Shilling for Obama

Eamon Javers of Politico recently wondered why Matt Drudge, the proprietor of the widely-read Drudge Report, so frequently links to stories detailing the decline of the dollar. In the first three weeks of October, he noted, Drudge linked to such stories eighteen times. Javers suggests that Drudge’s interest in the subject may be politically motivated:

“What Drudge is doing is relentlessly hammering the continuing point which is linking Barack Obama’s administration and what some see as their failures on spending and their agenda on the economy, linking that to the declining value of the dollar. And what we see is the dollar becoming extremely politicized in the debate over whether this is Obama’s fault.”

The quote is revealing in more ways than one. For one thing, it lays bare the mindset of the mainstream media. Javers is only one of a legion of mainstream journalists who automatically assume that any story that reflects badly on the president must be an act of political gamesmanship. It apparently does not occur to them that Matt Drudge may be highlighting those items, because they are intrinsically newsworthy. So intent are they on pushing Obama’s agenda that they have failed to notice one of the most important stories of our time – the ongoing disintegration of the US dollar.

The repercussions of this are immense. Once the dollar collapses, it will take down with it the world’s monetary regime, which has the dollar as its foundation. This will impact all of us in profound and life-changing ways. But rather than reflecting on this situation, the journalistic elite merely wonders whether those who bring this matter to public attention have a political ax to grind with the president.

They would do well to consider that the story of the falling dollar is decidedly not the invention of Matt Drudge or some right-wing attack machine. It is financial market’s verdict on the fiscal mismanagement in Washington, DC. Last week Bloomberg – one of world’s premier business news agencies – opened one of its wires with the revelation that “The dollar reached a 14-month low versus the euro.” On Monday yet another report opened with this: “The dollar slid against high-yielding currencies, led by the Australian dollar.”

Continue reading at Frontpage

Disaster in the Making

Late last week the Associated Press featured a photo of House Speaker Nancy Pelosi jubilantly pumping her fist after introducing the sweeping health care legislation that she and her fellow Democrats had just rolled out.

But while Pelosi and her friends celebrate the 1,900 page monstrosity, Americans have every reason to feel outraged. The bill, which promises to provide healthcare coverage for 96 percent of Americans, would quickly morph into the largest entitlement program in American history. As such it promises to be a boondoggle of unprecedented proportions.

In the accompanying statement, Democrats estimated the bill’s cost at around $900 billion over ten years. Claiming it would “lower costs for every patient,” they contend it would not increase federal deficits. President Barack Obama said that the proposed legislation “clearly meets two of the fundamental criteria I have set out: It is fully paid for and will reduce the deficit in the long term.”

This is as great a lie as has ever been told.

Years of experience show that the cost of every entitlement program widely exceeds initial estimates. Less inclusive entitlements such as Social Security and medicare, which only affect a limited portion of the population, are projected to grow so costly as to be financially unmanageable. Some experts now estimate that the inherent liabilities of these two programs currently exceed $100 trillion. It is almost certain that the price tag for universal governmentally-run healthcare would eventually make the cost of these programs seem like change in comparison.

It cannot be otherwise. Such is the nature of bureaucracy that it is not possible for government to run anything well or expeditiously. We know from practical experience that every governmentally-managed project ends up mired in waste and inefficiency. The larger the scope of the project, the greater the resultant mess. It is a universal truism that government bungles everything it touches. Those who may think this an exaggeration should try to think of one government program that has been run efficiently or that has saved money.

Continue reading at Frontpage

The Coming Financial Crisis

The Associated Press noted last week that the federal deficit reached a record $1.42 trillion for the fiscal year that ended September 30. Up until now, most of the mainstream media have either ignored the exploding deficits or declared them a good thing, since they were supposed to lift us out of the recession. But now that the full figures have come in even some Obama-friendly media stalwarts are struck by their enormity.

