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Predictions For The Next Four Years (Part 2 of 2)

Predictions For The Next Four Years (Part 2 of 2)

(This is Part 2 of a 2 Part Series– To Start With Part 1 Click Here)

Dollar Under Strain

There are so many dollars floating around out there, and so little American production for those dollars to chase, eventually foreign central banks will get wise and look to divest. At some point, that trickle could turn into a flood, and result in a dollar run. If that happens, life in America will be rather bleak for a time.

Police State

Obama has consistently lied about his civil liberties stances; campaigning against the Patriot Act and then supporting the renewal, and promising to veto the National Defense Authorization Act, and then signing it. There is no reason to believe he will change course now.

A proliferation of traffic cameras is in my view as predictable as the summer solstice, and I imagine even leftists who believe the government can manage an economy will agree with my prediction that more traffic cameras will be installed across the country. This one has little to do with Obama, but as the economy falters, expect local governments to do anything in their power to claw revenue from the populace. Pay up you filthy peasants!

Rand Paul Rising

It is my expectation – as well as my personal hope, in full disclosure – that Rand Paul will rise further in political influence. Senator Paul from Kentucky will likely become the main leader of the libertarian faction of the Republican Party, upon the retirement of his father from the House at the end of this year.

Within Republican circles there are many who dislike the libertarian faction; indeed, libertarians tend to dislike the war on drugs, military intervention, and social entitlements. This tends to make the Republican establishment both irritated and nervous about their feasibility in elections.

In the near future we will not be able to afford the sacred cows which are held as critical in our current political discourse. There is going to be a movement of dissent, and as things get worse on all fronts, this movement will gain further sympathy.

Best Advice

People often get after me about being filled with gloom, and having no real solutions in mind. Those people often define the term “solution” as plan to preserve the status quo. Change, much like Perestroika, is defined along similar lines.

My best advice is to learn how to do something for yourself. I have been perfecting my recipe for buttermilk pancakes for example. I have an urge to learn how to make my own shoes, but I almost certainly lack the artistic skill necessary.

Politically, I would urge you to start going to your local government meetings and complaining about things that irritate you while you are there. Smart Growth zoning policies irritate me, but I live in an unincorporated area, so my vengeance must be preserved for another issue.

Also, there is never a bad time to buy a gun.

 

The post Predictions For The Next Four Years (Part 2 of 2) appeared first on The Conservative Reader.

Predictions For The Next Four Years (Part 2 of 2)

Waechter’s Final Pre-Election Weigh In: No Matter How You Vote, the Economy Will Not Improve

I cast my ballot early. I didn’t vote third-party and therefore my vote isn’t being wasted. It also isn’t going to matter.

Since 1990, the United States has run aggregate trade deficits above $8 trillion. This is funny, because in 1990 the M2 metric of currency supply was only $3 trillion. There should be nothing but dust coming out of the ATM machines. We have purchased entire merchant-fleets full of foreign goods, and paid for it by quite literally printing money.

Foreign countries, being more blatant about their currency devaluation policies, have been willing to go along with this arrangement. The result is this dynamic: The US prints dollars to buy goods from China, and the Chinese central bank prints yuan to buy the dollars. We get cheap Chinese stuff, the Chinese central bank gets huge dollar reserves, and the Chinese people get jobs and lots of inflation.

As the years went by, this dynamic absolutely shattered the productive impetus in the American economy. There is no reason to manufacture anything, or engage in productive activity in general. There is also no reason to hire people to help you be productive.

You can see this dynamic in your own communities, with factories that are closed, the kids that can’t find jobs, and farmers – busy producing inflation-sensitive commodities on land, which can’t be outsourced – buying new trucks with cash. The illness in our economy is bad monetary policy.

In a normal economy, if there is demand for consumer goods, entrepreneurs have to take land, labor, and capital and combine them in a way that produces goods efficiently, and at a price the general public can afford to pay. The American economy has another option – we can simply print money and spend it on imports, which is much simpler, requires no investment of capital or any hiring, and is much cheaper.

