Over the last several weeks there have been rumors that a group of countries, including China, Russia, Japan, France, and the oil rich Gulf States are preparing to dump the dollar for oil trades. This follows months of speculation that many of the same countries have been working to replace the dollar as the world's primary reserve currency with a new international monetary standard based on a basket of currencies. The dollar has been plunging on world markets.
Why is this import? Well, because the massive and ever increasing U.S. government debt has been largely financed by foreign countries. When a country sells us products for dollars, it can use the dollars in four ways:
• It can buy things from us
• It can buy things (like oil) from other counties that are priced in dollars
• It can invest in U.S. assets (stocks, bonds, real estate, etc)
• It can lend the money to the U.S. government to finance deficit spending
Countries like China sell us products for dollars. They lend a lot of this money to the U.S. government to finance deficit spending. China also uses some of the dollars to buy oil, which is priced in dollars. The countries who sell oil for dollars also use their dollars to finance U.S. government debt.
If countries stop taking dollars for oil and other products they sell to us, it will be the end of the U.S. government’s ability to borrow enormous sums of money. If that happens, the days of big government would soon be over because they wouldn’t have the money to keep spending. That’s a very good thing.
The question is how it would happen? If the world dumps the dollar, the government will have two choices. They can cut spending and live within their means. Or they can turn the printing presses on to keep spending just a tiny bit longer, and create a hyperinflation in the process. The latter would be a catastrophe that would wipe out the middle class and set the stage for political upheaval, including the potential for violent revolution. It’s happened in other countries. We don’t need it to happen here.
If the world does dump the dollar, let’s hope that there are enough rational people around to realize that the party is over and have the courage to reign in government spending. If not, things will get much worse before they get better.
Monday, October 12, 2009
Tuesday, September 29, 2009
Is opposition to Obama’s programs really driven by racism?
Recently, there has been a flurry of accusations claiming that the people who oppose Obama’s programs are motivated by racism. I understand the why. Most Republicans didn’t say a thing when George Bush expanded the federal government at a faster clip than anyone since LBJ. The very few Republicans, like Ron Paul, who did speak out against the big government schemes of George Bush and Karl Rove were ostracized by the GOP leadership.
Today, Republicans are going ballistic because Obama is doing basically the same thing as Bush – spending money like crazy, centralizing decision making, and driving a stake into the heart of America’s future. It shouldn’t be surprising that many see racism at work, even though a better explanation is simple partisan politics.
Regardless, it should be very clear that the GOP is filled with unprincipled hypocrites who, like the Democrats, only care about power and control. They need do some house cleaning if they want to gain the trust of the American people again.
Today, Republicans are going ballistic because Obama is doing basically the same thing as Bush – spending money like crazy, centralizing decision making, and driving a stake into the heart of America’s future. It shouldn’t be surprising that many see racism at work, even though a better explanation is simple partisan politics.
Regardless, it should be very clear that the GOP is filled with unprincipled hypocrites who, like the Democrats, only care about power and control. They need do some house cleaning if they want to gain the trust of the American people again.
Wednesday, September 16, 2009
The Sheer Idiocy of Government
There was a great story today about how the government denied a disabled person the request to buy a $150 iPhone application that translates text to speech. Instead, they recommended that the person purchase an $8,000 specialty computer that can’t be used for any other function.
Why? Because, Medicare regulations only allow people to purchase single purpose devices. Any and all multi-purpose devices are automatically rejected, even though they may be orders of magnitude less expensive. Wouldn't it be great if a disabled person could check their email from the same computer that they used for their disability??? Unfortunately, it's just not allowed according to government rules.
There is only one word to describe this -- idiotic.
This conclusively demonstrates the sheer idiocy of government. There isn't any common sense. There isn't any compassion. There are only mindless people who follow mindless rules.
Then we wonder why everything is so screwed up.
Why? Because, Medicare regulations only allow people to purchase single purpose devices. Any and all multi-purpose devices are automatically rejected, even though they may be orders of magnitude less expensive. Wouldn't it be great if a disabled person could check their email from the same computer that they used for their disability??? Unfortunately, it's just not allowed according to government rules.
