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The Blindness of Modern Economists

economy

Supposedly one of the top ten reasons to become an academic economist is that it gives you a chance to talk about money without ever having to make any. Also, you get to say “trickle down” with a straight face.

The contrast between mainstream academic economics and “real world economics” has always been stark, but today the disconnect is so enormous that it seems the two have nothing at all in common. If you were to ask Paul Krugman and Doug Casey how to fix what ails our economy, you’d get two diametrically opposed answers.

Here are some educated guesses why that may be the case:

Mainstream economics relies heavily on mathematics, whereas real-world economics shuns it. In the hard sciences like physics or chemistry, fields based on immutable natural laws, focusing on math produces the best results. Economics, on the other hand, is a social science and attempts to explain human behavior—arguably the most fickle of actions, and no more mathematically quantifiable than the exact degree of mortification when throwing up on the dress of your 12th-grade crush at a high school reunion. Which, of course, has never happened to anyone we know.
In the hallowed halls of academia, you need not be correct to be useful. In the world of business, if you’re wrong more often than you’re right, you won’t stay in business for long. In contrast, academic economists can and have made very successful careers out of being apologists for the regime. No matter that they’ve been dead wrong in virtually every forecast they’ve ever made: as long as their forecasts align with their peers’, they can collectively claim, for example, that no one could have ever seen the financial crisis coming.
Most academics believe that their work is worth more than the free market gives them credit for. That’s not to say that academics’ work is not important—it is. But there’s a huge difference between thinking and doing, and those who are paid only to think rarely become wealthy. My guess is that academics are bitter about this fact, and believe that because the free market doesn’t adequately reward them, there must be something wrong with it. They correctly understand that oftentimes, the only way for them to obtain a lot of money is to steal it via the government; and because that principle applies to their line of work, it must apply to all others too.
The misguided belief that aggregate demand drives the economy creates a vicious cycle. Mainstream economists believe that aggregate demand—the total demand for goods and services in the economy at a given time and price level—is the wellspring from which all prosperity emerges, and so anything that increases aggregate demand must be positive, even otherwise wasteful government spending. Economists also use these as an excuse to make laughably rosy forecasts. After all, consumers spend more when they think the economy is growing like Jack’s beanstalk, so why not add some more beans while we’re at it? It’s all for the greater good. We initiates, of course, know what awaits us at the other end of that lofty stalk.
Contrast that with real-world economists who are loyal to their investors, clients, or subscribers. If our Chief Economist Bud Conrad constantly made incorrect forecasts in order to help the economy recover, we wouldn’t have any subscribers. That’s why Bud tells it like it is—as he will in the upcoming issue of The Casey Report, in which he evaluates whether tepid GDP growth or soaring stock prices more accurately describe what’s really happening in the economy.

I’m sure I’ve overlooked many other compelling reasons. But regardless of why economists differ, it’s important to understand on exactly which issues they differ, and which understanding is correct.

This week’s contributor is real-world economist Alasdair Macleod, head of research at GoldMoney. In a scathing article, Alasdair explains a few of the common errors mainstream economists make, the origins of those errors, and why they’re wrong.

The dollar – and the USA – is toast

Lord Monckton sees China prepping for final collapse of America

Obama has done it. He has brought America down. It only took him just over four years. The Republicans could have stopped him. They didn’t.

How did the nihilistic left succeed in destroying America? Simple. They learned just a little of the capitalism they hate, and they drove your nation into outright bankruptcy.

And here is what the GOP has to say about it: just about nothing.

The once-mighty United States is now the most indebted nation on Earth. In round numbers, here are just some of the vital statistics as the patient dies:

National debt: $17 trillion, or $50,000 per man, woman and child, or $150,000 per taxpayer. Annual federal deficit: $1 trillion. Medicare/Medicaid/Obama”care”: $1 trillion a year. Social Security: another $1 trillion a year. Defense: two-thirds of a trillion. Unemployment handouts: $2 billion per working day. Debt interest: $1 billion per working day. Federal pensions, ditto.

