Posted tagged ‘Debt Ceiling’

Must Reads For The Week 2/10/18

February 11, 2018

 

THE FED AND THE STOCK MARKET

Is The 9-Year Dead Cat Bounce Finally Ending? By Charles Hugh Smith, at oftwominds.com. The Feds double edged sword of artificially low interest rates and money printing have created bubbles in the financial markets. No one knows what is and is not a bubble activity. We just know printed money went into the financial markets. As Jim Grant has said, “It is money in search of mischief”. In other words, artificially low interest rates and printed money misallocates scarce resources to activities that would not exist under free market interest rates and stable money.

When the Fed raises interest rates and takes money out of the system by unwinding its balance sheet, the bubble activities will be revealed. Could this be what is happening to the stock market now. The Fed’s QE Unwind Accelerates Sharply, at zerohedge.com. The Fed created the financial bubble in the first lace and is now trying to figure out how to gradually let the air out, instead of popping it. They hope a stronger economy can help release the air slowly over time.

Former Fed Chairman Alan Greenspan Warns: “We Have A Stock Market Bubble, at zerohedge.com. No kidding! You helped cause it by lowering interest rates and printing money.

The worlds Central Banks Holding Steady, But Promise More Rate Hikes, at mises.org. I scratch my head when I hear central banks talk about price inflation without mentioning that their policies are the cause of inflation. Prices will go up and down because of supply and demand. But this is not inflation. Money printing is the definition of inflation.

DEBT

Pentagon Auditor Can’t Account For $800 Million In Spending, at zerohedge.com. No shock here. There is waste, theft and fraud everywhere tax payer money is spent.

Credit Card, Student and Auto Debt All Hit Record Highs In December, at zerohedge.com. Borrowing money means you bring your future consumption into the present. How much more do you have to produce in order to be able to pay off the interest and inflated cost of present consumption and to also be able to consume when the future becomes the present?

Republican Fiscal Hawks Revolt Against Budget Deal, Suspension Of Debt Ceiling, at zerohedge.com. How can the Republicans in Congress say they are for small government when they pass a budget that increases the yearly budget debt by $400 billion? Only fiscally responsible Republicans stood against this budget. With the Fed saying they are going to increase interest rates, the $20 plus trillion national could increase exponentially.

Student-Loan Crisis Worsens; Looming Defaults Strain Govt Bailout Program, at zerohedge.com. Since the Government took over student loans it has become a bubble activity. The rise in the cost of college tuition is being caused by borrowed money being used to pay for college. When students get out of college and have more debt than income there will be defaults. These defaults will eventually be paid by you and me the tax payer. What a scam!

The Cure, at ericpetersautos.com. Excerpt from the article: “Imagine how different cars would be if people had to pay for them – as opposed to financing them. Debt – which is what financing is – allows people to buy more car than they can afford. It hides the actual cost of the car. It enables the government to impose costs in the forms of mandates which would otherwise be unaffordable – and so, objectionable. People would complain in the one language the government understands. They would not comply – because they could not buy.”

OTHER STUFF

We Say Peoplekind”: Trudeau Mansplains To woman That “Mankind” Is Not an Appropriate Term, at zerohedge.com. This is the the idiocy of political correctness. Everyone with a brain knows what mankind means.

Lawmakers Want To Ban Tide-Pods From Looking So Delicious…. Seriously, at zerohedge.com. Who in their right mind would think eating laundry pods is a good idea? What kind of ego does it take to think it is your job to protect these idiots from themselves?

The Greatest Public Health Mistake Of The 20th Century, at mercola.com. We have been told for decades to stay out of the sun or wear sunscreen when you have to be out in it. But staying out of the sun causes a vitamin D deficiency. The study says that vitamin D may prevent 30 deaths for each death caused by skin cancer. Thomas Sowell is right again when he said, “There are no solutions in life. There are only trade offs.” We were sold a bill of goods on a bad trade off.

The Fragile Generation, at zerohedge.com. Excerpt from the article: “Bad policy and paranoid parenting are making kids too safe to succeed…..This generation of kids must be protected like none other. They can’t use tools, they can’t play on grass, and they certainly can’t be expected to work through a spat with a friend.”

 

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Thomas Sowell’s Random Thoughts

November 29, 2013

I try to read everything Thomas Sowell writes. His random thoughts articles (read most recent article here),  always makes me think.

Here are some excerpts.

-“Don’t you love it when a politicians says, “I take full  responsibility”? Translated into plain English, that says, “Now that I have admitted it, there is nothing more for me to do (such as resign) and nothing for anyone else to do (such as fire me).” Saying “I take full responsibility” is like a get-out-of -jail-free card in the Monopoly game.”

– “If you believe in equal rights, then what do “women’s rights,” “gay rights,” etc., mean? Either they are redundant or they are violations of the principle of equal rights for all.”

– “One of the painfully sobering realizations that come from reading history is that utter incompetence that is possible among leaders of whole nations and empires — and the blind faith that such leaders can nevertheless inspire among the people who are enthralled by their words or their posturing.”

