President Barack Obama was elected in November under the pretense that he was a moderate Democrat that would unite red states & blue states together. He was going to be the post-partisan president who would unite Democrats & Republicans together and end the vicious partisanship of the Bush presidency. Under the Bush administration, the culture war was front and center in American politics creating two entrenched camps of partisans that made Washington ineffective and despised by the American public. During their control of Congress, Republicans often kept Democrats out of legislative process and compromised their core conservative principles in order to stay in power. However, Americans read through this governing approach in 2006, giving the GOP a sound defeat and allowing Democrats to take control of both houses of Congress. For the next two years, President Bush continued to slide in popularity and Americans looked to turn the page on the Bush years for good. They drifted towards a charismatic senator from Illinois named Barack Obama who inspired Americans with his soaring rhetoric and can-do attitude regarding America’s future. He inspired Americans in the spirit similar to JFK and Ronald Reagan, winning the 2008 presidential election by 7 points over GOP candidate Sen. John McCain. Americans were ready to be moved towards greatness and were hoping that President Obama could make them feel good about their country again. They were tired of divisiveness and partisan politics that dominated the Bush years. They wanted CHANGE.
9 months into President Obama’s first term in office, a majority of Americans are extremely disappointed by the president’s efforts. Buyers remorse is settling in as many Americans feel like Pres. Obama’s promise of being post-partisan was disingenious and will not come to pass during his presidency. Let’s look first at the $800 billion stimulus package. Did Obama ask congressional Republicans to help him write the bill along with Democrats? No. Instead he said “We won, we write the bill.”
That one line began the split that has now lead to a very partisan Washington led by an ideological president. President Obama and congressional Democrats are now prepared to pass Health Care Reform that will not have a single Republican voting for it. It is so partisan that moderate Democrats in the Senate such as Joe Lieberman, Ben Nelson, and Mary Landrieu are considering not voting for it and perhaps filibustering the bill. However, Congress becoming one of the most partisan chambers in recent memory is not enough for Obama’s White House. Instead, the Obama administration finds it necessary to declare war on its critics, which include Fox News, the Chamber of Commerce, Wall Street executives, and tea party protesters. And if that wasn’t bad enough, the administration continues to dump on President Bush and blame him for Afghanistan and a struggling economy.
What all this leads to is a President who looks like he is in over his head. It does feel like the “adults” have left the White House and bunch of amateurs have taken over. What the American people want most from their president is “leadership” and President Obama has shown little since taking the oath of office in January. He hasn’t contributed to crafting any piece of legislation that has been presented in Congress. He has to make a decision on Gen. Stanley McChrystal’s recommendation of 40,000 more troops in Afghanistan. President Obama also has failed to control his own party in Congress, which is fracturing between liberals and blue dogs. Each week, Americans are getting less confident that President Obama will move this country in the right direction. He has united the conservatives and Republicans in strong opposition against his policies and now moderates and independents are beginning to abandon him.
As we head into next week’s election, it looks like Democrats are going to receive a big wake up call from the voters. In the latest polls, it looks like Bob McDonnell will coast to easy win in Virginia gubernatorial race, Chris Christie will narrowly unseat incumbent Governor Democrat Jon Corzine in New Jersey, and it even possible that Conservative Party candidate Doug Hoffman will unseat liberal GOP candidate Dede Scozzafava and Democratic candidate Bill Owens. Also in the latest Gallup Poll, 4o% of Americans state that they are conservative. Also, the Obama administration has recently admitted that unemployment may not get lower than 10 percent until the end of 2010. All these indicators point to a possible wave election in 2010 giving GOP control of one or both houses of Congress.
Then, Obama will not only have divided America, but also the federal government. It is so surprising that a candidate that expressed so much optimism during the 2008 campaign has caused a country to harbor such deep divisions in such a short period of time. The main distinctions between Americans now doesn’t just include the culture war, but also the issue of big government versus small government. A large contingent of Americans are getting fed up with Washington regulating their lives with entitlement programs, high taxes, and increasing deficits that will limit their opportunity to manage their economic future. More and more Americans are beginning to distrust large institutions such as government, the media, and big business that Obama is portecting each day. The middle class believed that Obama was going to fight for them after feeling left behind by a previous administration that didn’t improve their standard of living. Instead, they are going to be burdened with paying higher taxes to support the president’s overreaching domestic agenda. President Obama’s CHANGE has divided America into entrenched partisan camps with the political center moving toward the right. Obama’s “Yes We Can” approach has turned out to be empty rhetoric and broken promises. As we near Halloween, America feels like it has been tricked with an elaborate hoax. Maybe, Obama is the Joker after all.