Now for the big numbers. Your government’s Social Security liability is as big as the national debt: $17 trillion. Its prescription drug liability is $22 trillion. Then there’s the Medicare liability of $86 trillion. Total unfunded liabilities of the U.S. government are $125 trillion.

Net assets for each U.S. citizen are $300,000. The net liability of the U.S. government, shared among its citizens, amounts to almost four times that: $1.1 million a head. And the government’s debt is growing at $1 million every 45 seconds. To cover its annual deficit, it is printing $1 trillion a year of currency that is not backed by any asset whatsoever.

Here is what will happen next. When the crash comes, don’t say you weren’t given fair and clear warning.

First, the dollar will cease – no, make that “is already ceasing” – to be the world’s reserve currency. China, as I have been warning you she would, has realized the dollar is finished. So she is quietly making startling progress with bilateral and multilateral deals to replace the dollar with the yuan as the world’s currency of choice.

Sterling, once the world’s reserve currency, went precisely the same way in 1967 under orders from Moscow, which then largely controlled the governing Socialist Labor party in Britain.

After the Second World War, the Socialist/Communist governments of Attlee and Wilson bankrupted Britain with health-care and welfare programs and nationalization of industries. Inflation rose to 27 percent.

Obama’s copycat policies are different in only one respect. Moscow is no longer calling the shots. International totalitarianism no longer needs direction. Its cruel, hate-filled, destructive mission now advances on autopilot.

Watch some of the straws in the wind. China and Korea have come to a little-noticed agreement that international trade between them will no longer be denominated in U.S. dollars, but in yuan, or Won.

Behind the closed mahogany doors of the world’s finance houses, elaborate and secret preparations are being made for the upheaval and international financial collapse that will follow the deliberate printing-out and consequent implosion of the dollar.

Your GOP representatives should be, but are not, asking the administration to reveal to them the ever-tougher terms on which the Chinese continue – with ever-greater reluctance –to lend money to keep their communist ally in the White House afloat.

Do not believe China cannot afford to let her biggest creditor fail. She can, she will, and she is making careful preparations to do just that.

If you thought the crash of 2008 was bad, think again. The crash that is coming –I cannot put a date on it, but it is not far away now – will be orders of magnitude worse.

So, what should you do to protect yourself and your family? First, get rid of every dollar you have. Dollars are now all but worthless. When the crash comes, they will have no value at all.

In hard times, most financial instruments – currencies, stocks, bonds – are not worth the paper they are printed on. Get rid of them now. Buy silver coins. They will quintuple in price once the crash sets in, and they are small enough to be fungible when the dollar dies.

Buy land, some of it well-wooded, some of it arable, some of it grassland. You will need the timber to power your steam tractor. Gasoline will be a costly rarity. And make sure you can defend yourselves. Starving mobs are no respecters of persons. Do what the Mormons do: Get three months’ supply of imperishable foodstuffs and hide them in the basement.

Absurd though this advice may now seem, there is a real danger that the crash will sudden. If so – perhaps for several months, and even for years – the fabric of civilization, including the food-supply chain, will fail.

It is not my custom to write in millenarian or apocalyptic terms. But the very best that can be said for your current administration is that it simply has no idea what damage it is doing. It is printing money in the vain hope of buying itself time. Yet every fake dollar that comes off the printing-presses makes the problem worse and the solution harder.

At worst, what is now happening to your nation may be deliberate. In that event, your current “president” will go down as history’s greatest villain. In any event, he will go down as history’s greatest incompetent.

Do not believe none of this can happen. Psychiatrists study what they call “normalcy bias.” People expect that everything will carry on and that America is too big to fail. She is not. She has failed. You will pay a heavy price for her failure, unless you act now to defend yourselves against what your government, with the culpable, silent acquiescence of the GOP, is doing to destroy your nation.

