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By Pete Moore On August 2nd, 2011 at 4:05 pm

How degrading to the American people that a Russian should be exactly right in describing the US as a global economic “parasite”, but he’s right of course. My only quibble is that he’s correctly describing Washington. He says ““They are living beyond their means and shifting a part of the weight of their problems to the world economy”, and that “They are living like parasites off the global economy and their monopoly of the dollar.”

Continuing to live too high on the hog means that the US Treasury is sucking vast amounts of capital from money markets which could be productively used around the world instead of spent as politicians direct. When the Fed steps in and monetises government debt the inflation is exported out of the US because of the dollar’s reserve status. Most currencies are backed in part by the dollar, so their values are eroded as the dollar declines. Washington is a drain on the global economy. I see that Putin is calling for other reserve currencies. There is a reserve currency. Gold is now on its way past £1640/ounce.

Democrats are now likening Tea Party tribunes to terrorists. Whether or not Biden joined in with this new polite discourse, it seems other Democrats have done so. (Of course, we know that Democrats don’t actually think of the Tea Party as terrorists; if they did so the ATF would be supplying them with guns). This chart, already parabolic, is about the make another vertical move.

It’s clear that the Tea Party’s stated aims of reversing government spending and reducing debt are wholly in accordance with American history and tradition. I’d suggest it’s those who wish to load yet more trillions of debt onto the young and unborn who are different and out of step. If they cannot even now sense the need to reverse the debt curve they are either mendacious or unhinged from reality.


By Pete Moore On July 26th, 2011 at 3:43 pm

The British economy is flatlining. Among the bizarre excuses for this are the Royal Wedding (keeps everyone indoors?), a warm and sunny April (gets everyone out?) and the Japanese earthquake and tsunami (“chuck that one in also”).

Of course the economy is flatlining. There was no recovery from recession and there will be no recovery while the economy groans under the weight of the mega-regulatory state on its back. We know what to do to get out of the hole we’re in, it’s been done before. A prime myth of the Great Depression is that it was ended by the US entering WW2, as if converting to a total war economy dedicated to capital destruction generates wealth. Tim Stanley in Telegraph blogs manages to identify when and how recovery took place while comparing the Obama and FDR methods. Check it out:

In 1946, President Truman cut spending by more than 50 per cent, retired one million civilian employees from the federal payroll and slashed many New Deal regulations.

Fifty per cent! That’s what you call rolling back the state. The Great Depression lasted until war’s end. Recovery happened only when the federal government stopped sucking vast amounts of capital from the economy and a large number of men were released from government servitude to do productive work. It unleashed an incredible wave of saving, investment, innovation, productivity and growth until LBJ’s Great Society reforms and Nixon’s monetary corruption began to foul the engine.

Keynesians spent the war years predicting catastrophe again when millions were demobbed. They were wrong. We know how an economy grows and why it crashes. There is no magic involved, all it takes is for government to get out of the way, the further the better. Real and susbstantial cuts in both taxes and cost-increasing regulations are a prerequisite for recovery to happen.


By Pete Moore On July 21st, 2011 at 10:45 am

All previous attempts at shoring up the Eurozone having come to nought, Merkel and Sarkozy have come up with another plan. This one is a “Greek bond buyback” scheme, reports the Telegraph involving some private haircuts. There’s no word yet which, if any, private bondholders will wear that one. Even so, this cunning plan would mean outright default.

What doesn’t change is that the Greek state was bust yesterday and it will be bust tomorrow. One of two ways seem possible: either some kind of eurozone break up or fiscal union across the eurozone. Unsurprisingly, the Euro-central planners who inflicted this catastrophe on hundreds of millions of people are pushing for the latter.

The chances of that happening are remote. It would require permanent capital flows from Germany to the PIIGs and the German people, even if they could afford it which they cannot, won’t stand for that. Back to where they were then: states still bust, the eurozone still up it without one and with a currency still on course for a meeting with the iron laws of economics.

As someone has pointed out here before, the economic limits of the regulatory welfare state have been long ago obliterated. Failure and collapse is assured. This is a thoroughly good thing. Decades of over consumption must now be paid for with decades of under consumption and saving. This is the only way to recovery.

UPDATE: Andrew Lilico, a man more right than most in the mainstream, blogs: “Most of the measures being discussed are variants of “more of the same” – the same stupid, misconceived, economically-ignorant, market-hating, ill-directed folly that has characterised policy-making since mid-2007. Most of it is just “one more heave”, good money thrown after bad.”


By Pete Moore On July 14th, 2011 at 5:15 pm

Moody’s put the US government debt on a downgrade warning this week after the Pouty President walked out of talks with GPO negotiators. Now, S&P has followed suit with Reuters reporting a warning that “it would downgrade the country’s debt if the Treasury Department is forced to prioritize payments because Congress does not raise the debt limit”. What are they waiting for? Get on with it. I’d downgrade not just the debt but the dollar and economy as a whole. The debt ceiling will be raised and the “Federal” Reserve will have to print up the bucks to buy the government debt which will flood out further.

A opportune moment then to view the first 2012 Presidential campaign ad from the one man inside the Beltway who would put a stop to this mega-ponzi, economically suicidal nonsense.

Quite a production, I’m sure you’ll agree. The message is as clear now as it has been for years – if GOP voters are to walk the walk and if they are not big government socialist talkers in disguise, there is only one option.