There is only one word to describe this -- idiotic.
This conclusively demonstrates the sheer idiocy of government. There isn't any common sense. There isn't any compassion. There are only mindless people who follow mindless rules.
Then we wonder why everything is so screwed up.
Acorn Scandal: “Mainstream” Media Corruption Not New
The "mainstream" media's refusal to discuss Acorn's criminal conduct demonstrates conclusively how corrupt the media really is. This is not news to me. I figured this out more than 27 years ago when I caught ABC news involved in a propaganda campaign against Ronald Reagan.
I was in Greece, with the U.S. Air Force for a couple of months during the early 80s. The U.S. Airbase was an extension of the Athens Airport. About 50 Greeks worked on the base as cooks, janitors, etc.
The Campaign for Nuclear Disarmament was raging across Europe. Enormous marches were being held in places like London, Paris, and Berlin against Reagan’s plans to stage short range ballistic missiles in Europe.
We were staying in a hotel in Glyfada, which was a suburb of Athens. The Air Force delivered VHS tapes of the ABC News. We’d typically get them 3 days after the original broadcasts.
One day, the Greeks who worked on the base went on strike. They went on strike for all of the usual reasons – more pay, better benefits, etc. They formed a small picket line in front of the airbase. A few people from the smaller and nuttier of the two communist parties joined them. We were told not to go to work for a couple of days.
Three days later (after the strike was done and we were all back to work) we received a VHS tape of the ABC News, where Frank Reynolds was reporting that the Campaign for Nuclear Disarmament staged a massive anti-American protest in Athens, which shut down the airbase. They showed footage of what seemed to be hundreds of thousands of Greeks marching in the streets. The video was not labeled “file footage”.
We were all sitting there scratching our heads wondering what the heck was going on. We asked an employee of the hotel to look at the tape. He said that this was a video of the protests against the Greek dictatorship from about 10 years earlier.
It was very obvious to us what was really happening -- ABC News was engaged in a propaganda campaign against President Reagan and his plans to stand up to the Soviet Union.
Yesterday, when asked why he wasn't reporting on the Acorn Scandals, ABC News Anchor Charlie Gibson claimed that he hadn't even heard about them. In other words, nothing has changed with the media's selective and politically biased "reporting" in 27 years.
I was in Greece, with the U.S. Air Force for a couple of months during the early 80s. The U.S. Airbase was an extension of the Athens Airport. About 50 Greeks worked on the base as cooks, janitors, etc.
The Campaign for Nuclear Disarmament was raging across Europe. Enormous marches were being held in places like London, Paris, and Berlin against Reagan’s plans to stage short range ballistic missiles in Europe.
We were staying in a hotel in Glyfada, which was a suburb of Athens. The Air Force delivered VHS tapes of the ABC News. We’d typically get them 3 days after the original broadcasts.
One day, the Greeks who worked on the base went on strike. They went on strike for all of the usual reasons – more pay, better benefits, etc. They formed a small picket line in front of the airbase. A few people from the smaller and nuttier of the two communist parties joined them. We were told not to go to work for a couple of days.
Three days later (after the strike was done and we were all back to work) we received a VHS tape of the ABC News, where Frank Reynolds was reporting that the Campaign for Nuclear Disarmament staged a massive anti-American protest in Athens, which shut down the airbase. They showed footage of what seemed to be hundreds of thousands of Greeks marching in the streets. The video was not labeled “file footage”.
We were all sitting there scratching our heads wondering what the heck was going on. We asked an employee of the hotel to look at the tape. He said that this was a video of the protests against the Greek dictatorship from about 10 years earlier.
It was very obvious to us what was really happening -- ABC News was engaged in a propaganda campaign against President Reagan and his plans to stand up to the Soviet Union.
Yesterday, when asked why he wasn't reporting on the Acorn Scandals, ABC News Anchor Charlie Gibson claimed that he hadn't even heard about them. In other words, nothing has changed with the media's selective and politically biased "reporting" in 27 years.
