US Economy Stuck in Misery

Joel S. Hirschhorn

The middle class is dead. The US has produced a self-sustaining two-class society. Most Lower Class Americans are in bad or uncertain economic shape but the rich and powerful Upper Class crowd keeps making and spending money as if there has been no recession.

Talk about a possible double-dip recession misses the larger reality: For many millions of Americans the first recession is still here; there has been no recovery for them. Too bad President Obama cannot comprehend that. Nice that only 23 percent of people believe that his policies have made economic conditions better. Maybe they got the change they were waiting for.

A new survey by the Pew Research Center provides disturbing data that no amount of lies from politicians can refute. Without a lot more consumer spending, remember, the US economy will not regain lasting health. The scope of the economic shock is shown by the 60 percent of Americans that have cut down on borrowing and spending. And nearly 50 percent are in worse financial shape because of the economic downturn. Forty percent of adults have tapped savings and retirement accounts to make ends meet. Nearly 25 percent have had to borrow money from someone. Ten percent have moved back with their parents to survive the economic tsunami, and that rises to 24 percent for workers between 18 and 29 years old.

More and more Americans now recognize that retirement will have to wait. For those 62 and older and still working, 35 percent have postponed retirement. That jumps to 60 percent as a likely action for working adults between ages 50 and 61. Replace the golden years with the disappointment years, especially when inevitable reduced Social Security and Medicare benefits hit hard.

For those still lucky enough to have jobs, the Commerce Department reports that the personal savings rate in May -- the part of wage income that goes unspent -- rose to 4 percent, the highest amount in nearly a year, as anxious consumers faced continued economic woes, such as fears about losing jobs or homes, affording food and health care, and a tumbling stock market.

And always remember that the official jobless rate of just under 10 percent is pure bunk; it really is close to 20 percent nationally, and a lot worse in many places and for African-Americans and Hispanics. The average time for being without a job is now six months, with many more people jobless for a whole lot more, often several years. All this means suppressed consumer spending and continued high home foreclosure rates. No big surprise that consumer confidence crashed almost 10 points between May and June. Welcome to high anxiety.

Also keep in mind that even as the general consumer spending shows little life, the Upper Class keeps on living it up. Gallup reported “Upper-income Americans' self-reported spending rose 33% to an average of $145 per day in May -- up from $109 per day in April 2010 and May 2009, and the highest monthly average since November 2008.” The rest of the population’s self-reported spending averaged $59 per day in May. So, rich Americans are spending nearly twice as much as the vast majority of Americans every day. Indeed, Tiffany reports sales up 17 percent in the jeweler's most recent quarter. Overall US luxury sales, says MasterCard SpendingPulse, jumped 22.7 percent in March, over the previous year. The increase in luxury buying appears to be coming almost totally from the "ultra-affluents," those households making over $250,000 a year. Their first-quarter spending increased 22.6 percent, meaning that they have returned to spending at pre-recession levels.

And here is a gem of a new statistic. In 2009, the Economic Policy Institute reports that the typical working American with a four-year college degree took home $1,025 per week, $5 a week less than Americans with a four-year degree took home, after adjusting for inflation, in the year 2000. How’s that for progress?

Meanwhile, almost half of U.S. companies that reduced or suspended their contributions to employee retirement plans during the recession haven’t restored them.

The ultra ugly truth is that there is very little hope for the US economy providing true prosperity for the vast majority of people in the foreseeable future. Unemployment will remain high and consumer spending will remain low except for the wealthy. Economic inequality is terrible and punishing most Americans who should forget about that fabled American dream. To visualize America's staggeringly unequal distribution of wealth, suggests University of Tennessee at Martin historian David Barber, envision a 100-seat auditorium filled with 100 people. If seating in that auditorium reflected our current wealth distribution, the single richest person in the hall "would be able to spread out smartly" over nearly 43 seats. The poorest 60 would have to squeeze into just one.

As government deficits continue at historic high levels there will be even more pain as local and state governments cut employment and services. All the economic impacts of the BP oil spill in the Gulf region will continue to expand and reverberate and it is doubtful that enough money will come from BP to those in pain soon enough to prevent catastrophes for millions of people.