Playing a respectable game of golf is often thought of as a good business asset. Deals get made on the green, and progress is realized. This time-tested combination of sport and selling is clearly why our wise president has now been golfing as many times than his predecessor (the evil Bush; in case you forgot, President Obama will remind you a few times this week) in about a third of the time.
Yes, those 24 rounds of golf for Obama took just 9 months, compared to 34 months for Bush. This is a testament to Obama’s incredible ability to do the work of mere mortals all while improving his pitch and putt.
I’m personally sure his advisers haul out the war maps and economic data on a nifty little customized golf cart (no doubt powered by biofuels and solar energy) that makes the management of two wars and economic crisis a cinch. Desk work is so overrated, and why tie yourself down when the season is ending so soon!
What? You can’t imagine completing an honest day’s work while competing on the links? I shouldn’t think so. There’s a reason this man was elected: like he told Sen. Reid, he has “a gift.” I say, truly, he is the One we have been waiting for.
A warning to those who would imitate, even those who manage a modicum of success: golf is not an aerobic sport. After you get your work done and put away your sticks, be sure to get in a game of basketball for heart health. (If not, it’ll probably be mandatory soon enough, anyway.)
All you office drones, make like O, and get a leg up!
Victor Davis Hanson, classicist and historian, has on NRO this morning a sweeping condemnation of the administration, in his typically brilliant and sage manner. It begins:
For 30 months the nation has been in the grip of a certain Obama obsession, immune to countervailing facts, unwilling to face reality, and loath to break the spell. But like all trances, the fit is passing, and we the patient are beginning to appreciate how the stupor came upon us, why it lifted, and what its consequences have been.
Another section worth reading and re-reading:
His opposition is no longer ossified, but decentralized and grass roots. One of the oddest proofs of that statement is the sudden leftist furor at tea parties, town halls, the media, dissent, and free speech. As long as Obama was opposed by calcified Republicans in Congress, there was no real danger to him. But once the opposition proved populist, panicked liberal elites started demonizing populism — and Obama now finds himself opposed to the popular grievance-mongering that was once the mother’s milk of our Chicago organizer’s existence.
Check it out.
The jobless claims horse, that is.
Dow Jones reporting today that job loss claims were up again, and once again higher than expected.
From the report:
Weighing on stocks, the U.S. Labor Department said initial claims for jobless benefits rose by 11,000 to 531,000 in the week ended Oct. 17. The previous week’s level was revised from 514,000 to 520,000.
Economists surveyed by Dow Jones Newswires had expected only a slight increase of 4,000, with the report serving as another sign of tough times for the jobs market.
I thought we were on our way to recovery? Why aren’t the job losses at least slowing?
It seems we are approaching a new paradigm for liberal reporting on our president. After completely dropping the ball throughout the election season, failing as they did to report the extent of his associations with anti-Semite, racist Reverend Jeremiah Wright, domestic terrorist Bill Ayers, Israel-bashing Rashid Khalidi, communist Frank Marshall Davis, and the entire Chicago political underground, the media seem stupefied that their candidate is not all he was cracked up to be.
Now pervading news reports is a bizarre perception that he is an unknown quantity. Richard Cohen, writing in the Washington Post today, claims “He doesn’t go way back with the unions — he doesn’t go way back with anything — and the Jews are having second thoughts.” Well, hold on. He goes back with plenty of unpalatable characters (see above) and movements, including a stint teaching community organizing according to the testament of communist Saul Alinksy.
This change in tone, from sycophantic to allegedly disoriented, is completely understandable. To be perfectly frank with their readers/viewers only after the election would ruin all credibility that these dying media dinosaurs still retain. Although I wouldn’t quite say that their self-interest excuses them. Alarmingly, the now-president’s Marxist roots are still not reported in the mainstream press. We are stuck with this ill-considered, amateur statesman/professional radical for president for at least 3+ more years. Attention press! Please let his real personality be known!
That headline alone is enough to make a conservative queasy.
Bono is not a bad guy, however, and I admired him when he used to meet with and occasionally praise Bush. He strikes me as results-oriented when canvassing for his noble goals, which I view as a rather good trait.
