Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Tag Archives: Austerity

U.S. Government’s Interest Costs to Quadruple in 10 Years

This article first appeared online at TheNewAmerican.com on Thursday, February 5, 2015: 

On Tuesday, the Wall Street Journal reported that the federal government will be paying $800 billion annually just to service the interest on its massive debt by 2025, up from just over $200 billion currently. By 2021, those interest costs will equal what the government is projected to be spending on national defense, and on non-defense (so-called “discretionary” items), and will greatly exceed those two budget items just by 2025. The Journal also noted that “non-discretionary” items (so-called “mandatory” expenditures) will continue their inexorable march upward, from $2 trillion currently to more than $4 trillion by 2025.

Surprisingly, few eyebrows were raised over the announcement,

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Wisconsin Governor Walker to Substantially Reduce University Spending

This article first appeared online at TheNewAmerican.com on Wednesday, February 4, 2015: 

On Tuesday, as part of his continuing quest to bring Wisconsin’s government spending under control, Governor Scott Walker announced a 13-percent cut to the University of Wisconsin’s $2.3 billion annual budget. In addition, his plan includes a two-year tuition freeze and the severance of state control over the university, passing it over to an autonomous authority. It also includes drug testing for people applying for public assistance, the merging of several state agencies, and the elimination of 400 state jobs. Walker explained: “Our plan will use common-sense reforms to create a government that is limited in scope and ultimately more effective, more efficient and more accountable.”

He also made clear in a radio interview that professors are going to have to ante up as well: 

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Controversial Harvard Professors predict high inflation and defaults for the US

The two Harvard professors who made themselves famous, and then infamous, are at it again, now predicting that America will soon be forced to

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“Saudi Texas” is changing the world’s economic and political landscape

The virtual explosion in Texas’ production of natural gas and oil, thanks to fracking, caught even Citigroup off-guard. In February it apologized for so widely missing the mark in its report the previous year entitled “Energy 2020: Independence Day”:

Momentum toward North American energy independence accelerated last year [2012] well beyond the wildest dreams of any analyst and

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The Implosion of the Social Security Disability Ponzi Scheme Accelerates

Fresh data just released by the trustees of the Social Security Administration show that the number of people receiving benefits from the Disability Insurance Trust Fund has exploded over the last five years, reducing the surplus in that fund from $216 billion in 2008 to just over $100 billion in 2013. There were 7.4 million recipients in January 2009, but as of October 2013, there are nearly 9 million beneficiaries, not including

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Staff Report from the IMF Blames the European Union for Mishandling the Greek Crisis

The report from the International Monetary Fund is remarkable in its candor: efforts to bail out Greece were fumbled as the IMF, the European Commission and the European Central Bank all tried to promote their own agendas with little regard for the lowly Greek citizen.

Happily the disclaimer appeared on the front page:

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Austerity is impending the economy, say the Keynesians

Two writers at The New York Times have embraced the fallacy that cutting government spending is keeping the economy from growing. It is Keynesian claptrap.

Let’s let them rant a little before responding:

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Flight Delays Increasing as FAA Announces Sequester Furloughs

Last Sunday the Federal Aviation Administration (FAA) announced that it was being forced to furlough its traffic controllers because of cuts to its budget forced by the “sequestration” that began last month. Delays at major airports of 90 minutes and longer were being reported late Sunday night and were spreading into Monday

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Moody’s Downgrades Britain’s Credit, Expects Little Improvement for Years

Last Friday Moody’s Investors Service announced its downgrade of the United Kingdom’s government bond ratings by one notch, from AAA to Aa1, a move that was anticipated a year ago when the credit rating agency moved its rating on UK bonds from

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Calvin Coolidge: the Man Nobody Knows

Thanks to a remarkable essay by a remarkable historian, the story of Calvin Coolidge is just now getting some attention and appreciation. Known as Silent Cal , historians have largely ignored him because he wasn’t a

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What the US can learn from Latvia. Latvia?

What makes this report from the International Monetary Fund (IMF) so remarkable is its source. According to the IMF’s own website,

The International Monetary Fund (IMF) is an organization of 188 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

The reality is vastly different. The IMF is the agent, along with the World Bank, that drives impoverishment in those 188 countries. Here’s what Anthony Wile says about this tag-team:

The World Bank and the IMF work hand in hand. The World Bank loans money to corrupt governments that loot or squander the funds and then the IMF comes in and insists on an “austerity program” of higher taxes and lower government spending to ensure the loans are paid back.

