The Heritage Foundation ran a contest to see if anyone could come up with better gifts for the Queen than the iPod the Obamas gave her. They divided it into two parts: thoughtful gifts and humorous ones. Some of the thoughtful gifts were truly excellent — Obama’s protocol people should take notes. But one of the facetious gifts was my favorite:
…the U.S. Constitution since we aren’t using it…
(Cross-posted at Public Secrets, my home on the Web)
Ed Morrissey explodes the meme that the left is trying to make reality that President Obama was just trying to pick something up off the floor when he bowed before Saudi King Abdullah. He notes that, throughout the bow, Obama’s right hand is engaged in a handshake and his left hand remains in view.
A bonus item from Ed – Arab News, the English-language mouthpiece of the House of Saud, dismissed Obama’s new Afghanistan/Pakistan policy while praising his fealty to the followers of Islam.
When the housing bubble burst last summer, people started worrying about more than just the values of their homes. Fannie Mae and Freddie Mac collapsed and, in their wake, took down major banks like Bear, Sterns and legendary insurance giants like AIG. If you’re an investor, you can recall when these stocks were among those considered to be as close to “sure things” as any investment could be. Their collapse, and the threatened fall of other big banking houses, was and is frightening.
On top of that, the Big Three automakers -GM, Ford, and Chrysler- entered what may well be their death throes. Think about it: three of the biggest symbols of American wealth and power, indeed, of a uniquely American lifestyle, looked like so much fodder for the vultures. Again, scary.
And, of course, our leaders didn’t help dispel that sense of impending doom. President Bush proclaimed he had to abandon capitalism to save it. And President Obama has spent the last two months since his inauguration telling us we’re in the worst crisis since the Crash of ’29 and the Great Depression. (Not to mention the repeated attempts to cast him as a new FDR.)
So, we’re moving from the New Crash to the New Great Depression, right? It’s 1932 again, isn’t it? Time to figure out what to wear to the breadline, eh?
Not so fast. You might need a wheelbarrow, instead.
If the Telegraph’s Martin Hutchinson is right, we should be worried that instead of 1932, it’s 1923:
…look at the Weimar government. Suffering from the trauma of defeat in the First World War and the burden of reparations, it was too weak to raise taxes. It ran large budget deficits instead. Interest rates were kept far below the rate of inflation, while money supply expanded rapidly. About half of government expenditure was funded by newly printed money.
The great economist John Maynard Keynes provided an acid comment in 1920. “The inflationism of the currency systems of Europe has proceeded to extraordinary lengths. Governments, unable, or too timid or too short-sighted to secure from loans or taxes the resources they required, have printed notes for the balance.”
In Germany, the result was hyperinflation. By November 1923, the mark was worth one trillionth of its 1914 value. Pay packets were collected in wheelbarrows. Foreign depositors in German banks were wiped out.
Think about how President Obama and the progressive Democrats are spending like drunken sailors on payday: How are they going to pay for it? There are three ways: borrow the money (“Hello, Beijing? I’d like two trillion in take-out money, to go, please. Just charge it.”), tax the people until we bleed, or print a lot of new money. That last is the 1923 or “Weimar” option. Think it won’t happen? Think again:
The Federal Reserve ramped up its effort to revive the economy, declaring it would buy as much as $300 billion of long-term U.S. Treasury securities in the next few months and hundreds of billions of dollars more in mortgage-backed securities.
The Fed had already cut its benchmark interest-rate target to near zero. Unable to go lower, the central bank now is essentially printing money to raise the supply of credit and thus push down the longer-term rates paid by families and companies on mortgages and other key loans. The impact was immediately felt.
Prices on Treasury debt soared, pushing the yield on 10-year Treasury notes down to 2.53% from above 3% the day before — the largest one-day drop since the aftermath of the 1987 market crash. The rate on a 30-year fixed-rate mortgage for credit-worthy borrowers fell to about 4.75%. But the value of the dollar sank, a reminder of the risk the Fed is running by printing money to give the economy a jolt.