This awakening is heartening. The AP report does a good job of putting the deficit number against some other figures to give a sense of scale. The government’s shortfall last year, AP notes, is larger than the whole economy of India and more than the combined deficits during this country’s first two hundred years. It is, in fact, almost as large as the yearly economic output of Canada. AP quoted Kenneth Rogoff, former chief economist for the International Monetary Fund, who pointed out that “The rudderless U.S. fiscal policy is the biggest long-term risk to the U.S. economy.”

Rogoff only states the obvious. The gravest threat to this country’s economic well-being is the policies of this government. A Harvard professor and a Keynesian through and through, Rogoff is no right-wing conservative. But after surveying the grim economic picture, even liberals must recognize that the reckless spending of the Obama administration is taking us toward fiscal Armageddon.

Continue reading at Frontpage

The New Gold Rush

A remarkable piece of news came out of London last week. Harrods, one of Europe’s best-known department stores, has begun selling gold bullion.

This unprecedented move by the famous retailer reflects the rapidly growing appetite for investment-grade gold, which has been enjoying a bull run even as the world is bogged down in a global recession. Used as a hedge against currency weakness, especially the dollar, gold has been trading at record highs. Many analysts think this is no temporary spike, but a long-term surge that will continue as the word monetary system is pulled down by the mismanaged and collapsing dollar.

Swiss-based financial newsletter Daily Bell puts it bluntly:

“We are in a bull market cycle for money metals because fiat money is all but dead, including most importantly the American dollar.”

Simone Wapler, the editor of MoneyWeek agrees:

“Gold is being re-monetized. All the world’s paper monies are losing value – and credibility. There’s a race to the bottom as they try to devalue their currencies.”

Until quite recently, money was backed by gold. That changed after World War II, when Western powers set up a monetary system with the dollar at its center. The dollar was partially backed by the metal until 1971 when President Richard Nixon took it off the gold standard altogether. At that point, the dollar became pure paper money.

Continue reading at Frontpage

When the Greenback Goes Up in Smoke

“The world is changing, and the dollar is losing its status,” said Fabrizio Fiorini in an interview with Bloomberg this week. As one of those in charge of the $12 billion Aletti Gestielle SGR in Milan, Fiorini cannot be dismissed as some anti-American crank.

But Fiorini is only one of a legion of financial experts lamenting the dollar’s bleak prospects. So obvious and profound is the dollar’s predicament that CNBC’s Lawrence Kudlow recently felt compelled to pen a piece plaintively titled “Save the Greenback, Mr. President.” On Tuesday Reuters ran an article by James Saft headlined “Dollar Faces a Long Journey Downward.”

The roots of the dollar’s trouble are not difficult to trace. The main culprit is the breathtaking fiscal irresponsibility in Washington, D.C. With deficit spending completely out of control our government has been contracting obligations it cannot meet and the world is catching up with the fact. The fear is that the American government will do what governments almost always do when they find themselves facing an insurmountable debt: They inflate their currency to lighten the burden. This is, of course, a dishonest way to dispose of one’s obligations, because investors are paid back with debased money.

Faced with the prospect of holding increasingly worthless dollars, players around the world are looking for ways to unload the greenback. They have every reason to do so.

Continue reading at Frontpage

Dollar Trouble

“In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil,” reported the UK Independent last week. According to the story, a number of secret meetings have already been held to hammer out the new monetary framework. The news sent shock-waves around, and understandably so, given the potentially cataclysmic implications of this development. Should it succeed, it would portend nothing less than the collapse of the global monetary regime which has for more than six decades rested on the dollar as its pillar and foundation.

As expected, the countries involved issued prompt denials once the story broke. Their protestations notwithstanding, there is every reason to believe that the story is, in fact, true. For one thing, it was penned by the Independent’s long-time Middle East correspondent Robert Fisk, one of Britain’s most respected and credible journalists. The recipient of more awards and prizes than any other British foreign reporter, Fisk is not known for putting out stories based on unverified hearsay. But even more importantly, the move away from the dollar would be the logical culmination of the stream of warnings and complaints which have been heard in recent months from experts and finance officials of foreign nations.