The result was the largest consumption binge in history, and an economy dependent on investment bubbles – tech stocks, housing, government bonds. The Federal Reserve poured new money into the financial system. You could get a home equity loan to cover your credit card debt, rung up at retail outlets selling almost exclusively imported goods.

Since manufacturing was on the way out, the service sector was the place to be, and the best service sector jobs require college degrees, so the answer is to go to college. Both parties agreed; the answer wasn’t to address the problems with our monetary system, but to attend college. Every young person was told that college is critical.

Now, we have more people in their 20’s living with their parents, more college graduates than ever are working part time, if they can find jobs at all, and the only policy solutions coming out of our elected officials is to double down on college, fund green energy schemes ( I‘m talking about you, Chuck Grassley) and economic development kitsch projects at all levels, building economic Potemkin Villages designed to try and keep the consumption binge going.

Close down Maytag? No problem! Build a race track! Remember when Nancy Pelosi said that unemployment checks would stimulate the economy? People need to spend, spend, spend, because there is no work, work, work.

Without the inflationary monetary policy coming out of the Federal Reserve, the government could not run the enormous deficits, the trade deficit couldn’t have gotten this large (currency would have become scarce, and productivity more valuable), and the government would have to be honest about the absurd arithmetic surrounding our entitlement programs.

Therefore, neither party will countenance a serious challenge to our current monetary system. Even Paul Ryan’s budget plan – so maligned by the left – doesn’t eliminate the deficit nor tackles entitlements. Sound money might even threaten the defense budget, and is therefore terrorism.

So, Barack Obama champions stimulus programs to re-inflate consumption and crows about tariffs on Chinese tires; Mitt Romney labels China a currency manipulator for being willing to bite the inflation bullet themselves and hold our currency as a reserve.

Work in a factory keeps their people busy and gives them the illusion of progress – a bit like how college keeps young people in America busy and gives their parents the illusion that their children will “amount to something.“ Concerns that college diplomas are worthless and that the wages of the Chinese factory worker are shredded by inflation are secondary.

Offshoring is not the machination of evil capitalists; it is a phenomenon of monetary policy, plain and simple. Other countries are willing to hold our currency as a reserve, so we can buy imports with inflation. According to the Examiner, Jeep is next on deck to offshore.

So, services and technological expertise is the key to success in America, as long as another large, developing economy doesn’t devalue their currency and start holding dollars as a reserve.

Especially not one with a large, English-speaking population, and definitely not one with a past influenced by British rule. Why, if that happened, we could just print money and buy our services from that country, and you would run the risk of not fully understanding the technician’s accent the next time you have to call tech support, which is simply unimaginable.

I cast my vote. I ended up voting for the one that I figure is less likely to throw me into a gulag. I suppose this makes my vote “idealistic.”

Here we are. We have an economy that cannot produce wealth, based on consumption, with a government that we cannot finance and cannot change. We are consistently running trade deficits in excess of $40 billion per month but are told that we lack demand for stuff, almost 50 million people are dependent on food stamps, and an entire generation is shacked up at home, paying their student loans and otherwise too poor to participate in the consumption economy. Yet, there is no stomach for change.

When debating Walter Mondale in 1984, Ronald Reagan cited Cicero and remarked, “If not for the elders, correcting the mistakes of the young, there would be no State.”

What are the young supposed to do when their elders who run the government have lost their minds?

The post Waechter’s Final Pre-Election Weigh In: No Matter How You Vote, the Economy Will Not Improve appeared first on The Conservative Reader.

Completely Pointless and Utterly Absurd

Completely Pointless and Utterly Absurd

First, some chemistry; iodine turns black when exposed to starch. So, a lighter ink which contains iodine will turn black when it comes into contact with starch, which is included in the manufacturing process of standard copy paper. When the ink is used on paper that doesn’t contain starch (such as most paper made with cotton fiber instead of wood pulp) the ink will maintain a sort of brownish-yellow color.

