A New Era of Responsibility?

“We will continue to go through the budget, line by line, page by page, to eliminate programs that we can’t afford and don’t work,” declared President Obama in his State of the Union address on January 27.

Five days later the president delivered his Fiscal 2011 budget to the US Congress. This he did to much fanfare, seeking to cast it as a product of fiscal prudence. In the message that accompanied the document, he stated:

“The Budget includes more than 120 programs for termination, reduction, or other savings for a total of approximately $23 billion in 2011, as well as an aggressive effort to reduce the tens of billions of dollars in improper Government payments made each year.”

At first sight this may look like the work of an earnest waste cutter. It is, however, nothing of the sort. The $23 billion of “savings” is actually only about one half of one percent of the $3.84 trillion total.

A question for the president: Is one half of one percent all the waste you can find in the federal government? After all, it is an institution whose financial profligacy is legendary. Should we assume, Mr. President, that all of the remaining 99.5 percent is spent wisely and un-wastefully?

It goes without saying that most of the meagre $23 billion will never be cut. Those involved with the agencies and programs slatted for reductions will make sure of that. Claiming that their work is indispensable for the well-being of the nation, they will make a hysterical run on Capitol Hill where their cause will receive much sympathy. When all is said and done most of their budgets will not only be restored, but many will walk away with increases.

But here is the larger point. By calling the proposed $23 billion of cuts “savings,” the administration makes it sound as if the government’s expenditures would go down by this amount vis-à-vis last year’s levels.  This, however, is not the case. The proposed $3.84 trillion budget represents a three percent plus increase over the 2010 total. So even as ordinary Americans are forced to cut back on their consumption, the federal government’s voracious appetite for spending continues to grow unabated. Needless to say, we can ill afford it. As a consequence, the government will post a deficit of $1.25 trillion, which will represent more than 8 percent of the nation’s GDP. These abysmal figures, however, have done nothing to detract from the president’s sense of humor. He chose to unveil his budget under the motto “a new era of responsibility.”

But all this is still apparently not enough for some of the president’s friends on Capitol Hill. Shortly after he introduced his 2011 budget proposal, Rep. James Clyburn (D-S.C.), the House majority whip, opined that looking for any more savings would only make things worse. “We’re not going to save our way out of this recession. We’ve got to spend our way out of this recession,” he said.

The insanity of this should be obvious to all. It is simply impossible to spend our way out of trouble when we are so deeply in debt already. Spending more will only make things worse. Having incurred astronomical debts, we are still able to borrow at low rates because of the dollar’s status as the world’s reserve currency. But this situation will sooner or later come to an end. In another sign that the day of fiscal reckoning is approach fast, Moody’s Investor Serviceswarned that at some point it may be forced to lower America’s triple A credit rating. The reason for this? The unrestrained spending of the federal government. Steven Hess, senior credit officer at Moody’s, told the Financial Times that the budget outlook submitted by the Obama administration last week “did not stabilise debt levels in relation to gross domestic product.” It would be interesting to hear the spend-happy James Clyburn comment on that one.

Continue reading at Frontpage

Obama’s Budget Blame Game

Facing the brewing outrage about out of control spending, President Obama is doing what he usually does when he finds himself in trouble: He blames George Bush. He did this again in his State of the Union speech in which he repeatedly hinted that it is his predecessor who is responsible for the country’s fiscal plight. As to his own role, there was not much he could do, since he took office with “a government deeply in debt.” Our current deficits are thus largely Bush’s doing: “The problem is that’s what we did for eight years. That’s what helped us into this crisis. It’s what helped lead to these deficits.”

But let’s look at some facts. When Obama took office on January 20, 2009 the national debt was $10.6 trillion. By the time he delivered his State of the Union remarks last Wednesday, it stood at $12.3 trillion. As Ken Timmerman observes, this spectacular increase represents “the biggest expansion of government spending in U.S. history.”

To be fair, the expansion is partially attributable to Bush. This is largely due to the $700 billion TARP authorization which was passed toward the end of Bush’s presidency, and part of which was spent during Obama’s term.  But we must not forget that then-Senator Obama supported and voted for the measure. To now blame his predecessor for the cost of the policy he himself helped to implement is duplicitous at best.

There is every reason to believe that had Obama been in charge when the crisis erupted the national debt would have been even higher today. If anything, Obama thought the government was not spending enough. He sought to remedy this shortly after he took office with the $786 stimulus package. This was the largest spending measure in American history. The amount authorized in that single bill was more than one and a half amount the largest ever yearlydeficit posted under Bush in 2008.

This is not to excuse Bush’s spendthrift ways, but only to show the extent of Obama’s disingenuousness. But apart from the cynicism of it, there is an even more fundamental question that needs be asked. Even if we accept the claim that our present over-spending is somehow Bush’s fault, why has the president done nothing to address this problem?