Some impacted people may turn to religion as if God has not already shown total disdain for humanity. Some will delude themselves that voting for certain candidates in the coming midterm elections will help. Others will bury themselves in various distractions or choose to believe the political lies of President Obama and other politicians. [How did all that federal stimulus spending work for you?] Perhaps far more Lower Class people [Are you in denial about your Lower Class status?] should consider the advice of the deeply cynical: Kill Yourself. If only politicians would take that advice.

Happy Fourth of July. Time to try and remember the good old days.

USDA Reports Food Shortages: Wall Street 'Caught Off Guard' by Severity

Eric Blair

Several recent headlines indicate that food prices will continue their swift climb upward. These troubling new reports show that agriculture production and stored grains are critically low and experts are now predicting food shortages. Look at a few of today's mainstream headlines: Drought threatens global rice supply in the India Times; VA farmers say heat taking toll on crops, Associated Press; Severe food shortage follows lack of rainfall in Syria; and, finally, Corn prices bolt as USDA downsizes crop estimates, which states that, "Commodity professionals were caught off guard Wednesday by a U.S. Department of Agriculture report showing 1 million fewer acres of corn planted this year than earlier projected, and almost 300 million fewer bushels of corn in storage." And these articles don't begin to address crops being damaged by the toxic rain from the Gulf oil disaster. We are back to recession economics and rapidly heading toward a deeper, longer “Third Depression.” With all recent economic indicators setting new record lows and deficits at record highs, this ship is only going one way folks, down, down to Chinatown. This WTC-Building 7-style-controlled-demolition of the U.S. economy has long been engineered by the borderless banksters and will likely continue to collapse at the rate of free-fall gravity. With all of the manufactured confusion it may be difficult to know where best to invest your limited assets, but it seems to be clear that Food is on the march. Depressions are caused when capital is removed from the economy and that large sucking sound you hear is your money being vacuumed out of your pockets into the banksters' coffers. The shakedown went like this: they bet big, got fat, then lost thousands of times more than everything real on earth combined, then representatives of the serfs gave them all of the serfs’ money they need (including bonuses) to re-stimulate the economy. Well, our money is NOT flowing back into the economy as promised, and it will not be flowing back into the economy anytime soon. With nothing but crumbs left for the peasants, deflation is happening to durable goods and paper assets (of which real estate has become), while the cost of human necessity is rapidly inflating. There were several trend forecasters and financial firms predicting upwards of $200/barrel of oil before the Gulf oil gusher. The “analysts” said this would occur because of the perception of scarcity and a weakening dollar. The oil disaster and the subsequent outrage at Big Oil will surely take care of selling the perception of scarcity, while the Federal Reserve and Congress will surely take care of weakening the dollar.

We’ve seen this Beta test before when oil prices reached their peak of $147 in 2008 sending the price of food to the stratosphere. Food staples like rice nearly tripled in six months and at times increased 50% in just two weeks primarily because of record oil prices and a weak dollar in 2008. During this run up on prices, big box stores like Sam's Club and Costco were rationing the number of bags of rice customers could buy. You can bet that Food Crisis Beta 2.010 will be far more severe. This third factor of actual Food Scarcity, coupled with high oil prices and a feeble dollar, will multiply the severity of increasing food prices. Whether this scarcity is being engineered to further cull the population or is a genuine imbalance in supply and demand is not important. The fact is that this reality that is playing out in the matrix and this triple-threat to food costs creates an opportunity for the serfs to soften the recessionary blow, and perhaps offer some economic freedom. You don’t have to be an “End Times survivalist” to believe storing food is a pragmatic practice. Everyone with expendable cash can and should design a good food storage and rotation system and buy bulk food as an investment. Many rationalists are touting guns, ammo, and gold as good small-scale investments given the despicable agenda unfolding in our matrix. Certainly those are critical investments in an economy dwindled to the rationing of necessity, but not everyone is into guns or can afford bundles of gold. And gold, at the end of the day, can only be traded for necessity. These recent food alerts seem to indicate that food may be the best short-term investment for the “Average Joe.” It's simple, if the retail price of rice doubles as it did in 2008, then you (the investor) make 100% return in something that's immediately tangible. It’s time to pay the tax penalty to cash out your mediocre "I-bought-in-to-the-American-Dream" 401K and invest in Food!

