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	<title>FrontPage Magazine &#187; Vasko Kohlmayer</title>
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		<title>The Next Economic Meltdown</title>
		<link>http://www.frontpagemag.com/2010/vasko-kohlmayer/the-next-economic-meltdown/?utm_source=rss&#038;utm_medium=rss&#038;utm_campaign=the-next-economic-meltdown</link>
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		<pubDate>Fri, 12 Mar 2010 05:03:21 +0000</pubDate>
		<dc:creator><![CDATA[Vasko Kohlmayer]]></dc:creator>
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		<guid isPermaLink="false">http://frontpagemag.com/?p=54158</guid>
		<description><![CDATA[Government action is not the solution -- it's the problem.]]></description>
				<content:encoded><![CDATA[<p><a href="http://cdn.frontpagemag.com/wp-content/uploads/2010/03/economic-crisis.jpg"><img class="aligncenter size-full wp-image-54160" title="economic-crisis" src="http://cdn.frontpagemag.com/wp-content/uploads/2010/03/economic-crisis.jpg" alt="" width="450" height="273" /></a></p>
<p>&#8220;Economists: Another Financial Crisis on the Way&#8221; read a recent ABC News <a href="http://abcnews.go.com/Business/economists-warn-financial-us-economy/story?id=9990828&amp;page=2">headline</a>. The headline was occasioned by a report from an elite group of economists, financiers and former federal regulators headed by the Nobel Prize winner Joseph Stiglitz. The report warned that the American economy and the financial system are in danger of descending into another crisis. The fault, according to the authors, lies with “our government leaders,” who “have shown little capacity to fix the flaws in our market system.” This lack, they urged, should be remedied by more regulation.</p>
<p>Even though the recommendation may sound superficially reasonable, the advice is not only badly flawed, but it is a prescription for more trouble. To see why, we only need to ask this question: When have our government leaders managed to fix any problem in the market place? The market may not always produce the kind of results we like, but we have a long history of experience to show that attempts to correct it almost invariably produce more bad than good. Even in those cases where politicians&#8217; intent is pure, the interference tends to produce unforeseen consequences that are nearly always detrimental.</p>
<p>In the real world, however, politicians&#8217; regulatory motives are seldom chaste. The<a href="http://www.bloomberg.com/apps/news?pid=20601039&amp;sid=a48c8UpUMxKQ"> financial-reform bill</a> which was passed by the House of Representatives at the end of 2009 is a case in point. Advertised as a measure that would curb excesses on Wall Street, it was the brainchild of Financial Services Committee Chairman Barney Frank. But there is a problem with Frank&#8217;s involvement with this legislation. Since becoming the committee&#8217;s chairman in 2006, almost half of his <a href="http://www.alternet.org/story/144454/how_wall_street_bought_barney_frank?page=1">campaign contributions</a> have come from the finance, insurance and real estate industries. In other words, Barney Frank is regulating companies and institutions that bankroll his political career. The money they have invested in him has not gone to waste. Frank&#8217;s financial-reform bill includes a provision for $4 trillion in emergency funding for Wall Street the next time things come crashing down.</p>
<p>It&#8217;s fruitless to expect politicians to come up with the kind of regulation that would cure our economic and financial systems. After all, they cannot even balance the federal budget, which should not be all that difficult. All they need to do is <em>not</em> to spend more than they take in. For some reason, however, our leaders cannot live up to this very simple principle. Every year they run up large deficits which have produced a <a href="http://www.treasurydirect.gov/NP/BPDLogin?application=np">national debt</a> that the federal government will never be able to honestly discharge.</p>
<p>Failing to address this troubling concern, the report goes on to note:</p>
<blockquote><p>[T]he country is now immersed in a doomsday cycle wherein banks use borrowed money to take massive risks in an attempt to pay big dividends to shareholders and big bonuses to management – and when the risks go wrong, the banks receive taxpayer bailouts from the government&#8230; Risk-taking at banks will soon be larger than ever.</p></blockquote>
<p>This is correct. But it should be pointed out that this situation is largely due to government action. Banks take undue risks, because they know they will be bailed out if they fail. We should not be indignant at this, since their behavior is completely rational under the circumstances. The system is set up in such a way that even those who would like to play responsibly cannot do so. If they did, their earnings would lag behind those of their more aggressive competitors and the management would be pilloried for “substandard” performance. Thus the only real choice is to run with the herd and take the risks regardless of how excessive they may be.</p>
<p>But notice what is behind this. It is the government&#8217;s implicit guarantee of bailouts, which has given rise to a situation economists refer to as “moral hazard.” Moral hazard occurs when a player – in this case a bank – becomes fully or partially insulated from risk and as a result behaves differently that it would have if it were forced to bear the consequences of its actions. Here is a good <a href="http://www.floridahealthinsurancesource.com/FloridaHealthInsurance/MoralHazard.html">description</a> of this phenomenon:</p>
<blockquote><p>Moral hazard arises because an individual or institution does not take the full consequences and responsibilities of its doings, and therefore has a tendency to act less carefully than it alternately would, leaving another party to hold some responsibility for the consequences of those actions.</p></blockquote>
<p>With its “too big to fail” approach, the government has infused systemic moral hazard throughout the financial system. The party that now ultimately holds responsibility for the consequences of the banks&#8217; undue risk-taking is, of course, the US taxpayer. What we must never forget is that this state of affairs has been brought about by government intervention. The answer is not more regulation restricting banks&#8217; risky behavior, but the removal of bail out guarantees. Once that happens banks will be far more careful about how they manage their risk portfolios, knowing there will be a real price to pay for reckless choices.</p>
<p>The report&#8217;s call for “Congress to enact reforms strong enough to prevent another meltdown” is only to ask for more problems down the line. Whether we are faced with a financial, economic or any other crisis, we would do well to remember Ronald Reagan&#8217;s famous dictum: “Government is not the solution to our problem; government is the problem.&#8221; The present crisis is no exception.</p>
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		<title>Holding Spendthrifts Responsible</title>
		<link>http://www.frontpagemag.com/2010/vasko-kohlmayer/holding-spendthrifts-responsible/?utm_source=rss&#038;utm_medium=rss&#038;utm_campaign=holding-spendthrifts-responsible</link>
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		<pubDate>Mon, 01 Mar 2010 05:00:00 +0000</pubDate>
		<dc:creator><![CDATA[Vasko Kohlmayer]]></dc:creator>
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		<guid isPermaLink="false">http://frontpagemag.com/?p=52403</guid>
		<description><![CDATA[Those responsible for the public debt crisis should pay the price.]]></description>
				<content:encoded><![CDATA[<p><a href="http://cdn.frontpagemag.com/wp-content/uploads/2010/02/money.jpg"><img class="aligncenter size-full wp-image-52405" title="money" src="http://cdn.frontpagemag.com/wp-content/uploads/2010/02/money.jpg" alt="" width="450" height="341" /></a></p>
<p>“Greece on Friday unleashed a fierce attack on its European Union partners,” <a href="http://www.ft.com/cms/s/0/3cfeab9e-1813-11df-91d2-00144feab49a.html">reported</a> the Financial Times. The outburst was occasioned by the country&#8217;s rapidly deteriorating fiscal situation. In a televised message to his cabinet, Greek Prime Minister George Papandreou accused EU countries of sending “mixed messages about our country&#8230; that have created a psychology of looming collapse which could be self-fulfilling.”</p>
<p>This is a strange way of looking at the situation. For one thing, the “looming collapse” is not a psychological phenomenon, as the Greek prime minister tries to imply. It is a cold inescapable reality delineated by hard figures. Running budget deficits of nearly 13 percent GDP and carrying public debt of more than 110 percent, the Greek government has run the country into a fiscal hole.</p>
<p>Having assumed more obligations that it can make good on, Greece is for all practical purposes broke. If it does not get bailed out, the government will have to default and the country will go bankrupt. In other words, utter fiscal recklessness of Greek politicians has brought the nation to the brink. To blame it on others – as Papandreou tries to do – is as disingenuous as it is absurd. This, however, is politicians&#8217; normal modus operandi: to charge others with the messes they make. They do not admit their own guilt even when the issue is as straightforward as overspending by the very government they themselves run.</p>
<p>But it was not only other countries that came in for blame. Papandreou also vented his wrath at the market, the favorite whipping boy of profligate politicians. In his remarks, the Greek prime minister complained that his country had become “a laboratory animal in the battle between Europe and the markets.” It is difficult to ascertain the precise meaning of his remark, but its tenor makes it clear that the markets are the bad guys. The implication cannot be missed: It was the markets that somehow managed to rip the nation off despite the noble efforts of the conscientious Greek government.</p>
<p>Speaking of those evil markets, Spain&#8217;s National Intelligence Centre recently <a href="http://www.reuters.com/article/idUSLDE61D04V20100214?type=usDollarRpt">began looking</a> into the possibility of “speculative attacks” on Spain&#8217;s public debt. The investigation was opened after investors began demanding higher interest on Spanish government bonds in the wake of the Greek crisis. The country&#8217;s authorities promptly concluded that there may be a conspiracy afoot to bring down the Spanish government. Public Works Minister Jose Blanco hinted darkly at &#8220;somewhat murky maneuvers&#8221; on the part of the markets.</p>
<p>It has apparently not occurred to Spanish politicians that the rising bond yields may be somehow related to the fiscal morass they have created. With a soaring budget deficit of 11.4 percent GDP and a mounting public debt, investors demand higher interest to compensate for the risk of default. What Jose Blanco calls “somewhat murky maneuvers” is simply the natural reaction of creditors to the deteriorating balance sheet of the debt-issuing entity. But the Spanish authorities for some reason cannot see this basic axiom of finance at work here. Instead they authorize the country&#8217;s intelligence service to investigate the matter for signs of subversion. One would not be surprised if they eventually bring someone up on charges of market manipulation. Such is the instinctive thinking of all ruling elites. If something goes wrong, it is never their fault. The problem must be the work of insidious forces.</p>
<p>Our government is no exception. We have seen this dynamic during the bursting of the real state bubble and the subsequent unfolding of the financial and economic crises. One after another American politicians stood up to denounce the culprits which included the markets, bankers, capitalism, greed, derivatives, lenders, and much else besides. Even the late Ronald Reagan received his share of blame. In short, our politicians blamed everyone and everything except themselves. We should not be surprised if they send the CIA and the FBI to investigate the impending dollar collapse which their out-of-control spending will eventually bring about.</p>
<p>No matter how gross their corruption and mismanagement politicians never admit their wrongdoing. When the inevitable hour of reckoning arrives and the crisis hits, they lash out instead. More dangerously yet, politicians are especially adept at concealing the calamities they are in the process of creating. In the United States, for example, the federal government does not report its astronomical entitlement obligations on the nation&#8217;s balance sheet. In the corporate world this kind liability concealment constitutes a crime. In Greece, politicians masked their fiscal excesses with accounting tricks and complex currency transactions involving derivatives. Guess who they are now blaming for that? The bankers who helped them to execute the sales.</p>
<p>Fortunately there are still those who do not fall for this nonsense. Wolfgang Gerke, president of the Bavarian Center of Finance and honorary professor at the European School of Business, had this to <a href="http://www.bloomberg.com/apps/news?pid=20601087&amp;sid=aZom2jvtHvWk&amp;pos=1">say</a>:</p>
<blockquote><p>“Greece falsified deficit statistics, and that can’t be legal. Greece needs to be kicked out of the EU because otherwise there will be new copycats, and that could lead to the next catastrophe on financial markets.”</p></blockquote>
<p>It is good to hear a sane voice for a change. Gerke&#8217;s approach should be applied rigorously at every level and in every country, be it in Europe or in America. Let us not tolerate the absurd excuses and specious accusations. The prodigal politicians responsible for the public debt crisis that is affecting much of the western world must pay the price. People should keep that in mind when the next election comes around.</p>
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		<title>Doomsday for the Eurozone?</title>
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		<pubDate>Thu, 18 Feb 2010 05:05:08 +0000</pubDate>
		<dc:creator><![CDATA[Vasko Kohlmayer]]></dc:creator>
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		<description><![CDATA[Fiscal recklessness may break up EU's monetary union.]]></description>
				<content:encoded><![CDATA[<p><a href="http://cdn.frontpagemag.com/wp-content/uploads/2010/02/vasco.jpg"><img class="alignnone size-full wp-image-50402" title="vasco" src="http://cdn.frontpagemag.com/wp-content/uploads/2010/02/vasco.jpg" alt="" width="450" height="231" /></a></p>
<p>“Euro Area Headed for Break-Up,” <a href="http://www.businessweek.com/news/2010-02-12/euro-area-headed-for-break-up-socgen-s-albert-edwards-says.html">warned</a> a recent Bloomberg wire. The shocking headline was prompted by comments of Albert Edwards, a leading strategist at Société Générale, one of the oldest French banks. Speaking about the debt crisis that is currently engulfing Greece as well as a number of other eurozone* countries, Edwards <a href="http://www.neurosoftware.ro/finance/insurance/stock-market/albert-edwards-at-500-net-liabilities-to-gdp-it-is-too-late-to-prevent-the-collapse-of-the-g-7-greece-is-irrelevant-we-are-all-now-insolvent/">said</a>: “My own view of developments, for what it is worth, is that any help given to Greece merely delays the inevitable break-up of the eurozone.”</p>
<p>Lest you think Edwards is some kind of doomsday crank, he called the 1997 Asian currency meltdown one year ahead of time. A senior figure at one of Europe&#8217;s top financial service companies, he was also voted the second best European financial strategist in the prestigious Thomson Extel survey.</p>
<p>Edwards&#8217; prediction will not seem so far-fetched when we consider the eurozone&#8217;s skyrocketing debt. This development has caught many observers off guard, since the European Monetary Union lays down strict regulations aimed at preventing such a situation. The so-called Stability and Growth Pact requires each country&#8217;s to hold down its annual budget deficit below 3 percent of gross domestic product (GDP). The Pact also stipulates that any member&#8217;s public debt is not to exceed 60 percent of GDP.</p>
<p>The exacting regulations notwithstanding, this year only one eurozone country is expected to have a budget deficit that falls within the three percent limit. The rest will go over, most by a large margin. Germany, which was the country that lobbied most rigorously for the strict fiscal requirements, was among the first to break them. Greece is currently the <a href="http://mises.org/daily/4091">leading offender</a> with a deficit that equals 12.7 percent of its GDP. But the figures are generally abysmal throughout the monetary union. Ireland&#8217;s deficit, for example, is 11.5 percent, Spain&#8217;s 11.4 percent, Portugal&#8217;s 9.3 percent.</p>
<p>As far as public debt is concerned the average European ratio is 88% of GDP, nearly 50 percent above the “allowable” limit. The worst offender is Italy whose public debt stands at an astounding 127 percent GDP. Greece&#8217;s debt is 113 percent, Belgium&#8217;s 105 percent, Germany&#8217;s nearly 80 percent. High as these figures are, the reality is probably worse as EU countries routinely use an assortment of accounting tricks to understate their deficits and obligations.</p>
<p>It is becoming increasingly obvious that if the euro is to continue as a viable currency, eurozone states must take decisive measures bring their finances under control. This, however, appears to be a nearly impossible task. Greece shows us why. Shortly after the government announced a package of budget cuts and tax increases the country&#8217;s civil servants took part in a nation-wide strike. Plans are afoot for another one next month. At the same time, Greece&#8217;s umbrella private sector union is planning an extensive walk-out for the last week of February. The Associated Press <a href="http://www.wral.com/business/story/6985871/">observed</a> that the Greek government “may find that unions and voters push back against cutbacks that will take years to show results. With a potential public backlash, their chance to win approval for such measures remains unclear.”</p>
