More Fed Nonsense from Janet Yellen

Yellen's statements yesterday were ridiculous.  She said that the decision as to whether or not to raise rates would depend upon "further improvements in the labor market."  What exactly does that mean?  Employment creation is anemic and has been since the Fall of 2008.  That's seven years.  So, what does she mean?

If given a healthy dose of truth serum, here's what I think she really means:  "I have no idea why rates haven't gone up.  We've been hoping and praying for years that rates would rise, but they never seem to.  We plan to keep hoping and praying.  Obviously, we have no ready mechanism to raise rates.  Just saying "go up rates" doesn't make it so and, as everyone knows, open market sales to reduce reserves could easily be destabilizing."  Okay, I got that.

The Fed has the power to add to and subtract from the monetary base.  Outside of that, the only other power the Fed has is to badger big banks to bend to their will when they feel in the mood to badger.  But, one power the Fed does not have is the power to precisely control interest rates.  That they cannot do.  The past five years is pretty demonstrative evidence.

Paul Volcker, the greatest Fed Chairman in history in my view, always said that "we are just following the market," at the time the Fed announced a new target range for the Federal Funds rate.  Volcker understood what was going on and, I suspect, Yellen does as well.

But, it is so much easier to believe that the Wizard behind the curtain controls all of this than to accept the reality that markets control rates, not the Wizard.  So, look for more Fed speak nonsense.  Rates will rise when markets make them rise....not before.

Oil and the Monopoly Myth

Those who oppose free markets often cite monopolies and large corporations as needing to be tamed by a bureaucratic apparatus designed to "protect the public."

The energy "crisis," as it used to be known, was a clash between growing energy demands and limited supplies.  The Club of Rome, remember them, argued in the 1960s and1970s that the world was going to soon run out of fossil fuel energy and therefore economic growth should be shut down before the lack of energy supplies shut it down.  This argument persisted well into the twenty-first century until it was overwhelmed by massive increases in fossil fuel energy. Another Malthusian specter vanished as if by magic.

Think of all the newsprint and talk media wasted decrying the world's output outrunning it's energy supplies.

So, the ground shifted.  The "global warming" story replaced the Club of Rome argument, but led to the same conclusion: shut down economic growth.  As the "warming" story ran up against contrary facts on the ground, the "climate change" story began.  But, the conclusions are always the same: shut down economic growth.

Thus who push this line believe that there is a knowledgeable elite -- usually, themselves -- who can rescue us from all of this, if only we abandon free markets and let them decide who gets what and what goods and services can be produced in their vision of the brave new world.

It  is amazing that so many folks think their views should supplant the views of ordinary folks regarding what to produce and consume.  The great virtue of free markets is that, acting only with local information, average citizens in their personal efforts to improve their standard of living, provide benefits for everyone in increased production and increased consumption through economic growth.  No elite bureacrats are needed.

So, myths are created, that require elites to come to the rescue.  Is it time to reign in big steel, big oil, big autos, big old IBM.....?  It is obvious that the view that these monopolies controlled our very existence turned out to be ridiculous.  These so-called monopolies couldn't find a way to provide for their own survival, much less control the rest of us.  Monopolies carry the seeds of their own destruction as new products and new ideas push the monopolies out of the way.  Free markets win out, even over monopolies.

There is no bureaucracy that can protect us.  Bureaucrats can only enslave us.  Only free markets and human initiative can protect us and permit us to improve our lives.

Jack Lew is Clueless

Thursday, speaking in Lima, Peru, US Treasury Secretary Jack Lew said:  "When you look around the world, the question is the still the same.  Policy makers have the capacity to help boost growth, but it's a test for all our political systems to determine we have the political will."

How could you disagree with that?

The US, for example, has spent the last decade enacting endless suffocating regulations that have effectively prevented a strong economic recovery from the 2008 financial collapse.  These regulations and arbitrary government actions, mostly executive actions by the Obama Administration, now prevent any return to economic growth for the US.  The Obama's Administration certainly has the political will to kill off economic growth.  But, can growth be revived?

So, what is Lew's prescription for the US?  More government spending, restoring the funding for the Export-Import Bank and other goodies for special interest friends of the Obama Administration.  Is he kidding?

For Lew, economic growth means taking taxpayer money and giving it to people he likes.  That about sums it up.  So, he decries the fact that a freely elected Congress won't get on board with give-aways to his buddies.

This tells you a lot about our future as long as Lew and other Obama acolytes remain in power.  It's all about lining their personal pockets and giving the back of the their hand to the average American.

Now, Lew wishes that other countries will adopt similar policies to reward friends of his in their countries.  The Eurozone already has such policies in place, so Lew is obviously hoping to tap down the economic growth in Asia and the other few pockets of economic strength in the world.

Misery likes company.

Weak Economic Numbers Are Getting Weaker

Earlier this week, GDP for third quarter was announced by the Commerce Department as 1.5 percent, versus 3.9 percent in the second quarter.  Not much doubt about the trend here.

Today's personal income growth for the month of September checked in at barely positive.

For the average America, this data says more sluggish income, no chance of rising living standards, and continued demagoguery from the very folks that have created this nightmare -- the folks in the White House.

Until free markets are permitted to breathe again, there is no likelihood of improvement for the average American.  The only winners of the Obama-Clinton economic gameplan are those on top of the stagecoach, riding around in their limousines and jet planes, piously decrying inequality.  They should know. 

More Rubbish From Academia

One Stanford "scientist" and his two Berkeley colleagues have penned a study recently asserting that average income in Mexico will plunge 73 % due to "global warming."  US per capita income will fall 36 percent by 2100, according to "research" published by this trio.  This insightful nonsense will emerge into daylight in the November 30th issue of Nature magazine.

What is the basis for this "scientific" result?  You're right! Nothing.

What the authors have done is compare periods of high temperature with periods of low temperature and then check out the economic growth rates in the periods.  As an undergraduate essay, this absurd "research" would struggle to get a passing grade.  But, in the highly politicized climate of today's higher education "research" world, this nonsense now rates a way station on the way to fame and fortune for extreme left wing academics.

All you need, according to these folks, is a cold spell for the South Sahara to roar past Europe and the US in per capita GDP.  No need for free markets, education, natural resources.   This makes the study of economic development fairly simple.  We should focus on building efficient air conditioners -- that will quickly, according to these folks, provide all the economic growth that these poverty ridden countries will ever need.

Sadly, this kind of "research" is not unusual in the modern American elite university. It is typical.  Serious thinking is increasingly being replaced with stuff like this.

Accepting A Mediocre Economy

The Obama Administration is touting the US economic recovery as a job well done.  Data made public yesterday shows that 2014 produced 2.4 percent GDP growth.  Such low levels of growth were considered cause for alarm in the years before Barrack Obama became President.  Now, such mediocrity is extolled as acceptable, even worthy of praise.  How far expectations have fallen!

As the Wall Street Journal points out in an editorial today, it is impossible to find an economic recovery this mediocre at any time in American history.  This is a new record for economic sluggishness.

Don't expect this to change as long as the "war on the economy" continues, waged by the Obama Administration and it's army of bureaucrats.  While this won't hamper the "1 percenters" like Obama, Soros, Pelosi, Kerry and Buffett, it will damage the hopes and dreams of the middle class and the poor, who have no chance of prospering with the damaging economic policies of the Obama Administration.

But, if you listen to the President, he thinks these policies have been a success -- I wonder, who for?

The Budget Debate and Shutting Down The Government

According to the US Constitution, Congress makes the laws, including those governing the spending of money, and the President is the executive, enforcing the laws made by Congress.  So, how does a budget get enacted and implemented, according to the Constitution?

The House originates the budget, passes it and then the Senate acts.  Suppose the House and Senate have acted, then the budget goes to the White House for signature.

What happens if the White House says:  "I will veto this unless it includes massive monetary payments and bribes for me and my friends."  Then, suppose the White House proceeds to a veto.

Who is responsible for shutting down the government in this scenario?  Yep.  The White House.

So, the House and Senate should pass the budget resolution and the debt limit ceiling with whatever provisions they want.   Then, if the President chooses to shut down the government by demanding that he alone can enact legislation through veto threats, then let the President shut down the government by using his veto.

Forget the media's interpretation.  The true interpretation is that Congress is responsible for making the laws and if the President is willing to shut down the government to thwart Congressional intent, then let him.

It is way past time for the Congress to play the role that the Constitution intended and challenge the assertions of an over-reaching White House.  The President is shutting down the government whenever he vetoes a spending bill or a debt-limit bill. It is as simple as that.

Congressional leaders should stop saying: "We will not shutdown the government."  Congress is not shutting down the government by passing a budget and passing or refusing to pass a debt limit extension.  Congress is simply performing its function as provided for in the US Constitution.  Only the President can shut down the government if Congress does the job that it is supposed to do.