Finally, pray. God bless America. It has been nice knowing you. Only when you are gone will the world realize how much it misses you, and – paradoxically – how much it owes you.

Read more at http://www.wnd.com/2013/05/the-dollar-and-the-usa-is-toast/#MZjqFZzvdls1skvk.99

David Stockman feels force of Washington fury

david-stockman-the-budget-director-under-president-ronald-reagan-in-2007

It takes a lot for an official who served at the heart of the White House to go beyond the pale in Washington, but a diatribe against all economic policy since 1933 – attacking everyone from Franklin Roosevelt to Milton Friedman – is one way to manage it.
David Stockman, budget director for Ronald Reagan from 1981 to 1985, is the man who will be short of dinner party invitations after becoming the most mainstream figure to argue that all America’s economic problems stem from the welfare state and the end of the gold standard.
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Mr Stockman’s new book, The Great Deformation , highlights the enduring conservative appeal of a kind of economic primitivism that harks back to the days when laisser-faire ruled and macroeconomics had not been invented.
“The modern Keynesian state is broke, paralysed and mired in empty ritual incantations about stimulating “demand”, even as it fosters a mutant crony capitalism that periodically lavishes the top one per cent with speculative windfalls,” wrote Mr Stockman in the New York Times article that set off a minor furore in Washington this week.
The reaction, left and the right, was scathing. Jared Bernstein, former economic adviser to vice-president Joe Biden, gave one of the gentler liberal critiques. Mr Stockman, he said, was “about 11.8 per cent absolutely and totally on target” with his criticisms of crony capitalism. But the other 88.2 per cent was “a horrific screed, an ahistorical, dystopic, Hunger Games vision of America based on debt obsession and wilful ignorance of macroeconomics and the impact of market failure”.
The right was not much more impressed. David Frum, a speech writer for former president George W. Bush, called it “primitive” as economics, “silly” as advice, and diagnosed Mr Stockman with a mild case of elderly depression.
“As an insight into the gloomy mindset that overtakes us in older age, it’s a valuable warning to those still middle-aged that once we lose our faith in the future, it’s time to stop talking about politics in public,” he wrote.
Forecasts based on this world view have been spectacularly wrong in the last five years – instead of hyperinflation and a debt crisis, America has price rises of 1.3 per cent and a 10-year Treasury yielding 1.69 per cent. But Mr Stockman taps a strain of market discontent with fiscal stimulus and the US Federal Reserve’s policy of quantitative easing.
“There is nothing [Stockman says] that others haven’t,” says Peter Schiff, chief executive of the broker Euro Pacific Capital, with a similar outlook. “But when someone from the establishment criticises the establishment then everyone has to jump on him and discredit him.”
For the economic mainstream – which argues activist policy helps stabilise the economy, considers the gold standard ludicrously unworkable today, and diagnoses America’s primary problem as lack of demand – the 19th century critics are a challenge as there is some substance to the risks they identify.
There is legitimate concern about the rally in asset prices that has taken the S&P 500 index to a new high, and is spreading to real estate. Equity and property prices fell to long-run measures of fair value during the financial crisis, but not below, and have already moved above them.
“A lot of the inflation is in assets,” says Mr Schiff. “You can see it in the bond markets, you can see it in the stock market, you can see it in real estate. Real estate is already too high.”
The Fed rejects that QE – purchases of assets to drive down long-term interest rates – has formed an asset-price bubble. But concerns about stability have intensified at the central bank and led to debate about when to slow QE down.

If a bubble were to form and then to burst, it would seem to prove Mr Stockman and his colleagues right.High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/da17512c-9e0e-11e2-bea1-00144feabdc0.html#ixzz2Pg8x3eil

How the democrats have it all wrong regarding the economy

by Dennis Marcellino

Nearly everyone is dependant on the work of other people to survive and thrive (houses, food, cars, protection, computers, hospitals, stores, electricity, water, etc., etc.). So the good thing to do then in return would be for us to contribute our work for those other people to benefit by. Like it or not, that is the kind of economic system we live in. It is no longer bartering or self-sufficiency on tax-free land. And the exchange of labor is made through money. So we either give ourselves in dependency on job creators, or we work hard to become a job creator ourselves, at least to the point of creating enough income producing work for our self.