Which is all the more reason I dislike seeing him uncritically praise Obama. With lines like “So here’s why I think the virtual Obama is the real Obama, and why I think the man might deserve the hype,” and absolutely no tangible evidence to support his claim, I’m wondering if Bono is more savvy at pandering than people give him credit for.
It’s possible, even likely, that Bono has not fully considered the reasons that poverty exist – most of the time it’s tyrannical government. In this light, it’s quite ironic that he’d suck up to a contemporary American tyrant of the FDR (the original poverty president) mold, setting the stage as he is for a Second Great Depression.
This White House never fails to supply its critics with abundant ammunition. The latest creepy action is nothing less than a full out assault on Fox News.
The cable network has been targeted and isolated. The president has been making swipes at the network for years because, unlike other useless news networks, Fox has been reporting what the public did not want to hear: that Obama has a history of radicalism and the friends to prove it.
Aside from past remarks from the president himself, attacks were made Sunday by the White House Chief of Staff Rahm Emanuel, Senior Media Advisor David Axelrod, and Communications Director Anita Dunn:
Said Emanuel, Fox is “not a news organization so much as it has a perspective.”
Said Axelrod, “[Fox is] not a news organization. Other news organizations like yours ought not to treat them that way… We’re not going to treat them that way.”
Said Dunn, the network is “opinion journalism masquerading as news.”
And there we have it. Attacks on free press, intimidation of journalists, and disdain for and derision of critics. My prediction? Like the attacks on Rush, the White House is only going to accomplish dragging itself through the mud. Journalists and reporters are supposed to meddle in political affairs to a certain extent, provided they do lawfully and do not interrupt important duties. In the scheme of things, this meddling helps keep the country free (why we have that provision in the first amendment). The President of the United States of America, however, looks childish and insecure when he attacks, or directs the attack on, a cable news network.
Why is it that we periodically encounter contractions in economies?
This was a very active line of economic research in the 1920s and 1930s, and yet the topic is rarely researched today. It’s as if in our postmodernism we’ve lost our inquisitive nature; such questions are now blasé, and so a consigned, apparently sophisticated nihilism reigns over examining the nature of the business cycle.
To be fair, the state of business cycle research in this esteemed era of global learning is not exactly ignored. How could it be, when recession dominates news cycles and pushes two wars under the fold? It does, however, have a certain flavor to it: positivism. This is the same ideal that guides the scientific method. To avoid a long discussion about epistemology and methodology, one that I am not qualified to lead, I will simply suggest that instead of looking to explain the Why’s of the business cycle, it focuses on the How’s and then cobbles together the (largely) numerical findings in what can only be described as a consensus theory with no coherence and even some logical inconsistencies. These researchers tweak certain aspects when they are alarming and blatantly misleading or false, but still the looming and ultimate Why? for many was answered in 1936.
Most modern business publications give the answer in two words: animal spirits. This was the phrase that Cambridge economist and British public policy adviser John Maynard Keynes used in his 1936 General Theory of Employment, Interest and Money. According to Keynes, people inherently suffer from a harmful herd mentality that causes what now might be referred to as “irrational exuberance” (a la Greenspan), which drives prices far beyond what they “should” be.
This seems a plausible explanation, and one that appeals to our humbler and self-deprecating tendencies. Is it so hard to believe that people acted stupidly, enchanted as they were with dreams of huge profits for little work, and bought into the idea of drastically increased prosperity? At first pass Keynes’ theory appeals to our common sense. From this acceptance, it is a short step to Keynes’ interventionist policies of deficit spending and monetary inflation, designed to break the bad psychological cycle allegedly driving the economy into recession.
To sum up Keynesian theory: societies are irrational and prone to periodic cycles of boom-bust, beginning with animal spirits that drive overinvestment, leading to boom. This is followed by a crash, or bust, when the spirits experience an apparently whimsical change of heart. This then leads to a contraction in consumer spending and increased saving, because the crash violated the economic security felt during the boom. This contraction in consumer spending and increased thrift withhold resources, and businesses suffer from fewer sales and lower revenues. More firms go out of business, leading to more crash, leading to more savings, leading to even less business, leading to even more saving… so the cycle is conceived. It should be evident that this cycle has a positive feedback mechanism, and is thus self-reinforcing. Saving is the culprit, which is why it has been described as “the paradox of saving,” or “the paradox of thrift.” This is the central problem that Keynes looked to solve.
