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Obama-Stop Helping Us!
by Alfred Adask
A recent article in The New York Times ("Obama Will Seek Broad Expansion of Overtime Pay") reports that,
"President Obama this week will seek to force American businesses to pay more overtime to millions of workers, the latest move by his administration to confront corporations that have had soaring profits even as wages have stagnated.
"On Thursday, the president will direct the Labor Department to revamp its regulations to require overtime pay for several million additional fast-food managers, loan officers, computer technicians and others whom many businesses currently classify as "executive or professional" employees to avoid paying them overtime, according to White House officials briefed on the announcement."
The rationale for this increase is probably the belief that if people's incomes rise, they spend more and theoretically stimulate the economy.
But, on the other hand, if corporate labor costs rise, either corporate profits fall and/or prices go up. If prices rise, the economy slows.
So what will happen? By raising some employee's incomes will we stimulate or slow the economy?
Answer: That's the wrong question.
Of course, raising or lowering any individual's income makes a difference to that individual. But, one way or another, Obama's plan to raise the income for some corporate employees will be achieved by lowering the incomes of other corporate employees and/or raising costs for consumers. It's like squeezing a balloon. We can make the balloon bulge larger at one end if we squeeze the other end smaller.
But in the end, we still have the same amount of air in the balloon.
The only way we can really stimulate our "balloon" economy is by increasing the amount of "air" in the balloon.
From a national or economic perspective, it doesn't make any difference if we raise some employees' incomes by lowering other employees' incomes. We still have the same sized "balloon"-the same total income for the entire economy.
The primary solution is not to simply increase some people's incomes at the expense of other people.
The solution is to increase productively so there's more "air" in the economic balloon.
The fundamental problem is not that some people are paid too much and others are paid too little. The fundamental problem is that we don't produce enough goods and services to allow everyone to have a decent income.
If so, then who/what is the biggest cause for our stagnate or declining productivity?
A: Government
Six months ago, I reported on a study by two economists who calculated that American productivity was being crushed by government regulations. Their study concluded that if today's level of government regulation was the same as in A.D. 1949, the median income per household would rise from $53,000 (today) to over $300,000.
In other words, government regulations have reduced your potential income by about 80% over the past 65 years. In the name of "regulation," government has prevented our "balloon" economy from growing as large as it might've.
So, let's just suppose that the "several million additional fast-food managers, loan officers, computer technicians and others" (who President Obama proposes to help by raising overtime pay) were living in an economy that was regulated at the same level as A.D. 1949. They wouldn't need Obama's assistance. They might already be earning four times as much as they're currently paid.
In truth, we want a lot of the regulation government has enacted. Our food and drinking water needs to be pure. Our automobiles need to be manufactured so as to be safe to drive.
So, if we had to choose . . . if we could choose . . . I'll bet that Americans might vote to keep half of the existing governmental regulations. But I'll also bet that Americans would vote to eliminate the other half of today's regulations.
If the regulatory burden were cut by half, and if the economists' study on the effect of government regulations is true, then we might expect our incomes to be at least double what we currently earn.
How many problems do Americans have that couldn't be solved if their incomes were doubled? Not many.
Implication: If President Obama really wants to raise Americans' incomes, if he really wants to "stimulate" the economy, all he needs to do is cut government regulations by half. Do that, and this economy will roar like a lion.
But does President Obama really want to raise Americans' incomes? Does he really want to "stimulate" the economy?
Obama's actions-and those of the past few presidential administrations and congresses-suggest that their real objective is not increased American wealth or a stronger economy. Instead, their objectives appear to be increased power for the government and diminished wealth and fewer rights for the American people.
Want to help the economy, Mr. President? Get off our backs. If we don't have to carry you and all the other parasites who populate our bureaucracies, if we don't have to be restricted in our own freedoms to ensure the prosperity of major multi-national corporations, financial institutions that are "too big to fail," and the New World Order-we can support ourselves just fine.
Our nation and our individual prosperity is being destroyed by our own, unlimited government. If anyone wants a chance at rising prosperity and the American Dream, they'd better grab hold of the fundamental idea of the Constitution of the United States: LIMITED GOVERNMENT.