Who's to blame for the oil spill? Dick Cheney

Alex Pareene

The fingerprints of the worst vice-president ever are all over the environmental catastrophe

The Gulf of Mexico oil spill could end up being the worst American man-made environmental catastrophe of this generation. With the oil still spilling and investigations into the causes yet to come, it's too early to neatly assign blame to any one person. But for now, let's hold Dick Cheney personally responsible for the whole thing.

Here's the evidence: The Wall Street Journal reports that the oil well didn't have a remote-control shut-off switch. The reason it didn't have a thing that it seems every single offshore drilling rig should have? According to environmental lawyer Mike Papantonio, it's because Dick Cheney's energy task force decided that the $500,000 switches were too expensive, and they didn't want to make BP buy any.

Is that not enough reason to blame the former Dark Lord of the Naval Observatory? Guess what: Halliburton is involved, too! The Los Angeles Times reports that BP contracted Dick Cheney's old company to cement the deepwater drill hole. Cementing the hole was, according to the U.S. Minerals Management Service, "the single most-important factor in 18 of 39 well blowouts in the Gulf of Mexico over a 14-year period." And Hallburton is already under investigation for faulty cementing in an Australian well last year.

The spill will very likely destroy the fragile economies of at least five states and it could even plunge the nation into a depression. So thanks, Dick. Nice work.

www.salon.com

Federal Reserve Banksters, the Worlds Worst Gangsters

Clive Boustred

• May 1, 1776 Jesuit Professor Adam Weishaupt who was retained by Rothschild completes world dominance plan.
• 1776-1790: U.S. Independence - Free Banking -no formal central bank.
• 1791-1811: First Bank of the United States.
• 1816-1836: Second Bank of the United States.
• 1837-1862: Free Banking Era -no formal central bank.
• 1862-1913: System of National Banks (Consequence of Lincoln's War).
• 1914-crrent: A consortium of 12 privately held banks called the Federal Reserve Bank. The largest share holder of the bank are the Rothschild's of London.

The accomplishments of the Rothschilds and fellow banksters is nothing short of astonishing. They have literally got the world to hand them the right to manufacture money out of nothing and then to turn around and lend the mammon back to the world plus usurious interest! Almost single handedly, this small group of men have dominated the world. However, in their efforts to dominate the world they have caused extraordinary pain and agony and even potentially the complete destruction of life on earth.

The Federal Reserve Bank is a consortium of twelve private banks which are not part of the United States Government.

These private banks purchase paper notes from the U.S. mint for printing cost or simply enter digital money into their computer then lend back the money plus interest to the people through member banks. The profits go into the share holders of the bank's pocket's, the U.S. public receives no benefit.

The Primary Owners of the Federal Reserve Bank Are:

1. Rothschild's of London and Berlin 2. Lazard Brothers of Paris 3. Israel Moses Seaf of Italy 4. Kuhn, Loeb & Co. of Germany and New York 5. Warburg & Company of Hamburg, Germany 6. Lehman Brothers of New York 7. Goldman, Sachs of New York 8. Rockefeller Brothers of New York

All the primary owners are branches of European establishments. Foreigners, almost entirely Jewish, control the United States Money supply. They literally own exclusive rights to the dollar and simply enter dollars into their banks books to make money which they then lend back to us at a profit. For them money does not grow on trees, it is simply a data entry into their account. Clearly the private ownership of the U.S. Dollar is by far The Greatest Crime of the Century. The owners of this bank have been responsible for instigating all the major wars and depressions in the last 100 years. They own the bank, they own the dollar and they own all the major media channels, the military industrial complex and most politicians, judges and cops.

