Tag: Economics

–More debt-hawk injuries to America

An alternative to popular faith

Here is yet another example of many such instances (See: DAMAGES) showing the continuing damage debt-hawks cause America and our poorest citizens:
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By Greg Hitt and Sara Murray, WASHINGTON, 6/25/10: “Spooked by concern about deficits, the Senate shelved a spending bill that included an extension of unemployment benefits, suddenly cutting off a federal cash spigot opened by President Barack Obama when he took office 18 months ago.

“The collapse of the wide-ranging legislation means that a total of 1.3 million unemployed Americans will have lost their assistance by the end of this week. It will also leave a number of states with large budget holes they had expected to full with federal cash to help with Medicaid costs.”
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What is the evidence large federal deficits harm America? There is none. Yet, based solely on mystical faith and unsupported belief, the debt hawks have managed to punish millions of our poorest Americans.

The debt-hawks have heads of stone. They have hearts of stone, too.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity

–Japan: Debt/GDP = 218%. So?

An alternative to popular faith

In a previous post, I told you the Federal Debt/GDP ratio was an apples/oranges statistic, often quoted, but completely meaningless. (See: Debt/GDP). According to debt hawks and old-line economists, a high ratio portends inflation, recession and any number of other terrible economic outcomes. Of course, there is no evidence for this; it’s just popular faith unsupported by facts.

Read this article:

Associated Press; 6/22/10: TOKYO – “Japan’s economy, the world’s second largest, will expand at a faster pace in the current fiscal year than previously forecast as robust exports to Asia and improving corporate earnings are underpinning a broadening recovery.

“The Cabinet Office said Tuesday that Japan’s gross domestic product will rise 2.6 percent in the year to March 2011. “The upward projection was due to brisk growth in exports, especially to Asia. The forecast was also upbeat thanks to a recovery in capital spending and improving corporate earnings,” said Takashi Hanagaki, an official from the Cabinet Office.

“Earlier in the month, Japan upgraded its economic growth in the January-March quarter to an annualized pace of 5 percent from 4.9 percent in a preliminary report. But the encouraging figures, including Tuesday’s upward GDP revision, are tempered by persistent deflation and other negatives, including a lackluster labor market.

“Japan is also one of the most indebted countries in the world. Its public debt reached 218.6 percent of GDP last year, according to the International Monetary Fund.”

So here is Japan, with its 218% Debt/GDP ratio. It’s growth is anywhere between 2.6% and 5%. It’s large national debt has not caused the inflation debt hawks predict. On the contrary, Japan is fighting deflation. Further, the large national debt has not taken the place of capital spending as debt hawks also predict, but actually has facilitated capital spending as well as earnings.

Those are the facts, all of which will be disregarded by the debt hawks, the traditional economists and the media, who just know in their hearts that debt is bad, facts be damned. In fact, the AP article ended with this amazing sentence:

“Tackling the ballooning national debt is among most pressing tasks for Japan’s new Prime Minster Naoto Kan.”

Wrong. And that is why economics is a religion, not a science.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

–BP’s Adventures in Wonderland

An alternative to popular faith

Congressmen hate the truth. They don’t understand it. Why, they wonder, would anyone tell the truth when a lie is so much more convenient. So, you’ll get no greater outrage than when someone not only tells the truth, but does so in a politically risky manner.

Congressmen sitting on those high perches, pointing their talons down at businessmen, and demanding full genuflection. Congressmen express shock, “Shock, I say,” and indignation too. How dare these business people desire money, when that act is expressly reserved for politicians?

So when Rep. Joe Barton said, “I do not want to live in a country where any time a citizen or a corporation does something that is legitimately wrong is subject to some sort of political pressure that is – again, in my words, amounts to a shakedown. So I apologize,” Washington showed its outrage at this truth.

Yes, BP’s executives, and those down the line, made horrible decisions in the name of profits. And they should be punished. But wasn’t the federal government at least partly responsible? All those regulators who were accepting bribes to look the other way. Weren’t they aiding and abetting?