<p>Memories are still fresh of the <a href="http://www.guardian.co.uk/world/2009/jan/28/greece-farmers-protests">protests</a> that took place early last year. Angry at cuts in their subsidies, Greek farmers blocked major roads and paralyzed the country. Parts of the nation were thrown into chaos as lines of vehicles stretched for 12 miles or more. Unable to restore order, the prime minister was forced to beg the farmers to remove the roadblocks. &#8220;There is an urgent need to free up the roads. A whole society cannot be held hostage,&#8221; he pleaded.</p>
<p>This time around far more substantial steps must be taken in order to put Greece&#8217;s fiscal house in order. This is certainly not going to sit well with the Greek public and there is fear that things could deteriorate in dramatic fashion. Albert Edwards of Société Générale puts it this way:</p>
<p>Unlike Japan or the U.S., Europe has an unfortunate tendency towards civil unrest when subjected to extreme economic pain.</p>
<p>The Eurozone thus faces a seemingly unsolvable conundrum. Even though it is steeped deeply in debt, almost every serious effort to curtail spending meets with popular rage. The problem is that they cannot have it both ways. It is impossible to have a large welfare state and a sound fiscal house at the same time. It is either one or the other.</p>
<p>Until recently the euro was considered a possible alternative to the dollar as the world&#8217;s reserve currency. It was thought that the Monetary Union&#8217;s strict guidelines would safeguard its debasement. But it turns out that the Union&#8217;s respect for its founding documents is only paper deep. It is now becoming apparent that the disregard will have dire consequences. It may even bring about the break up of the eurozone and the demise of what once seemed like a solid currency.</p>
<p>Given that the United States is taking the same path of unrestrained spending, we would do well to take heed and learn from Europe&#8217;s painful lessons.</p>
<p>*NOTE: The eurozone – also called the euro area – is not the same as the European Union (EU). The European has twenty seven members as of this year. The eurozone is made up of those countries within the European Union that use the euro as their sole currency. The eurozone currently has sixteen member states.</p>
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		<title>The Savaging of Paul Ryan</title>
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		<pubDate>Wed, 10 Feb 2010 05:09:53 +0000</pubDate>
		<dc:creator><![CDATA[Vasko Kohlmayer]]></dc:creator>
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		<guid isPermaLink="false">http://frontpagemag.com/?p=49530</guid>
		<description><![CDATA[The Wisconsin Republican has a plan to restore America’s financial footing – and Democrats won’t forgive him for it. ]]></description>
				<content:encoded><![CDATA[<p><a href="http://cdn.frontpagemag.com/wp-content/uploads/2010/02/paul_ryan.jpg"><img class="alignnone size-medium wp-image-49533" title="paul_ryan" src="http://cdn.frontpagemag.com/wp-content/uploads/2010/02/paul_ryan-300x260.jpg" alt="" width="300" height="260" /></a></p>
<p>Bemoaning the legislative stalemate in Washington, President Obama last month publicly rebuked Republicans in a speech from New Hampshire:</p>
<blockquote><p>“You’ve been sitting on the sidelines criticizing what we’re proposing&#8230; You got a better idea bring it on.”</p></blockquote>
<p>The president has finally got his wish. It comes in the form of the most constructive legislative proposal to emerge from Congress in a long time. Called &#8220;A Roadmap for America&#8217;s Future,&#8221; it is the brainchild of Wisconsin Republican Rep. Paul Ryan. The <a href="http://www.roadmap.republicans.budget.house.gov/plan/#Intro">proposal</a> is unusual by Washington&#8217;s standards: It actually offers real solutions to a pressing problem.</p>
<p>Faced with moribund economy and weighted down with astronomical obligations it cannot make good on, our federal government is slouching toward fiscal disaster. This much is obvious to most observers and politicians alike. The problem is that politicians are loath to do anything about it, because the swamp of federal spending has always been a fertile ground for political fortunes. Paul Ryan&#8217;s <em>Roadmap</em> bucks this trend and seeks to reverse our disastrous course with a series of commonsense measures. Here are some of the plan&#8217;s highlights:</p>
<ul>
<li>Allowing those under 55 to invest over one-third of their current Social Security taxes into personal retirement accounts, similar to the Thrift Savings Plan available to federal employees;</li>
<li>Placing future Medicare beneficiaries (those currently under 55) into a semi-private programs similar to those currently used by Members of Congress;</li>
<li>Reducing the tax code into two rates: 10% on income up to $100,000 for joint filers and $50,000 for single filers, and 25% on taxable income above these amounts;</li>
<li>Eliminating the alternative minimum and the death tax;</li>
<li>Doing away with taxes on interest, capital gains and dividends;</li>
<li>Replacing the corporate tax—currently the second highest in the industrialized world—with a business consumption tax of 8.5%;</li>
<li>Imposing a 10 year discretionary spending freeze.</li>
</ul>
<p>The Congressional Budget Office <a href="http://www.roadmap.republicans.budget.house.gov/UploadedFiles/CBO01-27-Ryan-Roadmap-Letter.pdf">estimated</a> that Ryan&#8217;s plan would accomplish what no other recent proposal could claim to do – it would strengthen the economy and put the government&#8217;s finances on a sustainable track. Having evaluated the <em>Roadmap</em>, the CBO issued a letter which stated that it would “lower budget deficits” and “result in much less federal debt than under the alternative fiscal scenario and thereby a much more favorable macroeconomic outlook.” The Congressional Budget Office concluded its evaluation as follows:</p>
<blockquote><p>The Roadmap would put the federal budget on a sustainable path, generating an annual budget surplus of about 5 percent of GDP by 2080&#8230; The economy would be considerably stronger under the proposal than it would be under the alternative fiscal scenario. Real gross national product per person would be about 70 percent higher in 2058 under the proposal than under the alternative fiscal scenario.</p></blockquote>
<p>In his syndicated column, George Will – who is no ferocious partisan – <a href="http://www.orlandosentinel.com/news/opinion/views/os-ed-george-will-020710-20100208,0,2786839.column">praised</a> Ryan&#8217;s program as one that successfully “connects three destinations – economic vitality, diminished public debt, and health and retirement security.” Even President Obama himself was forced to <a href="http://www.ireport.com/docs/DOC-401841">admit</a> during his get-together with Republicans in Baltimore that Ryan&#8217;s proposal constitutes a “detailed” and “legitimate” plan to address our fiscal crisis.</p>
<p>Yet, Ryan&#8217;s constructive approach is not playing well with Congressional Democrats. Sensing the possibility of scoring political points, they wasted no time launching a salvo of vicious attacks. Rep. Chris Van Hollen, who chairs the House Democrats&#8217; reelection committee, had this to <a href="http://tpmdc.talkingpointsmemo.com/2010/02/dem-leadership-rips-republican-plan-to-privatize-slash-medicare-social-security.php">say</a> of Ryan&#8217;s plan: “Put it this way. For seniors on Medicare, it&#8217;s a dead end.&#8221; In case you missed it, the pun is not incidental. Van Hollen really meant to imply that Ryan&#8217;s plan would be the death sentence for seniors.</p>
<p>House Speaker Nancy Pelosi fired from both barrels when she described the <em>Roadmap</em> as a scheme that “provides tax breaks for the wealthy, it ends Medicare as we know it, and privatizes Social Security. Here they go again. Rehashing the same failed Bush policies.&#8221; Pelosi was deftly seconded by House Democratic Caucus Chair John Larson who chimed in with the following: &#8220;They are dusting off their old playbook, rehashing the policies that the American people have rejected in the past. They want to privatize Social Security. They want to turn Medicare into a voucher program. And they&#8217;re providing tax breaks for the wealthy while they raise taxes on the middle class.&#8221; Never one to mince words, Democrat guru and strategist Paul Begala scoffed: “They have ideas, and lots of them. And their ideas ruin the country.&#8221;</p>
<p>Killing seniors and “ruining the country” just about delineate Democrats&#8217; discussion parameters when it comes to Ryan&#8217;s plan. So vicious and intense has their assault been that that now even Republicans are trying to distance themselves from Ryan’s plan. Last week, the <em>Washington Post</em> gleefully reported that “even Ryan&#8217;s fellow GOP colleagues will not endorse his plan.” When asked about it, House Minority Leader John Boehner disclaimed any responsibility for the contents of Ryan’s plan, insisting that &#8220;it&#8217;s his.&#8221;</p>
<p>Despite assaults from the Left and the lack of reinforcements from his own side, the embattled Ryan is sticking to his guns. He has gone so far as to say that he is willing to fight for his cause and lose his job if it means ending the deficit. &#8220;The Democratic attack machine is in full throttle,&#8221; he said in a recent <a href="http://www.jsonline.com/news/wisconsin/83669182.html">interview</a> with the <em>Milwaukee-Wisconsin Journal Sentinel</em>. &#8220;It&#8217;s sad but predictable.&#8221;</p>
<p>And this brings us to the moral bankruptcy of Washington, DC. Overspending and saddled with obligations it cannot pay, our government is quickly approaching fiscal Armageddon. Our politicians, however, refuse to do anything about it, because it would mean that they would have to start behaving responsibly and stop buying votes with money they do not have. Then along comes one man who proposes meaningful, common-sense measures to avert the impending calamity. For this he gets vilified to the point that even the leadership of his own party, the party that claims to stand for fiscal responsibility, runs away from him in fear.</p>
<p>Given that we are on the brink, this situation is hardly tolerable. Take Medicare, for example. Its unfunded obligations are estimated by some to be in excess of $80 trillion. This is more than five times the current amount of our national debt. Even if the estimate is wrong by a half, this program by itself will still bankrupt our federal government. If we want to survive fiscally, something must be done, which is exactly what Paul Ryan is trying to do. And yet he is being brutally savaged, while those who defend this fiscal black hole posture as defenders of the people.</p>
<p>Several Democrats have charged that Ryan&#8217;s proposal will end Medicare as we know it. First of all, the charge is disingenuous, since anyone 55 years old or above will continue with the program. Given today&#8217;s life expectancy, we are talking about at least four more decades of the program&#8217;s continuance. But here is an even larger question: Why should ending Medicare be a bad thing? From whichever angle we look at it, Medicare has been a disaster. Ending it would be a good thing. In fact, America cannot prosper financially while Medicare continues in its present form.</p>
<p>Especially glaring is the fact that Democrats do not engage Ryan&#8217;s plan on its substance. The fact that his is the only proposal around that would alleviate our fiscal strain is of no concern to them. Instead they use fear-mongering and demagoguery to destroy and revile the man who at least attempts to do something about this country&#8217;s desperate straits. Given our dire situation, even Ryan&#8217;s plan may be the case of too little too late. But it is without question a step in the right direction and as such deserves serious attention from those who hold this nation&#8217;s purse strings.</p>
<p>Democrats will defend the status quo, because they think that by doing so they will make political hay. They obviously value electoral gain more than the price that will have to be paid. That price is America&#8217;s bankruptcy. And woe to anyone who attempts to do something about it. Reviled and abused, Paul Ryan is learning this lesson the hard way.</p>
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		<slash:comments>27</slash:comments>
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		<title>A New Era of Responsibility?</title>
		<link>http://www.frontpagemag.com/2010/vasko-kohlmayer/a-new-era-of-responsibility/?utm_source=rss&#038;utm_medium=rss&#038;utm_campaign=a-new-era-of-responsibility</link>
		<comments>http://www.frontpagemag.com/2010/vasko-kohlmayer/a-new-era-of-responsibility/#comments</comments>
		<pubDate>Tue, 09 Feb 2010 05:00:54 +0000</pubDate>
		<dc:creator><![CDATA[Vasko Kohlmayer]]></dc:creator>
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		<guid isPermaLink="false">http://frontpagemag.com/?p=49343</guid>
		<description><![CDATA[President's proposed 2011 budget is a fiscal sham.]]></description>
				<content:encoded><![CDATA[<p><a href="http://cdn.frontpagemag.com/wp-content/uploads/2010/02/obamaj.jpg"><img class="alignnone size-medium wp-image-49453" title="obamaj" src="http://cdn.frontpagemag.com/wp-content/uploads/2010/02/obamaj-300x225.jpg" alt="" width="300" height="225" /></a></p>
<p>“We will continue to go through the budget, line by line, page by page, to eliminate programs that we can&#8217;t afford and don&#8217;t work,” declared President Obama in his State of the Union address on January 27.</p>
<p>Five days later the president delivered his Fiscal 2011 budget to the US Congress. This he did to much fanfare, seeking to cast it as a product of fiscal prudence. In the <a href="http://www.whitehouse.gov/omb/assets/budget/03_Presidents_Message.pdf">message</a> that accompanied the document, he stated:</p>
<blockquote><p>&#8220;The Budget includes more than 120 programs for termination, reduction, or other savings for a total of approximately $23 billion in 2011, as well as an aggressive effort to reduce the tens of billions of dollars in improper Government payments made each year.&#8221;</p></blockquote>
<p>At first sight this may look like the work of an earnest waste cutter. It is, however, nothing of the sort. The $23 billion of “savings” is actually only about one half of one percent of the $3.84 trillion total.</p>
<p>A question for the president: Is one half of one percent all the waste you can find in the federal government? After all, it is an institution whose financial profligacy is legendary. Should we assume, Mr. President, that all of the remaining 99.5 percent is spent wisely and un-wastefully?</p>
<p>It goes without saying that most of the meagre $23 billion will never be cut. Those involved with the agencies and programs slatted for reductions will make sure of that. Claiming that their work is indispensable for the well-being of the nation, they will make a hysterical run on Capitol Hill where their cause will receive much sympathy. When all is said and done most of their budgets will not only be restored, but many will walk away with increases.</p>
<p>But here is the larger point. By calling the proposed $23 billion of cuts “savings,” the administration makes it sound as if the government&#8217;s expenditures would go down by this amount vis-à-vis last year&#8217;s levels.  This, however, is not the case. The proposed $3.84 trillion budget represents a three percent plus increase over the 2010 total. So even as ordinary Americans are forced to cut back on their consumption, the federal government&#8217;s voracious appetite for spending continues to grow unabated. Needless to say, we can ill afford it. As a consequence, the government will post a deficit of $1.25 trillion, which will represent more than 8 percent of the nation&#8217;s GDP. These abysmal figures, however, have done nothing to detract from the president&#8217;s sense of humor. He chose to unveil his budget under the motto “a new era of responsibility.”</p>
<p>But all this is still apparently not enough for some of the president&#8217;s friends on Capitol Hill. Shortly after he introduced his 2011 budget proposal, Rep. James Clyburn (D-S.C.), the House majority whip, <a href="http://thehill.com/blogs/blog-briefing-room/news/79039-clyburn-weve-got-to-spend-our-way-out-of-this-recession">opined</a> that looking for any more savings would only make things worse. “We&#8217;re not going to save our way out of this recession. We&#8217;ve got to spend our way out of this recession,” he said.</p>
<p>The insanity of this should be obvious to all. It is simply impossible to spend our way out of trouble when we are so deeply in debt already. Spending more will only make things worse. Having incurred astronomical debts, we are still able to borrow at low rates because of the dollar&#8217;s status as the world&#8217;s reserve currency. But this situation will sooner or later come to an end. In another sign that the day of fiscal reckoning is approach fast, Moody&#8217;s Investor Services <a href="http://www.ft.com/cms/s/0/a82cfe04-10f5-11df-9a9e-00144feab49a.html">warned</a> that at some point it may be forced to lower America&#8217;s triple A credit rating. The reason for this? The unrestrained spending of the federal government. Steven Hess, senior credit officer at Moody’s, told the <em>Financial Times</em> that the budget outlook submitted by the Obama administration last week “did not stabilise debt levels in relation to gross domestic product.” It would be interesting to hear the spend-happy James Clyburn comment on that one.</p>
<p>Needless to say, losing the triple A rating would have a devastating effect on this nation&#8217;s finances as it would make servicing the national debt far more expensive. The only way to avert this outcome is by slashing spending and cutting deficits. Unfortunately, those in charge lack the political will to do so. Instead of offering real solutions, the president tries to posture as a fiscal hawk while proposing laughable savings of one half of one percent. As if this was not bad enough, the third most powerful Democrat in the House of Representatives thinks that cutting further would be outright harmful.</p>