Continue reading at Frontpage

The $66 Trillion Question

Reporting on the recent protest march in Washington, the AP interviewedTerri Hall, a participant, who said that she “felt compelled to become political” because of her concerns about government spending. Hall thinks that America’s deficits are out of control, which, in her view, is “putting the country at risk.”

Terri Hall is but one of millions of Americans awakening to the fact that their country is in serious fiscal trouble. What most have not yet grasped is just how dire the situation really is. To put it plainly, the US is bankrupt. This is no hyperbole, but a reflection of the fact that the federal government has contracted more obligations than it can possibly make good on.

The federal government’s overall indebtedness is essentially the sum of two figures. The first is the national debt, which currently stands at $11.9 trillion. The second is the amount of implicit obligations inherent in entitlement programs. These are conservatively estimated to be in the area of $55 trillion. This makes for the sum total of at least $66 trillion.

Continue reading at Frontpage

They Call us Leftists

“Neocons are leftists in disguise,” claimed William H. Calhoun in an article a few years ago. The first impulse would be to dismiss the assertion with indignation. Surely few things could be more unpalatable or offensive than being called a leftist.

The more one reflects on the recent past, however, the more one realizes that Calhoun’s statement — an exaggeration though it may be — is not entirely groundless. If by a leftist we mean someone who expands government and the state, then surely we neoconservatives have displayed some leftist tendencies of late.

Continue reading at American Thinker

In Defense of Capitalism

“Capitalism is an evil, and you cannot regulate evil… you have to eliminate it and replace it with something that is good for all people,” concludes Michael Moore in his latest documentary Capitalism: A Love Story.

Moore’s fulmination is neither surprising nor atypical in this era when capitalism finds itself under all-out assault. Having become something of a derogatory term, capitalism gets faulted for almost every societal problem and ill. Blamed for exploitation, poverty, fraud, alienation, crime, racism and nearly everything else, capitalism is increasingly cast as the great villain of our time.

The bad rap could not be more undeserved. Rather than mankind’s scourge, capitalism has been its greatest benefactor. It is, in fact, the only socio-economic system that can provide ordinary people with dignified and prosperous lives. It was only with the advent of capitalism that the common man was able to escape the penury and filth of his existence to which he had been previously consigned. Until then, the lives of most people were short, hard and miserable. Today, as if by miracle, we can enjoy greater comforts and ease of life than the kings of the past. It is to capitalism that we owe this good fortune.

Capitalism is responsible for nearly everything that makes human existence easy and comfortable. The automobile, the supermarket, the personal computer, the washing machine, the hammer-drill, the iPhone, the airplane, the TV set, the chewing gum, penicillin, electricity and countless other good things have all been birthed and mass produced by capitalism.

Because of its immense wealth generating power, people who live in capitalist societies enjoy rising standards of living and material affluence. Conversely, those who live in non-capitalist societies invariably experience the opposite. To see this, it is enough to compare the experience of, let’s say, the United States,Switzerland and Australia, on one hand, with that of the Soviet Union, Cuba, North Korea and Saudi Arabiaon the other. The rule always holds: Capitalist societies are invariably prosperous. Non-capitalist ones are always poor.

Continue reading at Frontpage

Lying about the Debt

Last week the Office of Management and Budget released its updated fiscal outlook for the next ten years. Called the Mid-Session Review (MSR), the report was eagerly awaited in light of the growing alarm at the seemingly unrestrained spending of the current administration. This alarm is growing so widespread and intense that it threatens to sink much of the president’s program. Whether it comes to healthcare, cap-and-trade or various economic stimuli, their projected multi-trillion dollar costs are the number one concern on the minds of most voters.

Knowing that more bad fiscal news would effectually doom his agenda, the president and his team increasingly resort to deception. There is an an egregious instance of this in the MSR when they take advantage of confusing terminology to conceal the true size of the national debt.