Sometimes the bank pays an arbitrary 'franchise fee' to the U.S. government to keep the politicians paid off.

The first two private National Banking Systems lasted about 20 years before being eliminated. The current Federal Reserve Bank private National Bank has lasted nearly 100 years.

In Producer Aaron Russo's must see Movie "AMERICA: Freedom to Fascism", when interviewing Congressman Ron Paul, Aaron asks: "So the Federal Reserve is actually an illegal entity functioning within the Federal Government?" Ron Paul's response: "It's illegal. And what we have given to this so-called agency is the authority to counterfeit money."

The cost of this system to the U.S. public is hundreds of billions of dollars every year while holding the nation and people in a constant state of debt.

There have been assassination attempts on every President who attempted to eliminate these private National Banks. The privately held Federal Reserve Bank has not once been audited and never pays any income tax on their astonishing income.

The bank is supposed to bring stability to the economy, however, almost every major marked crash and war can be attributed to the Federal Reserve Bank, including the Great Depression, WW I, WW II, the Gulf War etc.

In 1913 in exchange for paying for his Presidential campaign, President Woodrow Wilson signed the Federal Reserve Act handing over the U.S. currency to twelve regional private banks. In 1933 Roosevelt confiscated citizens gold and handed it to these private banks.

Arguably the formation of the Federal Reserve Bank is The Crime of the Century

The Federal Reserve Banking Act, passed in 1913 is categorically unconstitutional, it is unlawful.

The Federal Reserve Bank's money fraud has devalued the dollar to about one percent of its worth in 1930

Henry Ford once said "It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning".

Article 1, section 8, of the Constitution reads:

The Congress shall have the Power.....To coin Money, regulate the Value thereof,....

Congress has no authority to delegate this responsibility to third parties. As a show of audacity and control, the Federal Reserve Bank prints their Notes with the faces of Presidents who adamantly opposed having a private National Bank, and Presidents the bank either tried to or did kill.

There will never be world peace, there will never be economic stability, there will never be a free economy as long as these banksters control the worlds money supply. Their goal is to achieve a socialist one world government - a "New World Order", as is printed in Latin on their $1 Note.

In exchange for the Rothschild's financial support for his presidential campaign, Woodrow Wilson's agreed that if elected, he would sign the Federal Reserve Act. In December 1913, while many members of Congress were home for Christmas, the Federal Reserve Act was rammed through Congress and signed by President Wilson. Regarding his actions Wilson later admitted. "I have unwittingly ruined my country".

The Rothschild's funded Woodrow Wilson's Presidential campaign on condition Wilson pass the Federal Reserve Banking Act. Today the Rothschild's are the primary owners of the Federal Reserve Bank. They control most of the world and through the control of central banks have instigated more wars and horror than any other family throughout history.

The Fed became law the day before Christmas Eve, in the year 1913, and shortly afterwards, the German International bankers, Kuhn, Loeb and Co. sent one of their partners here to run it.

"A great industrial Nation is controlled by its system of credit. Our system of credit is privately concentrated. The growth of the Nation, therefore, and all our activities are in the hands of a few men... who necessarily, by very reasons of their own limitations, chill and check and destroy genuine economic freedom." "We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the world - no longer a Government by free opinion, no longer a Government by conviction and vote of the majority, but a Government by the opinion and duress of small groups of dominant men". - President Woodrow Wilson (Just before he died, Wilson is reported to have stated to friends that he had been "deceived" and that "I have betrayed my Country". He referred to the Federal Reserve Act passed during his Presidency.)

The un-ratified 16th Amendment

The Constitution only allowed direct apportioned taxation amongst the States, so indirect Income Tax was initiated through the 16th Amendment so as to allow Congress to pay the bankers interest on our money and for any other whim. The 16th Amendment was pushed through without proper ratification in February of 1913.

According to the two volume work by Bill Benson and Red Beckman , "The Law That Never Was" the 16th amendment, which created the IRS, was never properly ratified, not even by one state! These gentlemen traveled the then 48 states to verify that fact. So in a very real sense the income tax isn't legal, as many have proclaimed, but try not paying it and see how far you get before the Feds come after you and confiscate everything you own.

