06/19/2014 Submitted by Tyler Durden by Brandon Smith of Alt-Market.com,
The multitudes of people, especially Americans, who view U.S. government activity in a negative light often make the mistake of attributing all corruption to some covert battle for global oil fields. In fact, the average leftist seems to believe that everything the establishment does somehow revolves around oil. This is a very simplistic and naïve view.
Modern wars are rarely, if ever, fought over resources, despite what the mainstream gatekeepers might tell you. If a powerful nation wants oil, for instance, it lines the right pocketbooks, intimidates the right individuals, blackmails the right officials or swindles the right politicians. It has no need to go to war when politicians and nations are so easily bought. Modern wars, rather, are fought in order to affect psychological change within a particular country or population. Wars today are fought to cover up corrupt deals and create desperation. Oil is used as an all-encompassing excuse for war, but it is never the true cause of war.
In reality, oil demand has become static and is even falling in many parts of the world, while new oil and gas-producing fields are discovered on a yearly basis. Petroleum is not a rare resource — at least, not at the present. And the propaganda surrounding the “peak oil” Armageddon scenario is pure nonsense. Oil prices, unfortunately, do not rise and fall according to supply – instead they rise and fall according to market tensions and, most importantly, the value and perceived safety of the U.S. dollar. Supply and demand have little to do with commodity values in our age of fiat manipulation and false investor perception.
That said, certain political and regional events are currently in motion that could, in fact, change investor perception to the negative, and convince the world of a false fear of reduced supply. While supply is more than ample, the expectation of continued supply can be jilted, shocking commodities markets into running for the hills or rushing into mass speculation, generally resulting in a sharp spike in prices.
A very real danger within energy markets is the undeniable threat that the U.S. dollar may soon lose its petrodollar status and, thus, Americans may lose the advantage of relatively low gas prices they have come to expect. That is to say, the coming market crisis will have far more to do with the health of the dollar than the readiness of supply.
In the span of only a few years, as the derivatives crisis took hold and the fed began its relentless bailout regime, petroleum costs have doubled. It wasn’t that long ago that someone could fill his vehicle’s tank with a $20 bill. Those days are long gone, and they are not coming back. The expectation has always been that prices would recede as the overall economy began to heal. Of course, our economy will not be healed until it is allowed to crash, as it naturally should crash. And as it crashes, because of our currency’s unique place in history, the price of oil will continue to climb.
The petrodollar has always been seen as invincible — a common denominator, a mathematical constant. This is a delusion propagated by a lack of knowledge and common sense amongst establishment economists.
As I have covered in great detail in numerous articles, the U.S. dollar’s world reserve status is nearing extinction. Multiple major economies now trade bilaterally without the use of the dollar; and with foreign conflicts on the rise, this trend is going to become the norm.
In the past week alone, Putin adviser Sergey Glazyev recommended to the Kremlin that a coalition of nations be formed to end the dollar’s reserve status and initiate a form of economic warfare to stop “U.S. aggression”. Of course, anyone familiar with the escapades of international banking cartels knows that it is the money elite that dictate U.S. aggression, just as they dictate the policy initiatives of Russia. I would note that there is only ONE currency exchange structure that could be used at this time to shift global forex reserves away from the dollar system, and that is the IMF’s Special Drawing Rights.
The argument has always been that the IMF is a U.S. controlled institution, however, this is a faulty assumption. The IMF is a GLOBAL BANKER controlled institution, a front organization for the Bank of International Settlements, which is why the recent refusal by the U.S. Congress to vote on new capital allocations for the IMF has resulted in the world’s central bank threatening to remove U.S. veto power. Globalists have no loyalty to any single nation, and the reality is, the fall of the dollar actually benefits these financiers in the long term.
Russia’s historic oil and gas deal with China, just signed weeks ago, removes the dollar as the petroleum reserve currency.
Russia’s largest gas company, Gazprom, has all but excluded the dollar in all transactions with foreign nations. In fact, nine out of 10 of Gazprom’s foreign clients were more than happy to buy their products without using dollars. This fact cripples the arguments of dollar cheerleaders who have always claimed that even if Russia broke from the dollar, no one else would go along.
Gazprom and the Russian government have followed through with their threats to cut off gas pipelines to Ukraine, and now, some analysts fear this strategy may extend to the EU, in which many countries are still 30% dependent on Russian energy.