Following Keynes’ logic, governments exist in part to smooth out these cycles by taxing during the boom so that they may spend during the bust. This helps plug the hole in consumer spending in the private sector – the alleged cause of the recession – and ultimately helps the economy as a whole. These relatively new interventionist policies were first adopted during the Great Depression following the market crash of 1929. Before this, American administrations claimed impotence (this is before Bill Clinton!), correctly in my view, and refused to step into the workings of the macroeconomy.
The subtler suggestion of Keynes’ theory was that even moral human societies are destined for periodic chaos, and that only government has the tools and foresight needed to save the shortsighted and parochial people from themselves. This idea was fundamentally anti-American when introduced, not to mention fundamentally opposed to Adam Smith’s principle of self-interest and concept of organized liberty. How the west, particularly America, came to adopt this alien view requires some historical context.
The years preceding 1936 were the interwar period, characterized in America by the so-called Lost Generation, and general disillusionment with the world as well as with American idealism. This is evident in America’s isolationism and detachment from Europe. For all their wonderful fashion and dazzling panache, 1920’s America was also cynical in a way that few of their ancestors would have understood. Across the Atlantic in Europe and Russia, Communism and Fascism, the ying and yang of Marxian dogma with a Nietzschean (i.e., strongman) touch, were rising intellectually as a challenge to western-conceived freedom. Following the crash of 1929 and facing recession, Americans looked overseas and saw the illusory successes of Germany and Italy restoring their national greatness through huge public works projects. The continuing recession of the 1930s (resultant largely from Keynes’ ideas) incubated the insecurities of the Lost Generation, and all the doubts and bitterness accumulated from WW1 onwards matured into a full-fledged crisis in American confidence; a not-insignificant doubt in the ongoing feasibility of liberty as an organizing principle. Only in this context can we understand how the nebulous idea of “animal spirits” gained academic traction. It was an act of desperation from a desperate and increasingly unmoored people.
As is usually the case, however, the intuitive solution is not quite right, notwithstanding its kernel of truth. To recount the story of how a truly general, yet largely ignored, theory of the business cycle developed, we must first take a brief detour back in time to Austria-Hungary, 24 years prior to Keynes’ publication. In this era, Europe was extensively classically liberal; socialism was still viewed with skepticism and had not yet ossified into a dogma. Understanding the rational conduct of free people was the agenda set for most pioneering economists.
In 1912, Austrian economist Ludwig von Mises published his Theory of Money and Credit. Continuing in the tradition established by his teachers – Carl Menger and Eugen Bohm-Bawerk – Mises set out to fully apply the law of marginal utility to money. Toward the end of his work, in a relatively brief section, Mises outlined how fractional reserve banking and the creation of credit out of thin air led inevitably to the boom-bust, or business, cycle. This critical insight, not fully expanded upon by Mises but characteristically lucid, gave one of Mises’ students a starting point to fully investigate the implications of credit expansion on the economy. This young student was the now famous Friedrich von Hayek, author of the still popular (although at the time, yet to be written) The Road to Serfdom.
In the 1930s, while the west wallowed in Keynes’ inspired economic stagnation and as a result began adopting super-authoritarian political regimes (the United States, notably, had its only four-term president), Hayek set out on a dual mission of explaining the business cycle from a free market perspective and at the same time exposing and deracinating Keynesian economics, which he viewed as subversive to free peoples
How did Hayek explain the business cycle? It is understandable through the contemplation of the meaning and function of interest rates, which modulate the tradeoff between consumption and savings. What of consumption versus savings? Before anything can be loaned, it must first be saved. This statement is parallel to the expression you can’t have your cake and eat it too! Consumption and savings are opposing concepts that describe the only two alternatives that man has when in possession of a good. Either it is consumed or it is not – if it is not, we say it is saved.
The ontological reason for savings is anticipated future consumption; we stave off consumption today so we can consume more tomorrow. As money is saved, a new opportunity arises that we call investment. Investment can take the form of debt or equity, but for the sake of minimizing the complexity inherent in such consideration, let’s pretend for a minute that all investment takes the form of loans (debt), and not ownership (equity). There are always two components to investment: risk and reward. The riskier the investment, the higher the expected reward. To maximize savings, people invest money across the risk spectrum and earn interest. Interest is the cost associated with utilizing someone else’s accumulated savings – that is, it is the lender’s remuneration for his opportunity cost. When interest rates are relatively high, it implies that people have a shorter time preference. When interest rates are low, it implies a protracted time preference. In a free market, low interest rates are almost certainly an outcome of abundant savings.