World War I Started on June 28, 1914 as a direct consequence of the Formation of the Federal Reserve Bank. It would not have been possible to start World War I without the formation of the Federal Reserve Bank. The primary beneficiaries of WWI were the owners of the Federal Reserve Bank.

After World War I had turned the United States from a debtor nation into a creditor nation. In the aftermath of the war, both the victorious Allies and the defeated Central Powers owed the United States more money than it owed to foreign nations. The Republican administrations of the 1920s insisted on payments in gold bullion, but the world's gold supply was limited and by the end of the 1920s, the United States, itself, controlled much of the world's gold supply. Besides gold, which was increasingly in short supply, countries could pay their debts in goods and services. However, protectionism and high tariffs kept foreign goods out of the United States. The Hawley-Smoot Act (1930) set the highest schedule of tariffs to date.

In the January 13, 1918 issue of New York World William Boyce Thompson, Federal Reserve Bank director and founding member of the Council on Foreign Relations applauded Russia for their "sweeping world changes.". The primary shareholders of the Federal Reserve Bank, the Rothschild's, funded the Bolshevik revolution. They literally sent a train with 50 million dollars worth of gold and fifty or so trained Jewish insurgents to instigate the communist revolution.

The Great Federal Depression

Within 15 years of the creation of the Federal Reserve Bank the U.S. experienced it's worst depression. The depression was initiated when the Federal Reserve Bank changed the valuation of the dollar then refused to provide banks with dollar bills causing a panic and a run on the banks. The primary beneficiaries of the depression were the owners of the bank and their colleagues. In the ensuing panic, the bankers brought one of their own out of retirement from the Morgan/Rothschild banking cartel and made him president. FDR has arguably, along with GWB and Lincoln have been the nations worst presidents.

April 5th 1933, President Franklin D. Roosevelt issued a treasonous Executive Order ordering citizens to hand their gold and gold certificates to the private Federal Reserve Bank: Executive Order 6102:

"Section 2. All persons are hereby required to deliver on or before May 1, 1933, to a Federal Reserve Bank or a branch or agency thereof or to any member bank of the Federal Reserve System all gold coin, gold bullion and gold certificates now owned by them or coming into their ownership on or before April 28, 1933"

"Section 9. Whoever willfully violates any provision of this Executive Order or of these regulations or of any rule, regulation or license issued thereunder may be fined not more than $10,000, or, if a natural person, may be imprisoned for not more than ten years, or both"

FDR proceeded to implement the "New Deal" which converted the United States of America to the United Socialist States of America. Instituting pure socialism in Social Security, the FCC to control the airwaves, the SEC to control banking and eliminate any potential competitors to the private Federal Reserve Bank.

We are still suffering the consequences of FDR's criminal "New Deal", a central government based on Fascist Socialism. Does F.D. Roosevelt earn the title of the worst president ever? Read the revealing article exposing the real deal by Robert Higgs

World War II

By instigating WWII, the Banksters were able to destroy eight monarchies throughout Europe while at the same time making extraordinary profits from their armaments companies. U.S. bombing runs on Germany were often specifically targeted at factories of competitors to the Banksters while carefully not bombing factories owned by the Banksters.

Kennedy Assassinated

On June 4, 1963, President Kennedy signed a Presidential decree, Executive Order 11110. This order virtually stripped the Federal Reserve Bank of its power to loan money to the United States Government at interest. President Kennedy declared the privately owned Federal Reserve Bank would soon be out of business. This order gave the Treasury Department the authority to issue silver certificates against any silver in the treasury. This executive order still stands today. In less than five months after signing that executive order President Kennedy was assassinated on November 22, 1963.

The United States Notes (silver certificates) he had issued were taken out of circulation immediately. Federal Reserve Notes continued to serve as the legal currency of this nation. It is estimated that 99% of all U.S. paper currency circulating in 1999 are Federal Reserve Notes.

The Fed allows Congress to spend all they want that's why your Congressperson does nothing.