A problem though now is that it can be very difficult for many to find jobs. (And some are not able to work, and do need our help. But they are very few. And I’m not including here single moms who through their own irresponsibility either had babies out of wedlock or didn’t properly set up a marriage to support their family. But that reveals the ugly moral side of the current culture that will be left for a separate article.)

I’m going on 65 and I probably wouldn’t be able to find a job, even though I’m highly skilled and highly educated, just because of my age. Therefore I’m lucky that I’ve worked hard to be able to make a living through self-employment. But what about people who aren’t self-employed and can’t find a job? That’s why we need a safety net. But that safety net doesn’t necessarily have to be the government. It could be relatives or churches or private organizations offering work. And it would have to be work that is being offered and not continual handouts, because the Bible says that those who don’t work should not eat.

2Thessalonians 3:6-15, “Our orders—backed up by the Master, Jesus—are to refuse to have anything to do with those among you who are lazy and refuse to work the way we taught you. Don’t permit them to freeload on the rest. We showed you how to pull your weight when we were with you, so get on with it. We didn’t sit around on our hands expecting others to take care of us. In fact, we worked our fingers to the bone, up half the night moonlighting so you wouldn’t be burdened with taking care of us. And it wasn’t because we didn’t have a right to your support; we did. We simply wanted to provide an example of diligence, hoping it would prove contagious.

Don’t you remember the rule we had when we lived with you? “If you don’t work, you don’t eat.” And now we’re getting reports that a bunch of lazy good-for-nothings are taking advantage of you. This must not be tolerated. We command them to get to work immediately—no excuses, no arguments—and earn their own keep. Friends, don’t slack off in doing your duty.

If anyone refuses to obey our clear command written in this letter, don’t let him get by with it. Point out such a person and refuse to subsidize his freeloading. Maybe then he’ll think twice. But don’t treat him as an enemy. Sit him down and talk about the problem as someone who cares.”

Therefore, if we want to be in harmony with God, job creation should be the first order of business. But the present government doesn’t live by God’s ways. It just gives perpetual handouts, which many are willing to take, and that don’t require a labor compensation. But because of the moral problem in our country that I previously mentioned, many are psychologically and emotionally ill and find it hard to work. That’s why it is equally important to address the moral problems in this country. And in this regard, the democrats just hurt the country more.

By the way, a side thought here is that Obama will solve the illegal immigration problem. But not in the way he thinks. He’ll solve it because there will be no extra jobs here for illegal immigrants to come and get because the job market is going to shrink due to Obamacare and taxes and stiff regulations on businesses.

So then what’s the answer? Mitt Romney had it right – the government does what it can to help facilitate the creation of jobs. And let’s face it, most job creation is not in the hands of government, it is in the hands of people – who have enough money and dedication to create businesses that employ people. The democrats obviously don’t get that. What they actually do was just expressed by Mitt Romney as to why he lost. He said that the government gives out “gifts” and then expects votes in return. But the rest of the working people have to pay for those gifts.

No, the answer was what Mitt Romney and Paul Ryan were proposing: create jobs, not handouts.

I said it in a previous article and I’ll say it again … this country shot itself in the foot by voting for Obama and increasing the democrat lead in the senate, and not voting for Romney, who has the proven skills for how to create jobs. Plus he understands good morals.

Byline: Dennis Marcellino is the author of The Plague Of Liberalism (www.ThePlagueOfLiberalism.com). His other books and DVDs can be seen at www.LighthouseBooksAndMusic.com.