China is currently striking oil deals not only with Russia but also with Iran. New oil deals are being signed even after a $2 billion agreement fell through this spring. And, despite common misinformation, it was actually China that was reaping the greatest rewards through the reopening of Iraqi oil fields, not the U.S., all while U.S. military assets were essentially wasted in the region.
Now, any U.S. benefits are coming into question as Iraq disintegrates into chaos yet again. With the speed of the new Islamic State of Iraq and Syria (ISIS) insurgency growing, it is unclear whether America will have ANY access to Iraqi oil in the near future. If ISIS is successful in overrunning Iraq, it is unlikely that Iraqi oil will ever be traded for dollars again. Unrest in Iraq has already caused substantial market spikes in oil prices, and I can say with considerable confidence that this trend is going to continue through the rest of the year.
Interestingly, mainstream news sources suggest that Saudi Arabia has been a primary funding source for the ISIS movement. It is true that the Saudis have warned for years that they would fund and arm Sunni insurgents if America ever pulled out of the country. But, I would point out that the U.S. has also been covertly supporting such extremist groups in the Mideast for quite some time, and this is not discussed at all in the MSM storyline. The mainstream narrative is painting a picture of betrayal by the Saudis against the U.S. through subversive groups designed to break the foundations of nations opposed to its policy views. When, in fact, the destabilization of Iraq has been nurtured by money and weapons from both America and Saudi Arabia.
It was the CIA which trained ISIS insurgents secretly in Jordan in preparation for their subversive war in Syria. It was an agreement signed by George W. Bush and delegated under Obama’s watch that allowed ISIS leader, Abu Bakr al-Baghdadi, to be set free in 2009. Saudi Arabia has been openly arming the Sunni’s for years with the full knowledge of the U.S. government. So then, why is the narrative being created that America and Saudi Arabia are at odds over ISIS?
Such a development would place the U.S. squarely in conflict with the Saudi government, our only remaining toehold in the global oil market. Without Saudi Arabia’s patronage of the dollar, most OPEC nations will follow (including Kuwait), and the dollar WILL lose its petrodollar status. Period.
In the past few days, Saudi Arabia has demanded that the foreign interests refrain from any military intervention in Iraq. While Barack Obama has repositioned an aircraft carrier, armed troops, and special forces in the area.
Now, my regular readers understand that this was going to happen eventually anyway. The Federal Reserve’s quantitative easing bonanza has destroyed true dollar value and spread unknown trillions of dollars in fiat across the planet. The dollar’s death has been assured. It has been slated for execution. This is why half the world is positioning to dump the currency altogether. My regular readers also know that the destruction of the dollar is not an accident; it is part of a carefully engineered strategy leading to the centralization of all economic power under the umbrella of a new global currency basket system controlled by the International Monetary Fund.
I believe Saudi Arabia may be a near term trigger in the next great shift in petroleum markets away from the dollar. Renewed U.S. involvement in Iraq, diplomatic tensions over ISIS, and more lucrative offers from Eastern partners have been edging Saudi Arabia away from strict petrodollar ties. This shift is also not limited to Saudi Arabia.
“Abu Dhabi, the most influential member of the United Arab Emirates,” has suddenly ended its long-standing exclusive relationship with Western oil companies and has signed a historic deal with China’s state-owned China National Petroleum Corporation (CNPC).
Russia has formed the new Eurasian Economic Union with Belarus and Kazakhstan, two countries with freshly discovered oil fields.
On the surface, it appears as though the world is huddling itself around oil resources in an environment of East versus West conflict. However, these changes are not as much about petroleum as they are about the petrodollar. The reality is the dollar’s reserve-status days are numbered and this is all part of the plan.
What does this mean for us? It means much higher gas prices in the coming months and years. Is $4 to $5 per gallon gasoline a burden on your pocketbook? Try $10 to $11 per gallon, perhaps more. Do you think the economy is straining as it is under the weight of current gas prices? Imagine the earthquake within our freight-based system when the cost of trucking shipments triples. And guess who will end up paying for the increased costs? That’s right: you, the consumer. High energy prices affect everything, including shelf prices of retail goods. This is just the beginning of what I believe will be ever expanding inflation in oil prices, leading to the end of the dollar’s petroleum reserve status, then it’s world reserve status by default, and the introduction of a basket currency system that will ultimately benefit a select few global financiers while diminishing the quality of living for millions, if not billions, of people.
