Miscellany: 1/14/13

Quote of the Day
Love will find a way. 
Indifference will find an excuse.
Author unknown

Chart of the Day

Courtesy of newsmax

There were a number of policy errors in the 1930's: tariff increases, the devaluation of the dollar (raising the conversion rate for gold), etc. It can be argued the intent is to water down existing debt, although you would think that creditors would demand premium rates to protect their principal. It's tough to fight the Fed when it can print dollars to buy bonds, pushing up prices, lowering yields/interest.

I don't think there's any such thing as a free lunch. An eroding currency has implications for living standards. Plus, you can view devaluation as a provocative 'beggar thy neighbor' policy. When I see the ECB and the Japanese government (see my 2012 Man of the Year post) resorting to the fiat currency printing presses, imitating Helicopter Ben, not good. We already saw the ugly head of protectionism pop up in the 2009 stimulus act (i.e., 'buy American' act). I'm worried about a vicious cycle which will not end well as every nation tries to export itself back to prosperity.

New JOTY Nomination

Barack Obama made a strong attempt to become the first two-time winner of my annual  mock award for Democrats behaving badly.

In the final press conference of his first term, President Barack Obama warned he would not negotiate with Republicans who he said were holding “a gun at the head of the American people” over raising the country’s debt ceiling.

In reality, the Spendthrift-in-Chief has kidnapped the American Dream and he demands a blank check. It'e not the GOP whom bears the risk of hyperinflation, it's the American people.

I'm getting more and more concerned about the President's tone, inflexibility, and threats. Using news conferences and threatening to use the State of the Union or Inaugural Address to launch political attacks? Fundamentally uncivil leadership. As a lame duck term-limited President, he is starting out with a weaker hand in both chambers of Congress, I have never been elected dog catcher, but I would have enough street smarts to co-opt the opposition. Even if somehow Obama gets his way on the debt ceiling, I think it's highly likely we will see US Treasury note downgrades from the credit agencies. I would want to have some sort of concession to prove to the agencies and the financial markets that the US stands behind its debts and is seriously looking at getting its house in order. May I suggest that Obama agree to back Simpson-Bowles in exchange for the reset?

People Have Got to Know 
Whether or Not Their President is a Crook Deadbeat

"We are not a deadbeat nation," [Obama] declared, less than a week away from taking the oath of office for a second term.

Does anyone believe with $80T in unfunded senior entitlement liabilities, an upcoming healthcare monstrosity which requires 10 years of taxes to fund 6 years of operation, an anemic economy, already $16.4T in official debt that the US, which has never collected as much as $3T in annual revenues, is ever going to pay off these massive debts?

The President has complete control of this by simply saying that his first priority is ensuring that the debt is serviced, no matter what.

Lawmakers face three distinct deadlines before April 1. The debt limit must be raised to prevent a default, a series of across-the-board spending cuts is to kick in on March 1, and funding for most government programs will run out on March 27.

Obama virtually dared Republicans to let the government shut down rather than renew funding beyond March 27. "It will hurt the economy," he said emphatically.

 Barack Obama demanded on Monday that lawmakers raise the nation's $16.4 trillion federal debt limit quickly, warning that "Social Security benefits and veterans' checks will be delayed" if they don't 

Economics-illiterate writers. The government will NOT go onto default. We have enough incoming taxes to fund 60% of operations, including all debt interest charges. It's funny Democrats seem to understand this concept in arguing social security reform is not a major problem when pay-go ensures at least part of every check is guaranteed.

Hurt the economy? The government takes its funds from the real economy; government is a monopoly utilizing force.. What really hurts the economy is unsustainable, inefficient government,  policy-caused uncertainty, and  overregulation. Obama makes a false choice: we have to accept overbuilt government or anarchy. We need to ensure  taxpayers only fund efficient, right-sized government.

How many times have I mentioned that fear-mongering progressives always try to reduce budget issues to citizen services? Obama is knowingly disingenuous as usual. Take social security. Social security is completely funded by incoming payroll taxes plus interest on the social security reserves--and it could dip into reserves (over $2.5T) if necessary--and not touch general revenues at all. Obama as usual is ill-informed and intellectually lazy.

The People's Republic of California: Balanced Budget?

Fresh off a class warfare tax hike to 13.3% in the last election, does this sound like it's too good to be true? It's because it is:

Keep in mind that California's income tax is based off federal income figures; with federal upper level wages and investment taxes going up this year, higher income folks had a large incentive, particularly on the federal level, to push income into 2012. This is unsustainable; higher income people are likely to change residency or engage in tax avoidance strategies because of the double progressive income tax hit. But there are other things to keep in mind:

According to the California Controllers’ Office, the state is running a 24.2 billion dollar budget deficit.

The finance department estimates there is still a $28 billion “Wall of Debt” built up over years of internal borrowing, as well as more than $100 billion in unfunded liabilities in state-backed retirement health and pension systems.

Governor [Brown] is taking credit making huge cuts to spending. How huge? Well this one is only 11 billion dollars more than the last one. 

Brown learned that last budget gimmick from Obama--counting reduced budget increases as "cuts'




As Mayor 'Dead Fish' Would Say,
'Never Let a Serious Crisis Go to Waste'
(That's Where Hard-Earned Tax Dollars Are Sent in Haste)



Musical Interlude: My Favorite Groups
 The Stylisics, "You Are Everything"