficiently or perhaps at all. Millions of people will starve to death under such conditions.

2. Obamacare has raised costs

The costs associated with Obamacare are still not known or calculable. The rules are still being written. Already there are thousands of pages. Even though we passed it as Speaker Pelosi suggested as a means to find out what was in it, we still don’t know as the rules are still being made up.

For sure the program is driving up the costs of medical care and driving down the quality. That is exactly the opposite of what was promised. Business firms face great uncertainty as to what this mandate will do to their costs and operating procedures. Obamacare is rising the cost of employees. When you penalize something, you get less of it. That is a prime reason why there is no employment recovery in this country.

Employers have frozen their hiring until clarity develops. The development of clarity is no assurance that they will change their behavior. If the costs are too high (and they appear to be for many smaller businesses who create the most jobs), then hiring will not return.

The effect on hiring is only one negative. Full-time workers are being made part-time in order that they be exempted from the Obamacare mandate. These steps are not something business wants to do, it is something they must do in order to survive.

3. Government policies have made the dole more lucrative than work

As we make it easier to get unemployment benefits for longer time periods, more people take advantage of the system. So too with food stamps and disability. All programs are at or near record levels in what is supposed to be four years into an economic recovery. For many, the benefits of becoming a government dependent exceed what they can earn. One study reported that a family of four, collecting all the benefits for which they were entitled, would have to earn $65,000 per annum to have the same after-tax purchasing power.

If you are a product of the government schools and are legal to work (i.e., have skills enough that you are affordable at the minimum wage or higher), at what point do you realize that there is no need to go through the hassle of actual work. You can live pretty well by staying home and taking advantage of the entitlements available to you. That is exactly what a larger and larger percentage of the population are realizing. In many cases, it is economically irrational to work.

This behavior creates a social pathology that only worsens over time. Kids learn from their parents that work is not necessary and the many ways to game the system. In this regard, look for this problem to become worse over time unless these programs are cut back.

There Can Be No Recovery

Despite all you hear coming from the government’s media megaphone, there is no economic recovery underway, nor can there be one. The policies in place ensure that one will not happen. Economics is not a top-down science as Keynesians and politicians want you to believe. You can throw as many Fed dollars into the system or devise innumerable government stimulus programs. These are all top-down. Economics is a bottom-up process that starts with individual decisions and behavior. Individuals respond to available choices and incentives. They act in their own self-interest not in the manner in which some government planner wants them to act. Top-down programs do not affect the incentives of the individual decision-makers.

We raise the costs on those who work (higher taxes) and the businessmen who provide the jobs. One of the basic laws of human nature is that when you penalize something or make it less pleasant, people will want less of it. It is not a mystery why business is not hiring and the number of workers is declining. The return to both is declining as a result of government policies.

We raise the rewards for not working. Another basic law of human behavior is that when you increase rewards for a particular kind of behavior, you will get more of it. It is not a mystery why more people are choosing the dole than ever before. Government has encouraged them to do by providing higher rewards.

Add in the regime uncertainty associated with unstable or unpredictable laws and regulations and you have the perfect storm. There is no incentive to hire. Business hunkers down not knowing what is coming their way next. They understand they are targets of this Administration. It is unlikely that there will be any improvement on this fron while Obama remains in office. This behavior has nothing to do with politics. Even businesses headed by Democrats are behaving in this fashion. It is self-interest as in the desire to survive that motivates this behavior.

Why The Economy is Dying

As government grows the private sector shrinks. As the private sector shrinks there are fewer goods and services produced (government produces no goods and few services). I believe it was Dick Armey who described this situation with the wagon analogy: there are more people riding in the wagon and fewer pulling the wagon. As the wagon becomes heavier, the remaining pullers must work harder to move it.

The pullers must support the riders. Government does not support the riders or anyone else for that matter. Whatever government has it has taken from the pullers. Whatever it doles out it must get from taxes, borrowing or printing new money. Regardless of which means it uses, it is all coming from the pullers. They pay the borrowing back. They have less as a result of higher taxes. They are made poorer by the rising prices from the printing of money.

As the burdens increase on the pullers and the benefits increase for the riders, more pullers decide to ride. The truly creative and talented can always make enough money to continue to work rather than ride. However, when their efforts can be expended in other countries that penalize them less, at some point they no longer pull the wagon. They leave the country to climes where they are treated better.

Each increase in government spending means requires more money from the private sector. That means greater distortions in the incentive-disincentive calculus that produces fewer people pulling the wagon. Now fewer people must support more non-producers. Every time someone gets in the wagon, the burden on the productive sector increases. More must be extracted from a smaller group to serve the increasing riders.

That is what is happening in this country. If it is not reversed, the economy will stagnate and eventually implode. This conclusion is dependent upon nothing more than simple arithmetic. How bad is the imbalance today? Tyler Durden provides some information (my emboldening in red added):

The punchline: 110 million privately employed workers; 88 million welfare recipients and government workers and rising rapidly.

And since nothing has changed in the past two years, and in fact the situation has gotten progressively (pardon the pun) worse, here is our conclusion on this topic from two years ago:

We have been writing for over a year, how the very top of America’s social order steals from the middle class each and every day. Now we finally know that the very bottom of the entitlement food chain also makes out like a bandit compared to that idiot American who actually works and pays their taxes. One can only also hope that in addition to seeing their disposable income be eaten away by a kleptocratic entitlement state, that the disappearing middle class is also selling off its weaponry. Because if it isn’t, and if it finally decides it has had enough, the outcome will not be surprising at all: it will be the same old that has occurred in virtually every revolution in the history of the world to date.

But for now, just stick head in sand, and pretend all is good. Self-deception is now the only thing left for the entire insolvent entitlement-addicted world.

Is The Decline Inevitable?

Of course not. As Lawrence of Arabia stated: “Nothing is written.”

The Economic Solution

The solution to solving the problem is quite simple for an economist. Merely reverse the process. Make it attractive for people to jump out of the wagon and begin pulling. For businesses, make it attractive for them to hire. Make it unattractive to be on the dole. Reverse the growth of government and you increase the size of the private sector. More capital is made available for productive activities rather than being squandered by government. Talent stops leaving the country when they are treated more favorably here, whether this be via lower taxes or less onerous regulatory burdens. Then, get government out of the way and let markets solve the problem.

The Political Barrier

For the political class, the solution borders on the impossible. Politicians have bribed the citizenry with goodies for votes. They have sold the notion that government is responsible for all good things. The economic solution runs counter to everything that politicians have peddled. Further it reduces their power and ability to retain office, at least in a manner in which they are accustomed. It shrinks their perquisites. It shrinks their vote-buying ability. In short, it is virtually impossible for them to go along with such a solution.

What politicians thrive on is what created the current problems. Reversing this behavior is alien to them. They would not know how to behave under such conditions. Yet the economic solution is the only solution!

Do I expect politicians to change and save the country? No! Is it possible they could? Probably not, but “nothing is written.”

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