Interest rates are hence very important prices. Information provided by interest rates helps shape the economy around the demographics and preferences of the population. Artificially altering interest rates thus has real, tangible effects. Consider the effects of lowering interest rates artificially in the context of savings and investment, described above. In effect, the low rates send out the message that savings is abundant, and hence society as a whole can afford to invest in riskier business proposals. In terms of finance, it shifts any number of projects with a negative net present values into profitable territory. As the late Murray Rothbard (another student of Mises) pointed out, this phenomenon is seen especially in the increased production of long-term durable goods, like, say, houses.
The culprit here is not then the esoteric animal spirits, but the institution that sets target interest rates: the central bank. Americans call their central bank the Federal Reserve, or simply the Fed. Mechanistically, the Fed is able to target interest rates because it has sole, legal power over the currency. To lower interest rates, it “prints money.” (Note: the Fed does not literally print money anymore; this somewhat arcane expression refers to what used to happen before the invention of computerized banking systems.) New money is given to banks in exchange for U.S. Treasury bonds, and because they have more liquid assets (that is, more loan fodder), they can lower rates to reach new customers – customers who are by definition less profitable and even unprofitable investments than those funded without the inflated money supply. (A fuller explanation requires an integration of monetary theory, which is beyond the scope of my current ambition!)
It would be wrong to attribute all the blame on the Fed. In truth, bankers have been creating money out of thin air for centuries. We used to see the inevitable consequences of this scam in the form of bank runs, which have all but been illegalized by the FDIC (a government program created under that four-termer). However old this practice may be, there is a fancy term used to describe what would otherwise be called fraud: fractional reserve banking. It is just as the name implies: banks reserve a fraction of what they are given in deposits, and loan out the rest. Reserve ratios are now written in law, but 10:1 is common practice. Because these created dollars are then deposited into other banks, the total leverage achieved is closer to 100:1. (For a better explanation, see here.) Absent a central bank’s discounting window (i.e., bailout), however, bankers must consider that their competition can call their loans and finally bankrupt them. Under the gold standard and absent nefarious banking bailouts, competition provided a natural check on excessive leverage and riskiness.
When the Fed dropped rates dramatically following September 11, 2001, it “printed” roughly $200 billion dollars. This was illusory in the sense that it required no commensurate production. It was akin to telling everybody in the nation that $200 billion dollars was now added to the savings pool. (Of course, if this kind of action made a contribution to real savings, there would be no reason not to print $200 trillion.) This $200 billion hit bank books, and was lent out at multiples. This lending consumed real savings, fueled unprofitable ventures, and gave the illusion of tremendous prosperity. But, as predicted, prices caught up eventually, and loans went bad. Companies must liquidate their resources and find new channels of sustainable production. Our economy is not adequately meeting our needs and must undergo a literal transformation. This is a costly process that is, tragically, the result of our own monetary machinations and finally hubris. A continued effort to frustrate this adjustment will prolong hardship, dispiriting the population and, if history is any guide, lead to the ascent of unsavory political forces.
For a few brief years, it looked like the Fed had figured out how to trump economic laws. We now have empirical evidence that Mises and Hayek were correct, and the creation of money out of thin air, and not animal spirits, is the culprit.
I hope this provides an introduction to the alternative theory of the business cycle. It should be obvious that many societal implications flow from this analysis, one of the most important being that a government that controls the money supply has no logical restraint on spending. Throughout, I’ve tried to name the important social scientists and theorizers who developed the thoughtful system of analysis. Unmentioned here, but influential to my own thinking, is Michael Novak, whose lifelong study of free societies and prodigious output are a treasure trove of insight. As usual, I recommend mises.org for further reading on economics and classical liberalism. (An article applying the theory to reality can be found here.)
I have always believed the main reason why some kids are so undisciplined these days is because of the parents and the larger adult community that looks the other way. As the mother of the slain Chicago teen states, we have become afraid and passively stand by, and in some instances, coddle those who run amok in our communities.
just produced another 3 Nobel Prize winners in the categories of Physiology or Medicine.
From the CNN report:
“Elizabeth H. Blackburn, Carol W. Greider and Jack W. Szostak will share the $1.4 million prize for research on structures at the end of chromosomes called telomeres and on an enzyme that forms them, called telomerase.”
Practical applications of their research include cancer treatment and aging.
For reference, sine 1980, 41 Americans have won this distinguished prize (many times it has been shared). See this Wiki list to get a sense how spectacularly superior our research output is compared to the rest of the world.