Put the constitutional limits back on government, and our incomes can once again become almost unlimited.
On the other hand, if we allow government to keep growing in power and regulatory breadth, I will guarantee that 90% of the American people are headed into an impoverished, third-world future.
Defining "Hyper-inflation"
By Alfred Adask
Last December, John Williams of Shadowstats.com wrote an article that predicted the onset of "hyper-inflation" in A.D. 2014.
I recently wrote an article about Mr. Williams' prediction and one of my readers wrote back to asked if I could define "hyper-inflation".
It was a good question. I thought about a reply and in doing so, I discovered a plausible definition for hyper-inflation that I've never before heard:
I can't define "hyper-inflation". So far as I know there is no absolute definition that's universally accepted-other than "a lot". I know that some economists say hyper-inflation means a rate of inflation that's over 50% per year. I'd be inclined to view any rate of inflation that exceeds 25% as "hyper".
I initially supposed that "hyper-inflation" really meant:
1) any rising rate of inflation that the government and/or Federal Reserve is unable to control;
2) A significant loss of confidence in the fiat currency by the general public.
But, on reflection, I realized that the two meanings I'd proposed were actually synonymous-much like two sides of the same coin
Therefore, I proposed that, in combination, a single definition of "hyper-inflation" might be:
"A rising rate of inflation caused by a loss of public confidence in a fiat currency that the government and/or central bank is unable to control."
Thus, hyper-inflation might be any rate of inflation not caused by government, and more, beyond government's capacity to control.
In the end, my definition of hyper-inflation isn't based on a particular number or "rate of inflation" so much as any rising rate of inflation (caused by the public rather than the government) that the government is unable to resist or control.
Under my proposed definition, "hyper-inflation" is not about the rate. It's about the control.
* We've had persistent inflation for most of my lifetime that probably averages out to around 2% per year. This "inflation" has been caused and controlled by government rather than the people and/or the free markets. Thus, we might define "inflation" (but not "hyper-inflation") as a reduction in the purchasing power of the fiat dollar that's been intentionally caused by government but is also controlled and limited by the federal government.
We might therefore avoid defining "hyper-inflation" as anything over a specific rate of inflation (like 25% or 50%).
Instead, we might define "hyper-inflation" as any rate of inflation that is: 1) caused by the people's loss of confidence in the fiat dollar; and 2) beyond the control of the federal government and/or federal reserve.
Thus, my proposed definition for hyper-inflation is not about a particular rate of inflation, but is instead based on a non-governmental cause and government's inability to control.
Whatcha think? Does that make any sense?
Promises, Promises
by Alfred Adask
According to Reuters ("Crimea Votes To Join Russia, Accelerating Ukraine Crisis")
"The EU summit in Brussels seemed unlikely to adopt more than symbolic measures [against Russia] . . . . The European Commission has announced an aid package of up to 11 billion euros ($15 billion) for Ukraine over the next couple of years provided it reaches a deal with the International Monetary Fund, entailing painful reforms like ending gas subsidies."
The Russian's will take Crimea by implied force and the West will take the western Ukraine by monetary subjugation. The eastern Ukraine's fate remains to be discovered. Either way, the former Ukraine will lose some or all of its former sovereignty.
The major powers of the world have allegedly promised to "help" the Ukraine, but no one will truly help the Ukrainians remain independent or sovereign. Instead, the big predators will carve up the Ukraine like a dead water buffalo.
"France has a deal to sell warships to Russia that it is so far not prepared to cancel, London's banks have profited from facilitating Russian investment, and German companies have $22 billion invested in Russia."
Those facts indicate that while right and wrong may be noble concepts, when it comes to geopolitics an in general and the Ukraine in particular, it's all about the money. Insofar as France, England and Germany are making more money off their relationship to Russia than they are off their relationship to the Ukraine, they will not impose any serious sanctions against Russia.