"Mr. Chairman, we have in this Country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve Banks, hereinafter called the Fed. The Fed has cheated the Government of these United States and the people of the United States out of enough money to pay the Nation's debt. The depredations and iniquities of the Fed has cost enough money to pay the National debt several times over. .... This evil institution has impoverished and ruined the people of these United States, has bankrupted itself, and has practically bankrupted our Government. It has done this through the defects of the law under which it operates, through the maladministration of that law by the Fed and through the corrupt practices of the moneyed vultures who control it. " - Congressman McFadden on the Federal Reserve Corporation Remarks in Congress, 1934 Floor of the House of Representatives by the Honorable Louis T. McFadden of Pennsylvania. Mr. McFadden served as Chairman of the Banking and Currency Committee for more than 10 years. There were two assassination attempts against McFadden.

"Why did we give a monopoly of creating money out of thin air to a private corporation? The result is exactly the same as if someone was picking your pocket every year, because that is exactly what they [the Federal Reserve Bank] are doing." Franklin Sanders, Author, Tax Honesty.

"We shall have World Government, whether or not we like it. The only question is whether World Government will be achieved by conquest or consent." - Paul Warburg, Council on Foreign Relations and Architect of the Federal Reserve System: Feb 17, 1950 in an address to the U.S. Senate. See also US World Dominance Plan

"Who controls money controls the word". – Henry Kissinger Counsel on Foreign Relations

Ron Paul introduces bill to eliminate Federal Reserve Bank: see GovTrack.us. H.R. 2755--110th Congress (2007): To abolish the Board of Governors of the Federal Reserve System and the Federal reserve.

According to Congressional record the U.S. Government can buy back the FED at any time for $450 million. That's about half the amount of money we pay them daily.

As of March 6, 2006, the national debt stands at 8.2 trillion dollars. The American taxpayers have paid the FED banking system $173,875,979,369.66 in interest on that debt in just five short months, from October, 2005, through February, 2006. No con artist or group of con artists in history has ever perpetrated a scam that even approaches the scope of this one.

libertyforlife.com

No One's Capital Is Safe in Obama's America

Claude Sandroff

Obama's poorly coded message to investors is to take your money out of America and keep it out. Whether through excessive taxation, suffocating over-regulation, or thuggish confiscation, the lesson to be drawn by anyone with excess capital is to look for friendlier places to put it to work.

The list of friendlier places excludes North Korea, Venezuela, and Iran for the time being, but almost everywhere else qualifies. Russia's president spent several days in Silicon Valley recently looking for adventurous investors and came away with a $1B commitment from Cisco Systems. For Cisco, sitting on a cash hoard of $30B, with years of experience partnering with the burgeoning Russian venture capital industry, the decision was probably not a very tortured one. And what a perfect opportunity for Cisco's CEO John Chambers to keep his cash as far from Obama's collection agencies as possible.

President Medvedev promises Cisco a capital gains tax rate of zero; President Obama promises to retire the evil George Bush capital gains rate of 15% and increase it to 20% in 2011. Cisco is merely telecasting to anyone who wants to tune in that Russia is taking advantage of Obama's lurch towards socialism (or worse). While Russia is portraying itself as a stable bastion for capitalists, America is increasingly seen as the land that mauled Chrysler and GM bondholders. While erstwhile command economies are liberalizing, America under Obama is nationalizing. The lesson is clear: Don't leave cash within the American financial system, earning minimal returns, with the fear that at any moment your assets can be confiscated or redistributed by a lawless and capricious federal government.

When will Obama decide that Cisco (or Wal-Mart, or Apple, or Google, or any other successful enterprise) is not paying its "fair share"? Aren't the profit margins earned by Cisco on its routers - sometimes approaching 70% - too rich, or even obscene? Aren't these gains, in essence, nothing but windfall profits resulting in the eventual gouging of the average American internet subscriber? Cisco might not drill in the Gulf of Mexico for its profits, but man-made disasters could await it too, in the form of arbitrary, BP-like shakedowns of its hard-earned wealth. Why risk shakedowns in gangland Obama when a much more competent criminal like Putin will guarantee your investments?