April 24, 2013
By Paul Craig Roberts
For Americans, financial and economic Armageddon might be close at hand. The evidence for this conclusion is the concerted effort by the Federal Reserve and its dependent financial institutions to scare people away from gold and silver by driving down their prices.
When gold prices hit $1,917.50 an ounce on August 23, 2011, a gain of more than $500 an ounce in less than eight months, capping a rise over a decade from $272 at the end of December 2000, the Federal Reserve panicked. With the United States dollar losing value so rapidly compared to the world standard for money, the Federal Reserve’s policy of printing $1T annually in order to support the impaired balance sheets of banks and to finance the federal deficit was placed in danger. Who could believe the dollar’s exchange rate in relation to other currencies when the dollar was collapsing in value in relation to gold and silver?
The Federal Reserve realized that its massive purchase of bonds in order to keep their prices high (and thus interest rates low) was threatened by the dollar’s rapid loss of value in terms of gold and silver. The Fed was concerned that large holders of U.S. dollars, such as the central banks of China and Japan and the OPEC sovereign investment funds, might join the flight of individual investors away from the dollar, thus ending in the fall of the dollar’s foreign exchange value and thus decline in U.S. bond and stock prices.
Intelligent people could see that the U.S. government could not afford the long and numerous wars that the neoconservatives were engineering or the loss of tax base and consumer income from off-shoring millions of U.S. middle-class jobs for the sake of executive bonuses and shareholder capital gains. They could see what was in the cards, and began exiting the dollar for gold and silver.
Central banks are slower to act. Saudi Arabia and the oil emirates are dependent on U.S. protection and do not want to anger their protector. Japan is a puppet state that is careful in its relationship with its master. China wanted to hold on to the American consumer market for as long as that market existed. It was individuals who began the exit from the U.S. dollar.
When gold topped $1,900, Washington put out the story that gold was a bubble. The presstitute media fell in line with Washington’s propaganda. “Gold looking a bit bubbly” declared CNN Money on August 23, 2011.
The Federal Reserve used its dependent “banks too big to fail” to short the precious metals markets. By selling naked shorts in the paper bullion market against the rising demand for physical possession, the Fed was able to drive the price of gold down to $1,750 and keep it more or less capped there until recently, when a concerted effort on April 2-3 drove gold down to $1,557 and silver, which had approached $50 per ounce in 2011, down to $27.
The Federal Reserve began its April Fool’s assault on gold by sending the word to brokerage houses, which quickly went out to clients, that hedge funds and other large investors were going to unload their gold positions and that clients should get out of the precious metal market prior to these sales. As this inside information was the government’s own strategy, individuals cannot be prosecuted for acting on it. By this operation, the Federal Reserve, a totally corrupt entity, was able to combine individual flight with institutional flight. Bullion prices took a big hit, and bullishness departed from the gold and silver markets. The flow of dollars into bullion, which threatened to become a torrent, was stopped.
For now it seems that the Fed has succeeded in creating wariness among Americans about the virtues of gold and silver, and thus it has extended the time that it can print money to keep the house of cards standing. This time could be short or it could last a couple of years.
For the Russians and Chinese, whose central banks have more dollars than they want, and for the 1.3B Indians in India, the low dollar price for gold that the Federal Reserve has engineered is an opportunity. They see the opportunity that the Fed has given them to purchase gold at $350-$400 an ounce less than two years ago as a gift.
The Fed’s attack on bullion is an act of desperation that, when widely recognized, will doom its policy.
The Fed is creating 1T new dollars per year, but the world is moving away from the use of the dollar for international payments and, thus, as reserve currency. The result is an increase in supply and a decrease in demand. This means a falling exchange value of the dollar, domestic inflation from rising import prices and a rising interest rate and collapsing bond, stock and real estate markets.
The Federal Reserve’s orchestration against bullion cannot ultimately succeed. It is designed to gain time for it to be able to continue financing the federal budget deficit by printing money and also to keep interest rates low and debt prices high in order to support the banks’ balance sheets.