* Last week, Mish Shedlock reported in his Global Economic Trend Analysis that Russian President Putin had said,
"The tense situation in the Crimea, associated with the possible use of the armed forces, just dissipated, the need for that did not arise. The only thing which was necessary, and which we did, was to strengthen the protection of our military installations. Therefore I believe that it will not be necessary for us to do anything like that in eastern Ukraine."
Translation? The "war" in the Ukraine is about over.
Russia has annexed the Crimea and will hold it.
Russia won't go further into the Eastern Ukraine-at least, not for now.
Six months from now, a year from now, maybe two years from now, Russia will take the Eastern Ukraine and once again, the world will do nothing but wring its hands.
Putin got away with "half a loaf" today. He'll take the other half, tomorrow.
* The Israeli newspaper Arutz Sheva which published in article entitled "Ukraine's Lesson for Israel: 'US Guarantee Worthless":
"Ex-Member of the Knesset Aryeh Eldad notes that in 1991, the US and Britain guaranteed Ukraine's security in exchange for nuclear disarming."
But as we can see, the US and UK promises of 20 years ago are no longer worth as much as they were then. The Ukraine, relying on US and UK protection against Russia, gave up its nuclear arsenal in the 1990s. However, Ukraine now finds itself unarmed in a face-off with Russia (which has the world's largest arsenal of nuclear weapons) and unprotected by the US/UK.
Result? The Ukraine is out-gunned and can therefore kiss the Crimea goodbye.
The Arutz Sheva article continues:
"The lesson for Israel from Ukraine's current plight, according to ex-Member of the Knesset Aryeh Eldad, is that Western guarantees of Israel's security must never be trusted.
But that's not exactly true.
That lesson isn't a result of the "Ukraine's current plight"-it's the result of the US government's financial plight. Our government is insolvent and can't afford to keep the treaty promises it made to the Ukraine.
On the face of it, our inability to make good on treaty obligations to Ukraine may not seem so important. However, our government's inability to keep its treaty promises in the Ukraine implies that it might also be unable to afford to keep its treaty promises made to Israel or Japan.
If our government fails to honor treaty obligations to the Ukraine, we can reasonably suppose that some middle-eastern countries will be encouraged to step up their attacks against Israel. Likewise, we have to believe that China will view the US failure to back the Ukraine as evidence that the US might also fail to fully perform its treaty obligations to defend Japan. China must be at least slightly encouraged to step up pressure on Japan over the Senkaku islands.
The drama in the Ukraine will ultimately affect geopolitics far beyond the Ukraine, itself.
Given its financial plight, the US government may not only be unable to keep all of its treaty obligations to foreign countries. It may also be unable to keep its retirement promises to So-So Security beneficiaries, pension promises to former government employees, promises to repay the National Debt, or even the implied promises to maintain some fairly stable value of the fiat dollar.
Because our government is broke, a lot of promises made in the past will go unkept.
Our government's abandonment of the Ukraine is simply one concrete instance of many such abandonments that may be headed our way.
* If foreign nations see that the treaty promises made by the formerly mighty U.S. government can't be kept, those nations will stop relying on the bankrupt US government and start seeking security from other sources like Russia and China that are not insolvent.
It may seem odd, but a primary casualty of the Russian annexation of the Crimea could be the fiat dollar's status as World Reserve Currency. Insofar as the foreign public and foreign governments lose confidence in America's military power and ability to keep former treaty promises, foreign confidence in the fiat dollar will also wane. As foreign public confidence in the dollar wanes, the dollar's status as World Reserve Currency will also wane, and the fiat dollar's purchasing power will fall.
I doubt that the loss of confidence reflected in the Arutz Sheva article will be critical. But I also doubt that such confidence, once lost, will be easily regained. If so, our Ukrainian adventure may result in a small but permanent devaluation of the dollar. Similar instances of government's inability to keep its promises in the future will also tend to devalue the dollar. Each devaluation may be small, but their effects may be cumulative.
If government can't keep its promises, the public won't maintain their confidence in the government, the economy or the fiat currency. Without public confidence, the entire Ponzi-scheme will collapse.
Got gold?
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