Cisco is not the only company sitting on a gigantic cash cushion. All told, the balance sheet cash for the non-financial segment of the S&P 500 totals around $1 trillion. Businesses sit on these huge asset cushions and accept earning virtually nothing in real terms because risks are too high to consider anything else.

In 2011, one of the largest tax increases in American history goes into effect. Not only do capital gains rise, but so too does the payroll tax, the income tax, and the estate tax. And even then, businesses large and small, while in their final financial death throes, will have nothing to look forward to other than the doom of ObamaCare and the unknown costs that Obama will attempt to afflict via cap-and-trade and a European-style value-added tax.

Fears are also emerging about the eventual burden imposed on all of us by dozens of states virtually bankrupt, especially if the federal government structures bailouts for those states deemed too big to fail. Unfortunately, the biggest and most likely to fail - California, New York, and Illinois - are Democrat and union fortresses that Obama will not let topple. These and many other states have already been thrown a life jacket during the last near-trillion dollar stimulus in the form of unemployment insurance and other transfer payments. But the effects of those financial stimulants are beginning to wear off, and the federal drug dealer has little inventory left - except for massive money-printing.

Inflation is almost the last strategy left for the Federal Reserve, having driven short-term interest to zero and purchased all the treasuries, agency, and mortgage debt thrown its way.

Fears of excessive taxation and unpredictable costs are muting American entrepreneurial animal spirits. These fears are likely at the root of our persistently high unemployment. The issue too often is not lack of loan supply to launch a new enterprise, but a lack of demand for the loans to get started. Strangling business creation translates into no new job creation. If you launch a business today and organize as an S-Corporation, how can you be even reasonably sure will you take home enough in profits to justify the initial risk of the undertaking? And if you were successful enough to reach the revenue heights of $250K, Obama would target you as a capitalist predator and promote you to the highest tax bracket.

In contrast to Jefferson's goal of preserving "a model of government, securing to man his rights and the fruits of his labor, by an organization constantly subject to his own will," our current administration is brutally determined to transform government into an organ that redistributes those fruits to its cronies. The reaction of sane, rational Americans to these perverse incentives is not to create or hire or produce. Instead, existing businesses and potential founders of new ones are hunkering down, hoping to wake up from this national nightmare in 2010 and 2012 with some of their wealth still intact.

Claude can be reached at csandroff@gmail.com.

www.americanthinker.com

Time to shut down the US Federal Reserve? – Telegraph Blogs

Time to shut down the US Federal Reserve?

By Ambrose Evans-Pritchard Economics Last updated: June 29th, 2010

189 Comments Comment on this article

Like a mad aunt, the Fed is slowly losing its marbles.

Kartik Athreya, senior economist for the Richmond Fed, has written a paper condemning economic bloggers as chronically stupid and a threat to public order.

Matters of economic policy should be reserved to a priesthood with the correct post-doctoral credentials, which would of course have excluded David Hume, Adam Smith, and arguably John Maynard Keynes (a mathematics graduate, with a tripos foray in moral sciences).

Adam Smith didn't have an economics PhD

“Writers who have not taken a year of PhD coursework in a decent economics department (and passed their PhD qualifying exams), cannot meaningfully advance the discussion on economic policy.”

Don’t you just love that throw-away line “decent”? Dr Athreya hails from the University of Iowa.

“The response of the untrained to the crisis has been startling. The real issue is that there is an extremely low likelihood that the speculations of the untrained, on a topic almost pathologically riddled by dynamic considerations and feedback effects, will offer anything new. Moreover, there is a substantial likelihood that it will instead offer something incoherent or misleading.”

You couldn’t make it up, could you?

“Economics is hard. Really hard. You just won’t believe how vastly hugely mind-boggingly hard it is. I mean you may think doing the Sunday Times crossword is difficult, but that’s just peanuts to economics. And because it is so hard, people shouldn’t blithely go shooting their mouths off about it, and pretending like it’s so easy. In fact, we would all be better off if we just ignored these clowns.”