When the Fed can no longer print due to dollar decline which printing would make worse, U.S. bank deposits and pensions could be grabbed in order to finance the federal budget deficit for a couple of more years. Anything to stave off the final catastrophe.
By its obvious and concerted attack on gold and silver, the U.S. government could not give any clearer warning that trouble is approaching. The values of the dollar and of financial assets denominated in dollars are in doubt.
How the Fed Tanked Gold & Silver
By Paul Craig Roberts
I was the first to point out that the Federal Reserve was rigging all markets, not merely bond prices and interest rates, and that the Fed is rigging the bullion market in order to protect the U.S. dollar’s exchange value, which is threatened by the Fed’s quantitative easing. With the Fed adding to the supply of dollars faster than the demand for dollars is increasing, the price or exchange value of the dollar is set up to fall.
A fall in the dollar’s exchange rate would push up import prices and, thereby, domestic inflation, and the Fed would lose control over interest rates. The bond market would collapse and with it the values of debt-related derivatives on the “banks too big to fail” balance sheets. The financial system would be in turmoil and panic would reign.
Rapidly rising bullion prices were an indication of loss of confidence in the dollar and were signaling a drop in the dollar’s exchange rate. The Fed used naked shorts in the paper gold market to offset the price effect of a rising demand for bullion possession. Short sales that drive down the price, trigger stop-loss orders that automatically lead to individual sales of bullion holdings once their loss limits are reached.
According to bullion trader and whistle-blower Andrew Maguire, on Friday, April 12, the Fed’s agents hit the market with 500 tons of naked shorts. Normally, a short is when an investor thinks the price of a stock or commodity is going to fall. He wants to sell the item in advance of the fall, pocket the money, and then buy the item back after it falls in price, thus making money on the short sale. If he doesn’t have the item, he borrows it from someone who does, putting up cash collateral equal to the current market price. Then he sells the item, waits for it to fall in price, buys it back at the lower price and returns it to the owner who returns his collateral. If enough shorts are sold, the result can significantly drive down the market price.
A naked short is when the short seller does not have or borrow the item that he shorts, but sells shorts regardless. In the paper gold market, the participants are betting on gold prices and are content with the monetary payment. Therefore, generally, as participants are not interested in taking delivery of the gold, naked shorts do not need to be covered with the physical metal. In other words, with naked shorts, no physical metal is actually sold.
Consider the 500 tons of paper gold sold on April 12. At the beginning gold price that day of about $1,550, that 500 tons comes to $24.8B. Who has that kind of money?
What happens when 500 tons of gold sales are dumped on the market at one time or on one day? It drives the price down. Investors who want to get out of large positions would spread sales out over time so as not to lower their sales proceeds. The sale took gold down by about $73 per ounce. That means the seller or sellers lost up to $73 dollars 16 million times, or $1.2B. [Over the next two days it dropped $200 per ounce. That equals a $3.2B fall.—Ed.]
Who can afford to lose that kind of money? Only a central bank that can print it.
Paul Craig Roberts is a former assistant undersecretary of the U.S. Treasury and former associate editor of The Wall Street Journal. He is the author of many books including The Tyranny of Good Intentions, Alienation and the Soviet Economy, How the Economy Was Lost and others.
- The Assault On Gold – Paul Craig Roberts (paulcraigroberts.org)
Is the U.S. economy about to experience a major downturn? Unfortunately, there are a whole bunch of signs that economic activity in the United States is really slowing down right now. Freight volumes and freight expenditures are way down, consumer confidence has declined sharply, major retail chains all over America are closing hundreds of stores, and the “sequester” threatens to give the American people their first significant opportunity to experience what “austerity” tastes like. Gas prices are going up rapidly, corporate insiders are dumping massive amounts of stock and there are high profile corporate bankruptcies in the news almost every single day now. In many ways, what we are going through right now feels very similar to 2008 before the crash happened. Back then the warning signs of economic trouble were very obvious, but our politicians and the mainstream media insisted that everything was just fine, and the stock market was very much detached from reality. When the stock market did finally catch up with reality, it happened very, very rapidly. Sadly, most people do not appear to have learned any lessons from the crisis of 2008. Americans continue to rack up staggering amounts of debt, and Wall Street is more reckless than ever. As a society, we seem to have concluded that 2008 was just a temporary malfunction rather than an indication that our entire system was fundamentally flawed. In the end, we will pay a great price for our overconfidence and our recklessness. (Read More….)
