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Central Bank “Stimulus” is Really a Huge Redistribution Scheme

October 21, 2019

Central Bank “Stimulus” is Really a Huge Redistribution Scheme

When an economy turns from expansion to contraction there is an order of events. The first signs are an unexpected increase in inventories of unsold goods, both accompanied with and followed by business surveys indicating a general softening in demand. For monetarists, this is often confirmed by an inverting yield curve, which tells them that at the margin the short-term rates set by the central bank are becoming too high for business conditions.

That was the position for the US 10-year bond less the 2-year bond very briefly at the end of August, since when this measure, which is often taken to predict recessions, has turned mildly positive again. A generally negative sentiment, fueled mainly by the escalating tariff war between America and China, had earlier alerted investors to an international trade slowdown, expected to undermine the American economy in due course along with all the others. It stands to reason that backward-looking statistics have yet to reflect the global slowdown on the US economy, which is still buoyed up by consumer credit. The German economy, which is driven by production rather than consumption is perhaps a better guide and is already in recession.

After an initial hit, a small recovery in investor sentiment is understandable, with the negative outlook perhaps having got ahead of itself. But we must look beyond that. History shows the combination of a peak in the credit cycle and tariffs can be economically lethal. A brief return to a positive yield curve achieves little more than a sucker rally. It may be enough to put further monetary expansion on pause. But when that is over, and jobs begin to be threatened, there can be no doubt that central banks will ramp up the printing presses.

 …click on the above link to read the rest of the article…

The Aristocratic Illusion

January 18, 2018

The Aristocratic Illusion

They’re not as smart as they think they are.

If you draw your sustenance from the government—as an employee, contractor, or beneficiary of redistributed funds—the money you receive comes from someone who had no choice whether or not you got paid. Except for those jobs the government mandates, private sector workers’ compensation comes from employers who have freely chosen to pay it. The jobs they perform are worth more to their employers than what they’re paid, or the jobs wouldn’t exist.

Here’s a new definition of aristocrat: a person legally entitled to take money from other people without their consent. This definition focuses on what aristocrats do and have done throughout the centuries, regardless of their labels.

If you’re an aristocrat, the thought that you’re living on somebody else’s dime may cause psychological stress. All sorts of rationales have been concocted to justify this privileged position. The most straightforward is the protection racket. In exchange for their subjects’ money, aristocrats protect them from external invasion and preserve domestic order. It’s not a voluntary trade—the subjects can’t say no—but at least both sides get something from it.

However, “protection racket” doesn’t have quite the moral gloss aristocrats crave. Deities may not have been an aristocratic invention, but they jumped on the concept of divine favor to justify their position. It makes it harder to oppose the rulers if authority is bestowed by the gods or the government is a theocracy. Ultimately, regardless of rationale, the ideology always come down to: The aristocracy is superior to those they rule. The aristocrats have no trouble believing it; they have to psychologically justify their positions to themselves. The trick is to get the subjects to buy in.

…click on the above link to read the rest of the article…

Is Capitalism Dead or Merely Dying?

October 22, 2017

Is Capitalism Dead or Merely Dying? 


Alfred Wertheimer Elvis 1956
 

New Zealand’s new prime minister Jacinda Ardern calls capitalism a blatant failure. Former Greek finance minister Yanis Varoufakis says capitalism is ‘merely’ coming to an end because it is making itself obsolete. Mathematics professor Bruce Boghosian claims that without redistribution of wealth, our market economy would not be stable, because wealth always tends to concentrate. The people at Artemis Capital Management write that the stock market has begun self-cannibalizing like a snake eating its tail, and the only reason we’re not in a recession already is ‘financial alchemy’.

At the very least we can say that the system is under pressure. But what system is that? It would be nice to have a clearcut definition of capitalism, but alas, there are many, about as many as there are different forms of it. That doesn’t make this any easier. Americans call many European economies ‘socialist’, which seems to mean they are not capitalist. But Scandinavian countries don’t function like the Soviet Union either.