During the campaign Obama cast himself as someone who would boldly tackle the great problems that afflict this country. Why, then, has he not tried to introduce some sanity into federal finances and budgeting? A year should given him plenty of time to at least make a start in the right direction. And yet the president has done anything to stop the spending craze. Quite to the contrary, he has inflamed it further by ratcheting up spending to unprecedented levels. And now when a shell-shocked nation recoils at his excesses, he tries to blame another. This is not how great leaders act.

Continue reading at Frontpage

Do We Have What It Takes?

Last week’s special election in Massachusetts has made it strikingly clear that a seismic electoral shift is underway in America. So profound is this shift that even left-leaning populations are now willing to vote for those who refer to themselves as conservatives. While liberal pundits still shake their heads in disbelief, this is not all that surprising given the manifestly misguided and destructive actions of the progressives in Washington, D.C.

Unrestrained spending, nationalization of the private sector, and the rapid expansion of the state in every direction have frightened and repulsed the American people. As a result, the power pendulum is now swinging fast to the other side. That this is no wishful thinking is affirmed by a string of announced retirements by prominent Democrats who have apparently seen the writing on the wall. This combined with the fact that self-identified conservatives constitute the largest ideological demographic in the United States almost guarantee a conservative electoral resurgence.

But even as the American people are increasingly looking to conservatism for deliverance, we need to ask whether we have what it takes to tackle the existential challenges this country faces. Many of us may be startled by this question, since we take it for granted that our side has exactly what America needs at this difficult hour. But even a quick look at the Massachusetts race should make it obvious why this question must be asked.

It has been widely observed that healthcare was a pivotal issue in that contest. As one pundit put it in the Wall Street Journal “a centerpiece of Mr. Brown’s campaign was opposition to the president’s health-care plan.” So strong was Brown’s opposition that he referred to himself as Brown 41. He did this to emphasize his intent to be that 41^th vote that would bury the current reform bill in the mire of Senate’s legislative filibuster.

In light of the growing discontent with Obama’s proposed reform, Brown’s stance paid rich electoral dividend. In addition to being politically expedient, his opposition was, of course, also the right line to take. This is because the president’s proposed takeover of one sixth of the American economy is a sure prescription for disaster. There are even those who think that its implementation would mean the end of America as we know it. Judging from what happened in other countries, they are probably right. Nationalized medicine – which is without question where Obama’s “reform” would eventually lead – is often that final straw that breaks people’s spirit of independence and turns them into docile wards of the state.

But amidst all the raging passions and strife we should not overlook the fact that Barack Obama is right about one thing: America’s medical system is in trouble and needs to be reformed.

Thus President Obama is correct in identifying the problem. It is his proposed remedy that is wrong. In the president’s mind the crisis is a result of market failure. On this point he could not be more mistaken. To begin with, the free market cannot be responsible, because there is little of it left in that troubled sector. The most tightly and extensively regulated sphere of our economy, healthcare delivery is governed by countless rules and regulations. Those who think that American medicine is a free market affair only need only to ask medical practitioners who every day belabor under the crushing burden of governmentally-mandated decrees and requirements.

If truth be told, American medicine is half-socialized already and it is this pervasive governmental involvement that is the cause of the problem. This should come as no surprise, since what is happening in healthcare happens every time government gets involved in any area. It has been well established – both by empirical observation and by theory – that government intervention invariably introduces inefficiencies, disruptions and dislocations. There is, in fact, a direct correlation between the level of government engagement in a given sector and the degree of dysfunction that the sector will suffer as a result. The many deep and serious problems that are afflicting the healthcare industry – the rapidly rising costs, the inefficiencies, the onerous administrative and bureaucratic burdens – are the inevitable result of the relentless and extensive interference by government.

There is only one way in which America’s medical system can truly be reformed: by getting government out of it. Only by turning the industry over to the free market can costs be brought down and the system made more efficient. It has been shown over and again that the free market delivers goods and services in the most efficient way at the lowest cost. If we let it to operate in this sector, it will in time optimize efficiency and drive prices to the lowest level possible. Government intervention, on the other hand, will accomplish the exact opposite. Given all that we know about economics, it cannot be otherwise.

And this brings us back to Scott Brown whose opposition to Obama’s plan will thankfully help to forestall the disaster which the president’s plan would inevitably foist on the country. But we also need to ask this question: Does the man whom many would like to make the standard bearer of the incipient conservative revival have what it takes to help solve the crisis?

Unfortunately, he does not. Scott Brown is actually for governmentally managed healthcare as evidenced by his support for Massachusetts’ program of mandated health insurance. While it is true that Brown will vote to stop the kind of socialization Obama has in mind, he himself cannot effect workable reform. Any attempt by him to implement his ideas on the national level would, in fact, only further exacerbate the crisis.

Continue reading at American Thinker

On the Road to Trouble

“Is America’s Financial Collapse Inevitable?” asks the title of a recent piece by Patrick Buchanan. The article points out something we have repeatedly discussed here: There is no way the federal government can meet its financial obligations.