<p>Even as Obama and Clyburn were talking up the proposed budget, House Majority Leader Steny Hoyer worked quietly behind the scenes to line up votes to raise the <a href="http://www.google.com/hostednews/afp/article/ALeqM5hEkfx_bpGC-zVoeKNR38gWLcjXdw">debt ceiling</a> by another $1.9 trillion. The effort to pass the record hike was triggered by the Treasury&#8217;s warning that the national debt is on the track to hit $14.3 by the end of this month. If the Treasury&#8217;s estimate is correct, the national debt will have grown by more than one third in less than thirteen months of Obama&#8217;s term. This expansion of national indebtedness is as astounding as it is unprecedented. But if this should frighten you there is no need to worry, because we have just entered “a new era of responsibility.”</p>
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		<title>Obama’s Budget Blame Game</title>
		<link>http://www.frontpagemag.com/2010/vasko-kohlmayer/obama%e2%80%99s-budget-blame-game/?utm_source=rss&#038;utm_medium=rss&#038;utm_campaign=obama%25e2%2580%2599s-budget-blame-game</link>
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		<pubDate>Wed, 03 Feb 2010 05:39:25 +0000</pubDate>
		<dc:creator><![CDATA[Vasko Kohlmayer]]></dc:creator>
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		<guid isPermaLink="false">http://frontpagemag.com/?p=48538</guid>
		<description><![CDATA[The president blames his predecessor for his own fiscal profligacy.]]></description>
				<content:encoded><![CDATA[<p><img class="alignnone size-full wp-image-48540" title="bush-and-obama" src="http://cdn.frontpagemag.com/wp-content/uploads/2010/02/bush-and-obama.jpg" alt="bush-and-obama" width="614" height="485" /></p>
<p>Facing the brewing outrage about out of control spending, President Obama is doing what he usually does when he finds himself in trouble: He blames George Bush. He did this again in his State of the Union <a href="http://www.whitehouse.gov/the-press-office/remarks-president-state-union-address">speech</a> in which he repeatedly hinted that it is his predecessor who is responsible for the country&#8217;s fiscal plight. As to his own role, there was not much he could do, since he took office with “a government deeply in debt.” Our current deficits are thus largely Bush&#8217;s doing: “The problem is that&#8217;s what we did for eight years. That&#8217;s what helped us into this crisis. It&#8217;s what helped lead to <em>these</em> deficits.”</p>
<p>But let&#8217;s look at some facts. When Obama took office on January 20, 2009 the national debt was $10.6 trillion. By the time he delivered his State of the Union remarks last Wednesday, it stood at $12.3 trillion. As Ken Timmerman <a href="http://newsmax.com/KenTimmerman/kentimmerman-barackobamastateoftheunion/2010/01/28/id/348296">observes</a>, this spectacular increase represents “the biggest expansion of government spending in U.S. history.”</p>
<p>To be fair, the expansion is partially attributable to Bush. This is largely due to the $700 billion TARP authorization which was passed toward the end of Bush&#8217;s presidency, and part of which was spent during Obama&#8217;s term.  But we must not forget that then-Senator Obama supported and voted for the measure. To now blame his predecessor for the cost of the policy he himself helped to implement is duplicitous at best.</p>
<p>There is every reason to believe that had Obama been in charge when the crisis erupted the national debt would have been even higher today. If anything, Obama thought the government was not spending enough. He sought to remedy this shortly after he took office with the $786 stimulus package. This was the largest spending measure in American history. The amount authorized in that<em> single</em> bill was more than one and a half amount the largest ever <em>yearly</em> deficit posted under Bush in 2008.</p>
<p>This is not to excuse Bush&#8217;s spendthrift ways, but only to show the extent of Obama&#8217;s disingenuousness. But apart from the cynicism of it, there is an even more fundamental question that needs be asked. Even if we accept the claim that our present over-spending is somehow Bush&#8217;s fault, why has the president done nothing to address this problem?</p>
<p>During the campaign Obama cast himself as someone who would boldly tackle the great problems that afflict this country. Why, then, has he not tried to introduce some sanity into federal finances and budgeting? A year should given him plenty of time to at least make a start in the right direction. And yet the president has done anything to stop the spending craze. Quite to the contrary, he has inflamed it further by ratcheting up spending to unprecedented levels. And now when a shell-shocked nation recoils at his excesses, he tries to blame another. This is not how great leaders act.</p>
<p>It is truly ironic that even as he tries to make the case against Bush, the president unwittingly condemns himself. For if Bush was an ignominious spender, then Obama must be triply so. The highest deficit posted under Bush was $457 billion in 2008. In a budget document released on Monday, the White House <a href="http://www.reuters.com/article/idUSTRE60U1PZ20100131">estimates</a> that the deficit for fiscal 2010 – the first fiscal year in which Obama is charge for the full duration – will reach $1.6 trillion. In light of these figures, for Obama to charge his predecessor with fiscal profligacy is absurd. His behavior brings to mind the proverbial man who keeps pointing out a speck in his neighbor&#8217;s eye while failing to notice a plank in his own. This is by no means to suggest that Bush&#8217;s $457 billion deficit is a speck, but only that the president&#8217;s fiscal indignation is badly misplaced.</p>
<p>Even as he keeps blaming his predecessor, President Obama is creating a disastrous fiscal legacy for his successor. In a little publicized <a href="http://vasko.wordpress.com/2009/08/28/debt-as-percentage-of-gdp/">document</a> released by the Office of Management and Budget in August of last year, the administration projected a rapid growth in spending during the rest of Obama&#8217;s term. So much so that the national debt will exceed the critical level of 100 percent GDP in fiscal 2011. This will be the highest level since 1945 and the highest ever in peace time.</p>
<p>When the next president assumes office, he will inherit financial disorder of catastrophic proportions. He will be handed a bankrupt government and an un-repayable national debt swollen by this president&#8217;s spending binge. But do not hold your breath waiting for President Obama to accept responsibility. After all, it&#8217;s all Bush&#8217;s fault.</p>
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		<title>On the Road to Trouble</title>
		<link>http://www.frontpagemag.com/2010/vasko-kohlmayer/on-the-road-to-trouble/?utm_source=rss&#038;utm_medium=rss&#038;utm_campaign=on-the-road-to-trouble</link>
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		<pubDate>Mon, 25 Jan 2010 05:00:15 +0000</pubDate>
		<dc:creator><![CDATA[Vasko Kohlmayer]]></dc:creator>
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		<guid isPermaLink="false">http://frontpagemag.com/?p=47504</guid>
		<description><![CDATA[How will our government pay all its debts?]]></description>
				<content:encoded><![CDATA[<p><img class="alignnone size-full wp-image-47507" title="road" src="http://cdn.frontpagemag.com/wp-content/uploads/2010/01/road.jpg" alt="road" width="450" height="338" /></p>
<p>“Is America&#8217;s Financial Collapse Inevitable?” asks the title of a recent <a href="http://www.wnd.com/index.php?fa=PAGE.view&amp;pageId=122030">piece</a> by Patrick Buchanan. The article points out something we have repeatedly discussed here: There is no way the federal government can meet its financial obligations.</p>
<p>If our government were ever to do so, it would first have to eliminate its colossal deficits. For this to happen deep budget cuts would be required. But this is something that is not conceivable in today&#8217;s environment. We will understand why when we look at the largest budget items, which are Medicare, Social Security, Medicaid, defense and interest on the debt. Since these constitute the bulk of government expenditures, any meaningful deficit reduction would require that substantial cuts be made there. The problem is that all of the above are for all practical purposes untouchable.</p>
<p>Interest on the debt is out of question, since not paying it in full would put our federal government in default. This cannot be allowed to happen as it would result in the immediate collapse of our currency. As far as Medicare, Social Security and Medicaid are concerned, no elected official will touch them with a ten foot pole, since doing so would mean political suicide. When it comes to defense the prospect of any reductions is likewise nil. The ongoing operations in Iraq, our deepening commitment in Afghanistan as well as numerous challenges presented by the War on Terror make any deep cuts a practical impossibility.</p>
<p>But what about taxes? Could they not be raised to increase revenue and close the budget gap that way? To begin with, any sharp hikes are out of question for the increasingly unpopular president who pledged during the campaign not to raise taxes on the middle class. To even suggest such a thing would be politically precarious if not suicidal. But even if Obama would somehow managed to do it, higher taxes would only further depress the already-overtaxed and over-regulated economy. This would in turn shrink the tax base and forestall the possibility of higher revenue intake.</p>
<p>Buchanan asks how are we ever going to get a handle on our runaway finances if “taxes are off the table, Afghan war costs are inexorably rising and cuts in Social Security, Medicare, Medicaid and entitlement programs are politically impossible.” There is, of course, no satisfactory answer. The truth is that our government is not going to get its fiscal house in order. And even though Buchanan does not state so explicitly, the implied answer to his starting question – is America&#8217;s financial collapse inevitable – is “yes.”</p>
<p>Pat Buchanan is not alone suffering from dark premonitions. Last week legendary investor and market commentator Marc Faber pulled no punches when asked what he thought of America&#8217;s prospects. “We are doomed,” was his <a href="http://www.businessinsider.com/henry-blodget-marc-faber-we-are-doomed-2010-1">response</a>. The reason for his bleak assessment? The immense and rapidly growing indebtedness of the federal government. In addition to all the other problems, Faber predicts that the rate interest that the government has to pay on the debt will shoot up rapidly in the next few years. Last year interest claimed about 12 percent of the government&#8217;s tax revenue. Faber estimates that within five years the figure will climb to some 35 percent. It goes without saying that such a jump would have a devastating impact on the already overextended federal budget.</p>
<p>Marc Faber is not the only one who worries about this. It has been pointed out by a number of finance experts that up until now the federal government has been able to borrow at very low rates due to the dollar&#8217;s status as the world&#8217;s reserve currency. But there are clear signs that this favorable situation is coming to an end. Sensing that the US will not be able to make good on its debt, governments and investors have been growing increasingly wary of financing our borrowing by buying treasuries. But even as they plead with Washington to end its spendthrift ways, they have been earnestly searching for an alternative to the dollar. Admittedly, this is no easy task, since there is no major government today that can be trusted to conduct its fiscal affairs in a way that would guarantee a stable currency.</p>
<p>It would seem that long-term currency stability is not a realistic possibility in the era of central banking. This is because politicians will invariably exploit the looseness of fiat money to satisfy their insatiable spending urges. But the advantage is only temporal. In the end there is always a price to pay for spending more than one has. This applies to everyone including sovereign governments. In their case the price that is paid is the depreciating currency as central banks print money in order to pay for politicians&#8217; promises. It is paradoxical that the brunt of this is born by ordinary people and not by those who are most directly responsible for the situation. While politicians keep promising and getting elected, the population bears the cost as the real value of their assets and savings decreases with the depreciating currency. This is the situation that we see taking place in this country today.</p>
<p>It may be objected that the people themselves are ultimately responsible, because they vote for politicians who promise all those expensive programs. Perhaps so. There are, however, encouraging signs that the American people are becoming increasingly aware of where the problem lies. In what amounted to a referendum on President Obama&#8217;s expansive agenda, the victory of Scott Brown in Massachusetts showed that even a left-leaning electorate can grow wary of government&#8217;s ability to provide and finance massive undertakings such as national healthcare. Another sign of shifting sentiment can be detected in a recent Washington Post ABC News <a href="http://www.cnsnews.com/news/article/59933">poll</a> which asked this question: “Generally speaking, would you say you favor smaller government with fewer services, or larger government with more services?” Only 38 percent wished for a larger government with more services while 58 percent wanted a smaller government with fewer services.</p>
<p>This is good all news, but it still does not solve that <a href="http://www.ncpa.org/pdfs/ba662.pdf">$100 trillion question</a>: How is our government going to pay for all the massive obligations that it has so unadvisedly assumed?</p>
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		<title>Comrades&#8217; Way</title>
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		<pubDate>Wed, 20 Jan 2010 05:06:57 +0000</pubDate>
		<dc:creator><![CDATA[Vasko Kohlmayer]]></dc:creator>
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		<guid isPermaLink="false">http://frontpagemag.com/?p=46529</guid>
		<description><![CDATA[President Obama's policies are bearing the same fruit as those of his socialist counterparts.]]></description>
				<content:encoded><![CDATA[<p><img class="alignnone size-full wp-image-46531" title="comrades-logoclearorangewhi" src="http://cdn.frontpagemag.com/wp-content/uploads/2010/01/comrades-logoclearorangewhi.gif" alt="comrades-logoclearorangewhi" width="510" height="354" /></p>
<p>“Unemployment holds at 10 percent,” read assorted <a href="http://cfc.news8.net/videoondemand.cfm?id=56348">headlines</a> in response to December&#8217;s <a href="http://www.bls.gov/news.release/empsit.nr0.htm?utm_source=Newsletter&amp;utm_medium=Email&amp;utm_campaign=Morning+Bell">employment data</a> provided by the Department of Labor.</p>
<p>The headlines represent a brave effort by the administration&#8217;s supporters to put a good spin on the bad news. Although not great, things are at least not getting worse is the implication. But things are getting worse. Last month the economy actually shed 85,000 jobs. The reason why the loss did not push up the jobless rate was because over the same period 600,000 discouraged people gave up looking for work. Because of this, they are no longer classified as unemployed. Had those workers been taken into the account, the December unemployment rate would have been 10.4 percent, the highest in almost thirty years.</p>
<p>When <em>all</em> those who have given up looking for employment are included, we get an overall unemployment level of 17.3 percent. This is the number that really matters, because it is a true gauge of the job market. It is also the measure that is given when people talk about the unemployment numbers during the Great Depression. Significantly, today&#8217;s picture is beginning to increasingly resemble that of the 1930s. And as luck would have it, all this is happening under the auspices of the man who rode into the Oval Office on promises of swift fixes.</p>
<p>As an aside, when unemployment was barely 5 percent in 2007 the media kept talking about the worst economy in our lifetimes. Today the grossly understated unemployment rate of 10 percent  is a sign that things are “steady” and “stable.” Can you imagine what would have happened if the rate had shot up to 10 percent under George W. Bush? The refrain would have been “impeach and crucify.”</p>
<p>It would not, however, be fair to take President Obama&#8217;s promise of quick remedies too literally.  It was made in the heat of a campaign when politicians must say all kinds of things to stand a chance. The president was actually correct when he later observed that the problems from which we suffer were long in the making and cannot be fixed overnight. Our problems are for the most part rooted in the many years of liberal/leftists policies, which, sadly, have been practiced by both parties. They also happen to be the same policies that President Obama has relentlessly pursued since the first day of his presidency. They include include government expansion, reckless borrowing, unsustainably low interest rates, heavy regulation and federal intrusion into every part of our lives.</p>
<p>This being said, the American economy has always possessed an inner resilience that time and again made it possible to shake off blows inflicted by the political class. The one exception was the presidency of Franklin Roosevelt – a driven and charismatic centralizer – <a href="http://www.amazon.co.uk/Politically-Incorrect-Guide-Depression-Guides/dp/1596980966">whose policies</a> kept the economy in the grip of a depression for over a decade. Given Obama&#8217;s FDR-like faith in the efficacy of government intervention, we may not only have a reprisal, but things may actually get worse than they did in the 1930s.</p>
<p>There are several reasons for that. When FDR assumed office the American economy was fundamentally stronger. The United States was an industrial giant producing and exporting goods. The private sector was largely free and the federal government was incomparably smaller than it is now. There was no federal debt to speak of and we had a sound gold-based currency. Today things are much different. We have a consumption-based economy. Around 70 percent of all economic activity in the United   States is made up of consumer spending. Most of what we consume is imported from abroad and much of it is bought on credit. Bloated and octopus-like, the federal government stands poised to squeeze every last life-drop from the battered private sector. It controls, regulates and taxes as never before. Not content with the trillions it has extracted from the productive sector, it has assumed gargantuan debts it cannot pay.</p>