– “The one thing that the national debt ceiling does not do is put a ceiling on the national debt. It just provides political melodrama when the existing ceiling is repeatedly raised to accommodate ever higher spending.”

Related ArticleThomas Sowell’s Random Thoughts, at austrianaddict.com.

Related ArticleRandom Thoughts And Other Thoughts By Thomas Sowell, by austrianaddict.com.

Related ArticleThomas Sowell Explains How Democracy And Freedom Are Not The Same Thing, by austrianaddict.com.

The Market (Individuals) Finds Ways Around Govenment Intervention.

October 7, 2013
600 mm by 300 mm (24 in by 12 in) emergency pl...

(Photo credit: Wikipedia)

INDIVIDUAL DECISION MAKING vs. GOVERNMENT DECISION MAKING

I’ve always thought free market capitalism would always out pace the interventions of Government, but when the bubble burst in 08, I started to change my mind as I began to educate myself about the interventions by the Fed via the double edge sword of low-interest rates and electronically printing counterfeiting money. I had never understood the ramifications of these policies until I started reading about the Austrian Business Cycle Theory. We have talked about these ramifications in these posts: The Role Of Interest Rates In A Market Economy, Thomas Woods Explains The Austrian Business Cycle Theory, Keynes Was Correct In 1919!,  A Look Over The Horizon At What Lies Ahead If We Continue Down The Central Planning Road, What Comes First Production Or Consumption,

I had become more pessimistic about the chances of the market regaining the lead over Government intervention, but recently I’m seeing signs of the market starting to reassert its dynamism. Two examples are the shale oil boom and another is the plummeting sales of electric cars. The oil boom is happening in spite of the best efforts of Government to get in it’s way, and electric car sales prove the consumer ultimately makes the decision on what succeeds and fails in the market, and not the Government. I should never have been pessimistic in the first place because the market is always attempting to correct the interventions perpetrated on it by the Government.

THE BUST IS THE CURE FOR THE PRINTED BOOM

If we look at the case of the housing boom that lead to the 08 bust, the boom was out pacing the corrections by the market, much like the story of the tortious and hare, but once economic reality finally caught up to the fake reality created by Government, the bust in housing occurred. The bust was the cure for the artificial boom created by the Government and the Fed, and should have been allowed to run its course in order to wring out all the misallocations that had been allowed to grow during the boom. From the politicians stand point this much-needed cure was a political nightmare, because they were in the driver seat when the crash happened. So instead of letting the market cure the problem they created, the Government and the Fed stepped in and “saved” the too big to fail banks by lowering interest rates to near zero and injecting close to $3 trillion into the economy through the purchase of mortgage-backed securities and treasury bills. This doesn’t even count the TARP bailout under Bush or the $900 billion economic stimulus package under Obama. What the Fed and the Government did to grow the boom and then “save’ the economy from the bust, was like a doctor prescribing steroids to his young patient in ever-increasing amounts to help build a big strong body. Everyone could see him growing because of his outward appearance, but no one could see what was happening on the inside. When his organs began to fail, and his body began to break down, the doctor prescribed more steroids to try to keep his body growing. This isn’t a perfect analogy but it’s close to describing what the Fed and the Government has done to the economy over the last 15 plus years. Unlike the patient, who will eventually die, the economy won’t die, it will continually keep trying to make corrections for all the interventions by the Fed and the Government. Why won’t the economy die? Because an economy is simply the result of all the decisions made by each individual as they cooperate and compete with other individuals on how to use scarce resources for production and consumption. Government intervention is just one variable that has to be considered when individuals make decisions. When Government intervention grows to a certain point, individuals start spending more time protecting what they have rather than spending  time producing more. The standard of living begins to stagnate as we start to consume more than we produce.

Here is a chart that shows that debt doesn’t create growth. The G7 nations consist of US, UK, France, Germany, Italy Canada, and Japan. The debt that was created to grow these economies has only marginally increased GDP compared to the growth in debt. In fact the GDP number is fake because the electronically printed counterfeit money that gets used for consumption is counted when GDP is calculated. You could say the central banks are counterfeiting a positive GDP number. Read article here.

CONCLUSION

This debt has to be paid back by future production. Future production also has to sustain future consumption by Government and private individuals. If production can’t cover all three (debt, Government consumption, and individual consumption), who do you think will have to sacrifice for the other two? The upcoming debt ceiling fight will answer that question. My prediction is the debt ceiling will go up and there will be no actual cuts in Government spending, just minor reductions in the rate of growth. I hope I’m wrong.

Ted Cruz Lets Us See The Magic Show From Behind The Curtain.

May 31, 2013

Magicians hate it when someone shows the audience how a magic trick works. Ted Cruz is showing us how the verbal sleight of hand artists in the Senate perform their misdirections. Big Government Senators from both parties have to be upset with him, which is great for liberty and bad for arbitrary power by Government [tyranny].

As F.A. Hayek stated, “…The battle for freedom must be won over and over again, the socialists of all parties must be persuaded of defeated if they and we are to remain free men.”

If you want to know who a man really is, find out who his enemies are.