Traditionally, the most scrutinized and reported on portion of budget documents is the section containing summary tables. This is because they present data, trends and projections – which are often complex and confusing – in relatively easy-to-grasp graphical form. The exhibits are normally arranged in order of importance with the big picture presented first.

The leading table in Obama’s Mid-Session Review is labelled S-1 and called Budget Totals. As would be expected, it seemingly features the three main indicators of a country’s fiscal health: GDP, deficit, and “debt held by the public.” The table’s penultimate line appears to present that all-important gauge: the country’s indebtedness expressed as a percentage of GDP. The administration forecasts rapid growth of this variable. It will jump from 40.8 in 2008 – the last year of Bush – to 55.7 percent in 2009. It will then grow to 70.0 percent in 2011 and finally it will reach 76.5 percent of GDP in 2019, the last year for which projections are made.

Looking at the chart most people will naturally get the impression that these figures express the country’s public debt as a percentage of its annual economic output. This, however, is not so. In reality America’s public debt will be much higher. This is because “debt held by the public” – which is what the administration tracks in its first exhibit – is not the same thing as “public debt.”

Continue reading at Frontpage

The Worst is Yet to Come

“Today, we’re pointed in the right direction… While we’ve rescued our economy from catastrophe, we’ve also begun to build a new foundation for growth,” said President Obama recently.

Unfortunately, the president’s declarations and all the talk about the green shoots by his acolytes in the media are merely wishful thinking. Far from rescuing it, the Bush/Obama stimulus has dealt a damaging blow to the economy, and one which will exert its harmful effects for years to come. We only need to take a quick look at the big picture to see why.

Last year the American economic system experienced major trauma as more and more banks, companies and individuals were brought to the verge of bankruptcy. In most cases their plight was caused by their inability to service their liabilities. Buoyed by the easy availability of cheap credit and loose monetary policy of preceding years, government, commercial entities as well as private persons had taken on unprecedented levels of debt. Paul Craig Roberts, formerly Assistant Secretary of the Treasury in the Reagan Administration, correctly points out that we lived in “a debt economy.”

Continue reading at Frontpage

America’s National Debt

America’s National Debt and Gross Domestic Product

The figures are taken from the Mid-Session Review by the Office of Management and Budget published by the White House on August 25, 2009

The dollars amounts are given in trillions

For in-depth analysis click here

	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019
Gross Domestic Product (GDP)	$14.116	$14.442	$15.123	$16.021	$16.997	$18.011	$19.016	$19.983	$20.944	$21.890	$22.857
Total, gross federal debt	$12.212	$14.087	$15.276	$16.388	$17.509	$18.646	$19.772	$20.930	$22.095	$23.272	$24.505
Debt as % of GDP	85.8%	97.5%	101.0%	102.2%	103.0%	103.5%	103.9%	104.7%	105.4%	106.3%	107.2%

Falling for the Great Lie

Speaking about foreign holders of American treasuries, the noted financial expert Peter Schiff said this in aspeech at the Ludwig von Mises Institute:

“We’re not going to pay the Chinese back their money. It’s impossible. We can’t. We can’t possibly.”

Schiff’s point was that America is not good for its debts. Sadly, he is right. Having incurred more than $65 trillion in obligations of various kinds, the federal government finds itself in an insurmountable fiscal hole. To give a sense of size, this amount is more than the annual economic output of the whole world and four times America’s Gross Domestic Product. It would be impossible to manage this even if our leaders suddenly came to their senses and began to behave responsibly. There is little chance of that, however. The larger our debt, the more eager they are to spend more.

Despite our leaders’ efforts to conceal the level of indebtedness, its reality cannot be evaded. The steady weakening of the dollar is one evidence of that. In recent months financial experts have even been discussing the unthinkable: The possibility that the American government may default. The well-known writer Niall Ferguson suggested this possibility in an interview with Vanity Fair in January of this year. Around the same time The Washington Post ran an article under the headline We’re Borrowing Like Mad. Can the U.S. Pay It Back? This was at the time when the notion of a trillion dollar budget deficit seemed insane. Needless to say, the deficit will end up being close to $2 trillion at the end of this fiscal year.