If our government were ever to do so, it would first have to eliminate its colossal deficits. For this to happen deep budget cuts would be required. But this is something that is not conceivable in today’s environment. We will understand why when we look at the largest budget items, which are Medicare, Social Security, Medicaid, defense and interest on the debt. Since these constitute the bulk of government expenditures, any meaningful deficit reduction would require that substantial cuts be made there. The problem is that all of the above are for all practical purposes untouchable.

Interest on the debt is out of question, since not paying it in full would put our federal government in default. This cannot be allowed to happen as it would result in the immediate collapse of our currency. As far as Medicare, Social Security and Medicaid are concerned, no elected official will touch them with a ten foot pole, since doing so would mean political suicide. When it comes to defense the prospect of any reductions is likewise nil. The ongoing operations in Iraq, our deepening commitment in Afghanistan as well as numerous challenges presented by the War on Terror make any deep cuts a practical impossibility.

But what about taxes? Could they not be raised to increase revenue and close the budget gap that way? To begin with, any sharp hikes are out of question for the increasingly unpopular president who pledged during the campaign not to raise taxes on the middle class. To even suggest such a thing would be politically precarious if not suicidal. But even if Obama would somehow managed to do it, higher taxes would only further depress the already-overtaxed and over-regulated economy. This would in turn shrink the tax base and forestall the possibility of higher revenue intake.

Buchanan asks how are we ever going to get a handle on our runaway finances if “taxes are off the table, Afghan war costs are inexorably rising and cuts in Social Security, Medicare, Medicaid and entitlement programs are politically impossible.” There is, of course, no satisfactory answer. The truth is that our government is not going to get its fiscal house in order. And even though Buchanan does not state so explicitly, the implied answer to his starting question – is America’s financial collapse inevitable – is “yes.”

Pat Buchanan is not alone suffering from dark premonitions. Last week legendary investor and market commentator Marc Faber pulled no punches when asked what he thought of America’s prospects. “We are doomed,” was his response. The reason for his bleak assessment? The immense and rapidly growing indebtedness of the federal government. In addition to all the other problems, Faber predicts that the rate interest that the government has to pay on the debt will shoot up rapidly in the next few years. Last year interest claimed about 12 percent of the government’s tax revenue. Faber estimates that within five years the figure will climb to some 35 percent. It goes without saying that such a jump would have a devastating impact on the already overextended federal budget.

Marc Faber is not the only one who worries about this. It has been pointed out by a number of finance experts that up until now the federal government has been able to borrow at very low rates due to the dollar’s status as the world’s reserve currency. But there are clear signs that this favorable situation is coming to an end. Sensing that the US will not be able to make good on its debt, governments and investors have been growing increasingly wary of financing our borrowing by buying treasuries. But even as they plead with Washington to end its spendthrift ways, they have been earnestly searching for an alternative to the dollar. Admittedly, this is no easy task, since there is no major government today that can be trusted to conduct its fiscal affairs in a way that would guarantee a stable currency.

Continue reading at Frontpage

Comrades’ Way

“Unemployment holds at 10 percent,” read assorted headlines in response to December’s employment data provided by the Department of Labor.

The headlines represent a brave effort by the administration’s supporters to put a good spin on the bad news. Although not great, things are at least not getting worse is the implication. But things are getting worse. Last month the economy actually shed 85,000 jobs. The reason why the loss did not push up the jobless rate was because over the same period 600,000 discouraged people gave up looking for work. Because of this, they are no longer classified as unemployed. Had those workers been taken into the account, the December unemployment rate would have been 10.4 percent, the highest in almost thirty years.

When all those who have given up looking for employment are included, we get an overall unemployment level of 17.3 percent. This is the number that really matters, because it is a true gauge of the job market. It is also the measure that is given when people talk about the unemployment numbers during the Great Depression. Significantly, today’s picture is beginning to increasingly resemble that of the 1930s. And as luck would have it, all this is happening under the auspices of the man who rode into the Oval Office on promises of swift fixes.

As an aside, when unemployment was barely 5 percent in 2007 the media kept talking about the worst economy in our lifetimes. Today the grossly understated unemployment rate of 10 percent  is a sign that things are “steady” and “stable.” Can you imagine what would have happened if the rate had shot up to 10 percent under George W. Bush? The refrain would have been “impeach and crucify.”

It would not, however, be fair to take President Obama’s promise of quick remedies too literally.  It was made in the heat of a campaign when politicians must say all kinds of things to stand a chance. The president was actually correct when he later observed that the problems from which we suffer were long in the making and cannot be fixed overnight. Our problems are for the most part rooted in the many years of liberal/leftists policies, which, sadly, have been practiced by both parties. They also happen to be the same policies that President Obama has relentlessly pursued since the first day of his presidency. They include include government expansion, reckless borrowing, unsustainably low interest rates, heavy regulation and federal intrusion into every part of our lives.

This being said, the American economy has always possessed an inner resilience that time and again made it possible to shake off blows inflicted by the political class. The one exception was the presidency of Franklin Roosevelt – a driven and charismatic centralizer – whose policies kept the economy in the grip of a depression for over a decade. Given Obama’s FDR-like faith in the efficacy of government intervention, we may not only have a reprisal, but things may actually get worse than they did in the 1930s.