The Mineral Management Service, that was supposed to supervise offshore drilling, but instead accepted numerous gifts and even bedroom service – weren’t they a federal agency working for President Obama?

So when Mr. Obama threatened BP chairman, Carl-Henric Svanberg, with the full weight of the U.S. government, Mr. Svanberg caved, and bravely responded something to the tune: “We’ll set up a $20 billion damages fund and we’ll take the money from our shareholders.” Ah, courage.

Now Mr. Obama trumpets about how he forced BP to give money to some people by taking it from other people. Oh, and by the way, he also caused more people untold damage and misery by ending offshore drilling for six months, but please don’t mention it.

BP’s CEO Tony Hayward has spent hours and hours being grilled by Congress, because after all, isn’t the CEO of a giant company supposed to know every detail of every action by every employee every minute of the time? Sure, and under the same logic, why isn’t President Obama sitting in front of those same Congressmen, answering questions about his Mineral Management Service’s failures? Why is Obama able to point his finger at Hayward, while Hayward can’t point at Obama?

In summary: Joe Barton told the truth and was punished by Washington. BP took money from one group of people to pay another group, and Washington thinks that’s fair. Tony Hayward admitted fault and was vilified by Washington. President Obama admitted nothing and then caused even worse problems, and was applauded by Washington. Meanwhile, Washington, which was partly at fault, and has the unlimited ability to create money, while taking nothing from people, has not created a damages fund, but rather sits back and points fingers.

Lewis Carroll would love it.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity

–Punish BP or . . . ?

An alternative to popular faith

Those rotten scoundrels have ruined our oceans and our shores. They should pay not only for the cleanup, not only for the jobs lost because of the pollution, not only for the damage, but they even should pay for jobs lost because of President Obama’s decision to stop deep-water drilling. BP should pay, pay, pay until they bleed, then pay some more. These people must be held accountable.

Phew! Now I feel better.

But, wait. What is BP? It’s a legal description, nothing more than words on a piece of paper. It has no physical existence. You can’t punish BP any more than you can punish a law or a page of sheet music. BP, as a legal entity, neither caused, nor can cure, the oil spill. That disaster was caused by people, and it is people, not a piece of paper, who must be held accountable.

So the question becomes, which people should be punished? BP has a huge number of employees, the vast majority of whom had nothing to do with the oil spill. It has a huge number of innocent shareholders, a huge number of innocent suppliers, a huge number of innocent oil users. In some ways, you and I are part of BP, because as users of oil and oil-related products (i.e. all products) we are affected by what its employees do.

Which of those people should be “held accountable”? What if holding all of BP “accountable” means thousands of innocent people will be fired, or innocent suppliers will be put out of business, or all of us will have to pay more for our oil and gas, or all of us who hold BP stock, either directly or as part of a fund, will lose? What if punishing BP has an adverse effect on the whole economy. Is that wise?

Somewhere between vengeance and economic reality lies the answer. Punishing BP, as a company, punishes all of us who already are suffering from the gusher. And though widespread vengeance may feel good, there is a “cut-nose-spite-face” aspect to be considered. So, what can be done to help prevent a repeat?

First, let’s identify the people specifically responsible. Certain BP employees. Certain employees of BP suppliers. The guys who mixed and poured the rotten cement that didn’t hold.

And, with all the focus on BP, let’s not forget those government employees who failed equally. I’m talking about the people who, after having been bribed with nice gifts, so readily approved all of BP’s actions.

Yes, we should fine, fire, even jail all the responsible individuals. That would help prevent future problems. Of course, that doesn’t pay for all the efforts to cure the situation nor for all the losses. Who should pay the billions for that?

If you really care about the economy, and are not just flailing out in retribution, you would agree the economically wise approach would be for the federal government to pay. That way, the guilty would be punished, the innocent spared and the economy stimulated.

Government pays = people benefit. BP pays = people pay.

So what’s your choice: Vengeance or money in your pocket?

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity