The Second Grand Unification Theory of Sucking
It’s just a helluva news day for a Friday — and usually they hold the bad stuff back until after the markets close. But since everything is everywhere, I have a job to do this morning. Let’s get to it.
Retail sales “unexpectedly” cratered in May. Especially telling is this bit from the WSJ story:
The retail sales report “is a reminder that households are not going to be the engine of growth for some time,” Capital Economics economist Paul Dales wrote in a note, adding that the retail sales report “dramatically weakens the outlook for consumption growth in the second quarter.”
Huh. So it seems that artificially propping up home prices doesn’t help people buy homes or avoid foreclosure. Who knew?
The plan, I suppose, was to purposely return us to the housing bubble, when Americans borrowed against their homes to buy lots of cool stuff. Of course, the first time the bubble popped it cratered the economy of pretty much the entire planet. American consumers wised up, and stopped borrowing (not always by choice) and started socking money away and paying down debts.
American politicians on the other hand didn’t wise up, and instead doubled down on stupid. Make that tripled down — because not even government can get consumers to borrow and spend, while at the same time stopping banks from lending any money. Again — who knew? Although don’t be surprised if our Dear Leader manages to reinflate the housing bubble despite himself.
Now that American consumers are loaded down with debts (both public and private), it’s apparently the perfect time to saddle them with ever-higher energy prices. Because if there’s one way to get people shopping again, it’s to drastically increase the cost of making, shipping, storing, buying, owning and operating virtually everything.
Meanwhile, official unemployment refuses to duck much below ten percent, and nearly one in five Americans is at best underemployed.
Maybe it has something to do with the fact that American employers have been saddled with unknowable new health care costs. Oh, and that American entrepreneurs are about to get socked with increased taxes and American corporations are penalized with the industrialized world’s second-highest tax rate.
Or maybe it has to do with the First Grand Unification Theory of Sucking, explained on this page almost exactly one year ago. Back then I said the Stimulus was doomed to fail, for three possible reasons:
1. That extra spending means extra taxes which means the whole thing is a wash. (Government spending having some “multiplier” effect unknown to consumer or business spending is a big, fat lie.)
2. That extra spending means extra debt, which drives up interest rates, which chokes off growth.
3. That extra spending means extra money being printed, which means inflation which means any growth is illusory.
Reason 1 seems the most obvious reason for the Stimulus Fail thus far — but the spending binge is yet. And back then I illustrated it with some very funny examples involving the Three Stooges and cute stuff like that, but one year and four days later, I’m not feeling very amusing. Or amused. Why? Because after spending $800 billion we didn’t have to create jobs that never materialized, Obama wants to spend $30 billion more we don’t have to create even more jobs that will never materialize. So please excuse me for not going “Ha!”
Meanwhile, we’re literally being crushed by the public debts we’ve already accrued, the public debts we’re shortly to accrue, and the long-term public debts which will make the last year seem like a Golden Age.
Again, American consumers are hunkering down and paying down their private debts, because we know someday we’ll have to pony up for the tab on Washington’s no-limit MasterCard.
But don’t worry — how high can those payments really go, when interest rates are still being held so low? Just try to forget those low rates give the Fed zero wiggle room to deal with any future crisis, while also reducing the value of the dollar and increasing the risk of adding inflation to our recession. And you thought “Stagflation” went out with bell bottoms and Donna Summer.
And we haven’t even gotten to what’s happening in the Gulf of Mexico — but for now let’s just hope I don’t have to revisit the Spill again in another year, and leave it at that.
Somehow, the Democrats grandfathered in every bad idea the Republicans promulgated under Bush, then asked themselves, “But how can we really make things bad?”*
Well, now we know.
And while I won’t say “I told you so,” please note the “Second” in the headline above.
*There are some who say that destroying the economy is a feature, not a bug. I usually lump the Cloward-Piven Conspiracy Theorists in with the Birthers and other assorted kooks — but the CPCTers are looking smarter every day.
The Cloward-Piven Strategy/B> – or whatever it is “properly” titled – is nothing I would ever have remotely associated with “whack-jobs” or such
[side note: while I *do* consider as legitimate the matter of Obama's Constitutional qualifications, and NOT a dismissive "birther" issue...albeit a "distraction" from other matters of import],
so please inform us all here why Obama’s actions do not make up a “destroy/weaken America” tactic/plan.
kind of love this argument…
“*There are some who say that destroying the economy is a feature, not a bug. I usually lump the Cloward-Piven Conspiracy Theorists in with the Birthers and other assorted kooks — but the CPCTers are looking smarter every day.”
Theirs nothing illegal about obama even purposely destroying the econ in the name of socialism… however dare demand obama be forced to comply with the US Constitution and must show he meets said US Constitution requires no thats just insane….
A Classic of why this country is falling apart… US Constitution be damned we need to worry about some minor social issues….
That line of thinking is why the party mottos are
Dem “socialism now, ovens, gulag, etc in a little while”
GOP “socialism for your grand kids and oven “never”"
I can’t wait for the tea party to get rid of the fascist and the fascist-lite party.
Not to burst your bubble but the tea parties have only ONE goal.
That one goal while great (very great) is not the only thing people look at.
Voting for one thing and ignoring the rest is to be blunt beyond stupid. We wanna make sure that we don’t buy more than we want.
As such we must look deeper than the tea parties do.
The tea parties one goal and that is restoring the US Constitution… that will have far reaching effects on all groups and all areas of government.
Ayn Rand said it best:
” The difference between a welfare state and a dictatorship is only a matter of time.”