Continue reading at Frontpage

Ending Corruption in Washington

Even as our government officials claim that the worst of the recession is behind us their actions hardly indicate that they believe it themselves. The financial-reform bill that the House of Representatives passed last month authorizes the Federal Reserve to provide up to $4 trillion in emergency relief to big banks the next time things come crashing down. This flies directly in the face of the often heard assurances that the bailout spree is over. Obviously not, as the House is laying the groundwork for the continuation of the money bonanza. And what a bonanza it promises to be. The authorized figure is far more than anything we have seen so far. To give a sense of scale, it exceeds by a factor of five the amount of President Obama’s stimulus package.

The bill is the brainchild of Barney Frank, the ultra liberal chairman of the House Financial Services Committee. Believe it or not, it is the same Barney Frank who has been calling for tighter regulations of Wall Street and its practices. And yet at the same time, this man is prepared to give the bankers unprecedented amounts of money. How can this be?

If we want to understand why a politician takes the positions he does, we can usually figure it out by following the money. Barney Frank is no exception. A recent article by Kevin Connor offers some revealing data and facts. Since rising to a leadership position on the House Financial Services Committee in 2002, Frank has been getting almost half of his campaign contributions from what is referred to as FIRE. The acronym stands for the finance, insurance, and real estate industries. In other words, some fifty percent of Congressman Frank’s campaign cash is supplied by that bundle of special interests loosely referred to as Wall Street. So liked is Frank by them that they have made him a leading beneficiary of their generosity on Capitol Hill. Notes Connor:

Only two members of the House have taken in a larger share of their money from Wall Street over the past two campaign cycles – Paul Kanjorski, a Democrat, and Spencer Bachus, a Republican. And during the 2006 cycle, Frank took in more money from FIRE than any other Democratic member of the House, and all but a few Republicans.

In light of the above, Frank’s willingness to authorize $4 trillion for his benefactors should really come as no surprise. The truth is that Barney Frank is in the back pocket of Wall Street, and judging from his “reform” bill his sponsors are getting an excellent rate of return on their investment. This is, however, something Frank would not want his liberal base to figure out given that in public he poses as the scourge of unscrupulous financiers. Nothing could be further from the truth.

The case of Barney Frank shows the cancerous corruption at the heart of our system whereby lawmakers write favorable legislation in exchange for bribes. To make the whole racket even more perverse such legislation often involves massive transfers of cash. In practical terms it means that politicians use the power of the state to take money from one group of citizens and give it to the special interests who finance their careers.

Many people think that to stamp out this corruption we need some reform bill that would regulate how campaign donations are given and received. But this is a futile hope. There have been bills of this kind, but politicians have always found ways around them. After all, such bills must be written and passed by the very people whose conduct we seek to rgulate. Because of this, we can be certain that the measures they propose will be weak and loophole-ridden.

Neither will it do to vote the bumps out. This has also been tried before and always with the same result: Most of those who replace the bumps eventually turn into bumps themselves. We have seen it in 1994 when the Gingrich republicans – riding a wave of national disgust with Congressional shenanigans – threw out the spendthrift, earmark-addicted, special-interest beholden Democrats. But barely a decade later one could hardly tell the difference, and in 2006 when they were sent packing by an angry electorate. The Democrats who took their place promised the most ethical Congress in history. Instead we got a gang of thieves whose pilfering of our national wealth makes Bernie Madoff look like a choir boy.

Continue reading at American Thinker

Mother Nature’s Sucker Punch

“Beijing had its coldest morning in almost 40 years and its biggest snowfall since 1951. Britain is suffering through its longest cold snap since 1981. And freezing weather is gripping the South, including Florida’s orange groves and beaches, and the Northeast,” reads a recent AP wire.

It could not be more ironic that all the efforts of the world’s sophisticates to build Obama up have been brought to nought by mother nature who exposed him for the chump he is. For only a chump could advocate economic suicide to stop global warming while the earth was about to enter a historic arctic snap.

Obama tried this in Copenhagen where he feverishly pressured the assembled dignitaries to adopt measures that would drive their economies into the ground. Not surprisingly, they said, “thanks, but no thanks.” They apparently did not think it was such a good idea to drag their people back into the stone age for the sake of a scam. On the other hand, they expressed no reservation if Obama tried to do this at home in America.

The arctic gust should blast away whatever is left of that bogus know-it-all mantle the dotting media have tried to spin around the man. The truth is the president has no clothes and the world is not warming either. The leaders of rising economic powers perceived this in Copenhagen and treated him accordingly. In a stinging snub, the Chinese prime minister did not show up for the second of their two scheduled meetings and sent a low level negotiator instead. When a frantic Obama tried to get an appointment with India’s prime minister, he was curtly informed that the premier had – Elvis-like – left the building and was on his way to the airport. Those were unprecedented humiliations for a sitting US president. The dissing, however, is not all that surprising given the president’s comedic behavior.