When a country like Latvia successfully resists the temptation of easy money offered by the IMF and decides instead to the do right, proper and prudent thing, the IMF would be the last place one would find an article praising such a decision, and the natural flow of prosperity that results. Here’s the opening paragraph from the IMF:

Latvia’s economy continues to recover strongly. Following real GDP growth of 5.5 percent in 2011, growth is expected to exceed 5 percent again this year despite recession in the euro area. Labor market conditions are improving. The unemployment rate fell from 16.3 percent at the beginning of the year to 13.5 percent at the end of the third quarter, despite an increase in participation rates. Real wage growth remains restrained. Consumer price inflation has declined sharply, easing to 1.6 percent at end-October after peaking at 4¾ percent in mid-2011. Robust export growth is expected to keep the current account deficit at about 2 percent despite recovering import demand.

Reading between the lines, the IMF is saying that Latvia would be much worse off if they had followed the IMF’s lead in “solving” their financial problems. This is how Anders Aslund, writing for the Peterson Institute for International Economics, put it:

Remember that in 2008–09, Latvia lost 24 percent of its GDP. It was heading toward a budget deficit of 19 percent of GDP in 2009 without a program of radical austerity. But the Latvian government did undertake austerity, and the last two years’ success shows the merits of that policy…

The going does not get much better than this. Latvia will have the highest growth rate and one of the smallest budget deficits in Europe this year, probably 5.3 percent, along with low inflation and wonderful export expansion. The only shortcoming is the still high unemployment rate, but unemployment is a lagging indicator and it is falling sharply.

Here’s how they did it:

The government told people how bad the situation was, and the various social partners responded by signing up to a truly radical austerity program. One-third of the civil servants were laid off; half the state agencies were closed, which prompted deregulation; the average public wage was cut by 26 percent in one year…

Top officials were hit … with 35 percent in wage cuts … [and] public servants were no longer allowed to sit on state corporate boards and earn more than from their salaries, a malpractice that is still common in many European countries. The government exposed high-level corruption.

Is there a lesson here for us?

Tax Hikes Austerity vs. Spending Cuts Austerity

Europe Simulator

Europe Simulator (Photo credit: wigu)

Dan Mitchell of Cato nails it: if austerity measures are applied to the private sector, the economy goes into the dumper. If austerity is applied to government spending, the economy revives. He is getting support for his thesis not only from simply looking at the slowdown in Europe (with some notable exceptions), but from Matthew Melchiorre from the Competitive Enterprise Institute, who said:

The looming fiscal cliff, with four times more tax increases than spending cuts, would reduce growth, not debt. Tax-heavy European austerity plans have failed. We must cut public spending to prosper.

The folly of “austerity” composed mainly of tax hikes with less in the way of spending reductions has driven the economies of the Old World into the ground. We’re next…

He looks at the European countries that are implementing austerity through tax increases rather than

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Spain’s Catalonia Region Demands Independence

Draft of New Statute of Autonomy for Catalonia...

Draft of New Statute of Autonomy for Catalonia of 2005 (Photo credit: Wikipedia)

Every September 11 the people of Catalonia, an independent region in northeast Spain, celebrate their “national day” — Diada — by taking the day off and parading through the streets of Barcelona. In past years the celebration was a festival used by some citizens as an excuse to get some fresh air, make some noise, and have some fun. This year, nearly one-quarter of the region’s seven million citizens used the celebration as an excuse to swarm into Barcelona to protest Spain’s austerity measures, which have raised unemployment in Catalonia — referred to locally as Catalan — to nearly 25 percent.

The immensity of the crowd far exceeded expectations so that parade routes had to be adjusted and parking places found for the more than 1,000 buses chartered to bring Catalans into the city. Most revelers were waving flags that said, “Catalonia: a new European state.” Said Alfred Bosch, a member of the Catalonian government:

All the flags I can see are the pro-independence flags of Catalonia with the lonely star right in the middle of the triangle.

And everybody is wearing these flags. I have never seen so many pro-independence flags in my all life.