If you pay for gasoline with a fifty dollar bill, chances are the cashier will make a mark on it with a counterfeit detector pen. American currency, made of cotton fiber and not including starch, will leave the ink that lighter color. Counterfeit currency printed on regular paper will make the ink turn black.

Interestingly enough, counterfeit currency made with cotton fiber parchment paper, available at every stationary supply store in the country, will pass as genuine under the ink test. The Secret Service, which investigates counterfeiting, doesn’t include the detector pens in their list of recommendations for examining currency.

So, a counterfeit bill passes the test and is accepted by a cashier. Later, the bank where the money is deposited is able to detect that it is fake. The incident makes headlines, and every store in town attempts to take precautions – by buying counterfeit detector pens, which will give a passing grade to upscale resume stationary. A completely pointless test creates a new vulnerability and becomes utterly absurd.

It appears to me that just about everything sold as urgently necessary is, upon closer examination, completely pointless and utterly absurd.

Prairie Meadows Casino was billed as a way to revitalize the economy. It is owned by Polk County, and the revenue was supposed to fund education, roads, and economic development.

Much of the money is used to pay the interest on the tax-exempt bonds issued to build the Iowa Events Center – which, although a lovely facility, employs only a handful of people and isn’t exactly the urban goldmine that developers always claim to have in their hip pocket.

I haven’t been to a casino in years and don’t intend to go back. Gambling used to be a risqué vice; now it is nothing more than another way to feed the voracious wolves.

Speed cameras should go in this category as well because they don‘t stop speeding nor do they protect the public. I was on the interstate in Cedar Rapids a while back, and everyone around me was driving above the speed limit. Upon approaching the sign indicating a traffic camera, they all slammed on the brakes very hard. After passing the camera, they sped up again.

Furthermore, I could drive down that stretch of highway drunk, while sending a text message, and using hallucinogenic drugs- but as long as I am not speeding, the camera is useless.

Government at all levels promises to build roads and develop your economy.  What actually happens is that they tax you, fine you, and monitor you – and the roads are still terrible. Infrastructure projects have become the best Trojan Horse to sneak in a tax increase- actually go and take a look at the budget of your local government. How much of your tax money goes to bond interest for infrastructure projects?

Iowa Title Guaranty, a part of the Iowa Finance Authority, was created in 2001. You see, in Iowa, when you buy a house it is traditional to have a lawyer review a title abstract and write an opinion about it. In every other state, you just buy title insurance, and when the big investment banks started jamming mortgages together into mortgage-backed securities they got used to having a standardized title insurance policy along with their mortgages.

They simply didn’t know how to deal with an attorney’s title opinion letter. Pity. It looked like Iowans might be denied the joy of subprime mortgages, and would have to make do with conforming loans.

But, not to worry! Here comes the state legislature with Iowa Title Guaranty, offering what the big investment banks were used to seeing. Oh, the joy of it; Iowans would have access after all to mortgages with bad terms, adjustable rates, and given without regard to lending standards. Being suckered into bad loans is practically a human right, after all. Title Guaranty – Completely pointless, and utterly absurd.

Even jobs can be completely pointless and utterly absurd. Anything involving the “green economy” springs to mind. Being paid by the government to build solar panels that will never be installed, for instance. Sure, a few people earned a few paychecks before Solyndra folded, but they produced absolutely nothing of value for the economy as a whole.

The Federal Reserve was billed as a way to avoid economic crises and facilitate greater wealth. In the end, it facilitated the largest fiscal and trade deficits in human history. Since 1990, we have run aggregate trade deficits in excess of eight trillion dollars, which is interesting because back in 1990 the M2 supply was only three trillion dollars. Either we ran out of currency (three times) or we were paying for imports with inflation.

When the Byzantines wanted to buy Chinese silk, they had to sell glass and other wares, or else they would have run out of gold. (They ended up stealing silk worms and producing it themselves). We can buy foreign goods by doing nothing more complicated than printing money.

Politicians offer to solve this problem with government action – either stimulus spending or trade wars – but never with stable currency policy, making any of their efforts completely pointless and utterly absurd.

I believe that our future as a nation will come down to whether or not we can successfully identify the completely pointless and utterly absurd things swirling around in our government, our economy, our businesses, and our culture. This will involve a great deal of complaining, which fortunately is the only real talent I possess. Now, to find a way to earn tons of money while doing it.

 

Time to End the Iowa Finance Authority

Time to End the Iowa Finance Authority

In 1975, Iowa’s elected so-and-so’s felt inclined to establish the Iowa Finance Authority, giving it the mission of assisting the people of Iowa in acquiring affordable housing.  I guess Iowans tended to live in mud shacks prior to 1975, but no matter, the government is here to help.

Except, it doesn’t help. The Iowa Finance Authority’s own website (http://www.iowafinanceauthority.gov/) tells the tale, and affordability is not the goal of our state-level state corporatists. According to the talking points, IFA helps low-income Iowans, the disabled, and the otherwise strained in the task of obtaining affordable housing, which is simply not true. Nothing the IFA does is aimed at helping citizens afford anything, all they do is encourage easy credit.

Getting easy credit is not the same as being able to afford something. What IFA is doing is helping people borrow too much money for assets that are priced too highly for them to otherwise afford, thus allowing more people to overspend on housing. With more people able to arrange the credit for higher priced assets, the prices of the assets (in this case, housing) are able to stay higher than they otherwise would. They even provide direct cash subsidies for down payments.   Imagine the housing market as a giant auction. If the bidders are on a budget, the winning bids will trend downwards. If the bidders are flush with cash and anxious to buy, bids will trend upwards.

Thus, IFA is working to make housing expensive, not affordable. So, pat yourselves on the back, IFA, for making it easier for the disadvantaged to borrow too much to purchase assets that are overpriced; that‘s compassion in action.

There has also been some mission creep at IFA over the past thirty seven years, with the agency taking on financing of apartment blocks, renovations, and a shadowy, ill-defined activity called “economic development.”

Considering that we don’t have one any more, efforts to develop an economy are uniquely popular among voters, and this popularity allows government to push any issue it wishes under the guise of being an economic development initiative. Economic development, then, is anything politicians say it is, period.

Considering the vague nature of economic development programs, the Iowa Finance Authority is surprisingly straightforward with its role in the economic development process. On the IFA website, by clicking a tab marked “Economic Development,” we can get the clear picture:

“The Iowa Finance Authority (IFA) issues tax-exempt bonds for a wide range of projects.”

Well, there you have it. Not content with helping to arrange mortgages for people who can’t afford them, IFA has branched into the tax-exempt bond market. They also arrange revenue bonds for private projects, and although the State of Iowa isn’t legally on the hook if the project fails, any default would affect the credit ratings of future revenue bonds, and it is a virtual certainty that the state would opt to pay in the end.

So, IFA arranges bonds for economic development projects, diverting your taxes and user’s fees towards providing tax-exempt income to rich people in the process.

The Authority’s defenders will say that it is self-sufficient. There’s a reason to keep an odious program. Might I suggest the immediate establishment of the Iowa Cocaine Authority; that will be financially self-sufficient.

IFA isn’t really a line-item on the state budget, but the state is the ultimate guarantor of the debts being incurred by this program, and while perhaps not legally obligated to make good, the state will do so in a pinch, lest the ratings of future bonds be damaged. Thus, there is potential downside risk which the Authority’s champions in the legislature have not bothered to consider.