The president indeed deserves a Nobel Prize, but for tomfoolery. It should be presented to him by Al Gore who is often called a “prophet” by his groupies. Some prophet he. In January of 2006 he was quoted in the Washington Post as claiming that “humans may have only 10 years left to save the planet from turning into a total frying pan.” Third of the way down Gore’s apocalyptic timeline, things are still not getting getting any warmer. Quite to the contrary, if it continues on in this way by the end of the ten years we will have all frozen to death.

Gore’s doomsday claims notwithstanding, data for the latest decade appear to indicate that the world is actually cooling. Let us hope that the trend will not continue, because serious scientists tell us that we are due for another ice age. This is not a pleasant prospect given that the last time around the permanent ice sheet extended all the way down to New York’s Central Park.

Gore’s failed prophecies did not prevent him from leveraging his fear-mongering into an immense personal fortune. His antics and stunts easily make him the leading candidate for the title of the greatest scam-artist of all time. One cannot, in fact, think of any other man who has fooled so many people and made so much money from his swindle.

It comes complete with brazen hypocrisy whereby Gore – who himself likes to live like a king – would force others into public transport and socialist-era highrise buildings. When called on his environmental sins, he piously claimed that he does his penance by purchasing carbon credits. What he did not say is that he bought those credits from the company he himself founded and co-owned. Gore obviously believes that the penance money should stay in the family. By this he has proven wrong that old proverb about not being able to eat one’s own cake.

Continue reading at American Thinker

Unhinged Spending Syndrome

“Yukio Hatoyama, the new Japanese Prime Minister, has stunned a nation already mired in huge public debt by unveiling the country’s biggest ever postwar budget,” reported the UK Times the other day. Hatoyama’s budget of 92.3 trillion yen – roughly $1 trillion – represents a jump of some 10 percent over last year’s figure.

It goes without saying that the Japanese government does not have enough cash to pay for this extravaganza. In order to cover its bills, it will have to borrow a record 44.3 trillion yen ($440 billion), which will push the country’s public debt to nearly 195 percent GDP. This figure represents the largest debt-to-GDP ratio by far of any developed country. This increase in indebtedness comes at a time when tax revenues are projected to fall to the lowest level since 1984. According to projections, the amount of Japan’s debt issuance next year will exceed the government’s tax intake. This will mark a historic milestone of sorts, as Japan has not experienced this level of imbalance since the end of World War II.

It is ironic that Hayotama was swept to power in August on the promise that he would end the era of wasteful public spending that marred the rule of the previous government.  Today Hatoyama says that the sharp increase in public outlays is necessary, because it is aimed at “saving people’s lives.” At the same time, he seeks to convince the Japanese public that fiscally things are still under control. “I believe that we have delivered all we can without compromising fiscal discipline,” said Hatoyama at a news conference last week. But with a debt of nearly double the country’s annual economic output his words hardly sound reassuring.

Unfortunately, Japanese politicians are not the only ones suffering from a bad case of the unhinged spending syndrome. Their American counterparts are also badly afflicted by this pernicious malady. In its latest outbreak, California’s Governor Arnold Schwarzenegger has petitioned the federal government for help in closing the California’s $21 billion budget gap. In other words, Schwarzenegger is seeking a bailout for his insolvent state. The governor has been hard at work cultivating the political soil to make D.C. receptive to his plea. This is a somewhat delicate undertaking for a republican these days, given that Washington’s financial strings are largely controlled by democrats. But Governor Schwarzenegger has apparently figured out what it takes to win the favor of those in charge. For months he has enthusiastically praised President Obama and last week even gave him an A for his performance so far.

Continue reading at Frontpage

The Greatest Story ever Told

Someone once called the birth and life of Jesus Christ the greatest story ever told. It most certainly is, for no other story offers such a powerful and sublime mixture of wonder, pain, hope, and love. Paradoxically, the very thing that makes this story so irresistible to some also stands as a stumbling block to others, because to them its claims seem so fantastic that they could hardly be true.

Why, it is often asked, would God come down to this earth — a tiny planet tucked away in a forlorn corner of the universe — and assume human form? Why would the all-powerful Creator of this vast cosmos become a common man, and then let himself to be spat upon, tortured, and executed in a most demeaning and painful way?

To many, this notion seems far-fetched and strange. Some even think it outright absurd and preposterous. Of course, one can see why they would feel this way. But once we transcend the confines of our self-centered frame of reference and look at things from a higher plane, it will begin to make sense.

Wondrous as every aspect of creation is, man stands without question as its crowning glory. Hebrew scriptures tell us that man was created in God’s image. Man indeed possesses astonishing faculties that render him godlike in more ways than one. Man can, for example, perceive and drink in the beauty that surrounds him — be it a dewdrop, a person, or the glittering stars of a distant galaxy. Man can love. He has a sense of right and wrong. Man knows good, and he knows evil. He can conceive of the eternal. Man can contemplate his own existence. Man can dream and hope and grieve and rejoice.

