Busted: Bankers and The Global Economy

March 1, 2009

U.S. Budget Goes Bust

obama-camp-lejeuneThe economy is in a tailspin, contracting at a 6.2 percent pace in the last three months of 2008: the worst performance in decades. The White House announced that it will take a 36-percent stake in Citigroup in the hope of keeping it afloat amid huge toxic debt and a continuing crisis of confidence. These are ominous reminders that the nation has critical decisions to make in order to turn things around. President Obama appears to have ditched the Bush administration’s Washington-style budget sleight-of-hand with the attempt to honestly portray what the government will actually spend. In the mind of President Obama, his truth in budgeting approach is designed to help Americans make informed choices. That is exactly what Americans have been doing without government so far. We react to the failures of government, business and even ourselves. Even so, President Obama reveals that $3.6 trillion is to be spent in 2010, with almost $1.2 trillion of it borrowed.

What is President Obama’s message to taxpayers and Capitol Hill? We need to quit magical thinking. All the thing the nation’s needs will not pay for themselves. Laying the groundwork for a strong economy in the future isn’t without cost. Does America want to kick fossil fuels out for a greener future? How will America reform how we pay for health care, so that the nation can get more for our dollars and reduce the ranks of the uninsured? How do we keep Medicare solvent with the swelling rank of the disabled and a steadily growing retirement community? The nation needs a larger federal contribution for our schools. How will the nation repair and maintain roads, bridges, airports and mass transit? Now there is talk of building a modern energy grid. The president is counting on the economy to be growing by 2011. He plans on halving the deficit by 2013 through taxation of the upper class and perhaps through restricting corporate taxes loopholes and offshore banking. Keeping a deficit in the same place is difficult enough with the proposed spending required to save the nation and its’ current power and financial structure. That deficit reduction remains to be seen. Along the way, the nation must discontinue the practice of borrowing, spending and passing the bill to our kids to deal with. We just haven’t figured out how to do that yet.

You can argue that money isn’t everything, but you can’t argue that fact when you are in government and money is everything. ~ E. Manning

September 4, 2008

Inflation: Sick of the “I” Word

Yes. Every American knows what the Fed is reluctant to admit. The economy is struggling. Prices remain high. Booyah. It’s a revelation.

It took the Fed and the federal government almost 9 months to admit the truth about the mortgage, banking and finance debacle. They had all the facts and saw it coming. They looked the other way in the hope that you might not notice or in the vain hope that a pied piper might come along and enchant all the rats. Shortly after that mortgage and finance truth was reinforced by reality, Bear Stearns collapsed, threatening the fall of U.S. investment bankers. Now the Federal Reserve has effectively nationalized every important sector of the banking community within the United States in the effort to keep the show running in the spirit of confidence. The federal government a/k/a the American taxpayer is theoretically on the hook for the entire expense, enslaving the nation to an uncertain future unless we wise up.

We’ve heard about the “R” word, but never has another word meant more to a nation or a global economy in consternation than the infamous “I” word that economists, writers and politicians cannot fail to utter in quiet undertones of fear. What make the “I” word so dangerous is the lack of power against it. Inflation isn’t just a cycle. Inflation is a symptom of unbridled lack of discipline and theft by the Federal Reserve and central bankers themselves. The fact is that authorities have decided that if we mention inflation enough, the public will actually stop taking it seriously.

Inflation has been described as “creeping.” Inflation may well be creepy and may well be advancing, but inflation has showed its ugliness rather dramatically. The nation faces higher inflation than in more than 20 years. Even worse, the nation flutters on the brink of truly nasty stagflation.

The officials in charge won’t readily admit such a thing. First, we have invented hard and fast rules about such topics. Economics is a science say many experts. We have strict definitions for these kinds of things say leaders. That depends on what school of thought you choose to believe. Still, you may be right if you consider economics to be on the same level of science as evolution. The best and the brightest are still unresolved about both except where it fits an agenda for power as they constantly update the facts in an effort to make their case.

In the meantime, prognosticaters are expecting a “rough patch” to come up soon. This patch could happen at any time. Christmas is going to be very bad, business pundits say in prophecy. Bad depends on the level of expectations. If consumers continue to retrench by only buying what they need, the economy is doomed in the eyes business retailers and tax collectors.

American consumers may be in a “slump”, but business and government is in the midst of a crisis. Government has grown to depend on more consumption and rosy projections to raise operating funds by taxation. Business has grown to depend on cheap foreign labor to slash expenses while raising prices. Inflation comes as much from greed and usury of the little guy on both sides as it does from devaluation of American currency and weakness in the dollar.

Food and fuel prices have knocked inflationary values out of the park recently. The Fed says that fuel prices have moderated somewhat, but are still elevated. Considering that the average barrel of oil averaged about $37.00 in 2004, the word elevated is an understatement.

Then the Fed blithely states that wage gains are modest. This is an obscene statement considering that wages have been flat for years, even when adjusted continually for “nominal 3 percent inflation.” No danger for inflationary pressure here because employers are laying off workers in droves in an effort to save the bottom line of business. Employers haven’t been known to be “overly generous” in at least 3 decades.

Manufacturing is weak or declining as corporations close down facilities and offshore jobs to foreign nations with significantly lower wage rates and taxation. The things that America still manufactures like steel, heavy machinery and aircraft are cheaper for foreign buyers because of the weakness of the devalued dollar. This possibility combined with stimulus payments are being given credit for growth figures in the second quarter of 2008.

The largest problem with concepts like recession and inflation is that like every other economic idea, there isn’t much agreement on much of anything. Now that is science. ~ E. Manning

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