Washington Must Get Out of Our Lives So We Can Work and Produce Again

The uncertainty caused by this administration is what will hold back the great American engine of productivity. We the people don't know what to expect in the near and long term future what with looming dual monstrosities of the Health Care Bill and the Cap and Trade bill with its carbon tax, not to mention looming inflation, that are poised to siphon off our wealth. This uncertainty causes paralysis resulting in people hoarding their money (those that still have jobs) instead of investing and buying. The good thing is that we're learning the lesson that savings are important. At the same time, an economy that doesn't move forward because of political uncertainties can be disastrous for a nation. Our politicians have to GET OUT OF THE WAY and leave us alone to work, invest, purchase and save as we deem appropriate for our own life - not based on politicians' expediency of the minute decision. WSJ has a good piece about our "hangover".

The panicked Democrats' biggest problem is that Congress and the President have erected the biggest overhang of economic policy uncertainty that anyone can remember.

One big difference between Washington and private markets is that politicians think everything they do is free-standing. Markets, however, combine all the potential costs of Washington's policies and then decide whether to invest, or not. Consider what private decision-makers see in their future:

A 2,074-page, trillion-dollar health-care bill to redesign 17% of the U.S. economy. A carbon tax—cap and trade—that remains an Obama priority ahead of the Copenhagen climate summit next month. A falling dollar and gyrating commodity prices, with no idea where those prices will go next.

Democratic liberals are talking about an income tax surcharge to pay for any commitment in Afghanistan. Card check, to expand unionization of the private economy, remains a priority. Domestic discretionary spending in fiscal 2010 is set to rise at 12.1%, with inflation near zero.

Nurturing a fragile economic recovery into a durable expansion requires policies that restore public confidence and reassure investors, risk-takers and employers. The Democratic agenda is doing precisely the opposite, which is how you get subpar growth and fewer new jobs. (READ AT WSJ)

Inflation Is Always Caused by Bad Government: NOT "Greedy Businessmen"

Remember Zimbabwe where Mugabe printed money like it was going out of style? People were carting around wagon loads of paper bills to pay for some bread (more pictures)? Walter Williams, my favorite economist (alone with Thomas Sowell and Milton Friedman) explains that what causes inflation is an increase in the money supply not backed up by output - remember those printing presses we saw in the News a few months ago on TV? Who gets the blame though by our politicians? - the greedy businessman as he raises prices. Tell that theory to a Zimbabwean.

With the massive increases in federal spending, inflation is one of the risks that awaits us. To protect us from the political demagoguery that will accompany that inflation, let's now decide what is and what is not inflation. One price or several prices rising is not inflation. Increases in money supply are what constitute inflation, and a general rise in prices is the symptom. As the late Nobel Laureate Professor Milton Friedman said, "(I)nflation is always and everywhere a monetary phenomenon, in the sense that it cannot occur without a more rapid increase in the quantity of money than in output."

Thinking of inflation as rising prices permits politicians to deceive us and escape culpability. They shift the blame saying that inflation is caused by greedy businessmen, rapacious unions or Arab sheiks. Instead, it is increases in the money supply that cause inflation, and who is in charge of the money supply? It's the government operating through the Federal Reserve Bank and the U.S. Treasury…

Our highest rate of inflation occurred during the Revolutionary War, when the Continental Congress churned out paper Continentals to pay bills. The monthly inflation rate reached a peak of 47 percent in November 1779.

This painful experience with inflation, and collapse of the Continental dollar, is what prompted the delegates to the Constitutional Convention to include the gold and silver clause into the United States Constitution so that the individual states could not issue bills of credit. The U.S. Constitution's Article I, Section 8 permits Congress: "To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures." (Read here at CapMag.com)

No more Failed Policies Of The Past that doubled the national debt in 8 years. Obama can do much better than that. He can double it in just 2 years. Yes, He Can. (Read more)

Madoff is Kid Stuff compared to Government Plunder

• "It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."
  (Henry Ford, founder Ford Motor Co.)