Read more: http://patriotupdate.com/articles/how-the-democrats-have-it-all-wrong-regarding-the-economy#ixzz2CfmjhGaU

AMERICANS NOW 'SENSING DANGER'

THE BEGINNING OR THE END - OUR ECONOMIC FUTURE

For Economic Recovery We Go Back In History and Ask - Ludwig von Mises, the great Austrian economist

(no title)

By Larry Johnson

Like the Titanic as it settled beneath the waves, the U.S. economy is underwater and headed for the bottom again. The jobs report today was not just “bad,” it was alarming. Unlike previous reports, the media, both written and electronic, have caught on and realize that sunny praise sung by the White House about a supposed one-tenth of a percent decline in jobless numbers is total bullshit.

The only good news for Obama is that we may actually be nearing the bottom of the 2008 Depression and the housing market may be on the cusp of turning around. But that ain’t happening in a dramatic fashion in the next five months. The numbers in the latest Bureau of Labor Statistics tells a grim story:

The civilian non-institutional population grew by 180,000 people in the last month. The term–civilian non-institutional population–refers to “persons 16 years of age and older residing in the 50 States and the District of Columbia who are not inmates of institutions (for example, penal and mental facilities, homes for the aged), and who are not on active duty in the Armed Forces.”

So you would expect the civilian labor force to increase. Right? I mean, with population growth that “180,000″ number comes primarily from new 16 year olds entering the potential labor pool.

Wrong. The civilian labor force declined 342,000 since March 2012. Got that? Although Barack Obama is jumping around in his cheerleader outfit touting the news that 115,000 jobs were created in April, more than THREE TIMES that number left the labor force. Is that because they won the lottery? Is that because they earned so much money on lucrative business deals that a mass of folks decided to retire? WRONG!

No amount of lipstick will turn this pig of an economy into a bathing beauty. Since last April (2011), the number of people “no longer in the labor force” has increased by almost 2.7 million. Obama likes to thump his chest while claiming speciously that his Administration has created 4.4 million jobs in the last three years. Well Bucko, 2/3rds of that number has left the labor force in just one year. That’s not a record to run on.

What do you folks think?

THE OBAMA ECONOMY IS WRECKING NASCAR

OBAMAS ECONOMY HAS 88 MILLION NOT IN THE LABOR FORCE

BY THE UNIONLABORREPORTt was less than a year ago that Barack Obama’s senior adviser, David Plouffe said:

After 2½ years in office, President Obama now “owns” the economy as an issue, according to top adviser David Plouffe, who added he was confident that voters understand that recovering from a devastating recession Mr. Obama inherited takes time.

“Of course he does,” Mr. Plouffe told NBC’s “Today” show host Matt Lauer when asked point-blank if Mr. Obama owns the economy.

“But the American people understand that we — it took us a long time to get to this mess,” Mr. Plouffe said. “It’s going to take us some time to come out. We are making progress.”

Well, after Friday’s jobs numbers came out (the economy added 120,000 jobs) Labor Secretary Hilda Solis promptly proclaimed: “That’s a noteworthy achievement.”

In fact, for the man who campaigned on the message of “hope” in 2008, the 120,000 jobs added is much fewer (about half) than expected and the edging down of the unemployment to 8.2% is not from job creation but from hopelessness.

There are now 88 million American who are “Not In Labor Force,” according to Department of Labor statistics, which the St. Louis Federal Reserve put into this pretty chart:
Obviously, others are seeing past Obama’s cheerleaders.

The Wall Street Journal stated:

But mostly, the picture was disappointing at a time when all eyes are on the U.S. to help keep global growth humming. The jobless rate, which is obtained from a separate survey of households, edged down to 8.2% from 8.3%, its lowest point in three years. However, that decline was due less to new hiring than people abandoning their job searches.

“I’m nervous,” said Jared Bernstein, former chief economist* for Vice President Joe Biden.

* Although Bernstein, according to his bio, is not really a trained-economist (he just played one in Washington), he is right to be nervous.

And, so should the Obama Administration.

The hard truth for Barack Obama is:

People have given up.

They have gone from ‘Hope’ to Hopelessness.

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