Continue reading at Frontpage

One Nation Under Debt

Frontpage, August 12, 2009

Show me the money! That seems to be the rallying cry of the dwindling number of people who still support the federal government’s debt-driving economic spending.

“I actually think that what we need now is another round of stimulus,” said economist Joseph Stiglitz in a recent CNN interview. In this era of budget busting deficits and mountainous debts, one would think that these must be the words of a fiscal crank. But Joseph Stiglitz does not fit the description: A professor atColumbia University, he won the Nobel Prize in economics in 2001. He has also served as Chief Economist of the World Bank and Chair of President Clinton’s Council of Economic Advisors.

Stiglitz’s sterling credentials notwithstanding, there was something very wrong with his CNN appearance: Almost nothing he said made sense. For instance, when asked by his interlocutor whether he was “worried about the amount of money this government is spending,” Stiglitz nonchalantly replied:

It all depends on what you do with the money. You know, businesses borrow all the time. If you borrow and create an asset, then the country’s balance sheet, our overall wealth can actually be stronger. If we invest in technology, if we invest in education, if we invest in infrastructure…these are high return investments.

Comparing government to a business when talking about spending is simply ludicrous. To begin with, any business with our government’s level of debt would be in bankruptcy by now. The public debt of the federal government, according to the administration’s own estimates, will soon exceed America’s annual economic output. On Stiglitz’s analogy, it is as if a corporation carried a debt burden equal to its yearly revenues.

The public debt, however, does not represent the full extent of the government’s indebtedness. Apart from what it owes to holders of treasuries, it is also liable for over $50 trillion in future payments to beneficiaries of entitlement programs such as Social Security, Medicare and Medicaid. Altogether, the government is on the hook for more than $65 trillion, which is more than the world’s annual combined economic output.

Unsurprisingly, a growing number of observers are now coming to the conclusion that it is simply impossible to meet all these obligations. But rather than facing up to the problem, the political class has found an easy way out. Using an accounting sleight-of-hand, they simply erased entitlements from the national balance sheet. Needless to say, it is a crime for businesses to conceal their liabilities in this way. Indeed, if any business behaved as irresponsibly and dishonestly as our federal government does, it would end up in bankruptcy proceedings, its bonds would be junk, and its management, in all probability, in jail.

Continue reading at Frontpage

The Capitalist Manifesto

First published at Frontpage

From the current economic crisis through third-world poverty to global warming, capitalism has been blamed for nearly every major problem of our day. Accused of fostering discrimination, exploitation, environmental destruction and a host of other ills, it looms as a popular villain in the contemporary western psyche.

But this viewpoint could hardly be more unfair, argues Robert Murphy in The Politically Incorrect Guide to Capitalism. In this much-needed work, Murphy takes on the most common anti-capitalist myths and exposes them for the lies that they are. In the process he shows that capitalism is not only innocent of the charges leveled against it, but it is actually one of the best things that has ever happened to man (and also to the environment).

This may come as a shock to those fed by the leftist propaganda of the education and media establishments. Take, for example, the often made claim that capitalism exploits the poor to serve the interests of the rich. “Historically, this is precisely backward,” notes Murphy. Before capitalism came along, the vast majority of people lived lives of endless drudgery, poverty and squalor. Those who believe that feudal serfs spent their time enjoying pristine nature, doing handicrafts and attending opera until capitalism spoilt their fun by imposing hard labor should think again. Luxury goods as well as life’s basic comforts were the monopoly of the small elite aristocracy. Things, however, changed with the advent of capitalism when businessmen began gearing production toward the newly rising and empowered working classes. Murphy points out how in the course of time this brought about a stunning result: “The average blue-collar worker under capitalism was (and is) fantastically wealthy compared to the kings of the feudal period.”

Continue reading at Frontpage