Tuesday, September 15, 2009
Obama’s Protectionist Folly
The Obama administration announced on Friday that it is imposing a 35% tariff on tires imported from China. This sent chills throughout the international community. America and much of the world are already mired in the worst economic crisis in decades. The administration’s ill-conceived protectionist action could spark a full-blown trade war that would deepen and lengthen the current downturn.
First, let me state unequivocally that I am not one who believes that running massive current account deficits year after year is inconsequential. Since 2001, when George Bush took office, the United States has run up a $3.8 trillion trade deficit in manufactured goods. That’s more than twice the $1.68 trillion trade deficit America incurred for imported oil and gas. The consequences of continuing this are very real, broad, and deep.
However, punishing Americans by raising the prices of imported goods is not the answer. The real solution is to fix America’s convoluted tax system, which makes products produced here increasingly uncompetative in world markets.
The U.S. has the second highest corporate tax rate in the developed world, which drives up the cost of goods that are produced in America. In addition, most other countries provide their domestic companies with tax rebates on goods that they produce for export, lowering their prices in world markets.
The government also taxes money that U.S. corporations earn overseas when the money is brought back home. This penalizes U.S. companies that want to use their foreign earnings to invest in America. As a result, a large portion of overseas earnings is never brought back home and put to productive uses. The U.S. is one of the very few countries in the world that do this. The Obama administration is proposing to make the situation worse by taxing foreign earnings whether or not the money is repatriated, which will surely drive corporate headquarters out of America.
The U.S. tax code also punishes savings. Not only does the government tax income that is saved, it also taxes the interest on that savings. Consequentially, Americans don’t save enough to finance all of the available domestic investment opportunities. Instead, we borrow money from countries like China and Saudi Arabia.
The U.S. also imposes payroll taxes on employers to fund Social Security and Medicare, which increases the cost employing people, thereby reducing the potential for job creation.
Lastly, it will cost Americans an estimated $350 billion next year just to comply with our overly complex tax code. That is money that can’t be used for more productive purposes.
The real answer to America’s trade deficit is to replace our convoluted and counter-productive system of taxing savings, production, and employment, with a simple system of taxing consumption. Doing so would have the following effects: America’s savings rate would increase. American would become a huge magnet for productive, job creating foreign business investment. American exports would be far more price competitive in world markets. In the domestic market, products produced in America would be more competitive with imports. In addition, money that is spent today complying with the complex tax code would be put to better uses.
There would be many other benefits as well, including increased privacy because the government would no longer be required to collect massive amounts of information about what we earn and how we spend it.
One such proposal for fixing our broken tax system is the Fair Tax, which proposes to replace all current federal taxes with a simple retail sales tax on goods and services.
Unfortunately, it’s not likely that the Obama Administration or the Democratic Congress will even consider anything like this. They are too busy bashing corporations and placating union bosses. Instead, in addition to their ill-conceived protectionist measures, they are likely to make the tax system even more convoluted and punitive, much to America’s determent.
First, let me state unequivocally that I am not one who believes that running massive current account deficits year after year is inconsequential. Since 2001, when George Bush took office, the United States has run up a $3.8 trillion trade deficit in manufactured goods. That’s more than twice the $1.68 trillion trade deficit America incurred for imported oil and gas. The consequences of continuing this are very real, broad, and deep.
However, punishing Americans by raising the prices of imported goods is not the answer. The real solution is to fix America’s convoluted tax system, which makes products produced here increasingly uncompetative in world markets.
The U.S. has the second highest corporate tax rate in the developed world, which drives up the cost of goods that are produced in America. In addition, most other countries provide their domestic companies with tax rebates on goods that they produce for export, lowering their prices in world markets.
The government also taxes money that U.S. corporations earn overseas when the money is brought back home. This penalizes U.S. companies that want to use their foreign earnings to invest in America. As a result, a large portion of overseas earnings is never brought back home and put to productive uses. The U.S. is one of the very few countries in the world that do this. The Obama administration is proposing to make the situation worse by taxing foreign earnings whether or not the money is repatriated, which will surely drive corporate headquarters out of America.
