A Notable Rant

Looks like I will have a number of videos this week. This one was too good to pass up. 

This is why you must cut spending. 

Why Are Gas Prices High?

In this clip Reich gives a long convoluted explaination about why Obama is not responsible. Stockman in a few sentences tells us exactly why gas prces are so high. 

False Prophets and the War on Women

A current popular meme for those supporting the Obama ticket is the supposed "war" on women. 

This war was supposedly started by Rush Limbaugh when he called Sandra Fluke nasty names. Ms. Fluke was the Georgetown student who testified before congress that the religious college she attended, Catholic Georgetown, should be forced to purchase contraceptives for her. I am not a listener to Limbaugh, but it seems to me that he should have instead pointed out the dumbness of her testimony. First Fluke's estimate of $1000 a year for birth control was absurdly high. The correct figure is $9 a month at the Walgreens nearest the college. Even ignoring the religious rights issue of forcing religious institutions to pay for abortion pills for students, Georgetown is a private university. Whatever it costs the university will be ultimately charge back to the student. Fluke will pay the bill for the pill either way. 

In a very odd screed a blogger for The Hill, Brent Budowsky, had this to say:

The Ayn Rand-like reactionary budgeting of Wisconsin Rep. Paul Ryan (R) is a dagger in the hearts of programs that serve women. The Austrian economics of Ron Paul is from the wrong century and the wrong continent, and profoundly hurts women.

To call Ryan Ayn Rand-like is laughable. Ryan is not even Rand Paul-like! His budget does not in fact cut anything. I blogged on this recently. 

Why then does the author lie? It fits his agenda. So rather than actually debate the fiscal train wreck that is coming, instead we talk about contraceptives. 

Here is what Bloomberg thinks:

Inaction isn’t inevitable: Deficit reduction is an unusual issue in that both parties fundamentally agree on the goal, even if they don’t agree on how to achieve it.

Actually both parties are in agreement, that no cuts are needed. No one but someone named Paul has actually suggested that the budget be balanced. 

Worse, too much deficit reduction too fast will hurt economic growth. You can see that happening in Europe, where an excess of austerity has tipped a number of nations into fiscal holes they can’t seem to climb out of. In a city as obsessed with deficits as Washington, yet unwilling to strike smart deals that pair long-term deficit reduction with short-term support for the economy, a bad turn in the economy or a set of policy misjudgments remain a real threat.

Doesn't Ezra Klein (author of the comments above) understand that the reason Greece used austerity was that it had no choice. No one would buy Greek bonds. Portugal and Spain are almost at this point—Ireland too. You cannot run a deficit if you do not have the money. Italy is not too far behind. Japan is talking about doubling their sales tax. Even that will not be enough. 

The US and Japan do control their own currency, unlike Greece, Ireland, Portugal, and Spain. I am not sure that this will be an advantage when the time comes that no one buys their bonds. Right now the Federal Reserve buys 61% of all new debt that the US issues. What happens when the Fed has to buy all debt issued—even the debt that would normally be rolled over? It will not be pretty. 

Maybe I am wrong and people like Klein and Budowsky are only deluded. I do not know where their head is—but that place is dark, warm and smells bad. 

How long before the US cannot sell bonds? I have been saying 3 to 7 years. Maybe if the Ryan budget passes this might be longer. Let’s say 4 to 8 years. This would mostly be psychological as the average person would not understand that the Ryan budget is a joke. 

I wrote about prophets last Friday. True prophets are not well received. This is why the false prophets of our congress and journalists are so well received. They say what is expected. I will close with what Noam Chomsky (Yes I know ...) said about true Bible prophets: 

The people who were honored in the Bible were the false prophets. It was the ones we call the prophets who were jailed and driven into the desert, and so on.

This is why Paul is so condemned. It is because he is right.  

Happy Rainbow Unicorns and the Ryan Budget

My daughter is 8 years old, and even though we have never celebrated Christmas she tells me that she believes in Santa. I think she is teasing me. I hope she is teasing me. My other children know I love to tease. It seems only fair that I get teased back. 

But even my daughter does not believe in happy rainbow unicorns. Looking over Congressman Ryan's proposed budget I have to conclude that he believes in happy rainbow unicorns. Republican president nominee Romney (I speak only slightly prematurely as it is Romney's turn) has worked closely with Ryan. This is his budget now. I guess Romney believes in happy rainbow unicorns too—or is willing to pretend he does until election day. 

I am supposed to take heart from the fact that Obama's budget believes in flying happy rainbow unicorns—but I just get depressed. There are no cuts. The economic assumptions are absurd. Obama's projection is that spending will increase 5% yearly over the next 10 years. Ryan is proposing that the spending will grow 4% over the next ten years. Neither approach can be sustained.