<p>Government propaganda notwithstanding, this nation can only be saved through revival of the private sector, since the private sector is the only institution that can create real jobs and real wealth. Government is the last place we should look to for provision, because in the final analysis government can only smoother, pilfer and waste. This is a truth we seem to have forgotten as a nation. It is now costing us dearly as we have a president who is using the power of the state to strangle America&#8217;s private enterprise. So vigorous his efforts have been that they even impressed the die-hard socialist Hugo Chavez. When commenting on Obama&#8217;s nationalization of General Motors, Chavez referred to our president as “<a href="http://www.reuters.com/article/idUSTRE5520GX20090603">comrade</a>.”</p>
<p>But praise and approval from Chavez do not necessarily certify one&#8217;s competence given that Chavez is driving his own country into ruin. Although rich in oil, Venezuela is plagued with poverty and shortages of all kinds. It even has to <a href="http://www.reuters.com/article/idUSTRE60B56Y20100112?feedType=RSS&amp;feedName=worldNews&amp;rpc=22&amp;sp=true">ration</a> energy and recently the government devalued the currency because of fiscal mismanagement.</p>
<p>Disturbing as it may sound, what we are seeing in Venezuela today may well be a preview of what&#8217;s in store for America. We are, in fact, already getting a partial taste of it. To begin with, we have an overbearing government that wants to run and control (Chavez-like) every aspect of our society. Our real unemployment is higher than that of Venezuela. Certain parts of this country have experienced blackouts. And the utter fiscal irresponsibility of on the part of our leaders has resulted in a dramatic drop in the value of our currency.</p>
<p>Looking at all this, one gets the feeling that our system is on the edge of a precipice and that only a mild push would suffice to send it tumbling down. Unfortunately, we have people in Washington whose misguided policies may well deliver that push. Such an event would be bad news for Americans, but it would certainly please Chavez who has repeatedly prophesied America&#8217;s collapse because its capitalism. Should there indeed be a collapse the Venezuelan will have been only half right. Genuine capitalism has never brought down any country, because capitalism engenders wealth, stability and prosperity. What bring societies down is those who nationalize, regulate and overspend. And they like to call themselves “comrades.”</p>
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		<title>Unhinged Spending Syndrome &#8211; by Vasko Kohlmayer</title>
		<link>http://www.frontpagemag.com/2010/vasko-kohlmayer/unhinged-spending-syndrome-by-vasko-kohlmayer/?utm_source=rss&#038;utm_medium=rss&#038;utm_campaign=unhinged-spending-syndrome-by-vasko-kohlmayer</link>
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		<pubDate>Tue, 05 Jan 2010 05:15:21 +0000</pubDate>
		<dc:creator><![CDATA[Vasko Kohlmayer]]></dc:creator>
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		<guid isPermaLink="false">http://frontpagemag.com/?p=44492</guid>
		<description><![CDATA[An international addiction to debt plagues both Japan and California.]]></description>
				<content:encoded><![CDATA[<p><img class="alignnone size-full wp-image-44537" title="spending" src="http://cdn.frontpagemag.com/wp-content/uploads/2010/01/spending.jpg" alt="spending" width="411" height="300" /></p>
<p>“Yukio Hatoyama, the new Japanese Prime Minister, has stunned a nation already mired in huge public debt by unveiling the country&#8217;s biggest ever postwar budget,” <a href="http://business.timesonline.co.uk/tol/business/markets/japan/article6967956.ece">reported</a> the UK Times the other day. Hatoyama&#8217;s budget of 92.3 trillion yen – roughly $1 trillion – represents a jump of some 10 percent over last year&#8217;s figure.</p>
<p>It goes without saying that the Japanese government does not have enough cash to pay for this extravaganza. In order to cover its bills, it will have to borrow a record 44.3 trillion yen ($440 billion), which will push the country&#8217;s public debt to nearly 195 percent GDP. This figure represents the largest debt-to-GDP ratio by far of any developed country. This increase in indebtedness comes at a time when tax revenues are projected to fall to the lowest level since 1984. According to projections, the amount of Japan&#8217;s debt issuance next year will exceed the government&#8217;s tax intake. This will mark a historic milestone of sorts, as Japan has not experienced this level of imbalance since the end of World War II.</p>
<p>It is ironic that Hayotama was swept to power in August on the promise that he would end the era of wasteful public spending that marred the rule of the previous government.  Today Hatoyama says that the sharp increase in public outlays is necessary, because it is aimed at “saving people&#8217;s lives.” At the same time, he seeks to convince the Japanese public that fiscally things are still under control. “I believe that we have delivered all we can without compromising fiscal discipline,” said Hatoyama at a news conference last week. But with a debt of nearly double the country&#8217;s annual economic output his words hardly sound reassuring.</p>
<p>Unfortunately, Japanese politicians are not the only ones suffering from a bad case of the <em>unhinged spending syndrome</em>. Their American counterparts are also badly afflicted by this pernicious malady. In its latest outbreak, California&#8217;s Governor Arnold Schwarzenegger has petitioned the federal government for help in closing the California&#8217;s $21 billion budget gap. In other words, Schwarzenegger is seeking a bailout for his insolvent state. The governor has been hard at work cultivating the political soil to make D.C. receptive to his plea. This is a somewhat delicate undertaking for a republican these days, given that Washington&#8217;s financial strings are largely controlled by democrats. But Governor Schwarzenegger has apparently figured out what it takes to win the favor of those in charge. For months he has enthusiastically praised President Obama and last week even gave him an A for his performance so far.</p>
<p>Schwarzenegger and his cohorts claim that California&#8217;s financial woes are caused by a weak economy. But this is not so. Strictly speaking, California&#8217;s problems are not a result of a deteriorating economy, but of the irresponsibility of the state&#8217;s political class. By offering unsustainably generous social programs, keeping a highly-paid bureaucracy and financing a whole array of extravagant projects they have simply broken the bank. With the damage done, it is time for those responsible to bear the consequences of their actions. They must face the people of California standing on the ashes of their state&#8217;s burned fiscal house. To bail them out would truly be unforgivable. If the federal government grants them the funds they seek, they will not only not be punished for their recklessness, but they will cast themselves as California&#8217;s saviors. They will use their bailout loot to further entrench themselves in power and continue their destructive works. These people must not be rewarded; they need to face the music instead.</p>
<p>Sad to say, both parties bear responsibility for California&#8217;s present woes. Long gone are the days when Arnold Schwarzenegger excoriated his legislators for their fiscal excesses. Calling them “girly men” for lacking the courage to bring the state&#8217;s finances in order, he held them up to public scorn before the whole nation. But it did not take long for the governator to adopt the spending mindset of the very people he ridiculed and turn into a girly man himself. And today he comes to Washington begging the federal government for other people&#8217;s money so that he can get out of his pickle.</p>
<p>It is truly paradoxical that Schwarzenegger is asking for help from someone who is even more bankrupt than his own state. With a national debt of over $12 trillion and an entitlement burden in excess of over $100 trillion, the US government is saddled with obligations it cannot possibly meet. If it were not for the dollar&#8217;s status as the world&#8217;s reserve currency and the ability of the Federal Reserve to print it at will, our federal government would now be out of business.  In any case, its days as a financially viable entity are numbered. Even as we speak, the world is feverishly looking for an alternative to the dollar. Once it is found, our currency will disintegrate as governments and investors will refuse to finance our ever growing debt. It is also possible that they will not wait for an alternative to emerge, but that at some point will simply begin dumping dollars in an effort to cut their loses.</p>
<p>We must never lose sight of what has led to this predicament – excessive spending by the political class. As in the case of California, both parties are culpable. Although Republicans like to cast themselves as the party of fiscal sobriety, the fact is that whenever they hold power they grow both spending and deficits. It seems to be the defining feature of the Western political dynamic that whenever a party assumes power – regardless of whether it is ideologically right or left – it invariably increases government expenditures. Today many charge the Japanese prime minister – who heads a center-left party – with the socialist type of disregard for the basic laws of finance and common sense. The charge is true enough, but they forget that the road was paved by the previous governments, most of which were on the other side of the ideological divide.</p>
<p>The same holds truth for the United States. People fault President Obama for his lack of fiscal restraint. And deservedly so. They, however, overlook the fact that the ground was prepared by the previous administration. That administration, among other things, broke previous spending records, implemented a costly entitlement program and set us on the road to endless bailouts. It is true that republicans are somewhat more restrained than their counterparts across the aisle, but that is not good enough when we are headed for financial disaster.</p>
<p>What we desperately need are adults who realize that we cannot indefinitely go on spending more than we have. Unfortunately, neither side of the Western political mainstream appears to harbor such politicians. Whether you look at Japan, California  or the United States, the unhinged spending syndrome does not discriminate. An equal opportunity affliction, it affects both sides regardless of their stated ideological orientation.</p>
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		<title>Ben Bernanke: Bust of the Year – by Vasko Kohlmayer</title>
		<link>http://www.frontpagemag.com/2009/vasko-kohlmayer/ben-bernanke-bust-of-the-year-%e2%80%93-by-vasko-kohlmayer/?utm_source=rss&#038;utm_medium=rss&#038;utm_campaign=ben-bernanke-bust-of-the-year-%25e2%2580%2593-by-vasko-kohlmayer</link>
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		<pubDate>Thu, 24 Dec 2009 05:02:32 +0000</pubDate>
		<dc:creator><![CDATA[Vasko Kohlmayer]]></dc:creator>
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		<description><![CDATA[Why should we expect the Fed Chairman to solve a crisis he didn’t see coming?

]]></description>
				<content:encoded><![CDATA[<p><img class="alignnone size-full wp-image-42872" title="bernanke" src="http://cdn.frontpagemag.com/wp-content/uploads/2009/12/bernanke.jpg" alt="bernanke" width="535" height="335" /></p>
<p>“The story of the year was a weak economy that could have been much, much weaker. Thank the man who runs the Federal Reserve, our mild-mannered economic overlord.” Thus <a href="http://www.time.com/time/specials/packages/article/0,28804,1946375_1947251_1948043,00.html">wrote</a> <em>Time</em> magazine about Fed Chairman Ben Bernanke, winner of the magazine’s “Person of the Year” award for 2009. Virtually crediting Bernanke with halting the world&#8217;s descent into an abyss, <em>Time </em>reverentially portrays him as a benevolent demigod, wisely presiding over our economic healing.</p>
<p>But when one carefully reads the featured <a href="http://www.time.com/time/specials/packages/article/0,28804,1946375_1947251_1948043,00.html">interview</a>, an impression forms that is sharply at odds with the one intended by <em>Time</em>&#8216;s panegyric. The interview is, in fact, so full of red flags that one almost wants to run for the closest <a href="http://doctorbulldog.files.wordpress.com/2009/08/panic-button.jpg">panic button</a>. Perhaps the most revealing moment comes when Bernanke talks about whether he foresaw the 2008 crisis:</p>
<blockquote><p>“We were certainly aware of the risks of financial crisis, but one as large and as dangerous as this one, I certainly did not anticipate. I wish I had, but I didn&#8217;t.”</p></blockquote>
<p>This is an astonishing admission from the Fed Chairman. The man who is now supposed to fix our problems did not see them coming in the first place. One may perhaps think that the problems were so byzantine that they were undetectable until they at last erupted in the crisis. But this is not so. There <em>were</em> those who saw the problems clearly. A few predicted the crisis with uncanny accuracy.</p>
<p>One of them was Peter Schiff, a financial commentator and president of Euro Pacific Capital. From 2005 onward, Schiff warned about the upcoming meltdown both on television and in writing. Early in 2007 Schiff published a book called <em><a href="http://www.amazon.com/Crash-Proof-Economic-Collapse-Sonberg/dp/0470043601">Crash Proof: How to Profit From the Coming Economic Collapse</a> </em>in which he told what was going to happen and advised how to prepare.</p>
<p>His predictions proved prescient and those who followed his advice were able not only to preserve their wealth but also to increase it. It is paradoxical that as Schiff was sounding the alarm, mainstream pundits – those of the Greenspan/Bernanke worldview – were laughing in his face. (You can see an eye-opening compilation of Schiff&#8217;s pre-crisis appearances on major television networks and the sneers he received by clicking <a href="http://www.youtube.com/watch?v=Z0YTY5TWtmU">here</a> and <a href="http://www.youtube.com/watch?v=2I0QN-FYkpw">here</a>.)</p>
<p>Peter Schiff was not the only person who saw the crisis coming. Texas congressman Ron Paul saw it also. As early as September, 2003 he <a href="http://www.ronpaul.com/2009-09-15/ron-paul-on-msnbc-end-the-fed/">warned</a> in the banking committee of the US Congress about the danger of a real-state bust:</p>
<blockquote><p>“If we continue to inflate this bubble this way the housing crisis is going to cause an explosion and there is going to be damage worldwide.”</p></blockquote>
<p>Almost no one on the committee – or in America at large for that matter – listened to Ron Paul&#8217;s warnings. Instead Paul was mocked and accused of insensitivity toward the poor. Needless to say, his foresight was vindicated in spectacular fashion by subsequent events.</p>
<p>Of course, Peter Schiff and Ron Paul have no crystal ball that enables them to foretell future events with uncanny accuracy. Their grasp of financial and economic situation is rooted in the <a href="http://mises.org/">Austrian school of economics</a>. An outgrowth of classical liberalism, its main proponents are Ludwig von Mises, Nobel Prize winner Friedrich von Hayek and Murray N. Rothbard. One of the main focus areas of this school is the business cycle – the boom-and-bust recurrence – which defines the trajectory of western-style economies.</p>
<p>The Austrian school sees the central bank as the driver of the business cycle. This it causes by holding interest rates artificially low, which sends misleading signals through the economy. Fueled by cheap credit, more projects are begun than existing economic resources can support. These projects are termed malinvestments. Once inflation becomes a concern and the central bank – the Fed – is forced to raise interest rates, those projects must be abandoned. It is this that brings on the bust, more commonly referred to as “recession,” which is something we are living through right now. During this painful period of readjustment, labor and resources that were tied up in malinvestments must be relocated to more sustainable uses. The bust – unpleasant as it invariably is – is in reality a necessary and much-needed corrective. Because of this, it should be left to run its course. Any attempt on the part of government to forestall it will only make the inevitable day of reckoning all the more painful.</p>
<p>Yet this is precisely what our government, under Bernanke’s advisement, has been attempting to do. It has tried to keep up the inflated property prices; it has bailed out malinvestments; and, perhaps most dangerously, it has kept interest rates at near zero percent.</p>
<p>Ben Bernanke&#8217;s Fed has had a hand in all three policies. It has been buying toxic mortgage-backed securities, it has been providing cash for the bailouts, and it has been holding the federal funds rate at the rock bottom. And even though these misguided policies have softened the bust by partially re-inflating the bubble, they will produce disaster down the road. They have only postponed the inevitable and the next bust will be more violent than it would have been without all this government intervention. Equally alarmingly, the Fed&#8217;s loose monetary policy has put great downward pressure on the currency. The dollar has lost nearly twenty percent of <a href="http://www.fxstreet.com/rates-charts/usdollar-index/">its value</a> since February 2006, the month when Ben Bernanke took the reins of the Federal Reserve. The policies he has pursued have greatly contributed to this decline.</p>