The Iowa Finance Authority is a detrimental, utterly unnecessary political boondoggle and economic white elephant. Its rhetoric and its effects do not match up, and its only redeeming feature – financial self-sufficiency – belies potential risks that have not been properly explored. It is an agent of expanding municipal bond debt, and Iowa’s own contribution to the ongoing assault on thrift that is being conducted by governments at all levels.

Therefore, the time has come that we do away with this middle-aged, miniature HUD. Iowa did without it for better than one hundred years, and we can do so again.

 

Tom Harkin Dissembles on Higher Education

Tom Harkin Dissembles on Higher Education

Our esteemed Senator Harkin has been holding some hearings on for-profit colleges back in D.C., and now he has penned an editorial for the Des Moines Register. In full disclosure, I dislike Tom Harkin. Intensely. Then again, back in 2008, Charles Grassley voted for the TARP bailout, and now I don’t like him either.

But, back to the junior Senator from Iowa; Senator Harkin penned an opinion-editorial decrying the high tuition, poor student outcome, and massive debt of the students of for-profit colleges. If somebody would be so kind as to pass this on to the right honorable gentleman, would Senator Harkin please explain why his criticisms of the for-profit colleges are not extended to all colleges? Why does the servant of the people limit his criticism to the obvious failures of the for-profit schools, and not touch upon the failures, just as obvious, of the Ivy League, non-profit schools, endowment liberal arts colleges, and even state schools?

I have three reasons which instantly spring to mind. First of all, Mrs. Harkin sits on Iowa’s Board of Regents. I don’t think Senator Harkin mentioned that; being a bachelor myself I’m only assuming that it would be appropriate to disclose that information.

Second, college professors and administrators appear to have privileged status in modern American society, and being part of the Nomenklatura (Russian for “Book of Names,” these were people who had earned favors from the members of the Communist Politburo), colleges can’t possibly be permitted to suffer the effects of a recession. After all, if your waitress doesn’t have a degree in sociology, how can we possibly have justice and compassion in our society?

Thirdly, and I think probably the most important, higher education is critical for the current political climate. We are in a deep economic depression and college is a useful way to keep young people busy. It gets them out of their parents’ houses, gives older voters the illusion that the young will be able to support themselves and fund the welfare state, and gives elected officials a ready-made line for why they need to be returned to office and why the public needs to turn over their wealth to the state -because children are the future, and we need to invest in our young people.

Political careerists have used that stupid old trope for decades now. We must, they tell us, rack up enormous debts – as a nation and as individuals – for the sake of the children, who will then grow up as serfs and endure an intense curtailment of their liberty and prosperity to settle the debts that we racked up for the sake of the children. It’s a bit like selling your car for gas money.

So, hurry up and enroll your kids in a state school, and make sure to cosign the Federal Stafford Loan promissory notes. Of course, you need to make sure you reelect your local deputies of the Supreme Soviet to make sure your kids can still get the chance to sign those promissory notes. Our economy, after all, is built on an Education-Employment model, where young people go to college so they can become more attractive to employers – employers who no longer have access to the capital they need to expand their businesses; considering that is where new jobs come from, that might be a bit of a problem – so unless your kids borrow money from the government to get an advanced degree, they might not get that job that doesn’t exist.

More than fifty percent of recent college graduates cannot find full time employment. All of them could get funding for a master’s degree if they really wanted it, though. It doesn’t mean anybody will have the capital to invest in employing them two or three years from now, but it will keep them busy and not officially part of the “unemployed.”

So, there you have it; as long as federal money is being funneled to state schools to cover exorbitant tuition for degrees not worth the paper on which they are printed, our dear Senator doesn’t seem to mind. I actually agree with Senator Harkin when he condemns the for-profit colleges; but he attacks them for being for-profit, not for being useless. I attack them for being useless – the same sin committed by most every college and university in the country, regardless of who runs them.

No career politician has the courage to take on the real problems facing the American economy, so perhaps Senator Harkin doesn’t warrant extra criticism for his cherry picking and selective righteousness – he certainly doesn’t deserve any credit, either.

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