Euro zone leaders agreed in principle on June 29 to establish a joint banking supervisor for the 17-nation single currency area, based on the European Central Bank, although most of the crucial details remain to be worked out.
The proposal was a tentative first step towards a European banking union that could eventually feature a joint deposit guarantee and a bank resolution fund, to prevent bank runs or collapses sending shock waves around the continent.
The leaders agreed that the euro zone’s permanent bailout fund, the 500 billion euro ($620 billion) European Stability Mechanism, would be able to inject capital directly into banks on strict conditions once the joint supervisor is established.
But the rush to put first elements of such a system in place by next year may come too late.
Deposit flight from Spanish banks has been gaining pace and it is not clear a euro zone agreement to lend Madrid up to 100 billion euros in rescue funds will reverse the flows if investors fear Spain may face a full sovereign bailout.
Many banks are reorganizing, or being forced to reorganize, along national lines, accentuating a deepening north-south divide within the currency bloc.
An invisible financial wall, potentially as dangerous as the Iron Curtain that once divided eastern and western Europe, is slowly going up inside the euro area.
The interest rate gap between north European creditor countries such as Germany and the Netherlands, whose borrowing costs are at an all-time low, and southern debtor countries like Spain and Italy, where bond yields have risen to near pre-euro levels, threatens to entrench a lasting divergence.
Since government credit ratings and bond yields effectively set a floor for the borrowing costs of banks and businesses in their jurisdiction, the best-managed Spanish or Italian banks or companies have to pay far more for loans, if they can get them, than their worst-managed German or Dutch peers.
The longer that situation goes on, the less chance there is of a recovery in southern Europe and the bigger will grow the wealth gap between north and south.
With ever-higher unemployment and poverty levels in southern countries, a political backlash, already fierce in Greece and seething in Spain and Italy, seems inexorable.
European Central Bank President Mario Draghi acknowledged as he cut interest rates last week that the north-south disconnect was making it more difficult to run a single monetary policy.
Two huge injections of cheap three-year loans into the euro zone banking system this year, amounting to 1 trillion euros, bought only a few months’ respite.
“It is not clear that there are measures that can be effective in a highly fragmented area,” Draghi told journalists.
Conservative German economists led by Hans-Werner Sinn, head of the Ifo institute, are warning of dire consequences for Germany from ballooning claims via the ECB’s system for settling payments among national central banks, known as TARGET2.
If a southern country were to default or leave the euro, they contend, Germany would be left with an astronomical bill, far beyond its theoretical limit of 211 billion euros liability for euro zone bailout funds.
As long as European monetary union is permanent and irreversible, such cross-border claims and capital flows within the currency area should not matter any more than money moving between Texas and California does.
But even the faintest prospect of a Day of Reckoning changes that calculus radically.
In that case, money would flood into German assets considered “safe” and out of securities and deposits in countries seen as at risk of leaving the monetary union. Some pessimists reckon we are already witnessing the early signs of such a process.
Any event that makes a euro exit by Greece – the most heavily indebted member state, which is off track on its second bailout program and in the fifth year of a recession – look more likely seems bound to accelerate those flows, despite repeated statements by EU leaders that Greece is a unique case.
“If it does occur, a crisis will propagate itself through the TARGET payments system of the European System of Central Banks,” U.S. economist Peter Garber, now a global strategist with Deutsche Bank, wrote in a prophetic 1999 research paper.
Either member governments would always be willing to let their national central banks give unlimited credit to each other, in which case a collapse would be impossible, or they might be unwilling to provide boundless credit, “and this will set the parameters for the dynamics of collapse”, Garber warned.
“The problem is that at the time of a sovereign debt crisis, large portions of a national balance sheet may suddenly flee to the ECB’s books, possibly overwhelming the capacity of a bailout fund to absorb the entire hit,” he wrote in 2010, after the start of the Greek crisis, in a report for Deutsche Bank.
European officials tend to roll their eyes at such theories, insisting the euro is forever, so the issue does not arise.
In practice, national regulators in some EU countries are moving quietly to try to reduce their home banks’ exposure to such an eventuality. The ECB itself last week set a limit on the amount of state-backed bank bonds that banks could use as collateral in its lending operations.