<p>But such is the way of government that those who cause most damage also receive most fawning and admiration. FDR, who kept America in the grip of the worst and longest recession in the country&#8217;s history, is widely worshiped today. Jimmy Carter, whose policies likewise caused much economic hardship, is feted as an elder statesman and was even given a Nobel Prize. Barack Obama – America&#8217;s most radical president who is taking this country down the road to socialism even while spending it into oblivion – received a Nobel Prize barely nine months into his first term. How fitting that each of the three men has also been named <em>Time</em>&#8216;s Person of the Year.</p>
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		<title>Fiddling While Treasury Burns – by Vasko Kohlmayer</title>
		<link>http://www.frontpagemag.com/2009/vasko-kohlmayer/fiddling-while-treasury-burns-%e2%80%93-by-vasko-kohlmayer/?utm_source=rss&#038;utm_medium=rss&#038;utm_campaign=fiddling-while-treasury-burns-%25e2%2580%2593-by-vasko-kohlmayer</link>
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		<pubDate>Mon, 21 Dec 2009 05:02:16 +0000</pubDate>
		<dc:creator><![CDATA[Vasko Kohlmayer]]></dc:creator>
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		<guid isPermaLink="false">http://frontpagemag.com/?p=42571</guid>
		<description><![CDATA[The Democrats’ latest spending outrage. ]]></description>
				<content:encoded><![CDATA[<p><img class="alignnone size-full wp-image-42572" title="outrageous-pushing-pork-af" src="http://cdn.frontpagemag.com/wp-content/uploads/2009/12/outrageous-pushing-pork-af.jpg" alt="outrageous-pushing-pork-af" width="492" height="373" /></p>
<p>The spend junkies who inhabit the United States Congress are once again trying to pull a fast one on the American people. Driven by an overpowering urge to feed their insatiable habit, they are plotting to raise the national debt ceiling by an unprecedented amount. <a href="http://www.politico.com/news/stories/1209/30417.html">Reports</a> Politico:</p>
<blockquote><p>“In a bold but risky year-end strategy, Democrats are preparing to raise the federal debt ceiling by as much as $1.8 trillion before New Year’s rather than have to face the issue again prior to the 2010 elections.”</p></blockquote>
<p>One must question Politico&#8217;s choice of terms in describing the strategy as “bold.” <em>Insidious</em> would be a more fitting adjective.</p>
<p>Knowing that the national debt will continue skyrocket, our representatives want to avoid voting for another increase before next year&#8217;s elections. Such a vote could possibly make the debt a subject of discussion, which is something they wish to avoid at all costs. Having done their best to spend us into oblivion, their bashfulness is understandable. But judging by their maneuvering, they obviously don&#8217;t think their work is done.</p>
<p>The proposed increase should give us pause, because it reveals the extent to which our congressmen plan to waste our money in the months to come. In their own estimation, they will need $1.8 trillion to get them through the period between the end of December and the next election. This amount is $400 billion above the $1.4 trillion deficit that the government posted in fiscal 2009. In other words, Congressional democrats estimate that nearly 30 percent more will be spent in the next 10 months than was expended during the whole of the record-breaking 2009.</p>
<p>“We’ve incurred this debt. We have to pay our bills,” said House Majority Leader Steny Hoyer. Hoyer&#8217;s statement is utterly disingenuous. If we paid our bills we would not have to raise the debt ceiling. The fact is that we do not pay our bills. We simply borrow when payments come due. And when we have to pay interest on our debt, we borrow for that too.</p>
<p>We have been told that the deficit spending of fiscal 2009 was a one off event necessitated by the crisis. It was claimed that the unprecedented outlays were necessary to halt our descent into the abyss. The astronomical deficit of 2009 was supposed to be an exception. Once the storm blew over, we were supposed to return to a more restrained mode of conducting our financial affairs.</p>
<p>Judging by their actions, Congressional Democrats have no intention of doing that. Quite to the contrary, they plan to spend even more than they did last year.  This poses a serious problem as our government is out of money, burdened with financial obligations it cannot conceivably meet. And yet our politicians plan to add to our debt in unprecedented measure. Looking at all this one almost gets the impression that our political establishment is in the grip of incurable spending madness.</p>
<p>Speaking of madness, President Obama said in his <a href="http://www.c-span.org/pdf/wh120809_obama.pdf">recent speech</a> at the Brookings Institution that we “had to spend our way out of this recession.”</p>
<p>If that were only so. When unemployment was approaching 6 percent under Bush, the media and democrats were bemoaning the bitter recession we were in. But today&#8217;s double digit percent unemployment apparently means that the recession is over.</p>
<p>The truth is that we have not spent ourselves out of anything. Rather, we have spent ourselves into a  hole. There is precious little to show for the trillions that have been burned. Earlier this year, the president&#8217;s advisors repeatedly assured us that with the stimulus unemployment would not exceed 8.5 percent. Today it is at 10 percent amidst a moribund economy. And even though we did not get the promised employment numbers, we got something else instead – a national debt worth more than $12 trillion. But even that is not enough for Washington&#8217;s voracious money appetite as evidenced by the efforts of our legislators to raise the debt ceiling.</p>
<p>But the president appears to be oblivious to all this. In addition to claiming that we have spent ourselves out of the recession he is also boasting that his administration has started “to make the hard choices necessary to get our country on a more stable fiscal footing in the long run.”</p>
<p>What “hard choices”? Obama&#8217;s every major proposal would dramatically add both to the deficit and to the national debt. Not in the least perturbed by this, the president continues to portray himself as a paragon of fiscal prudence. This is what he claimed in his Brookings speech:</p>
<blockquote><p>&#8220;[W]e’re taking responsibility for every dollar we spend&#8230; We’ve combed the budget, cutting waste and excess wherever we could. I’m still committed to halving the deficit we inherited by the end of my first term&#8230; We have begun to not only change policies but also to change the culture in Washington.&#8221;</p></blockquote>
<p>This is the stuff of alternative reality: The most fiscally profligate president in memory boasting about his restraint and thriftiness. He has apparently not noticed that our fiscal house is on fire. It is an alarming sight indeed to watch an American president fiddle while Treasury burns.</p>
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		<title>Spending Folly &#8211; by Vasko Kohlmayer</title>
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		<pubDate>Mon, 14 Dec 2009 05:00:27 +0000</pubDate>
		<dc:creator><![CDATA[Vasko Kohlmayer]]></dc:creator>
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		<guid isPermaLink="false">http://frontpagemag.com/?p=41659</guid>
		<description><![CDATA[The Obama administration's mind-boggling financial excesses and waste.]]></description>
				<content:encoded><![CDATA[<p><img class="alignnone size-full wp-image-41661" title="waste" src="http://cdn.frontpagemag.com/wp-content/uploads/2009/12/waste.jpg" alt="waste" width="450" height="337" /></p>
<p>“The U.S. government racked up a gaping shortfall in the first two months of this fiscal year after posting a record budget deficit last year,” <a href="http://www.reuters.com/article/idUSN0418093920091204">reported</a> Reuters recently.</p>
<p>Just in the first two months of fiscal 2010 – which began in October – our federal government managed to incur a budget shortfall of $292 billion. Alarmingly, the gap for the first two months of this fiscal year was wider than it was during the same period of last year, which ended with with a record deficit of $1.42 trillion. If this present trend continues, the government&#8217;s shortfall by the end of this month will match Bush&#8217;s 2008 spending record of $455 billion.</p>
<p>Here is something to ponder: In barely three months of this fiscal year, Barack Obama will manage to equal the outlays of George W. Bush during the whole of the most financially profligate year of his presidency.</p>
<p>The left used to bemoan bitterly the financial overindulgence of the Bush administration. Justifiably so. It is just too bad that they do not apply the same standard to the current administration. With Obama in charge they see nothing wrong with mind-boggling financial excesses and waste. They, in fact, clamor for more. Not content with the $786 billion pork-ridden outrage which they speciously called “stimulus,” they now demand another rescue package.</p>
<p>Liberals across the ranks – from Paul Krugman through Nancy Pelosi to Howard Dean – are calling for more money to be pumped into the moribund economy. One should not be wholly surprised at this, as the big spenders have repeatedly shown themselves singularly adept at stirring taxpayer money to themselves and their friends. Last week it was <a href="http://thehill.com/homenews/administration/71353-mark-penn-got-6-million-from-stimulus">revealed</a>, for example, that two firms ran by Hillary Clinton&#8217;s pollster Mark Penn grabbed nearly $6 million from the stimulus allotment.</p>
<p>In his <a href="http://www.c-span.org/pdf/wh120809_obama.pdf">speech</a> at the Brookings Institution last week President Obama promised what amounts to a new round of massive spending. Among other things, the president proposed “a boost in investment in the nation’s infrastructure beyond what was included in the Recovery Act,” “incentives for consumers who retrofit their homes to become more energy efficient,” and expanding “select Recovery Act initiatives to promote energy efficiency and clean energy jobs.” The president crowned this laundry list of waste with what looks like another financial black hole which will devour yet more of this country&#8217;s wealth:</p>
<blockquote><p>[W]e should also extend the relief in the Recovery Act, including emergency assistance to seniors, unemployment insurance benefits, COBRA, and relief to states and localities to prevent layoffs.</p></blockquote>
<p>Keep in mind that all this waste will be pilled up on top of last year&#8217;s out-of-control spending which resulted in record-breaking deficits and a skyrocketing national debt.</p>
<p>Moody&#8217;s Investor Service <a href="http://www.bloomberg.com/apps/news?pid=20601087&amp;sid=av16pDNNrMig">has warned</a> that the fiscal mess in Washington may eventually prompt it to lower America&#8217;s debt rating. Trying to be as delicate as possible, Moody&#8217;s said that the country&#8217;s public finances may “test the AAA boundaries.” One can get a sense of how bad America&#8217;s financial condition must be if even Moody&#8217;s worries about it. After all, Moody&#8217;s – the world&#8217;s top credit rating agency – did not see anything suspicious about a whole array of mortgage backed securities whose failure contributed greatly to the 2008 credit crisis.</p>
<p>Moody&#8217;s warning is in reality a plea for America to put its fiscal house in order. The fact that America still enjoys AAA rating is something of an anomaly, because America&#8217;s debt is not really safe. Any sober assessment must conclude that America cannot honestly settle with its creditors. The overwhelming obligations of the federal government make this impossible. America&#8217;s debts can only be nominally repaid with inflated money. Moody&#8217;s knows it, but being part of the monetary regime it will not adjust its rating to the reality of the situation. Doing so would require that the ratings of a number of other governments and financial institutions also be lowered. This would disrupt the workings of the highly fragile monetary system and expose its ultimate unviability. Ken Rogoff, the former chief economist at the International Monetary Fund was recently <a href="http://www.telegraph.co.uk/finance/china-business/6712676/China-wary-of-gold-bubble-danger-after-quietly-doubling-its-reserves.html">quoted</a> by the British channel Sky News as saying that “so many countries are in trouble that it is hard to know where the crisis could hit next. Once one sovereign state veers into default, clusters of others usually follow.”</p>
<p>In the meantime, Fitch – another of the world&#8217;s top rating agencies – <a href="http://www.ft.com/cms/s/0/2763a1d6-e3fc-11de-b2a9-00144feab49a.html">did cut the credit rating</a> of Greece to BBB+ with a negative outlook. The agency cited deep concerns over the country&#8217;s public finances as the reason for the move. Greece&#8217;s problems spring from the government&#8217;s reckless spending which has pushed the nation&#8217;s budget deficit to 12.7 percent of GDP. This is way above the eurozone&#8217;s limit of 3 percent.</p>
<p>Anders Borg, the finance minister of Sweden, the country which currently holds the rotating EU presidency, warned that the Greeks need “to get serious about their fiscal situation.” Stating the obvious, Borg said that a country that wants to remain financially viable “can’t run a 10 or 12 per cent deficit.”</p>
<p>Greece&#8217;s finance minister George Papaconstantinou responded that the country&#8217;s socialist government – which came into power just two months ago in the midst of the fiscal crisis – will do “whatever is required” to lower the deficit. Whether the Greek government manages to bring the country&#8217;s finances under control remains to be seen. But it is telling that even European socialists realize that budget shortfalls in the ten percent range pose a serious problem and they intend to do something about it.</p>
<p>Many Americans still do not realize that our federal government ran <a href="http://www.cbsnews.com/stories/2009/10/16/business/main5390305.shtml">a deficit of 10 percent</a> of GDP in fiscal 2009. But unlike the Greek socialists this administration apparently experiences no sense of alarm or urgency. Quite to the contrary, they plan to spend even more as evidenced by the president&#8217;s speech at the Brookings Institution. As if this was not enough, they are also pushing for so-called health reform, which would bleed untold trillion from our collapsing financial house.</p>
<p>In the past we used to laugh at the apparent mindlessness and follies of European socialists. These days, however, they seem less extreme and more reasonable than their counterparts in Washington.</p>
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		<title>House of Debt &#8211; by Vasko Kohlmayer</title>
		<link>http://www.frontpagemag.com/2009/vasko-kohlmayer/house-of-debt-by-vasko-kohlmayer/?utm_source=rss&#038;utm_medium=rss&#038;utm_campaign=house-of-debt-by-vasko-kohlmayer</link>
		<comments>http://www.frontpagemag.com/2009/vasko-kohlmayer/house-of-debt-by-vasko-kohlmayer/#comments</comments>
		<pubDate>Wed, 09 Dec 2009 05:05:09 +0000</pubDate>
		<dc:creator><![CDATA[Vasko Kohlmayer]]></dc:creator>
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		<guid isPermaLink="false">http://frontpagemag.com/?p=41011</guid>
		<description><![CDATA[What will keep the whole system up? What will bring it down?]]></description>
				<content:encoded><![CDATA[<p><img class="alignnone size-full wp-image-41013" title="housedebt" src="http://cdn.frontpagemag.com/wp-content/uploads/2009/12/housedebt.jpg" alt="housedebt" width="450" height="443" /></p>
<p>The announcement by the Dubai State Corporation that it was unable to pay interest on its debt sent shock-waves through global markets. Stocks and weak currencies dropped as traders and investors feared that this could usher a new episode in the world&#8217;s economic travailing.</p>
<p>One reaction in particular offered a revealing insight into just how uncertain things really are. <a href="http://business.timesonline.co.uk/tol/business/markets/the_gulf/article6934261.ece">Reported</a> the UK Times:</p>
<blockquote><p>Nervous traders transferred the focus of their anxieties from the risk of companies failing to the risk of nation states defaulting. Investors owed money by Mexico, Russia and Greece saw the price of insuring themselves against default rocket.</p></blockquote>
<p>This should tell us much about the fragility of the world&#8217;s financial system. The debt of the  Dubai&#8217;s state-owned corporation is approximately $80 billion. Even though it is a substantial figure, it is not very large in the grand scheme of things. To give a sense of proportion, Dubai&#8217;s debt comes roughly to one tenth of President Obama&#8217;s stimulus package.</p>
<p>And yet the possibility of default by Dubai World immediately sent investors scrambling to insure themselves against default by whole countries. Their fears even extended to nations such as Russia, a country which in a comparatively good position thanks to its large energy revenues.</p>
<p>This shows how little confidence the international financial community has in the system. The world&#8217;s money people fear that even a relatively small event can set off a chain reaction that would bring down nation states. Being part of the action, they are in the position to know what so many on the main street have suspected all along – things are not well. In the words of  noted financial commentator Bill Bonner, they fear that “the ripples stirred up in Dubai” could quickly “turn to Tsunami waves elsewhere.”</p>
<p>Despite what Barack Obama, Ben Bernanke and Timothy Geithner tell us, the problems that brought the global financial system to the brink in 2008 have not been fixed. They have only been papered over with massive amounts of freshly printed cash and cheap money in the form of near-zero interest rates. But too much money and easy credit were at the root of the problem in the first place. The measures that have been taken have only provided a temporary relief. Sooner or later the underlying problems will resurface again. The finance elites sense this, which is why even a relatively small failure makes them so nervous. They know that the seeming return to normalcy is only surface deep.</p>