And if you see how much money is involved in transfer payments to citizens in the US, the supposed bastion of free market capitalism, it’s tempting to conclude the system has already failed. But even with transfer payments, inequality is at record levels. That would seem to confirm Boghosian’s statement that “even if a society does redistribute wealth, if it’s too small an amount, “a partial oligarchy will result..” So what then?

Varoufakis and others want a “universal basic dividend”, or “universal basic income”. Would that be the end of capitalism as we know it? Or is it just a -perhaps more extreme- form of ‘state capitalism’? Varoufakis deems it inevitable because technology will eradicate so many jobs from societies that people won’t be able to make money from work. Personally, I’ve long thought that the pending large-scale demise of pensions systems will lead to some form of UBI.

…click on the above link to read the rest of the article…

Free Money Leaves Everyone Poorer

June 7, 2016

Free Money Leaves Everyone Poorer 

Destroying Lives

BALTIMORE – A dear reader reminded us of the comment, supposedly made by Groucho Marx: “A free lunch? You can’t afford a free lunch.”

Groucho-Marx_Groucho dispensing valuable advice     Photo via imdb.com

He was responding to last week’s Diary about the national referendum in Switzerland on Saturday. Voters will decide whether to give all Swiss residents a free lunch – a guaranteed annual income of about $30,000 a year [ed note: the initiative was overwhelmingly rejected with 78% voting against].

The problem with a guaranteed income (you get it no matter whether you have a job or not) is something we’ve been writing about for the last 15 years. It is the problem with all frauds… all cockamamie, jackass redistribution programs… and all something-for-nothing schemes.

And it is the same whether you are “stimulating” an economy with artificial, phony-baloney “money”, giving aid to foreign dictators, or handing out free lunches to voters at home.

The Deep State, in addition to being malignant and entertaining, is incompetent. It fights wars just to lose them. It solves problems and makes them worse. Led by the Yellen Fed, it “improves” the economy and leaves 9 out of 10 people poorer than they were before.

Today, we turn to a special war – the War on Poverty. Jesus dismissed it. “The poor you will always have with you,”he said. But that didn’t stop the feds from launching an attack.

 

1-BG-war-on-poverty-50-years-chart-2-825The “war on poverty” has been just as rousing a success as the “war on drugs”.  According to the NCPA is has actually cost $22 trillion so far (estimates of the total cost differ) – click to enlarge.

Fortunately, they are so clumsy, lame, and incompetent, they spare us a worse disaster. Had they been smarter and better organized, they would have done even more damage.

…click on the above link to read the rest of the article…

We need a new economic system

May 27, 2015

We need a new economic system

As the 2016 election begins to come into focus, economic populism appears to be the order of the day. The Center for American Progress, the Campaign for America’s Future and National People’s Action,Hillary Clinton, Bernie Sanders, Bill de Blasio and the Roosevelt Institute have all in the last few months released programmatic calls to action highlighting the need to tackle economic inequality. This is, of course, laudable — it’s not every day that virtually the entire spectrum of Democratic Party insiders and outsiders concurs that our increasingly unequal distribution of income and wealth is a central problem to be addressed. But are calls for reform and redistribution enough?

I am opposed to very little of what is being presented in these various platforms and proposals. They are, for the most part, perfectly sensible ideas — such as financial transaction taxes, increases to the minimum wage and using government funds to build and repair infrastructure such as roads and railways — that would be, for the most part, noncontroversial if we were living in an era of sensible politics. But the fundamental fact is that we are not.

Instead, we are living in the era in which the corporate institutions at the core of our politics, along with the radical financial inequalities our system now produces, have undermined the power relationships that once allowed for traditional reforms. The labor union — the fundamental institutional power base for tempering the excesses of a corporate economy — is regrettably in terminal decline, down to 6.6 percent of workers in the private sector. Long-term structural shifts in the political economy have rendered the program of regulation and reform more or less inoperative.

…click on the above link to read the rest of the article…

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