In one high-profile case, Germany’s financial regulator Bafin ordered HypoVereinsbank (HVB), the German subsidiary of UniCredit (CRDI.MI), to curb transfers to its parent bank in Italy last year, people familiar with the case said.
Such restrictions are legal, since bank supervision is at national level, but they run counter to the principle of the free movement of capital in the European Union’s single market and to an integrated currency union.
Whether a single euro zone banking supervisor would be able to overrule those curbs is one of the many uncertainties left by the summit deal. In any case, common supervision without joint deposit insurance may be insufficient to reverse capital flight.
German Chancellor Angela Merkel, keen to shield her grumpy taxpayers, has so far rejected any sharing of liability for guaranteeing bank deposits or winding up failed banks.
Veteran EU watchers say political determination to make the single currency irreversible will drive euro zone leaders to give birth to a full banking union, and the decision to create a joint supervisor effectively got them pregnant.
But for now, Europe’s financial disintegration seems to be moving faster than the forces of financial integration.
(Editing by David Holmes)
- Most-Accurate Forecasters See Euro Bottom at Odds With Options – Bloomberg (bloomberg.com)
- German president tells Angela Merkel to come clean on EU debt deal (independent.ie)
- Marsh on Monday: German anti-euro backlash gathers pace (marketwatch.com)
(Reuters) – After a month in which his re-election campaign picked up momentum, hard economic realities are about to hit President Barack Obama as he takes to the road on a campaign bus trip through the Rust Belt.
Poor manufacturing data earlier this week followed by a likely weak jobless report on Friday are reminding Obama that he has a lot of work to do to convince voters he is bringing the economy back to full health.
A Supreme Court victory for Obama on healthcare and a surprise expansion of immigration laws that put Republican opponent Mitt Romney on the defensive on the issue may soon fade from memory.
“By Friday, the Supreme Court will be in the rear-view mirror and everybody will be talking about the state of the economy,” said Greg Valliere, an analyst for institutional investors at Potomac Research Group.
“I think the debate on Friday will be whether the economy is still growing or whether we’ve hit a brick wall,” he said.
U.S. manufacturing activity contracted in June for the first time in nearly three years, data showed on Monday, stark evidence of a slowing economic recovery and that Europe’s debt crisis is weighing on the U.S. economy.
And the monthly jobless figures, the most closely watched economic indicator, are expected to be lackluster.
Economists polled by Reuters expect nonfarm payrolls to have risen by only 90,000 jobs in June and the unemployment rate will stay unchanged at 8.2 percent. Employers likely increased hiring, but not enough to dispel concerns that the economy is losing steam.
The fiscal gloom allows Romney to re-energize his charge that the White House is not creating jobs quickly enough, after his nonstop economic criticism was drowned out by last week’s Supreme Court ruling that Obama’s 2010 healthcare law is constitutional.
“From day one of his administration, the president has pursued policies that have hurt job creators, hurt the manufacturing sector, and left millions of Americans struggling to find work. It’s going to be hard for the president to argue Americans should gamble on a second term while on his bus tour,” Romney campaign spokeswoman Amanda Henneberg said.
Romney also struggled recently to explain his immigration position after Obama forced the issue on to the agenda by halting possible deportations of young illegal immigrants. The immigration debate helped Obama in polls.
RUST BELT PUSH
Obama begins a two-day campaign bus tour through Ohio and western Pennsylvania on Thursday. No matter how the unemployment report comes out, he will remind voters his bailout of the U.S. auto industry helped save jobs in the area.
In a tough economic climate, polls show that Obama still comes across as likeable although he does have a problem winning over white, middle-class male voters.
“Whoever does a better job of showing empathy will have a better chance of winning in November,” Valliere said.
Obama led Romney 48 percent to 43 percent in Gallup’s daily national tracking poll on Tuesday, the sixth consecutive day in which the survey has shown the Democratic incumbent with a statistically meaningful, if small, lead.
The five-point edge was Obama’s largest lead in Gallup daily tracking since April, and his longest such streak since then.
But economic clouds could again darken his re-election chances on November 6.
“Everybody is concerned about the prospects for the economy. There are two huge issues. One is Europe and the second is our own fiscal cliff,” said Isabelle Sawhill, a budget expert at the Brookings Institution, referring to programmed cuts in the U.S. budget and rising taxes next year, unless congress acts to avoid them.