<p>One can only wonder what governments will do when the crisis returns, since they have already fired the most potent weapons in their arsenal. It is not possible to lower interest rates below zero and given the current levels of government indebtedness, it will also be difficult to come up with more money for a new round of cash injections. A number of governments are on the brink of bankruptcy as it is. Another bout of massive borrowing is simply not a realistic possibility.</p>
<p>The next flare up could well bring on systemic failure. As it is, things do not look good. This year alone nearly 130 US banks have gone out business. This is four times more than the total for 2008. Recently it has been revealed by the Federal Deposit Insurance Corporation (FDIC) that more than 550 financial institutions are on the government&#8217;s problem list. What this means is that roughly 7 percent of US banks face the possibility of failure in the short term. Their names have not been released in order to avoid bank runs. Should these troubled banks start falling in large numbers, the effect would quickly snowball and many other banks who still appear relatively sound would be pulled down as well.</p>
<p>Fearing this, banks are reluctant to lend and prefer to sit on their cash to play it safe. The government is unhappy with this situation, because it wants as many loans as possible in order to stimulate economic activity. The Wall Street Journal <a href="http://online.wsj.com/article/SB125907631604662501.html?mod=WSJ_hpp_MIDDLTopStories">reports</a> that “government officials have stepped up pressure on banks to make more loans in recent weeks.” FDIC Chairman Sheila Blair echoed this point when she said: &#8220;We need to see banks making more loans to their business customers.&#8221;</p>
<p>Banks are, of course, correct in being careful. There is still too much debt in the system. What our economy needs at this point is further de-leveraging. Those businesses and enterprises that cannot make their payments need to go bankrupt so that the economy can be purged of the dross and then rise again on a healthier foundation. This, however, is precisely what the government is trying to prevent from taking place. It keeps propping up failed companies that should have been long out of business. Ensuring that they have access to cheap credit is part of that strategy. This approach averts some pain in the short term, but it ultimately only makes a sick system even sicker.</p>
<p>While the government is pressuring banks to make more loans, the FDIC – the very agency that insures depositors when a bank goes bankrupt due to bad loans – is itself in the red. What the FDIC&#8217;s predicament shows is that banks should be issuing fewer loans than they are currently making. But this is not the lesson government officials draw from the situation. Instead, they counsel the banks to do the opposite. They apparently do not worry where the FDIC will get its money from should more banks fail. After all, the printing presses of the Federal Reserve can easily resupply the depleted fund. All this money creation, however, exerts immense inflationary pressures on the dollar. This in turn is destabilizing to the world&#8217;s monetary regime which rests on the dollar as its foundation.</p>
<p>Rather than encouraging restraint, governments world over are making things worse by their irresponsible spendthrift policies. Those in the financial community know it, which is why they are so jittery these days. They know that even a Dubai size default could set off a chain of events that could eventually bring the whole system down like a house of debt that it is.</p>
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		<title>Preparing for Global Collapse &#8211; by Vasko Kohlmayer</title>
		<link>http://www.frontpagemag.com/2009/vasko-kohlmayer/preparing-for-global-collapse-by-vasko-kohlmayer/?utm_source=rss&#038;utm_medium=rss&#038;utm_campaign=preparing-for-global-collapse-by-vasko-kohlmayer</link>
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		<pubDate>Wed, 02 Dec 2009 05:06:09 +0000</pubDate>
		<dc:creator><![CDATA[Vasko Kohlmayer]]></dc:creator>
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		<guid isPermaLink="false">http://frontpagemag.com/?p=39569</guid>
		<description><![CDATA[The banks brace for an economic meltdown of epic proportions.]]></description>
				<content:encoded><![CDATA[<p><img class="alignnone size-full wp-image-39672" title="sink" src="http://cdn.frontpagemag.com/wp-content/uploads/2009/11/sink.jpg" alt="sink" width="450" height="302" /></p>
<p>“Société Générale has advised clients to be ready for a possible &#8216;global economic collapse&#8217; over the next two years,” <a href="http://www.telegraph.co.uk/finance/economics/6599281/Societe-Generale-tells-clients-how-to-prepare-for-global-collapse.html">reported</a> the UK Telegraph in a recent story.</p>
<p>Headquartered in France, Société Générale (SG) is one of Europe&#8217;s largest financial services companies. One of the oldest banks in France, it is also a quintessentially mainstream institution whose leadership is largely blind to the shortcomings of the world&#8217;s current monetary regime. As so many other mainstream outfits, SG failed to see the coming of the current crisis and had to be rescued to the tune of billions of dollars. Much of it, paradoxically, came from the American taxpayer via the AIG bail out.</p>
<p>One can get a good sense of how bad things must be if an institution like this is preparing its clients for the possibility of a “global economic collapse.” Given the present state of affairs, the bleak outlook is more than justified.</p>
<p>To begin with, many governments currently find themselves on the verge of bankruptcy. Having tried to spur economic growth through vast injections of new money, they have contracted immense public debts. “High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt,” concludes Société Générale in its report.</p>
<p>Leading the way is the United   States which posted a deficit of nearly 10 percent GDP during the last fiscal year. The Obama administration <a href="http://vasko.wordpress.com/2009/08/28/debt-as-percentage-of-gdp/">projects</a> that America&#8217;s national debt will exceed its annual economic output in the 2011 fiscal cycle. It will then continue expanding as far as the eye can see, reaching 107 percent of GDP in 2019. It should be remembered that these are the administration&#8217;s own figures, which almost always tend to be too optimistic. The reality is likely to be worse.</p>
<p>The deep indebtedness of western governments raises serious questions about their financial viability. Ambrose Evans-Pritchard, the Telegraph&#8217;s International Business Editor, <a href="http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100002059/is-6300-fair-value-for-gold/">puts</a> it bluntly: “Almost all western governments are insolvent&#8230; we are bust.” Evans-Pritchard is correct. The level of indebtedness is unsustainable. Unable to squeeze much more from taxes, sooner or later western governments will have to start defaulting. The default will very likely take the form of high inflation as governments will try to print away their immense debt burden. This will, of course, have dire economic repercussions.</p>
<p>Dire as Société Générale&#8217;s report is, it still does not do full justice to the dept of our predicament. When discussing America&#8217;s fiscal plight, for example, it fails to take into consideration the biggest drag of all – entitlements. Estimated at more than $100 trillion, this astronomical figure represents the largest financial obligation in the history of the world. More than one and a half of the world&#8217;s current economic output, entitlements are a millstone that will pull America down into financial ruin. Needless to say, the rest of the world will also be caught in the vortex. With Social Security going into the red perhaps as early as this fiscal year, the “global economic” collapse may occur sooner than later. Western government officials, however, appear unconcerned about the black clouds on the horizon. Rather than trying to rein in spending, they blithely pile on even more debt. Oblivious to the impending financial crack up, they instead worry about the <a href="http://blogs.telegraph.co.uk/news/jamesdelingpole/100017393/climategate-the-final-nail-in-the-coffin-of-anthropogenic-global-warming/">non-existent</a> anthropogenic global warming.</p>
<p>Meanwhile, the banksters managed to pull off another one, this time in the United Kingdom. On Tuesday last week it was <a href="http://news.bbc.co.uk/2/hi/business/8375969.stm">revealed</a> that Britain&#8217;s central bank – the Bank of England – had extended in October 2008 secret loans to two large banks. The amount involved was £67 billion, which is roughly $100 billion. The news provoked a furor across Britain with the public, politicians and commentators outraged at the secretiveness in which the transaction was executed. But the outrage has prevented people from seeing the more fundamental issue. So far no one has asked the most important question: Where had the money came from? Obviously it did not come from the government&#8217;s budget as such a huge expenditure could not have gone undetected.</p>
<p>The secret loan was an extra budgetary transaction by the Bank of England. But how did the Bank of England get all this money? It simply created it out of thin air and then pushed it to those in trouble. The ability of central banks to create new money at will is really nothing other than  legalized counterfeiting. Whenever the monetary elite needs to bail out their friends in some troubled economic sector, they simply send some freshly minted cash their way. But these huge inflows of new money dilute the existing money stock thus decreasing the value of the money that is held by the general public. The result is inflation. And although it may not be immediately reflected itself in the Consumer Price Index, it will sooner or later show itself somewhere. The current rise in prices across investment asset classes such as gold, equities, commodities, etc. is to some extent due to the inflationary monetary policies of governments across the globe. To put it differently, currencies are losing value in relation to tangible assets.</p>
<p>Everyone should be able to recognize that it is not possible to solve real problems by contracting ever more debt and by printing ever more money. And yet this is exactly what governments have been doing. This game cannot last forever and the house of cards they have built will sooner or later come crashing down. The “global collapse” of which Société Générale warns is a real possibility. Those who choose to ignore such warnings do so at their own peril.</p>
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		<title>Gulf States Leaving the Dollar Behind? &#8211; by Vasko Kohlmayer</title>
		<link>http://www.frontpagemag.com/2009/vasko-kohlmayer/gulf-states-leaving-the-dollar-behind-by-vasko-kohlmayer/?utm_source=rss&#038;utm_medium=rss&#038;utm_campaign=gulf-states-leaving-the-dollar-behind-by-vasko-kohlmayer</link>
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		<pubDate>Tue, 24 Nov 2009 05:00:49 +0000</pubDate>
		<dc:creator><![CDATA[Vasko Kohlmayer]]></dc:creator>
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		<guid isPermaLink="false">http://frontpagemag.com/?p=38548</guid>
		<description><![CDATA[Devastating repercussions for the United States.]]></description>
				<content:encoded><![CDATA[<p><img class="alignnone size-full wp-image-38550" title="dollar" src="http://cdn.frontpagemag.com/wp-content/uploads/2009/11/dollar.jpg" alt="dollar" width="450" height="338" /></p>
<p>&#8220;The Gulf single currency is not happening tomorrow or the day after,” <a href="http://www.breitbart.com/article.php?id=CNG.bf343ec6ecfc2a38424e5d01ec3e8d56.b1&amp;show_article=1">says</a> Kuwait&#8217;s Finance Minister Mustafa al-Shamali. “Sufficient time” is needed to prepare for such a move the minister told the Kuwaiti parliament last week.</p>
<p>Al-Shamali&#8217;s statement is startling in how matter-of-factly it reveals the intent of the Gulf states to abandon the dollar. Last month, veteran British journalist Robert Fisk filed a story titled “<a href="http://www.independent.co.uk/news/business/news/the-demise-of-the-dollar-1798175.html">The Demise of the Dollar</a>” in which he claimed that the Gulf countries were secretly working to set up a new currency to be used for oil trade. The report shook the markets and provoked a furor across the globe with many accusing Fisk of posting sensational stories based on obscure sources.</p>
<p>It turns out that Fisk was right. If anything his article understated how far along the Gulf countries had come in their quest to replace the dollar. So much so that they had set the beginning of the next year as the start of the new monetary regime. And even though they will not be able to meet the ambitious deadline, its very existence underscores the earnestness of those countries to decouple themselves from the dollar framework.</p>
<p>Such a move would have devastating repercussions for the United States, because it would deal a major blow to the dollar&#8217;s status as the world&#8217;s reserve currency. Once the dollar loses that special standing foreign central banks and investors will no longer be willing to continue purchasing Treasury bonds at low interest. Deprived of the ability to borrow cheaply from abroad, the American government would be forced to monetize portions of its debt in order to obtain cash for its expenditures. This would lead, among other things, to runaway inflation.</p>
<p>Perhaps the most telling thing about the ongoing effort of the Gulf states to drop the greenback is that none of them is an outright enemy of America. The United Arab Emirates, Kuwait, Bahrain, Qatar and Saudi Arabia maintain – for the most part – friendly relations with the United States. Their effort is thus not driven by some insidious desire to harm the US, but by the reckless monetary and fiscal policies of our own government. The spectacular growth of our national debt and the rapid expansion of the money supply have debased the dollar which has been dramatically losing value. It is all too understandable that resources-rich countries do not wish to trade their national wealth for an increasingly valueless currency.</p>
<p>There may still be those who think that all this is just a plot by Arabs to weaken the United States by sabotaging our currency. Arabs, however, are not the only ones trying to decouple themselves from it. Tuesday last week, Dominique Strauss-Kahn, the managing director of the International Monetary Fund, made a sobering <a href="http://www.reuters.com/article/asianCurrencyNews/idUSPEK20416820091117">speech</a> in which he said:</p>
<blockquote><p>The imperative of greater global currency stability means the world can no longer rely, as it has done since the end of the gold standard, on a currency issued by a single country.</p></blockquote>
<p>The “currency issued by a single country” is, of course, the dollar which has been the foundation of the global monetary system ever since the Bretton Woods conference which took place in 1944. The statement of Strauss-Kahn clearly indicates that IMF leadership is of the view that the dollar era is coming to an end. This is not so surprising given the dollar&#8217;s deteriorating condition. For world finance and trade to function smoothly, a strong and stable medium of exchange is required. The dollar no longer possess these qualities and its fall is wreaking havoc all across the globe.</p>
<p>What will replace the dollar is unclear. Strauss-Kahn suggests that it may be Special Drawing Rights which will grow out of the IMF&#8217;s in-house account. This would, in turn, be backed by a basket of national currencies. Such an arrangement, however, would have even lesser chance of success than the current regime as it would based on fiat paper currencies of selected nations. And if we can be certain of one thing, it is that fiat currencies will never be stable for very long because politicians will always debase them by excessive printing. This is what has ultimately happened to the dollar. Its fate was sealed when Richard Nixon took it off the last vestiges of the gold standard in 1971. Since then it has been steadily losing value, a process which has dramatically accelerated in recent years. One hundred thousand dollars went a long way in 1971. Today the same one hundred thousand possesses only a fraction of its former worth.</p>
<p>Whatever the future may hold, one thing is clear: The era of the dollar is drawing to an end. Saddled with debts that government cannot make possibly good on, the greenback has lost the world&#8217;s trust. The plan of the Gulf countries to give it up is one evidence of that. Its precipitously falling value is another. A week does not go by when officials of countries do not plead with our government to do something about our excessive indebtedness. Most recently, President Obama was told by Chinese officials during his visit that China will not keep buying our rapidly expanding debt indefinitely. There are no signs, however, that either the president or the Congress are serious about doing anything about it. On the contrary, they are compounding the crisis by contracting even more obligations. Our national debt has recently broken through the <a href="http://www.treasurydirect.gov/NP/BPDLogin?application=np">$12 trillion mark</a> even as those in Washington are attempting to implement a series of costly measures that would cost tens of trillions in the long term.</p>
<p>In light of this, is it any wonder that the world is trying to decouple itself from the currency that our own politicians are debasing with such astounding recklessness?</p>
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		<title>From Bust to Burst &#8211; by Vasko Kohlmayer</title>
		<link>http://www.frontpagemag.com/2009/vasko-kohlmayer/from-bust-to-burst-by-vasko-kohlmayer/?utm_source=rss&#038;utm_medium=rss&#038;utm_campaign=from-bust-to-burst-by-vasko-kohlmayer</link>
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		<pubDate>Thu, 19 Nov 2009 05:00:22 +0000</pubDate>
		<dc:creator><![CDATA[Vasko Kohlmayer]]></dc:creator>
				<category><![CDATA[FrontPage]]></category>

		<guid isPermaLink="false">http://frontpagemag.com/?p=37658</guid>
		<description><![CDATA[The "stimulus" measures continue. ]]></description>