No other creature possesses any of these wonderful abilities. Neither are they explainable by evolution, for they are not particularly useful in such a context. In fact, these abilities only make our lives unnecessarily complicated from an evolutionary point of view because they divert our attention and energies from seemingly more gainful pursuits. Thus man’s possession of these faculties cannot be justified in terms of scientific theories or materialistic categories. In this sense, they are supernatural, grafted as it were upon our cognitive apparatus from above.

But even as he possesses all these marvelous aptitudes, there is at the same time something deeply wrong with man. The evidence of this is all around us. Strife, conflict, and selfishness are facts of life. Mankind’s history is full of hatred, murder, and war. Even though man exhibits divine qualities, he can also be fiendishly cruel and ruthlessly rapacious. We make laws and erect fences to protect ourselves against the inhumanity of our fellow human beings. But it is not only other people we need to fear. Each one of us has lied, deceived, betrayed, taken, and injured. We have all been wronged, and we have all wronged in turn.

Scriptures call this sin and tell how it infected human nature, how it caused cracks and dislocations all throughout creation. Sin is deeply embedded in our nature. We incline toward it from early on, as anyone who has children quickly learns. It requires laws and rules and self-discipline to restrain sin’s destructive tendencies. And yet we fall for it again and again as we do things we later regret. Humanity, the pinnacle of God’s creation, has been doing this ever since the Garden of Eden.

Continue reading at American Thinker

Ben Bernanke: Bust of the Year

“The story of the year was a weak economy that could have been much, much weaker. Thank the man who runs the Federal Reserve, our mild-mannered economic overlord.” Thus wrote Time magazine about Fed Chairman Ben Bernanke, winner of the magazine’s “Person of the Year” award for 2009. Virtually crediting Bernanke with halting the world’s descent into an abyss, Timereverentially portrays him as a benevolent demigod, wisely presiding over our economic healing.

But when one carefully reads the featured interview, an impression forms that is sharply at odds with the one intended by Time’s panegyric. The interview is, in fact, so full of red flags that one almost wants to run for the closest panic button. Perhaps the most revealing moment comes when Bernanke talks about whether he foresaw the 2008 crisis:

“We were certainly aware of the risks of financial crisis, but one as large and as dangerous as this one, I certainly did not anticipate. I wish I had, but I didn’t.”

This is an astonishing admission from the Fed Chairman. The man who is now supposed to fix our problems did not see them coming in the first place. One may perhaps think that the problems were so byzantine that they were undetectable until they at last erupted in the crisis. But this is not so. There were those who saw the problems clearly. A few predicted the crisis with uncanny accuracy.

One of them was Peter Schiff, a financial commentator and president of Euro Pacific Capital. From 2005 onward, Schiff warned about the upcoming meltdown both on television and in writing. Early in 2007 Schiff published a book calledCrash Proof: How to Profit From the Coming Economic Collapse in which he told what was going to happen and advised how to prepare.

His predictions proved prescient and those who followed his advice were able not only to preserve their wealth but also to increase it. It is paradoxical that as Schiff was sounding the alarm, mainstream pundits – those of the Greenspan/Bernanke worldview – were laughing in his face. (You can see an eye-opening compilation of Schiff’s pre-crisis appearances on major television networks and the sneers he received by clicking here and here.)

Peter Schiff was not the only person who saw the crisis coming. Texas congressman Ron Paul saw it also. As early as September, 2003 he warned in the banking committee of the US Congress about the danger of a real-state bust:

“If we continue to inflate this bubble this way the housing crisis is going to cause an explosion and there is going to be damage worldwide.”

Almost no one on the committee – or in America at large for that matter – listened to Ron Paul’s warnings. Instead Paul was mocked and accused of insensitivity toward the poor. Needless to say, his foresight was vindicated in spectacular fashion by subsequent events.

Continue reading at Frontpage

Fiddling while Treasury Burns

The spend junkies who inhabit the United States Congress are once again trying to pull a fast one on the American people. Driven by an overpowering urge to feed their insatiable habit, they are plotting to raise the national debt ceiling by an unprecedented amount. Reports Politico:

“In a bold but risky year-end strategy, Democrats are preparing to raise the federal debt ceiling by as much as $1.8 trillion before New Year’s rather than have to face the issue again prior to the 2010 elections.”

One must question Politico’s choice of terms in describing the strategy as “bold.”Insidious would be a more fitting adjective.

Knowing that the national debt will continue skyrocket, our representatives want to avoid voting for another increase before next year’s elections. Such a vote could possibly make the debt a subject of discussion, which is something they wish to avoid at all costs. Having done their best to spend us into oblivion, their bashfulness is understandable. But judging by their maneuvering, they obviously don’t think their work is done.

The proposed increase should give us pause, because it reveals the extent to which our congressmen plan to waste our money in the months to come. In their own estimation, they will need $1.8 trillion to get them through the period between the end of December and the next election. This amount is $400 billion above the $1.4 trillion deficit that the government posted in fiscal 2009. In other words, Congressional democrats estimate that nearly 30 percent more will be spent in the next 10 months than was expended during the whole of the record-breaking 2009.