The U.S. tax code also punishes savings. Not only does the government tax income that is saved, it also taxes the interest on that savings. Consequentially, Americans don’t save enough to finance all of the available domestic investment opportunities. Instead, we borrow money from countries like China and Saudi Arabia.
The U.S. also imposes payroll taxes on employers to fund Social Security and Medicare, which increases the cost employing people, thereby reducing the potential for job creation.
Lastly, it will cost Americans an estimated $350 billion next year just to comply with our overly complex tax code. That is money that can’t be used for more productive purposes.
The real answer to America’s trade deficit is to replace our convoluted and counter-productive system of taxing savings, production, and employment, with a simple system of taxing consumption. Doing so would have the following effects: America’s savings rate would increase. American would become a huge magnet for productive, job creating foreign business investment. American exports would be far more price competitive in world markets. In the domestic market, products produced in America would be more competitive with imports. In addition, money that is spent today complying with the complex tax code would be put to better uses.
There would be many other benefits as well, including increased privacy because the government would no longer be required to collect massive amounts of information about what we earn and how we spend it.
One such proposal for fixing our broken tax system is the Fair Tax, which proposes to replace all current federal taxes with a simple retail sales tax on goods and services.
Unfortunately, it’s not likely that the Obama Administration or the Democratic Congress will even consider anything like this. They are too busy bashing corporations and placating union bosses. Instead, in addition to their ill-conceived protectionist measures, they are likely to make the tax system even more convoluted and punitive, much to America’s determent.
Peter Schiff to Announce for Senate
Peter Schiff -- one of the few economists to accurately predict the recession -- will announce on Thursday his run to unseat Chris Dodd.
This is the kind of smart guy we need in the Senate.
You can support him here
Look at these clips from 2006 and 2007:
This is the kind of smart guy we need in the Senate.
You can support him here
Look at these clips from 2006 and 2007:
Sunday, September 13, 2009
Tea Party a Major Success
By all accounts the 9/12 Tea Party was a major success. The D.C. police were surprised by how many people attended. At one point, they had to close Pennsylvania Avenue. Of course, the so-called “mainstream” media tried to downplay the significance of the protest, declaring that only “tens of thousands” of people were in attendance. The London Daily Mail was the first news source to set the record straight, estimating that up to 2 million people were in attendance.
When was the last time that the left was able to stage a protest rally that drew upwards of 2 million people?
The D.C. march was only part of the story. Tea Parties were held across the country. My wife and I were startled yesterday to see 50 or 60 protestors in our normally quiet suburb of Redmond, WA.
It's very obvious that something big is happening here. It's not just the Tea Parties. 20 states have now passed 10th Amendment Resolutions declaring their sovereignty over the federal government, demanding that the federal government stop usurping their power. Who would have thought even a couple of years ago that this would have been possible? It has now become inevitable due to the massive power grab of the Bush administration and the even greater foundation of tyranny being laid by Barack Obama.
Hopefully the Republican establishment will finally get the message and respond to voter discontent in the same way they did in 1994 – with a real program for true reform.
When was the last time that the left was able to stage a protest rally that drew upwards of 2 million people?
The D.C. march was only part of the story. Tea Parties were held across the country. My wife and I were startled yesterday to see 50 or 60 protestors in our normally quiet suburb of Redmond, WA.
It's very obvious that something big is happening here. It's not just the Tea Parties. 20 states have now passed 10th Amendment Resolutions declaring their sovereignty over the federal government, demanding that the federal government stop usurping their power. Who would have thought even a couple of years ago that this would have been possible? It has now become inevitable due to the massive power grab of the Bush administration and the even greater foundation of tyranny being laid by Barack Obama.
Hopefully the Republican establishment will finally get the message and respond to voter discontent in the same way they did in 1994 – with a real program for true reform.
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