Catalonia is a largely autonomous region of Spain with about 15 percent of the country’s population; it generates about 20 percent of Spain’s gross domestic product. It also pays more in taxes to Madrid than it receives in benefits. The fact that Spain levies taxes on Catalans and then sends only some of the money back to the region is galling, especially to those who

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Bailout of Spain Just a “Credit Line,” Says New Prime Minister

Mariano Rajoy

Following another last-minute late-weekend meeting of European Finance Ministers, Spain’s new Prime Minister Mariano Rajoy happily announced that not only was his country going to get more bailout funds than it needs, it’s coming without any strings attached. This is because, according to Rajoy, the new measures instituted since the victory of his People’s Party last November have been so effective in bringing common sense and prudent behavior back to the country’s financial markets. Those “radical” fiscal, labor-market, and financial-sector reforms that were instituted were the key, he said, adding,

If we hadn’t done this in these past five months, what was put forward [on Sunday] would have been a bailout of the Kingdom of Spain. Because we had been doing our homework for five months, what did happen…what was agreed, was the opening of a line of credit for our financial system.

There is no conditionality of any kind.

According to a report by the International Monetary Fund (IMF), Spain needed at least $50 billion to rescue and recapitalize its banks. But the Finance Ministers decided to up the ante significantly, to $125 billion, just to be safe. Said Olli Rehn, the European Union’s top economist, “This is a very clear signal to the markets, to the public, that the Eurozone is ready to take determined action.” He added, “We deliberately wanted to ensure there is some additional safety margin…. This is preemptive action.”

What Rajoy failed to mention is that there are most certainly strings attached, and when

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Eurozone Teetering on the Edge of Recession

The economic growth of Portugal, Italy, Irelan...

With economists predicting the start of an official recession in Europe, the latest numbers from the European Union’s statistics agency, Eurostat, show that the recession hasn’t been confirmed, at least not yet.

Without Germany’s slightly better economic performance in the first quarter, however, the recession would be official. Two quarters of “negative growth”—or rather shrinkage—is the usual definition of a recession, and it appears that the official declaration will have to wait until July. Germany was expected to grow at a paltry annualized rate of 0.1%—barely perceptible—but instead grew by a modest 0.5% in the first quarter, which followed a 0.3% contraction in the last quarter of last year. Some economists had the audacity to call this a “strong economic performance” by Europe’s powerhouse, but a closer look at the real numbers reveals how close a call it was and that it’s just a matter of time before the economists finally recognize the reality that

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French Elections: Austerity, No! More Spending, Yes!

François Hollande à Saint-Cyr-sur-Loire

By a three-point margin, French citizens replaced President Nicolas Sarkozy with the Socialist and Radical Left Party candidate, Francois Hollande. Hollande, a former mayor of Tulle (pop. 15,000) and then president of Correze (pop. 242,000), beat Sarkozy 51.9% to 48.1%, resulting in the first Socialist president of France since Francois Mitterand left that office in 1995. With Socialist Party majorities in the upper house of parliament and two-thirds of all French towns, a win by the party in the upcoming June elections in the lower house would give the Socialist Party “more levers of power than ever in its 43-year modern history,” according to NewsMax.com.

With such control, Hollande knows exactly what he is going to do: apply what France is already suffering from, only more so. He wants to spend more money even in the face of the agreement recently signed with German Chancellor Angela Merkel to cut spending in order to save the banks and the euro. His campaign slogan, “Austerity is not inevitable,” Hollande is persuaded that he can do the impossible: spend more and balance the budget at the same time. He plans to:

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The Greek Deal Saves the Banks

Map of Greece with EU flag

Following a 13-hour marathon session on Monday, eurozone ministers announced an agreement to loan Greece another $170 billion, which saves the banks while punishing private investors and damaging Greek national sovereignty.

The bailout brings the total spent or committed to save the eurozone countries of Greece, Ireland, and Portugal to $500 billion with little assurance that more won’t be needed very soon. Details of the agreement require that 90 percent of private bondholders agree to take a 53-percent haircut on their investments by exchanging old bonds for new. It requires acquiescence by Austria, Finland, Germany, the Netherlands, and Slovenia to allow the European Central Bank and the International Monetary Fund to part with the funds. And it forces Greece to accept permanent and rigid enforcement of debt service payments by outsiders monitoring government revenues and expenditures and forcing debt service payments to be made ahead of any other government commitments.

The parties who come out whole on the deal are, naturally, the European Central Bank and other banks that hold Greek debt. Their holdings will be paid off at par.

Observers with chips in the game were decidedly guarded in their enthusiasm. Joerg Kraemer, chief economist at Commerzbank AG in Frankfurt, said, “Greece will find it difficult to shoulder even the

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Eurozone Recession Accelerates; Moody’s Piles On

Board of Governors - International Monetary Fu...