				<content:encoded><![CDATA[<p><img class="alignnone size-full wp-image-37809" title="wallstreet3" src="http://cdn.frontpagemag.com/wp-content/uploads/2009/11/wallstreet3.jpg" alt="wallstreet3" width="450" height="365" /></p>
<p>A Reuters <a href="https://news.fidelity.com/news/news.jhtml?cat=Markets.US&amp;articleid=200911091022RTRSNEWSCOMBINED_N09257948_1&amp;IMG=N">story</a> titled “Wall Street jumps on renewed risk-taking after G20” touches on a startling fact: a recent summit in Scotland of finance ministers and central bankers of the G-20 countries gave impetus to another binge of risk-taking on Wall Street.</p>
<p>How can this be? How can a gathering of the very people who have pledged to rein in Wall Street&#8217;s reckless wheeling-dealing inspire the very thing they seek to curb?</p>
<p>To understand it, we need to look at the meeting&#8217;s resolution. In their final communique, the participants jointly agreed to continue with stimulus measures in order to support what they see as a fragile recovery:</p>
<blockquote><p>The recovery is uneven and remains dependent on policy support&#8230; To restore the global economy and financial system to health, we agreed to maintain support for the recovery until it is assured.</p></blockquote>
<p>To coincide with the summit, the International Monetary Fund (IMF) issued a report intended to lend further credence to the central bankers&#8217; strategy. Its premise is contained in this statement: &#8220;Premature exit from accommodative monetary and fiscal policies could undermine the nascent rebound.”</p>
<p>As most people know, those “accommodative monetary and fiscal policies” consists primarily of near-zero interest rates and massive cash injections into the economy. What the G-20 meeting did is, in effect, guarantee for the foreseeable future the availability of cheap loans and easy money. This makes for a temptation to engage in unhealthy risk-taking, because it invites Wall Street to take out cheap loans and then invest the borrowed money in assets that promise a higher rate of return. The difference is profit.</p>
<p>The problem with this is that the glut of cheap money pushes the trading price of assets into which it flows beyond what is warranted by economic fundamentals. The recent run in the stock market is an example of this. Many observers have been puzzled by the sharp rise in the price of equities in light of the difficult situation we find ourselves in. Given the economic realities, there is simply no way stocks should be going up that fast. The main reason behind their rapid rise is the ready availability of easy money. What this means, however, is that there is another bubble forming right before our eyes.</p>
<p>But stocks are not the only asset class that has been posting large gains in recent months. In his recent <a href="http://www.ft.com/cms/s/0/9a5b3216-c70b-11de-bb6f-00144feab49a.html">piece</a> in the <em>Financial Times</em>, Nouriel Roubini notes that there has been a “massive rally” in assets across the spectrum. Oil, energy and commodities have all participated. Observes Roubini: “Asset prices have risen too much, too soon and too fast compared with macroeconomic fundamentals.”</p>
<p>This incongruity cannot last forever. The prices of these assets will continue rising as long as investors have access to low interest loans. But sooner or later central banks will have to raise interest rate. Once that happens many borrowers will be forced to sell in order to cover their loans. As many people unwind their positions, assets will lose their artificially inflated value. Falling asset prices will then likely trigger a stampede with investors seeking to cut their loses. This will result in a rapid drop of value and we will end up with another bust.</p>
<p>The underlying mechanism will be similar to the one that led to the bursting of the housing bubble, an event that was triggered by the Fed&#8217;s raising of interest rates. This time, however, the bust will affect several asset classes simultaneously. That the burst of this multi-headed bubble in a shaky economic environment would have devastating repercussions goes without saying. This time, however, there will be no money for trillion dollar bailouts, since governments have already maxed out their credit cards. The next big bust can well bring the whole system to its knees.</p>
<p>But notice the cause of the predicament which lies with the government. In an effort to keep people content in their credit-funded lifestyles, our political and monetary elites have kept interest rates unnaturally low. As they do so, they unwittingly inflate bubbles whose subsequent busts wreak havoc across the economy. For well over a decade we have had unsustainably low interest rates which created an illusion of abundance and prosperity, but in the end we must pay the price. First it was the high-tech bubble, then it was the real estate bubble and now we are seeing the formation of a giant multiple asset class bubble. Assessing the situation, Ron Paul <a href="http://www.forbes.com/forbes/2009/1116/opinions-great-depression-economy-on-my-mind.html">wrote</a> in Forbes:</p>
<p>This is nothing less than the creation of another bubble. By attempting to cushion the economy from the worst shocks of the housing bubble&#8217;s collapse, the Federal Reserve has ensured that the ultimate correction of its flawed economic policies will be more severe than it otherwise would have been.</p>
<p>The government&#8217;s approach could not be more misguided: It seeks to cure the problem of years of excessively low interest rates with even lower interest rates. It is as if a doctor offered an addict more drug when he experiences the inevitable symptoms of withdrawal. The new fix will make the patient feel better for a while, but the temporary surge will only make his eventual crash all the more excruciating. At the G-20 summit the central bankers assured the patient that the drugs will keep flowing. Following their meeting, the markets rose sharply as the junkies took their fix.</p>
<p>Roubini warns of the danger of this in his <em>Financial Times</em> piece: “The Fed and other policy makers seem unaware of the monster bubble they are creating. The longer they remain blind, the harder the markets will fall.”</p>
<p>Roubini should know of which he speaks. Known also as Dr. Doom, he was one of the few who correctly predicted the housing bust.</p>
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		<title>How to Wreck the Economy &#8211; by Vasko Kohlmayer</title>
		<link>http://www.frontpagemag.com/2009/vasko-kohlmayer/how-to-wreck-the-economy-by-vasko-kohlmayer/?utm_source=rss&#038;utm_medium=rss&#038;utm_campaign=how-to-wreck-the-economy-by-vasko-kohlmayer</link>
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		<pubDate>Mon, 16 Nov 2009 05:01:19 +0000</pubDate>
		<dc:creator><![CDATA[Vasko Kohlmayer]]></dc:creator>
				<category><![CDATA[FrontPage]]></category>

		<guid isPermaLink="false">http://frontpagemag.com/?p=35868</guid>
		<description><![CDATA[The President tries to restore capitalism with the methods that brought it down.]]></description>
				<content:encoded><![CDATA[<p><img class="alignnone size-full wp-image-35869" title="the-great-depression" src="http://cdn.frontpagemag.com/wp-content/uploads/2009/11/the-great-depression.jpg" alt="the-great-depression" width="430" height="330" /></p>
<p>“The higher jobless rate could be  the new normal” reads the headline of a recent AP <a href="http://www.google.com/hostednews/ap/article/ALeqM5grRQ6dLLl9di4HgR4iI_gOesmUkwD9BEAN383" target="_blank">report</a>. Further down we read:</p>
<blockquote><p>“Even with an economic  revival, many U.S. jobs lost during the recession may be gone forever  and a weak employment market could linger for years.”</p></blockquote>
<p>The report&#8217;s message is clear. It will  be a long time before we recover our former prosperity. Things, in fact,  may never be as good as they used to be, at least not in our lifetimes.</p>
<p>But how can this be? After all, it  is Barack Obama who is in charge. Less than twelve months ago, the Associated  Press and the whole of the mainstream media were selling Obama as the  one who would speedily solve this nation&#8217;s economic ills. Obama was  presented as nothing less than a national savior who had all the right  answers.</p>
<p>Writing at CBS, Bonnie Erbe posted  a piece in January titled “The Economy Could Actually Turn Around  Under Barack Obama.” The piece quoted Jerome Idaszak, associate editor  of the Kiplinger Letter, who said: “There&#8217;s also a new sense of public  confidence in Washington. About 70% of Americans say they are optimistic  that the Obama administration will be able to spur growth.” Michael  Hirsh of Newswek showed childlike <a href="http://www.newsweek.com/id/168867" target="_blank">confidence</a> in Obama&#8217;s abilities even before he assumed  office:</p>
<blockquote><p>“The new president may  think his only task is to rescue the economy. But like FDR, he may have  to save capitalism itself.”</p></blockquote>
<p>How do we, then, explain AP&#8217;s present  lack of hope in a better tomorrow? It would seem that they are coming  to realize that the Messiah of yesterday is making a mess of things  today.</p>
<p>To be fair, Barack Obama has been dealt  a difficult hand. He has repeatedly said that this crisis was years  in the making and in that he is correct. But it should be noted that  it has been brought on by the very policies he subscribes to. This crisis,  as almost all other economic crises, has been caused by  government.  The housing bubble – the bursting of which set things off – was  a government creation. Inflated by a combination of unsupportably low  interest rates  – set by the Federal Reserve – and Congress&#8217;  misguided desire to increase home ownership among low income people,  it was a governmentally-induced phenomenon from beginning to end.</p>
<p>Even though Obama was not a major player  when those policies were enacted, they were precisely the kind of measures  he has always stood for. After all, he worked for ACORN, an organization  which threatened to shut down banks that did not meet mortgage quotas  for low income earners. So while it is true that Obama did not personally  bring about the crisis, the policies he espouses most certainly did.</p>
<p>In any case, now that Barack Obama  is in power he is doing everything he can to drive the economy off the  cliff and into the ground. David Horowitz recently made <a href="http://www.youtube.com/watch?v=W276ICvVAd4" target="_blank">a strong case</a> on Glenn Beck that Obama is a far-left radical  who poses a great danger to this country. Nowhere is this more obvious  than on the economic front. So ruinous have Obama&#8217;s actions been that  if a Hugo Chavez or some other America hater were given an opportunity  to call the shots, he could hardly outdo the president in the destructiveness  of his policies. Working relentlessly to impose government control over  the American economy and to annihilate the remaining vestiges of the  free market, Obama has already wrought untold damage. Nationalizing  banks and car companies, debasing the dollar, passing odious business  regulations and running up debts that we will never be able to repay  are only some of the highlights of Obama&#8217;s performance so far.</p>
<p>But all this is just the beginning,  because still in the works are two monumentally deleterious schemes  – Cap and Trade and Healthcare Reform.</p>
<p>The purported aim of Cap and Trade  is to eliminate the nonexistent phenomenon of man-made global warming,  but its real goal is to put a stranglehold on the American economy.  This will be done under the guise of penalizing those who use energy  deriving from fossil fuels. It is rightly said that energy is the lifeblood  of the American economy. Significantly, Americans obtain 85 percent  of it by burning C02-emitting substances, mainly oil and coal, which  is why Cap and Trade would have devastating consequences.</p>
<p>According to <a href="http://www.heritage.org/Research/EnergyandEnvironment/cda0904.cfm" target="_blank">analysis</a> by The Heritage Foundation, Cap and Trade  “promises serious perils for the American economy for the years and  decades ahead.” It would result in the loss of millions of jobs and  it would cut trillions of dollars from America&#8217;s economic output. Under  Cap and Trade the price of gasoline would go up 58 percent and the average  household electric rate would increase by 90 percent. Paradoxically,  all these immense costs would yield virtually no discernible benefits.  More from <a href="http://www.heritage.org/Research/EnergyandEnvironment/cda0904.cfm" target="_blank">Heritage</a>:</p>
<blockquote><p>Climatologists estimate  that Waxman-Markey&#8217;s impact on world temperature will be too small to  even measure in the first several decades. The theoretical moderation  of world temperature would be 0.05 degree centigrade by 2050.</p></blockquote>
<p>All this for less than one tenth of  one degree, and even this infinitesimal gain only shows up on models  that run on most optimistic assumptions. Looking at all the facts, one  cannot but conclude that Cap and Trade is nothing other than a stealth  move for the economy&#8217;s jugular.</p>
<p>As far as healthcare is concerned,  the president&#8217;s works are no less destructive. The bill that was passed  last Saturday by the House and <a href="http://apnews.myway.com/article/20091108/D9BR59EO0.html" target="_blank">hailed</a> as a “victory” for Obama contains a provision  that would prohibit insurance companies from refusing coverage based  on pre-existing health conditions. This is the equivalent of allowing  people to buy car insurance after their crash their car or buy fire  insurance after their house burns down. Highly controversial, this provision  was kept on the urging of President Obama who insisted that it be included  in the bill.</p>
<p>If you do not believe that an American  president would ever force such an onerous requirement on private businesses,  you should refer to <a href="http://www.whitehouse.gov/blog/The-Return-of-the-Viral-Email/" target="_blank">an  e-mail sent</a> to supporters  on August 8 by Obama&#8217;s senior advisor David Axelrod. The first bullet  point under the heading “8 ways reform provides security and stability  to those with or without coverage” reads:</p>
<ul>Ends Discrimination for Pre-Existing  Conditions: Insurance companies will be prohibited from refusing you  coverage because of your medical history.</ul>
<p>Clearly no insurance company can operate  under such a regime and continue as a viable commercial entity. Obama&#8217;s  healthcare “reform” would thus end up driving all insurers out of  business and eventually leave the government as the sole provider of  healthcare in America.</p>
<p>It should be obvious that the American  economy cannot survive the implementation of these odious programs as  they would vitiate America&#8217;s capitalist foundation. This is why the  president wants to make their passage his signature achievements.</p>
<p>David Horowitz is all too correct when  he <a href="../2009/10/20/barack-obamas-rules-for-revolution-the-alinsky-model/" target="_blank">writes</a> that Obama&#8217;s goal is “the systematic transformation  of our nation from an open, capitalist society, to a Big Brother-type  socialist nation.” Obama actions prove Horowitz right almost every  day as he takes this country down the sewage tubes of socialism. Despite  all his flowery promises, the American people have nothing good to look  forward to. The president&#8217;s media spokesmen know it, and they are dutifully  preparing us for the hardships to come.</p>
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		<title>Shilling for Obama &#8211; by Vasko Kohlmayer</title>
		<link>http://www.frontpagemag.com/2009/vasko-kohlmayer/shilling-for-obama-by-vasco-kohlmayer/?utm_source=rss&#038;utm_medium=rss&#038;utm_campaign=shilling-for-obama-by-vasco-kohlmayer</link>
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		<pubDate>Thu, 05 Nov 2009 05:00:55 +0000</pubDate>
		<dc:creator><![CDATA[Vasko Kohlmayer]]></dc:creator>
				<category><![CDATA[FrontPage]]></category>

		<guid isPermaLink="false">http://frontpagemag.com/?p=34732</guid>
		<description><![CDATA[Why the mainstream media won’t report the bad news about the falling dollar.]]></description>
				<content:encoded><![CDATA[<p><img class="alignnone size-full wp-image-34733" title="ist2_6132484-falling-money" src="http://cdn.frontpagemag.com/wp-content/uploads/2009/11/ist2_6132484-falling-money.jpg" alt="ist2_6132484-falling-money" width="304" height="304" /></p>
<p>Eamon Javers of <em>Politico</em> recently wondered why Matt Drudge, the proprietor of the widely-read Drudge Report, so frequently links to stories detailing the decline of the dollar. In the first three weeks of October, he noted, Drudge linked to such stories eighteen times. Javers suggests that Drudge&#8217;s interest in the subject may be politically motivated:</p>
<blockquote><p>“What Drudge is doing is relentlessly hammering the continuing point which is linking Barack Obama&#8217;s administration and what some see as their failures on spending and their agenda on the economy, linking that to the declining value of the dollar. And what we see is the dollar becoming extremely politicized in the debate over whether this is Obama&#8217;s fault.”</p></blockquote>
<p>The quote is revealing in more ways than one. For one thing, it lays bare the mindset of the mainstream media. Javers is only one of a legion of mainstream journalists who automatically assume that any story that reflects badly on the president must be an act of political gamesmanship. It apparently does not occur to them that Matt Drudge may be highlighting those items, because they are intrinsically newsworthy. So intent are they on pushing Obama&#8217;s agenda that they have failed to notice one of the most important stories of our time – the ongoing disintegration of the US dollar.</p>
<p>The repercussions of this are immense. Once the dollar collapses, it will take down with it the world&#8217;s monetary regime, which has the dollar as its foundation. This will impact all of us in profound and life-changing ways. But rather than reflecting on this situation, the journalistic elite merely wonders whether those who bring this matter to public attention have a political ax to grind with the president.</p>