“We’ve incurred this debt. We have to pay our bills,” said House Majority Leader Steny Hoyer. Hoyer’s statement is utterly disingenuous. If we paid our bills we would not have to raise the debt ceiling. The fact is that we do not pay our bills. We simply borrow when payments come due. And when we have to pay interest on our debt, we borrow for that too.

We have been told that the deficit spending of fiscal 2009 was a one off event necessitated by the crisis. It was claimed that the unprecedented outlays were necessary to halt our descent into the abyss. The astronomical deficit of 2009 was supposed to be an exception. Once the storm blew over, we were supposed to return to a more restrained mode of conducting our financial affairs.

Continue reading at Frontpage

Spending Folly

“The U.S. government racked up a gaping shortfall in the first two months of this fiscal year after posting a record budget deficit last year,” reported Reuters recently.

Just in the first two months of fiscal 2010 – which began in October – our federal government managed to incur a budget shortfall of $292 billion. Alarmingly, the gap for the first two months of this fiscal year was wider than it was during the same period of last year, which ended with with a record deficit of $1.42 trillion. If this present trend continues, the government’s shortfall by the end of this month will match Bush’s 2008 spending record of $455 billion.

Here is something to ponder: In barely three months of this fiscal year, Barack Obama will manage to equal the outlays of George W. Bush during the whole of the most financially profligate year of his presidency.

The left used to bemoan bitterly the financial overindulgence of the Bush administration. Justifiably so. It is just too bad that they do not apply the same standard to the current administration. With Obama in charge they see nothing wrong with mind-boggling financial excesses and waste. They, in fact, clamor for more. Not content with the $786 billion pork-ridden outrage which they speciously called “stimulus,” they now demand another rescue package.

Liberals across the ranks – from Paul Krugman through Nancy Pelosi to Howard Dean – are calling for more money to be pumped into the moribund economy. One should not be wholly surprised at this, as the big spenders have repeatedly shown themselves singularly adept at stirring taxpayer money to themselves and their friends. Last week it was revealed, for example, that two firms ran by Hillary Clinton’s pollster Mark Penn grabbed nearly $6 million from the stimulus allotment.

In his speech at the Brookings Institution last week President Obama promised what amounts to a new round of massive spending. Among other things, the president proposed “a boost in investment in the nation’s infrastructure beyond what was included in the Recovery Act,” “incentives for consumers who retrofit their homes to become more energy efficient,” and expanding “select Recovery Act initiatives to promote energy efficiency and clean energy jobs.”

Continue reading at Frontpage

House of Debt

The announcement by the Dubai State Corporation that it was unable to pay interest on its debt sent shock-waves through global markets. Stocks and weak currencies dropped as traders and investors feared that this could usher a new episode in the world’s economic travailing.

One reaction in particular offered a revealing insight into just how uncertain things really are. Reported the UK Times:

Nervous traders transferred the focus of their anxieties from the risk of companies failing to the risk of nation states defaulting. Investors owed money by Mexico, Russia and Greece saw the price of insuring themselves against default rocket.

This should tell us much about the fragility of the world’s financial system. The debt of the  Dubai’s state-owned corporation is approximately $80 billion. Even though it is a substantial figure, it is not very large in the grand scheme of things. To give a sense of proportion, Dubai’s debt comes roughly to one tenth of President Obama’s stimulus package.

And yet the possibility of default by Dubai World immediately sent investors scrambling to insure themselves against default by whole countries. Their fears even extended to nations such as Russia, a country which in a comparatively good position thanks to its large energy revenues.

This shows how little confidence the international financial community has in the system. The world’s money people fear that even a relatively small event can set off a chain reaction that would bring down nation states. Being part of the action, they are in the position to know what so many on the main street have suspected all along – things are not well. In the words of  noted financial commentator Bill Bonner, they fear that “the ripples stirred up in Dubai” could quickly “turn to Tsunami waves elsewhere.”

Despite what Barack Obama, Ben Bernanke and Timothy Geithner tell us, the problems that brought the global financial system to the brink in 2008 have not been fixed. They have only been papered over with massive amounts of freshly printed cash and cheap money in the form of near-zero interest rates. But too much money and easy credit were at the root of the problem in the first place. The measures that have been taken have only provided a temporary relief. Sooner or later the underlying problems will resurface again. The finance elites sense this, which is why even a relatively small failure makes them so nervous. They know that the seeming return to normalcy is only surface deep.

Continue reading at Frontpage

Preparing for Global Collapse

“Société Générale has advised clients to be ready for a possible ‘global economic collapse’ over the next two years,” reported the UK Telegraph in a recent story.

Headquartered in France, Société Générale (SG) is one of Europe’s largest financial services companies. One of the oldest banks in France, it is also a quintessentially mainstream institution whose leadership is largely blind to the shortcomings of the world’s current monetary regime. As so many other mainstream outfits, SG failed to see the coming of the current crisis and had to be rescued to the tune of billions of dollars. Much of it, paradoxically, came from the American taxpayer via the AIG bail out.