By Pete Moore On July 1st, 2011 at 3:30 pm

Meredith Whitney caused a stir last year with dire warnings of the state and municipal bankruptcies across the US. It looks like she might be right:

New Jersey Asks JP Morgan For $2.25 Billion Loan

Illinois out of money for income tax refunds: State owes businesses $620 million in income tax refunds dating to 2009

Minnesota: Broken deals, bitter words and a state shuts down

These headlines are from just the last three days, but it’s been happening all over for some time. To regular readers of Mish and Robert Wenzel it’s no surprise. Follow them for a ringside seat as it unfolds.

Wenzel says that it’s no time to own state or municipal bonds. This is true because defaults are certain, but such is the catastrophe it’s no time to be dependent on a state or municipal salary or pension either. The sustainable limits of the indebted regulatory state were broken a long time ago. The unwinding is inevitable and will be painful. The less exposure to and reliance you have on the state the less painful it will be.


By Pete Moore On June 25th, 2011 at 3:22 pm

The latest update to the chart used by the Obama Administration to convince America that the economy needed a mega-stimulus. Some seem to be confused whenever it’s rolled out, so: the light blue line was the estimated unemployment rate without stimulus, the dark blue line the estimate with stimulus, the red dotted line is the actual rate.

Steven Horwitz says it’s time to call the stimulus a failure. This is no surprise to those who recognise recessions as needed corrections for economies bent out of shape though malinvestment and distortion. When consumer tastes change or production becomes uneconomic, say through higher interest rates, capital and labour needs to be directed elsewhere. There is no painless way to do it, but sucking $787 billion from the economy to keep resources employed where the market says they are not required was always stupid. The policy is a failure.

I don’t particularly blame Obama. He knows nothing of economics and relies on his economic advisors. They know nothing either, because this crackpot scheme wouldn’t have been implemented if they did. He should sack them all, they are not required, they only make things worse.


By Pete Moore On June 22nd, 2011 at 10:08 pm

That “soft patch” being today’s euphemism for depression. The Chief Grand Economic Wizard met the press today. It was as ugly as it was a waste of time:

Brutally honest, Bernanke admitted that he had no clue what was actually causing the current fragility in the U.S. economic recovery.

Mirror, mirror on the wall …

Bernanke took the hit, admitting only some of the factors were temporary and that he didn’t know exactly what was causing the slowdown, but that it would persist.  “Growth,” said Bernanke, “will return into 2012.”

If that’s not a bear signal nothing is. “Growth” might return in the sense that the $1.5trillion held on reserve at the Fed will grow price inflation somewhat dramatically if it spills out, but growth in the real economy? Bernanke’s crystal ball is hardly to be respected:

Comrade Central Planner, this is How an Economy Grows and Why It Crashes.


By Pete Moore On June 21st, 2011 at 5:48 pm

Falling prices are the natural, benevolent harvest of free markets to which everyone is entitled, though not according to Paul Fisher of the BoE’s Monetary Policy Committee. He threatens more coin chipping QE because “If we get stuck in a deflationary rut it’s not clear we have sufficient ability to get out of that quickly.”

I see he has a PhD in Economic Modelling. What a shame for him; all that effort when the only good economic model is in the bin.

A fall in prices is to become more wealthy because our money is worth more. To a central planner like Fisher too many falls/too many people becoming more wealthy is a rut out from which we must be rescued by the Bank’s printing presses. This is not even to mention that prices are ripping right now, a predictable disaster not predicted by people like him when they started printing three years ago. Alas, printing money is all they know.

So savers will be robbed of fair interest and we will all become poorer through inflation because, well, the economy might not conform to someone’s model.


By Pete Moore On June 20th, 2011 at 1:35 pm

Mervyn King, Chief Central Planner of the Bank of England – and a gaggle of economists too – warned in 2008 that deflation was a real threat (these people never explain why falling prices is bad) and that the CPI would undershoot the Bank’s 2% target rate in 2009.

Thirty months later and price inflation continues to wash over:

“Six times as many households (36pc) saw their financial position worsen from May, compared to those who saw an improvement (6pc), the leading monthly survey from the financial information firm showed […]  People’s finances deteriorated as they delved into their savings and took on more debt to cope with increasing prices and falling incomes […] The findings support predictions from the Office for Budget Responsibility (OBR), the independent fiscal watchdog, that households will borrow more to maintain their living standards – £500bn more within four years, or £20,000 per family.”

This is no accident. Inflation is wealth confiscation, a tax by stealth. It is being deliberately induced to inflate away the government’s debts but we are being swindled and made poorer by the Bank and the Treasury.


By Pete Moore On June 18th, 2011 at 2:39 pm

Bill O’Reilly’s most revealing interview – about himself that is when he had Jon Stossel in to discuss Ron Paul’s appearance at last week’s GOP quizshow.

Catastrophic though the effects of Keynesian economics are, Keynes was the the most influential economist of the 20th Century yet it seems* O’Reilly does not even know how to pronounce his name:

How can anyone discuss world and national affairs with this level of ignorance? The more he talks here the more he shows he’s just a big mouthed fast talker. Why does anyone take any notice of these windbags?

* It does occur to me that O’Reilly is acting dumb, in a “knowing of Keynesianism is dirty” way, but that would be dumb itself. No-one can hope to have a knowledge of economics without considering Keynes and O’Reilly appears genuinely perplexed at the beginning of the piece when considering Ron Paul’s full sentences.