“The concerns and the fears… have already begun to undermine confidence in the economy and cause both consumers and businesses to hold back on what they are willing to spend,” she said.
Obama’s campaign points to steady, if slow, improvement in the economy since he has taken office, and says he could have done more if Republicans in Congress had not blocked his efforts to stimulate growth.
“Clearly, the economy is not functioning as well as we know that it could be. The political question is who are people going to point the finger at in doing that,” said Heather Boushey, an economist at the liberal Center for American Progress, which has close ties to the White House.
“The biggest problem in our economy is the U.S. Congress,” she said.
While the poor economy hurts Obama, it also holds risks for his rival.
Unrelenting Democratic attacks calling Romney a job killer during his time as a private-equity executive have helped drag down his poll numbers.
Romney is spending the week at his $10 million lakeside New Hampshire vacation estate, which features a three-vessel boat garage and where he and his wife have been photographed skidding across the lake on their personal watercraft.
That could provide fresh fodder for the Democrats’ portrayal of Romney as out of touch with ordinary Americans.
“It’s a bad headline. It can help reinforce or enforce perceptions, whatever they may be,” said Ethan Siegel, an analyst at the Washington Exchange, which tracks political developments for investors.
However, economic worries are much more prominent in voters’ minds that Romney’s vacations.
“In the end, no one’s going into the voting room, saying ‘Romney, he was in New Hampshire for the 4th of July and I’m voting no.’ It’s buzz, it’s chatter but it don’t matter,” Siegel said.
The Community Development Block Grant program is a perfect example of the blurring of responsibility between the federal government and the states. The program’s roots go back to the Great Society and the wishful belief that the problems of urban Americans could be solved with handouts from Washington. Instead, the program “has degenerated into a federal slush fund for pet projects of local politicians and politically connected businesses.”
That quote comes from Rep. Tom McClintock (R-CA) who introduced an amendment this week to terminate CDBGs. As McClintock explained to his House colleagues, it is not the federal government’s responsibility to fund purely parochial activities:
Even in the best of circumstances, these are all projects that exclusively benefit local communities or private interests and ought to be paid for exclusively by those local communities or private interests. They are of such questionable merit that no city council is willing to face its constituents and say, this is how we’ve spent your local taxes. But they are more than happy to spend somebody else’s federal taxes.
Unfortunately, McClintock’s words fell upon deaf ears as his amendment was voted down 80 to 342. Not a single Democrat supported the amendment. But it was the 156 Republicans who voted against the amendment that doomed it. Among those Republicans voting “no” was House Budget Committee chairman Paul Ryan (R-WI). Worse, only 33 percent of the GOP “Tea Party Freshmen” voted to terminate a program that is completely at odds with the principles of limited government.
As I noted back in May, many of the GOP freshmen have switched from tea to Beltway Kool-Aid. Take, for example, tea party favorite Allen West of Florida. On West’s congressional website, he states that “As your Congressman, I will curb out of control Government spending.” He also says that “we need to challenge the status quo in Washington and stop the floodgates of government spending” and that he will “carry the torch of conservative, small government principles with me to Washington.” West, however, voted to save the CDBG program and he also voted back in May to save the Economic Development Administration, which is another parochial slush fund. In April, he accused Democrats of being communists. That’s pretty rich given that he proceeded to vote to protect programs that engage in central planning.
- Freshman Republicans Switch from Tea to Kool-Aid (cato-at-liberty.org)
- Republicans Join Democrats to Save Corporate Welfare (Again) (cato-at-liberty.org)
Mamta Badkar | May 17, 2012, 10:54 AM
Unless Congress acts, more than $600 billion in tax and spending provisions will change at the end of the year. And this will impose fiscal restraint at a time when the U.S. economy is growing very gradually.
But what is the fiscal cliff? What impact could it have on the economy? What are the most likely scenarios? And which companies most exposed to government spending stand to take a hit?
- Ben Bernanke says Euro crisis, ‘fiscal cliff’ threaten U.S. economy (calgaryherald.com)
- What the Fed fears (economist.com)
- Here’s A Calendar For Fiscal Cliff-Mageddon (businessinsider.com)