At this early date in the crisis (it would be a late date, if we weren’t trying this Keynesian nonsense), deflation is probably a worse risk than inflation. In which case, American consumers are pretty smart operators.
Destroying the economy probably isn’t a feature but it definitely is not merely a bug. I suspect that they simply don’t realize how much damage they are doing to the economy. They think capitalism is a fat man chomping on a cigar and all they have to do is keep smacking him to keep the money flowing.
Stephen,
One quick question – why would people try to pay off their debt now? I don’t understand it. If your interest rate is fixed, and you expect inflation to kick in soon, it makes no sense to pay off the debt – it actually makes sense to acquire more fixed rate debt.
BTW, I’ve lived through 1000% inflation in Russia in the 1990ies, so my views are based on personal experience.
Stephen, what do you recommend? I have some extra money coming in over the next few months. Should I pay off credit cards and remainder of my car loan, or buy food stores, firewood and ammunition?
Credit cards are variable rate, so I recommend paying them off first, then stockpile supplies while continuing to make minimum payments on the car loan.
Thanks. Art Laffer’s article in the WSJ made me re-evalute priorities.
Listening to a Russian about economics is like listening to a Chicago politician about ethics; they know the rules, but don’t really understand them.
As an exercise: To utterly destroy an Economy, what have they missed? Seriously.
What further actions does this administration need to take to convince you that the Cloward-Piven strategy IS this administration’s overarching strategy?
Chill: I don’t need any more evidence.
But I think they will do four more things that will finally topple our economy: 1. Pass Cap and Trade, 2. pass another stimulus which means, 3. ask the Treasury to print more money and bring us inflation, 4. after Bush’s tax measures expire, they will increase all manner of taxes because when the Baby Boomers start to retire next year, someone needs to pay for their retirements.
I think, given the huge disjunction between Obama’s campaign promises and the way he and his co-partisans have actually governed, the thesis that we’re witnessing an unfolding plot to destroy the economy, to provide the pretext for further nationalizations and socialization, is stronger than any other explanation yet offered for the Administration’s policies. There’s certainly no objective, economically rational explanation for them, and anyone with three functioning brain cells should know it. But as preparatory maneuvers for fastening an economic dictatorship upon the United States, they’re completely consistent.
You are not taking your history back far enough. What you are describing is Fabian Socialism, as implemented intellecutally in Keynesian economics.
You absolutely need to read this book, available free on-line, and for purchase if you like to underline: http://www.keynesatharvard.org/
It will make you sick to your stomach once you realize that Obama is simply implementing a plan that ultimately dates back to Marx himself.
The task is to suck private capital out of the system. You do this by making everyone dependent on loans, by raising taxes on the rich, and by accumulating publicly held debt. Any policy that discourages savings is to be supported. Any policy that encourages debt is to be supported.
What did Fannie Mae and Freddie Mac do? They enabled an artificial market over-valuation by buying up loans that would not have been made if the originating banks did not know they had a “buyer of last resort”. This was further propped up by an easy money policy by the Fed.
When the bubble crashed, who benefited? People who had the money to buy underpriced assets. Our whole economic system is simultaneously a scheme for the rich to get richer, and the “Salariat” class (Keynes term) to take over. Some believe they work together, some don’t. In the end, it doesn’t matter.
We need real Capitalism. This will involve abolishing the Fed, Fannie Mae and Freddie Mac, and substantially every program Democrats have funded since FDR.
I have numerous ideas on how to do this, many but not all of which appear somewhere on my blog, linked above.
I remember when the crisis began and bush was still president and the democrats were contemplating writing ever larger and larger checks for money that we dont actually have, I told a friend of mine that we should do the reverse and drastically cut the budget and reduce debt. I was called a nut.
Now the money has been spent and it did nothing to improve the situation and by many accounts made it far worse. That who called me a nut? He still calls me a nut.
By the way, you are making the mistake most people make, which is to think the $800 billion was spent last year. In reality, it is spread over 5 years: 2009-2014.
Consider in this regard: http://watchdog.org/1530/6-4-billion-stimulus-goes-to-phantom-districts/
“[$6.2 billion in Stimulus] funds were distributed to 440 congressional districts that do not exist.”
Asked about it, the head honcho has this to say: “People make errors, and we’ve found people are making errors in these reports,” Pound said…
Recipients file their reports on a password-protected site. That information is then relayed to officials who oversee the recovery.gov website to post, Pound said. Unless an egregious error is noted, Pound said they post the information exactly as it is received.
“Our job is data integrity, not data quality,” he said.”
Is it just me, or does that look like a system for paying off your cousin Vinnie, and whatever Jeff Jones current pet project is?
I’ve been trying to convince a limp-wristed former leftist over at FrontPage mag of this, and have decided to move on to more important projects. I run out of sympathy for stupidity quickly.
Cloward-Piven are NOT some conservative conspiracy theory. They are two guys who actually wrote what they did, and published it as scholarship. Their plan only called for the demand side to be used to destroy the American system. It appears more evident every day that it has been up-graded to include the SUPPLY side, as well.
A little surprised at you, dude….
“…we’re literally being crushed…”
No, we are not. People need to learn to stop using “literally” when they obviously don’t mean literally.
Several humorous cartoons on the dishonestly of the current Administration at http://drawfortruth.wordpress.com/category/truthfulness/
http://www.foxnews.com/politics/2010/06/13/obama-appeals-congress-billion-emergency-aid/?test=latestnews#content
I see where Obama has requested another 50 Billion to bail out his beloved bloated government payroll. Maybe it’s time for the redistribution of wealth to stop. These people need to get a real job and stop sucking at the teat of the taxpayer.
I say “No”, enough is enough.