I hold my hand up Dr Athreya and plead guilty. I am grateful to Bruce Krasting’s blog for bringing this stinging rebuke to my attention.

However, Dr Athreya’s assertions cannot be allowed to pass. The current generation of economists have led the world into a catastrophic cul de sac. And if they think we are safely on the road to recovery, they still fail to understand what they did.

Central banks were the ultimate authors of the credit crisis since it is they who set the price of credit too low, throwing the whole incentive structure of the capitalist system out of kilter, and more or less forcing banks to chase yield and engage in destructive behaviour.

They ran ever-lower real interests with each cycle, allowed asset bubbles to run unchecked (Ben Bernanke was the cheerleader of that particular folly), blamed Anglo-Saxon over-consumption on excess Asian savings (half true, but still the silliest cop-out of all time), and believed in the neanderthal doctrine of “inflation targeting”. Have they all forgotten Keynes’s cautionary words on the “tyranny of the general price level” in the early 1930s? Yes they have.

They allowed the M3 money supply to surge at double-digit rates (16pc in the US and 11pc in euroland), and are now allowing it to collapse (minus 5.5pc in the US over the last year). Have they all forgotten the Friedman-Schwartz lessons on the quantity theory of money? Yes, they have. Have they forgotten Irving Fisher’s “Debt Deflation causes of Great Depressions”? Yes, most of them have. And of course, they completely failed to see the 2007-2009 crisis coming, or to respond to it fast enough when it occurred.

The Fed has since made a hash of quantitative easing, largely due to Bernanke’s ideological infatuation with “creditism”. QE has been large enough to horrify everybody (especially the Chinese) by its sheer size – lifting the balance sheet to $2.4 trillion – but it has been carried out in such a way that it does not gain full traction. This is the worst of both worlds. So much geo-political capital wasted to such modest and distorting effect.

The error was for the Fed to buy the bonds from the banking system (and we all hate the banks, don’t we) rather than going straight to the non-bank private sector. How about purchasing a herd of Texas Longhorn cattle? That would do it. The inevitable result of this is a collapse of money velocity as banks allow their useless reserves to swell.

And now the Fed tells us all to shut up. Fie to you sir.

The 20th Century was a horrible litany of absurd experiments and atrocities committed by intellectuals, or by elite groupings that claimed a higher knowledge. Simple folk usually have enough common sense to avoid the worst errors. Sometimes they need to take very stern action to stop intellectuals leading us to ruin.

The root error of the modern academy is to pretend (and perhaps believe, which is even less forgiveable), that economics is a science and answers to Newtonian laws.

In any case, Newton was wrong. He neglected the fourth dimension of time, as Einstein called it, and that is exactly what the new classical school of economics has done by failing to take into account the intertemporal effects of debt – now 360pc of GDP across the OECD bloc, if properly counted.

There has been a cosy self-delusion that rising debt is largely benign because it is merely money that society owes to itself. This is a bad error of judgement, one that the intuitive man in the street can see through immediately.

Debt draws forward prosperity, which leads to powerful overhang effects that are not properly incorporated into Fed models. That is the key reason why Ben Bernanke’s Fed was caught flat-footed when the crisis hit, and kept misjudging it until the events started to spin out of control.

Economics should never be treated as a science. Its claims are not falsifiable, which is why economists can disagree so violently among themselves: a rarer spectacle in science, where disputes are usually resolved one way or another by hard data.

It is a branch of anthropology and psychology, a moral discipline if you like. Anybody who loses sight of this is a public nuisance, starting with Dr Athreya.

As for the Fed, I venture to say that a common jury of 12 American men and women placed on the Federal Open Market Committee would have done a better job of setting monetary policy over the last 20 years than Doctors Bernanke and Greenspan.

Actually, Greenspan never got a Phd. His honourary doctorate was awarded later for political reasons. (He had been a Nixon speech-writer). But never mind.

Tags: blogs, Economics, economists, federal reserve, kartik athreya, US Federal Reserve