You don't believe me that the Ryan budget had few cuts? Look at this chart shamelessly stolen from Veronique de Rugy at National Review's The Corner. 

 

Yes he does cut a little here and there, mostly from abolishing ObamaCare.  But actually, in toto, the Ryan budget has no cuts. Spending just grows slightly more slowly.  

I was hoping for a Romney Unicorn picture too. He deserves one just as much as Obama. Ryan has promised a tax cut. But due to the way the Congressional Budget Office calculates things this is actually a 2 trillion dollar tax increase as a 4 trillion dollar tax increase is already baked into CBO's figure for the next ten years. Welcome to Republican Math. 

Obama's version of this is a 3 trillion dollar tax cut that is actually a 1 trillion dollar tax increase. Welcome to Democratic Math.

I would actually favor a rather large tax increase if spending could be cut in exchange. I must believe in happy rainbow unicorns too. 

Of course the immediate result was an outcry. Ryan is cruel to seniors. Ryan is cruel to the poor. Ryan favors the rich. Maybe all these things are true. Consider for a moment what will happen when investors realize that the whole federal budget is a house of cards that is crashing down. Bond sales will stop. Then either the budget gets cut 50% right then, or we print money and head toward hyperinflation. Large cuts now are better than draconian cuts later. 

In the interests of safety I have included this picture of Unicorn droppings for easy identification if it drops from the sky!If Ryan's modest cuts reduction in spending increases result in this much outrage, will the streets be quiet when the real cuts come? 

My advice to you is that you get out your shovel. To paraphrase a recent Rick Santorum rant, this is unicorn ****. There is going to be a lot of manure to clean up. Be Careful! Obama's unicorns fly.  

Financial Definitions Made Easy

I wish I had been this clever. This is Tim Price on the Sovereign Man site. 

“Investors back historic Greek debt swap” -    FT headline 9.3.2012.

BANK, n. Bottomless cavity in the ground that sucks in money and the unwary.
I had quite a bit of money but then I put it in the bank.

BOND, n. A profitless contrivance used for catching the gullible or feeble-minded.
That pension fund is 100% in bonds now.

BROKER, adj. A comparative descriptive state for a client of a Wall Street bank.
He didn’t exactly have a lot of money before he started dealing with Goldman Sachs. Now he’s even
broker.

BUBBLE, n. Fundamental prerequisite for a functioning Anglo-Saxon economy.
We need a new bubble to replace the ones we had in dotcom and property.

CENTRAL BANK, n. Lobbyist for commercial banks well versed in alchemy.

CURRENCY, n. Largely intangible substance with an inherent property that tends to instantaneous evaporation, the destruction of life and the permanent impairment of wealth.
I had money once but then I exchanged it for currency in a moment of madness.

DEFAULT, n. Semi-mythical celestial occurrence that passes by Earth every 76 years.
I was worried for a second about that Greek default, but I realise there’s nothing to see now and all is well.

FEDERAL RESERVE, n. A wholly owned subsidiary of Goldman Sachs.
The Federal Reserve voted to give a few more billion dollars to Wall Street.

GREECE, n. An undesirable or unfortunate happening that occurs unintentionally but results in harm, injury, damage and colossal loss of wealth. And profits for Goldman Sachs.
Did you see Greece ? Sheesh.

HORLICK, n. Progressive and insufficiently appreciated investment visionary.

HOUSE, n. In most countries, simply a place to live. In Britain, a theoretically infinite source of perpetual tax revenue for deluded Lib Dems. (This is tautological. – Ed.)

INVESTOR, n. Plucky protagonist admired for brave deeds and quixotic struggling who is about to get shafted by Wall Street interests.
I was an investor in euro zone sovereign bonds but then everything went Greek.

JAPAN, n. Where hopes of profit go to die.

KEYNES, n. Slang: Vulgar. Disparaging and offensive.
That joker Posen is a complete Keynes.

POLITICIAN, n. Someone better informed than you about how to spend your money.

RATINGS AGENCY, n. A professional entertainer who amuses by relating absurd and fantastical tales.
That ratings agency’s credit assessment was so funny, I had to change my trousers.

RESTRUCTURING, n. Statutory rape.
Those bondholders are undergoing a voluntary restructuring – you might even call it a ‘credit event’.

ROGUE TRADER, n. Unprofitable proprietary trader. (Hat-tip to Killian Connolly.)

SOCIETY, n. The process whereby wealth is diverted from taxpayers to banks.

TAXPAYER, n. Simple-minded dolt too foolish to be working for the government.

US GOVERNMENT, n. Another wholly owned subsidiary of Goldman Sachs.
We seem to be running out of Goldman Sachs alumni here in the Treasury. No, wait, we’ve still got hundreds of ‘em.

The Basic principles of economics are explained here.