• "Whereas we are being taxed on multiple levels, multiple times, from our single source of income, and from one single source, the government. Such a shame really, during the founding of this country they would not put up with such a tax as a tea tax, yet look at what the American people put up with today." (Rothchild Brothers of London, 1863).

Here is Ayn Rand writing about inflation and the proper role of government more than 30 years ago. And we still haven't learned our lesson as we watch our government grow and grow and grow to a behemoth life sucking monster.

• Inflation is not caused by the actions of private citizens, but by the government; by an artificial expansion of the money supply required to support deficit spending. No private embezzlers or bank robbers in history have ever plundered people's savings on a scale comparable to the plunder perpetrated by the fiscal policies of statist governments.
  
• ...in regard to social issues, "inflation" does not mean growth, enlargement or expansion, it means and "undue"-or improper or fraudulent-expansion. The expansion of a country's currency (which, incidentally, cannot be perpetrated by private citizens, only by the government) consists in palming off, as values, a stream of paper backed by nothing but promises (or hot air) and getting actual values, the citizens' goods or services, in return-until the country's wealth is drained. A similar activity, in private performance, is the passing of checks on a non-existent bank account. But, in private performance, this is regarded as a crime-and most people understand why such an activity cannot last for long.

• Today, people are beginning to understand that the government's account is overdrawn, that a piece of paper is not the equivalent of a gold coin, or an automobile, or a loaf of bread-and that if you attempt to falsify monetary values, you do not achieve abundance, you merely debase the currency and go bankrupt. ("Moral Inflation," in The Ayn Rand Letter, III, 12, 1 ) (Also see AynRand.org)
  

Getting High on Government Bailouts - An Addiction

Alex Epstein, an analyst at the Ayn Rand Institute has a clear, tough hitting article on the WHY of what is happening today to our financial institutions. The question I want an answer to is why our government has not learned it's lesson regarding meddling in the market place?

The main idea? Government meddling in our markets is always bad .

The diseases? 1. An addiction-to taxpayer money worse than crack cocaine
2. government manipulation of interest rates and money supply

The result? Inflation-the devourer of wealth.

Lesson? "Taxpayer bailouts breed market disasters".

Cure? Allow the market the freedom to correct itself by learning the hard lessons of bad decisions - in this case low interest loans to bad-credit borrowers.

"For decades our government has had a semi-official policy that large financial institutions are too big to fail — and therefore must be bailed out when they risk insolvency — a policy that creates perverse incentives for them to take on far more risk than they otherwise would. “Too big to fail” is implemented through a network of government bodies that protect financial institutions from the long-term consequences of their decisions at taxpayer expense — a phenomenon we can observe right now. Consider Bear Stearns! ...

"Consider Countrywide, a major subprime money loser just acquired by Bank of America. Private lenders have not been willing to grant Countrywide the tens of billions of dollars it sought to keep afloat, given the company’s huge and difficult-to-measure subprime exposure. In a free market, bankruptcy would loom — but in our system, Countrywide and others can turn to the government-backed Federal Home Loan Banks for cash; these banks have lent Countrywide over $70 billion so far. According to The Wall Street Journal, these banks specialize in “providing funding where other creditors won’t go” — which they can do because of “a widespread belief the government would bail them out [with taxpayer money] in a crisis.” ...

"Still another item on the bailout menu is provided by the Federal Reserve. Today and throughout history, when major financial institutions are losing money, the Fed uses its power to manipulate interest rates and the money supply so that banks can borrow cheaply — giving them easy money with which to paper over their old mistakes. Again, it is other taxpayers who pay — in this case, through inflation. Inflation depletes Americans’ hard-earned savings; the trend of skyrocketing housing and commodity prices we have witnessed during the last five years is just the latest and most obvious harm done by our government’s inflationary actions. ...

"The combined effect of these and other bailout policies is to make risk-taking less risky for large financial institutions — because true failure is not an option. ... (Read)

Alex Epstein is an analyst at the Ayn Rand Institute, focusing on business issues.