Government of the Toothless and By the Apathetic

And You Thought Your Government Was Scary!

 

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 So lets go over what your government has done for you this week….

 1) Passed financial reform that will supposedly prevent this kind of financial crisis.  You’re kidding, right?  With this set of politicians in special interests’ pockets?

 

2) Reinstated long-term unemployment benefits for the chronically unemployed, boosting the maximum benefit for those that have been out of work for 6 months or longer.

 

3) Is about to begin war-game/demonstrations of force with S. Korea in response to the sinking of the Cheonan way back in March.

  

   You don’t need a lot of my bully-pulpiting here, so I’m going to get right to the point.

 

  The financial reform bill is toothless. It would not have prevented this financial crisis and it will not prevent the next one.  Wall Street had plenty of time, money, and lobbyists to water the thing down.  Heck too-big-to-fail banks are now even bigger and their existence is now institutionalized in this new plan.

 

  Americans are hurting and many need the unemployment insurance.  However, this government can’t find any way to cut spending elsewhere to pay for it.  Pathetic, just keep adding to the deficit.  I don’t know about you guys, but if I hadn’t found a job and my unemployment insurance was running out, I’d put my MBA aside and start flipping burgers at McDonalds.  I’d be running the joint in 6 months if I hadn’t found a better job by then.

 

   It took us this long to do something about N. Korea sinking that ship and killing all of those sailors?  Isn’t that an act of war?  I’m not saying go to war with N. Korea, but obviously they are in the wrong.  We needed to have this demonstration of power far sooner instead of wrangling with the Chinese about how they felt about it.  Tell China to shut the hell up, we still carry the big stick T.R. gave us.  They are the ones defending North Korea’s sabre rattling.  That is an indefensible position.  

 

   These are all examples of weak government that can’t get its act straight.  Even worse, we are apathetic and just let them continue to pass imperfect laws and make bad policy decisions.  C’mon folks, wake up!

 

“The death of democracy is not likely to be an assassination from ambush. It will be a slow extinction from apathy, indifference, and undernourishment”.

- Robert Maynard Hutchins

 

- G.S.

Don’t Worry About the Crushing Debt You Are All Giving To Your Children!!!

Sheesh - You're All Like Chicken-Little

 

So I watched this interview on Yahoo’s Tech Ticker today….

http://finance.yahoo.com/tech-ticker/%22misguided-hysteria%22-debt-causes-inflation-and-other-common-misperceptions-522073.html?tickers=%5EDJI,%5EGSPC,AIG,FNM,FRE,XLF,TBT

I disagreed with a lot of what this guy said.  Granted, The US  is not Greece, I can get that such sentiment is an oversimplification that overlooks key points that he mentioned.  Ben Bernanke can’t waive an inflation wand, I can get behind that too, although I think he and his cronies can control it more than Srinivas Thiruvadanthai, (the guest on the segment) believes.

 I have a hard time believing the rest.  Why?  When you make a broad stroke and say that ‘everyone’s’ debt has been contracting by 5 quarters is unprecedented but then lump citizen and private sector savings into the gross overspending of the government, That my friends is not apples to apples. Companies and individuals seem to be able to learn from and change their bad behavior (maybe temporarily) government obviously cannot.

   He then goes on to state that Social Security is a pay-as-you-go system. True. However, by that exact definition, I am paying for a system that has a snow-ball’s chance in Hell of being around when I get to retirement age, much less when my son gets to retirement age. Do you know how many taxes and tax hikes we will pay to keep the baby-boomers’ checks coming?  How is that not punishing  future Americans by making them pay for an unsustainable system?  Fiscal rectitude today will keep social security solvent so that I get back something of what I put in.  

   Last, I don’t know where he’s looking but debt crushes growth when you have higher and higher interest payments on the mounting debt ( especially when short-term rates do inevitably rise) and that means less government sponsored grants for innovation, but more importantly, higher taxes on businesses.  That means less money for R&D, which is where innovation comes from.  Less innovation means fewer jobs created by new industry.  Creating new industries, which grows our economy and gives us something to sell to the world has been what kept this country ahead of the curve. Take that away, and we lose our competitive edge.  No matter how hard we work, the Chinese will always be able to do the same work cheaper.

- G.S.

Those Who Don’t Know History…

...Are Doomed To Repeat It

Niall Ferguson is a historian, not an economist.  He has a huge arsenal of data and levies significant warnings and criticism at the national debts held by the Western world which is putting contries like the US and the UK at real risk of a sovereign debt crisis in a few years.  As a student of history, he sees where similar fiscal and monetary policy has failed time and time again in the past and what the bad results have been.  

   He takes the counterpoint to Keynesian economic playbook that says you should spend your way out of a crisis – a la Paul Krugman.  He gave this excellent presentation at the Peterson Institute for International Economics back in May that lays it all out.  If you have the time, watch the video as you can see his grim graphs as well.

http://www.piie.com/events/event_detail.cfm?EventID=152&Media

If you don’t have the time, go to Tech Ticker on Yahoo and watch the shorter version via a couple of their segments with him from yesterday.

http://finance.yahoo.com/tech-ticker/niall-ferguson-a-u.s.-debt-crisis-is-on-its-way-518725.html?tickers=tlt,tbt,%5Edji,%5Egspc,spy,%5Eftse

http://finance.yahoo.com/tech-ticker/niall-ferguson-paul-krugman’s-advice-will-lead-us-down-a-road-to-ruin-518800.html?tickers=%5Edji,dia,spy,%5Egspc,%5Eixic,qqqq

   Ferguson levies an iron-clad argument against the fiscal policies of the US and the EU that bail out failed institutions (big banks, Freddie/Fannie, Greece, etc) by using exhorbitant amounts of money to temporarily get us out of the financial crisis of the moment.  This happens largely because our politicians make bad policy decisions and then do not have the will to make the needed austerity measure to cut back spending and raise taxes when we pay the consequences for those bad decisions.  Ferguson illustrates that all the while, we go deeper into debt and kick the can further down the road, making the consequences of our spending that much steeper when the financial chickens finally come home to roost.

  I will go one further and say that these politicians are so weak becuase we as the voters do not hold  many of them accountable.  We as a people generally are not comfortable with the truth that Ferguson puts in front of us and somehow we believe that the same politicians will affect real change in the corrupt system they operate in.  Why would they do that when it would adversely affect their power?  They LIKE the system we are in.  It is our job to toss them out.  Statesmen, not politicians are the leaders who will have the political will to address this mess we are piling on our children and grandchildren.

- G.S.