One can get a good sense of how bad things must be if an institution like this is preparing its clients for the possibility of a “global economic collapse.” Given the present state of affairs, the bleak outlook is more than justified.

To begin with, many governments currently find themselves on the verge of bankruptcy. Having tried to spur economic growth through vast injections of new money, they have contracted immense public debts. “High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt,” concludes Société Générale in its report.

Leading the way is the United States which posted a deficit of nearly 10 percent GDP during the last fiscal year. The Obama administration projects that America’s national debt will exceed its annual economic output in the 2011 fiscal cycle. It will then continue expanding as far as the eye can see, reaching 107 percent of GDP in 2019. It should be remembered that these are the administration’s own figures, which almost always tend to be too optimistic. The reality is likely to be worse.

The deep indebtedness of western governments raises serious questions about their financial viability. Ambrose Evans-Pritchard, the Telegraph’s International Business Editor, puts it bluntly: “Almost all western governments are insolvent… we are bust.” Evans-Pritchard is correct. The level of indebtedness is unsustainable. Unable to squeeze much more from taxes, sooner or later western governments will have to start defaulting. The default will very likely take the form of high inflation as governments will try to print away their immense debt burden. This will, of course, have dire economic repercussions.

Dire as Société Générale’s report is, it still does not do full justice to the dept of our predicament. When discussing America’s fiscal plight, for example, it fails to take into consideration the biggest drag of all – entitlements. Estimated at more than $100 trillion, this astronomical figure represents the largest financial obligation in the history of the world. More than one and a half of the world’s current economic output, entitlements are a millstone that will pull America down into financial ruin. Needless to say, the rest of the world will also be caught in the vortex. With Social Security going into the red perhaps as early as this fiscal year, the “global economic” collapse may occur sooner than later. Western government officials, however, appear unconcerned about the black clouds on the horizon. Rather than trying to rein in spending, they blithely pile on even more debt. Oblivious to the impending financial crack up, they instead worry about thenon-existent anthropogenic global warming.

Continue reading at Frontpage

Gulf States Leaving the Dollar Behind?

“The Gulf single currency is not happening tomorrow or the day after,” saysKuwait’s Finance Minister Mustafa al-Shamali. “Sufficient time” is needed to prepare for such a move the minister told the Kuwaiti parliament last week.

Al-Shamali’s statement is startling in how matter-of-factly it reveals the intent of the Gulf states to abandon the dollar. Last month, veteran British journalist Robert Fisk filed a story titled “The Demise of the Dollar” in which he claimed that the Gulf countries were secretly working to set up a new currency to be used for oil trade. The report shook the markets and provoked a furor across the globe with many accusing Fisk of posting sensational stories based on obscure sources.

It turns out that Fisk was right. If anything his article understated how far along the Gulf countries had come in their quest to replace the dollar. So much so that they had set the beginning of the next year as the start of the new monetary regime. And even though they will not be able to meet the ambitious deadline, its very existence underscores the earnestness of those countries to decouple themselves from the dollar framework.

Such a move would have devastating repercussions for the United States, because it would deal a major blow to the dollar’s status as the world’s reserve currency. Once the dollar loses that special standing foreign central banks and investors will no longer be willing to continue purchasing Treasury bonds at low interest. Deprived of the ability to borrow cheaply from abroad, the American government would be forced to monetize portions of its debt in order to obtain cash for its expenditures. This would lead, among other things, to runaway inflation.

Perhaps the most telling thing about the ongoing effort of the Gulf states to drop the greenback is that none of them is an outright enemy of America. The United Arab Emirates, Kuwait, Bahrain, Qatar and Saudi Arabia maintain – for the most part – friendly relations with the United States. Their effort is thus not driven by some insidious desire to harm the US, but by the reckless monetary and fiscal policies of our own government. The spectacular growth of our national debt and the rapid expansion of the money supply have debased the dollar which has been dramatically losing value. It is all too understandable that resources-rich countries do not wish to trade their national wealth for an increasingly valueless currency.

There may still be those who think that all this is just a plot by Arabs to weaken the United States by sabotaging our currency. Arabs, however, are not the only ones trying to decouple themselves from it. Tuesday last week, Dominique Strauss-Kahn, the managing director of the International Monetary Fund, made a sobering speech in which he said:

The imperative of greater global currency stability means the world can no longer rely, as it has done since the end of the gold standard, on a currency issued by a single country.

The “currency issued by a single country” is, of course, the dollar which has been the foundation of the global monetary system ever since the Bretton Woods conference which took place in 1944. The statement of Strauss-Kahn clearly indicates that IMF leadership is of the view that the dollar era is coming to an end. This is not so surprising given the dollar’s deteriorating condition. For world finance and trade to function smoothly, a strong and stable medium of exchange is required. The dollar no longer possess these qualities and its fall is wreaking havoc all across the globe.

Continue reading at Frontpage