Archive for September, 2013

Back in June, as the official government unemployment rate continued to fall, Federal Reserve Chairman Ben Bernanke indicated to the public that the Fed might begin to scale back its easy money policies sometime before the end of this year.  As the Fed met this past week, many economists and analysts expected it to announce that the central bank would indeed begin tapering its current $85-billion-per-month bond buying scheme known as Quantitative Easing 3.

But, these are also the same pundits who have been claiming for five years that the U.S. economy is in a state of recovery.  They are either disingenuous or totally clueless.

This commentator had no doubt the Bernanke Fed would not begin tapering QE3 now.  In fact, QE3 may never end.

In the first place, for five years now the Fed has injected over $2 trillion into the economy through QE 1, 2, and 3 and the real unemployment rate is still north of 14 percent. More Americans are on food stamps than ever before.  Middle class incomes are down and poverty is up.  At this point, Bernanke’s largess is a life support system for the economy.  It will not cure the patient; just simply prolong the agony until the day of reckoning.

And the day of reckoning will come when long-term interest rates climb to the level where the current QE induced housing and stock market bubbles pop.  The carnage from that, however, will be minor compared to the destruction left behind from the mother of all bubbles – Treasury Bills.  The point is, in June when Bernanke simply mentioned the Fed might begin tapering the stock market tanked 550 points and T-bill and mortgage interest rates instantly rose.  Imagine the impact if the Fed really pulled the plug on the economy’s life support.  Additionally, because T-bill and mortgage interest rates have been rising that could mean Bernanke has lost control of long-term rates.  The only tool he has for combating rising rates is more stimulus.  Thus, instead of taper talk, analysts should be asking when the Fed will increase the amount of bond purchases per month.

Lastly and perhaps the biggest reason why the Fed may never be able to cut back on its monetary stimulus is because to do so would accelerate the insolvency of Uncle Sam.  Realize that even though the current national debt is almost 3 times what it was in 1996, interest payments on the debt after adjusting for inflation are lower today than they were then.  The difference is the rate of interest the federal government is charged.  Bernanke has no choice but to keep printing.  If he tapers, rates will go up, interest payments will become a bigger share of federal expenditures and he will have to print even more to keep things going.  The hyperinflation that will result will finish off what’s left of the U.S. economy.

Many will say the above is nothing more than doom and gloom.  But, the above scenario is real.  Ben Bernanke steered Fed policy down a dangerous path in 2008.  Instead of allowing the market to liquidate the mal-investments from the preceding boom, Bernanke chose the politically correct way by attempting to re-inflate the bubble.  Instead of letting those that were reckless and brought on the crisis lose their shirts; Bernanke launched a massive program of bailouts and bond purchases.  He has printed himself (and us) into a corner and thrown away the key.  To keep things from crashing he has no choice but to continue printing.  Even then, the end will ultimately come and the devastation will be so much worse than 2008’s crisis.

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D.C. Mayor to Sign Outrageous Minimum Wage Scheme into Law?

This could be the week when Washington, D.C. Mayor Vincent Gray signs into law a minimum wage measure passed by the D.C. city council two months ago.  The Large Retailer Accountability Act would require stores that are larger than 75,000 square feet and whose parent companies have yearly revenues of $1 billion.to pay its workers 50 percent more than the current local minimum wage of $8.25 per hour.  Proponents of the new law cite the need for Wal-Mart and other employers to pay a “living wage”.  Detractors of the measure, including the liberal Washington Post, correctly claim it will give the nation’s capital an anti-business reputation which will continue to hinder job growth in the District.

Naturally, the Post’s analysis is spot on as Wal-Mart has threatened to scrap plans to build up to six stores in the D.C. area.  Altogether, 1800 jobs would be lost including at two locations in impoverished neighborhoods.

Nevertheless, backers of the measure are stubbornly sticking to their dogma even as Wal-Mart warns it will pull the plug on 1800 jobs if the measure becomes law.

Last week, Councilman Vincent Orange, in a statement reflecting serious economic imbecility, stated, “We’re glad (Wal-Mart) finally recognized the value of the District of Columbia, but we also recognize the value of our residents, and the value of one hour of our residents’ time is greater than $8.25″.

Wow, what does that mean?  Is Orange claiming that he and other council members are smart enough to determine the worth of every single worker in the nation’s capital?  Wasn’t this same hubris found to be fallacious in the collapsed Soviet Union?

It is bad enough that there is any minimum wage in D.C. let alone an attempt to produce a double tiered system.  Minimum wage laws are, as the late great Murray Rothbard put it, “compulsory unemployment”.  Rothbard explained it well:  “The law says it is illegal, and therefore criminal, for anyone to hire anyone else below the level of X dollars an hour. This means, plainly and simply, that a large number of free and voluntary wage contracts are now outlawed and hence that there will be a large amount of unemployment. Remember that the minimum wage law provides no jobs; it only outlaws them; and outlawed jobs are the inevitable result.”

But, besides Rothbard’s cogent argument against minimum wage laws, the two tier system developed in D.C.is un-American.  How can there be two different sets of rules for different players in the marketplace?  Would there not be outrage if the government provided bailouts to two car manufacturers while the third which managed its business responsibly was not rewarded with federal largess?  Perhaps that’s not the best example, but again, even the leftist Washington Post understands that the law will create an “uneven playing field” for Wal-Mart and other big box retailers.

At the end of the day, one must question the motives of the Washington D.C. city council which passed the measure.  This particular city council has had three of its members convicted, one plead guilty, and another under investigation for bribery and corruption.  The law targets large, non-unionized retailers.  Was its passage a payback for union donations?  Unfortunately, for workers in D.C., whether it was or not, if the mayor signs it into law they will be out 1800 jobs.

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The Jeffersonian

“I can give assurances to the public in Europe and around the world that we’re not going around snooping at people’s e-mails or listening to their phone calls,” Obama said. “What we try to do is target very specifically areas of concern.”

President Obama said these words in Stockholm, at a news conference with Swedish Prime Minister Reinfeldt. At home, he dishes this deceitful pablum out to American citizens by the shovelful. He seems to believe it. Then he rolls the same kind of statements out to the rest of the world, and expects people to believe it because he sounds so sincere! Or perhaps he thinks people believe it because everyone is grinning at him.

The issue isn’t whether the U. S. government “snoops at people’s e-mails or listens to their phone calls.” The issue is whether we have a government that follows its own laws. Note that President…

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