The declining value of the dollar is inflation: as more dollars are pumped into the system to pay for our national spending spree, the value of your money -your paychecks, your savings, the loose change lost in your couch- goes down. A buck just won’t buy as much as it did. Some inflation is normal and easily lived with; we’ve done just that since Reagan and Volcker conquered the beast of 1970’s inflation nearly 30 years ago. But government policy can create much worse inflation. If you’re like me and lived through the 70s, you know what I mean. While the Journal author calls this “a risk,” I think it’s guaranteed. The federal government will have to print money to meet the obligations it’s taking on, and that means an increasing and increasingly painful rate of inflation.
Back to Hutchinson’s article, he thinks Weimar-style hyperinflation may be the greater risk, rather than Depression-era levels of unemployment. I don’t know: it’s possible President Obama can achieve both. He reminds me (and not just me) of Jimmy Carter, and Carter during his term achieved what many economists had thought impossible, combining a stagnant economy with inflation to create stagflation. It’s possible that Obama’s new New Deal will stabilize the economy at some high, but “acceptable” level of unemployment, have slow to no growth, and high inflation.
In other words, we could be in for both 1932 and 1923. I wonder if they allow wheelbarrows in the breadline?
HERE WE GO: the Senate just passed the Obama budget, following approval in the House earlier today, Thursday.
RELATED: Leisure-suit government.
(Cross-posted at Public Secrets, my regular home on the Web.)
ST put this warning from Newt Gingrich about a third party springing up in 2012 up in Hot Headlines yesterday, which gives me the perfect opportunity to launch into my thoughts on this possibility. I’ve been tossing this around for the last 4 years, since President Bush’s re-election, when I became convinced that a significant portion of the Republican Party was more interested in purchasing the middle by growing government than actually opposing the Socialization of America espoused by the Democrats since LBJ. I’ve alluded to my thought process several times in my looks at where conservatism has been the last couple years.
First, allow me to summarize the gist of Gingrich’s comments. He notes that all of the Obama administration spending excesses were set up by the Bush administration, and that there is an undercurrent of disgust aimed at both parties. We all know about the right-v-Republican-v-right battle, and there was at one point a rather heated left-v-Democrat one. However, the Democrats in power are rapidly healing that rift, even as there are rumblings of a center-v-Democrat one. I’m not exactly convinced that “Blue Dog Democrats” or PUMAs exist, but if they do, they could make a third party a much more intriguing proposition.
The essential part of creating a third party is finding something that is not addressed by either of the two existing parties, but is popular enough to create an electoral majority. The ideology that is closest to being able to create that, social conservatism, has been sufficiently tarred by the left that even though individual issues still win on the ballot, politicians are sufficiently scared of the tar to actually attach themselves to it.
I wish I could believe that fiscal conservatism could be that glue. The scope of the various Tea Parties are encouraging. However, I’ve seen this before in the county I live in (Milwaukee County, Wisconsin), and while we still have the County Executive that got swept in, a supermajority of the County Board went back to the tax-and-spend-and-tax-and-spend-and-tax-and-spend tactics that ultimately led to the pension scandal that sparked the temporary tax revolt.
Even if a conservative glue could be found, there’s the matter of supplanting the Republican Party as the “Not-Democrat” Party. In most states, the existing “third” parties have consistently failed to get more than a handful of votes. Given the plurality-wins structure in most states, there will necessarily be a rather lengthy stretch of comlete Democrat control of government.
That brings me to the other limiting factor; time. There are actually three different clocks running; the 2010 elections, the point at which the “looters” and “moochers” are a majority, and the point at which the entitlement scheme starts drawing from the general fund rather than supplementing it. One could argue that we’re already past the second point; the fact that President Obama took a majority of the vote with a very-thinly-veiled Socialist agenda, and the Democrats in Congress and in statehouses increased their majorities with an unveiled Socialist one, would suggest that point has been crossed.
Similarily, it probably is too late to create a new “Not-Democrat” Party that will have a chance in the 2010 elections. It took the Republicans 6 years to be a force on the national scene. I’ve stated time and again that today’s Democrats will try their hardest to not repeat the mistakes of the 1850s and allow an “upstart” party to get enough roots to challenge their hegemony.
While there still is almost a decade before Social Security goes into the red, the problem is that those in office after the 2010 elections will be the ones to redraw the districts. Meanwhile, not only is nothing being done to correct the problem, but the things that can correct the problem have been systematically wrecked.
If someone could give me good news I could believe in, I would appreciate it.