<p>They would do well to consider that the story of the falling dollar is decidedly not the invention of Matt Drudge or some right-wing attack machine. It is financial market&#8217;s verdict on the fiscal mismanagement in Washington, DC. Last week Bloomberg – one of world&#8217;s premier business news agencies – opened one of its wires with the revelation that “The dollar reached a 14-month low versus the euro.” On Monday yet another report opened with this: “The dollar slid against high-yielding currencies, led by the Australian dollar.”</p>
<p>In recent months, there has been a proliferation of such stories. The fact that they are almost completely ignored by the mainstream media is less an indictment of Matt Drudge than of the media’s failure to inform the public. Reuters, another premier news service, recently posted a story quoting a close aide to French President Nicolas Sarkozy who accused Washington of “risking global inflation by printing money and flooding the world with liquidity.” Even more ominously, a French government spokesman said that Sarkozy will propose “a new international monetary organization which better reflects today&#8217;s world when France holds the presidency of the Group of 20 wealthy nations in 2011.” Whether this particular scheme succeeds or not, the mainstream media should take the clue: The dollar&#8217;s rein as king may drawing to an end.</p>
<p>Ever eager to help out President Obama, <em>Politico</em> tries to make the best of the bad situation by suggesting that a weak dollar is actually a good thing. It quotes a <em>New York Times</em> reporter Nelson Schwartz who recently wrote that:</p>
<blockquote><p>“A weak dollar could prove beneficial to the American economy by aiding long-suffering manufacturers, rebuilding a stronger industrial base and lifting exports even if it makes life harder for trading partners around the world, especially in Europe.”</p></blockquote>
<p>The idea is that the falling dollar will make American products cheaper abroad and as such they will be bought in greater quantities by foreigners. This is true enough, but the idea that the Obama presidency will somehow benefit American manufacturers is ludicrous. This is because President Obama has no intention of helping American industry. If he had, he would not push so hard for the odious “cap and trade” legislation. By penalizing the use of energy deriving from fossil fuels – which makes up for 85 percent of all energy used in America – this legislation will hit the manufacturing sector especially hard, since manufacturing tends to be energy intensive. The result will be the loss of millions of jobs and the devastation of whatever manufacturing is still left in America today.</p>
<p>The main reason for the collapsing dollar is not the president&#8217;s desire to help business but his out-of-control spending. With exploding deficits, Obama has brought federal expenditures to levels unseen since the height of World War II. Injecting trillions into the economy, some of which has been created out of thin air by the Federal Reserve, has dramatically increased the money supply and resulted in the dollar&#8217;s inevitable depreciation. The falling of the dollar has not been orchestrated by Obama out of his concern for his country&#8217;s industrial sector; it is a consequence of his fiscal recklessness. That this is not a better understood in the country is not the fault of Matt Drudge.</p>
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		<title>Disaster in the Making &#8211; by Vasko Kohlmayer</title>
		<link>http://www.frontpagemag.com/2009/vasko-kohlmayer/disaster-in-the-making-by-vasko-kohlmayer/?utm_source=rss&#038;utm_medium=rss&#038;utm_campaign=disaster-in-the-making-by-vasko-kohlmayer</link>
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		<pubDate>Wed, 04 Nov 2009 05:05:47 +0000</pubDate>
		<dc:creator><![CDATA[Vasko Kohlmayer]]></dc:creator>
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		<guid isPermaLink="false">http://frontpagemag.com/?p=34162</guid>
		<description><![CDATA[Meet the entitlement that finally breaks the federal government's back.]]></description>
				<content:encoded><![CDATA[<p><img class="alignnone size-full wp-image-34421" title="Pelosi Convention" src="http://cdn.frontpagemag.com/wp-content/uploads/2009/11/pelosi.JPG" alt="Pelosi Convention" width="453" height="321" /></p>
<p>Late last week the Associated Press featured a photo of House Speaker Nancy Pelosi jubilantly pumping her fist after <a href="http://www.breitbart.com/article.php?id=D9BKTGK80&amp;show_article=1%20%20">introducing</a> the sweeping health care legislation that she and her fellow Democrats had just rolled out.</p>
<p>But while Pelosi and her friends celebrate the 1,900 page monstrosity, Americans have every reason to feel outraged. The bill, which promises to provide healthcare coverage for 96 percent of Americans, would quickly morph into the largest entitlement program in American history. As such it promises to be a boondoggle of unprecedented proportions.</p>
<p>In the accompanying statement, Democrats estimated the bill&#8217;s cost at around $900 billion over ten years. Claiming it would “lower costs for every patient,” they contend it would not increase federal deficits. President Barack Obama said that the proposed legislation “clearly meets two of the fundamental criteria I have set out: It is fully paid for and will reduce the deficit in the long term.”</p>
<p>This is as great a lie as has ever been told.</p>
<p>Years of experience show that the cost of every entitlement program widely exceeds initial estimates. Less inclusive entitlements such as Social Security and medicare, which only affect a limited portion of the population, are projected to grow so costly as to be financially unmanageable. Some experts now estimate that the inherent liabilities of these two programs currently exceed $100 trillion. It is almost certain that the price tag for universal governmentally-run healthcare would eventually make the cost of these programs seem like change in comparison.</p>
<p>It cannot be otherwise. Such is the nature of bureaucracy that it is not possible for government to run anything well or expeditiously. We know from practical experience that every governmentally-managed project ends up mired in waste and inefficiency. The larger the scope of the project, the greater the resultant mess. It is a universal truism that government bungles everything it touches. Those who may think this an exaggeration should try to think of one government program that has been run efficiently or that has saved money.</p>
<p>We have great grounds for alarm: If this bill ever passes, the government will eventually end up as the sole provider of healthcare in the United States of America. This is because the bill contains an odious provision which would in due course drive all private insurance companies out of business. That provision would make it illegal for private insurers to deny coverage based on pre-existing conditions. This is the same as allowing people to purchase car insurance after they crash their car, or apply for homeowners insurance after their house catches on fire. No insurance company can survive under such onerous regime for very long.</p>
<p>Once the government ends up as the only insurer, it will then set rates for medical services and procedures in the same way it currently does with Medicare. This will only seem the sensible thing to do – costs must be controlled and greedy doctors must not be allowed to gauge. Government takeover will then be complete.</p>
<p>It is truly hard to believe that in the United States of America government can abuse private enterprise in this way. The American Constitution was written precisely so that something like this would never happen. For the government to run roughshod over the private sphere in this way is a violation of the very principles on which America was founded. That a bill like this could even see the light of day shows just how far we have fallen.</p>
<p>But is not all. The AP report contains this ominous sentence:</p>
<blockquote><p>Pelosi, D-Calif., and the leadership have yet to work out disputes over abortion services and health care for immigrants, issues that must be settled before the bill can come to a vote.</p></blockquote>
<p>In one fell swoop Pelosi is not only trying to eliminate private healthcare but also provide medical coverage for immigrants. Worse yet, they are scheming to include those who are here illegally. They will of course deny it publicly, but previous drafts contained provisions that would prevent medical professionals from inquiring into the status of those seeking care.</p>
<p>As far as abortion services are concerned, AP has missed the boat. Whatever differences there may have been, they have been worked out and settled. Charmaine Yoest, president and CEO of Americans United for Life, <a href="http://healthcare.nationalreview.com/post/?q=OTI2ZWE3MTZhN2NjZDlkMmNmYzI1MjhiYTY5NTdlNWQ=">wrote this</a> in <em>National Review</em> hours after the bill was made public:</p>
<blockquote><p>This bill would explicitly allow federal funding of abortion through the public option and would permit federal subsidies to go to private insurance plans that cover abortion. The bill would also ensure that at least one health insurance plan must cover abortion in every area of the country. These provisions create a dramatic change from the status quo — currently no federal dollars are used to pay for elective abortions or plans that cover abortion.</p></blockquote>
<p>So if you happen to be an illegal immigrant desiring an abortion, Congressional Democrats will be happy to oblige.</p>
<p>To obtain money for their schemes Democrats plan to raise taxes on pharmaceutical companies and makers of medical devices. In his <a href="../2009/10/28/obama-taxes-pacemakers-heart-valves-by-dick-morris/">recent column</a>, Dick Morris listed some of the items that will be subject to the new excise tax: pacemakers, stents, artificial heart valves, defibrillators, automated wheelchairs, mechanized artificial limbs, replacement hips and knees, surgical gurneys, laparoscopic equipment and such.</p>
<p>Morris then aptly pointed out the absurdness of it all: “President Obama is planning to reduce the cost of medical care by taxing it!”</p>
<p>President Obama and his fellow democrats are in effect proposing to tax, penalize and bankrupt the very people and companies that provide medical wonders that make our lives healthier, longer and more pleasant.</p>
<p>Congressman John Flemming of Louisiana&#8217;s 4<sup>th</sup> District got it just about right when he <a href="http://www.bayoubuzz.com/News/Louisiana/Politics/Louisiana_Politics_Dave_Treen_Vitter_And_Illegal_Aliens_New_Health_Care_Bill__9732.asp">said</a>:</p>
<blockquote><p>“What Speaker Pelosi unveiled today should be called Extreme Makeover: Socializing America’s Health Care. This plan is nothing more than the blueprint for a government takeover of our health care system and all that comes with it: delayed and denied services, bureaucrats stepping between doctors and patients, increased taxes for all American families.”</p></blockquote>
<p>This is a devious bill that portends the death of good healthcare in America. It will put bureaucrats and politicians in charge of one of the most important aspects of our lives, which – in light of their past record – is a truly frightening prospect. It will sink us financially by running up tens of trillions of dollars in costs. This bill is a national disaster in the making.</p>
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		<title>The Coming Financial Crisis &#8211; by Vasko Kohlmayer</title>
		<link>http://www.frontpagemag.com/2009/vasko-kohlmayer/the-coming-financial-crisis-by-vasko-kohlmayer/?utm_source=rss&#038;utm_medium=rss&#038;utm_campaign=the-coming-financial-crisis-by-vasko-kohlmayer</link>
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		<pubDate>Thu, 29 Oct 2009 04:15:25 +0000</pubDate>
		<dc:creator><![CDATA[Vasko Kohlmayer]]></dc:creator>
				<category><![CDATA[FrontPage]]></category>

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		<description><![CDATA[The U.S. government is on the brink of insolvency. 
]]></description>
				<content:encoded><![CDATA[<p><img class="alignnone size-full wp-image-32895" title="uncle-sam-broke" src="http://cdn.frontpagemag.com/wp-content/uploads/2009/10/uncle-sam-broke.jpg" alt="uncle-sam-broke" width="398" height="450" /></p>
<p>The Associated Press <a href="http://apnews.myway.com/article/20091017/D9BCHP5O0.html">noted</a> last week that the federal deficit reached a record $1.42 trillion for the fiscal year that ended September 30. Up until now, most of the mainstream media have either ignored the exploding deficits or declared them a good thing, since they were supposed to lift us out of the recession. But now that the full figures have come in even some Obama-friendly media stalwarts are struck by their enormity.</p>
<p>This awakening is heartening. The AP report does a good job of putting the deficit number against some other figures to give a sense of scale. The government&#8217;s shortfall last year, AP notes, is larger than the whole economy of India and more than the combined deficits during this country&#8217;s first two hundred years. It is, in fact, almost as large as the yearly economic output of Canada. AP quoted Kenneth Rogoff, former chief economist for the International Monetary Fund, who pointed out that “The rudderless U.S. fiscal policy is the biggest long-term risk to the U.S. economy.”</p>
<p>Rogoff only states the obvious. The gravest threat to this country&#8217;s economic well-being is the policies of this government. A Harvard professor and a Keynesian through and through, Rogoff is no right-wing conservative. But after surveying the grim economic picture, even liberals must recognize that the reckless spending of the Obama administration is taking us toward fiscal Armageddon.</p>
<p>An encouraging sign though it may be, the AP report leaves much to be desired. It asserts, for example, that the $1.42 trillion deficit “includes the cost of the government&#8217;s financial sector bailout and the economic stimulus program passed in February.” This is flat out false. Less than $200 billion was spent from the stimulus authorization in fiscal 2009. If the stimulus allotment had been tapped in full, the deficit would have been close to $2 trillion. Needless to say, most of the remainder will be spent in the current fiscal cycle, which will push up the 2010 deficit figure accordingly.</p>
<p>Further, despite its newfound concern about Washington&#8217;s overspending, AP exhibits striking fiscal naïveté when it maintains that the huge deficit could itself “be the seeds of another economic crisis.” Here is a newsflash for AP: The $1.42 trillion deficit is a crisis. There is simply no other way to describe our government&#8217;s unconscionable fiscal profligacy.</p>
<p>So bad things have become that, when asked about it, Senator Judd Gregg <a href="http://politicalticker.blogs.cnn.com/2009/10/18/gregg-u-s-could-be-on-path-to-a-banana-republic-situation/">told</a> CNN that “we’re basically on the path to a banana-republic-type of financial situation in this country.” Disturbing as it is to admit, Gregg is largely right. Saddled with more than $65 trillion in obligations, there is simply no way our government can make good on its debts.</p>
<p>The only reason things have not yet fallen apart is the dollar&#8217;s status as the global reserve currency. But this too is coming to an end. In recent months we have seen holders of our national debt grow increasingly alarmed about the integrity of their investment, with many openly voicing their desire to decouple themselves from the dollar regime. Their problem is that they have not yet figured out an alternative, so they have to stick with the dollar for the time being. But once they figure it out, the floor will fall out from under the once-mighty greenback and all fiscal hell will break loose.</p>
<p>In another sign of impending trouble, Sheila Bair – the nation&#8217;s top financial regulator – has <a href="http://money.cnn.com/2009/10/14/news/companies/fdic_deposit_fund/?postversion=2009101415%20">testified</a> before Congress that the Federal Deposit Insurance Corporation (FDIC) is running a shortfall. According to Bair, the fund – which is designed to protect consumer bank deposits – will have a negative balance at least through 2012. The reason for this is the mounting number of bank failures. As of Friday last week the <a href="http://apnews.myway.com/article/20091024/D9BHE7RG0.html">tally</a> for this year was 106 banks. This is most in a single year since the end of the savings-and-loan crisis in the 1980s. There are many more bank failures expected in the months ahead, with more than 400 banks currently flagged as being at risk.</p>
<p>This should be a warning to those who think that their bank accounts are safe, because they are “insured” by the government through the FDIC. This is a false assurance. Mired in debts it cannot pay, the U.S. government will be in no position to bail out anyone should another massive wave of bank failures take place.</p>
<p>Operating under permanent structural deficits, our government has no stash of real dollars to draw upon. Because of this, it can only replenish the sinking FDIC fund in one of two ways: It can either borrow more or it can simply print new money. Since there is every indication that the era of low bond yields is coming to an end, the money the FDIC will dish out during the next crisis will likely be of the printed sort. It will be inflationary diluted money whose value will be less than it was at the time when those “insured” deposits were made. In the last six months alone the dollar lost 10 percent of its value. Two hundred thousand fifty dollars of, let&#8217;s say, 2002 will be worth appreciably less in 2012. If things continue this way and if the government is forced to pump up freshly-printed billions into the FDIC, most depositors – especially those who put their money in the bank some time ago – will walk away with only a fraction of their original value.</p>
<p>The idea that a government that is itself in need of a bail out can come to anyone’s rescue is becoming increasingly untenable. Even the administration’s once-loyal supporters in the mainstream media no longer believe it.</p>
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