Economists polled by Reuters predicted that the recession in Europe that began late last year would continue into the new year and they weren’t disappointed. Reuters announced that economic output in the 17-member eurozone declined by 0.3 percent in the last quarter of 2011, the sharpest since the second quarter of 2009 at the start of the recession. Those same economists are now predicting that European GDP growth will stay negative at least for the rest of the year with only modest chances of improvement in 2013.

The International Monetary Fund (IMF) has the same negative expectations, predicting at least a 0.5-percent contraction of the eurozone countries next year. Even Germany, long the anchor to windward and the engine of growth for the European community, went negative in the last quarter compared to its modest growth rate of 0.6 percent in the third quarter.

Investment banking firm ING admitted that the decline caught their forecasters by surprise. Carsten Brzeski said the economic contraction “turned out to be weaker than expected.”

The Netherlands declined into recession (defined as two quarters of declines in GDP, or “negative growth” in economic parlance) with its third quarter contraction of 0.4 percent followed by another 0.7 percent decline in the fourth. Italy’s economy dropped by 0.7 percent in the last quarter with little improvement expected for at least a year. This puts Italy into the same recessionary camp as Belgium, Portugal, and Greece.

Portugal may be looking for another bailout as its economy suffered at 1.3 percent decline in the fourth quarter, more than double the 0.6 percent decline from the third quarter.

But Greece is the basket-case poster child for economic performance, with a stunning

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European Fiscal Pact: Closing the Ring

Graphic "When Greece falls" presente...

Monday’s meeting of the European Union in Brussels resulted in agreement of 25 of the 27 member states to inflict upon themselves and their hapless and increasingly powerless citizenry the tools of international fiscal dictatorship.

The purpose of the “fiscal pact” is to enforce “budgetary discipline” so that the present euro crisis can be contained and future such crises averted. In the short run that means granting the European Central Bank (ECB) additional power to expand its reserves so that bailouts to failing countries can continue, subject to enforcement rules. In the longer run, the pact puts in place the primary tool of coercion, the European Stability Mechanism, to be effective in July.

European Council President Herman Van Rompuy said that initially the ESM will be limited to just €500 billion ($650 billion) but that the ultimate number “will be reassessed down the line.”

Critics say that’s the entire purpose of the ESM: to set up the mechanism of control under the guise of providing bailout funds to members in need while installing ruling class elites (bankers with ties to Goldman Sachs) out of reach of the taxpayer class. Angela Merkel, German Chancellor and mouthpiece for the ESM, was clear: “It is an important step forward to a stability union. For those looking at the union and the euro from the outside, it is very important to show this commitment.”

She failed to mention that Great Britain and the Czech Republic have both

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Greeks About to Learn the True Cost of Bailouts

Ευάγγελος Βενιζέλος, συνέντευξη τύπου στα μέσα...

Greece’s Finance Minister, Evangelos Venizelosrejected the German idea of imposing a eurozone “overseer” as part of the agreement to keep bailout funds flowing to his country.

He said that the proposal, floated late last week as a condition for Greece to receive another $170-billion bailout from the European Central Bank, would force his country to choose between “financial assistance” and “national dignity.” He said that forcing Greece to accept such an overseer—with the power to veto Greek tax and spending decisions and make sure that debt service is paid before any other government expenditures—“ignores some key historical lessons.” An unnamed official privy to the conversation put it even more clearly: “If you went with that model, you’d do away with the normal democratic decision-making in a member state.”

Venizelos failed to be explicit about those “key historical lessons,” but the threat was clear: Here was Germany trying to enforce its version of financial austerity and “behavior” onto another sovereign nation, just as it did in the 1930s. It was also a reminder of the continuing failure of the EU, which was sold initially as a way to keep the German threat from rising again in the years following the Second World War.

Greece has so far been successful in negotiating a 70-percent “haircut” with private bondholders as part of the deal to bring its national debt down from the current 160 percent of Gross Domestic Product to an allegedly more manageable 120 percent by 2020. The bond holders will exchange their current bonds for new bonds that have 30 percent of the value of those they exchanged. They have agreed to take a loss of 70 percent of their original investment. But the Greek economy continues to languish, and its shortfall in tax revenues is widening rather than shrinking, putting into jeopardy another part of

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Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.