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: Great Depression

Congress to Grill Ex-Im Bank Chairman Over Corruption Charges

This article was first published at TheNewAmerican.com on Wednesday, June 25, 2014: 

English: , President of the

Fred Hochberg, President of the Export-Import Bank

On Thursday Fred Hochberg, Chairman and President of the Export-Import Bank, will be grilled by members of the House Financial Services Committee over charges of corruption and mismanagement at the 80-year old agency. His task to defend the agency appears formidable, especially with its charter being up for renewal at the end of September.

On Tuesday the Wall Street Journal reported that four Ex-Im employees have either been suspended or fired over the last few months as a result of “investigations into allegations of gifts and kickbacks.” But that’s just the tip of the iceberg. The Heritage Foundation reported on the same day that

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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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Monumental Hubris in Claim of Taxpayer Victory in GM Bailout

 

This article first appeared at The McAlvany Intelligence Advisor on Wednesday, December 11th, 2013:

In Treasury Secretary Jacob Lew’s fawning, obsequious, genuflecting announcement that the president had singlehandedly saved western civilization from a cataclysmic economic disaster, he said that by taking a loss, taxpayers actually scored a victory:

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US Treasury sells the rest of its GM shares at a loss, claims taxpayer victory

Treasury Secretary Jacob Lew announced on Monday afternoon that his department had sold the remaining shares of GM that it acquired following the forced bankruptcy of the auto giant in 2009, and made the $10.5 billion loss sound like it was a victory:

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Scary Default Scenarios Based on Faulty Treasury Department Release

Within hours of the “brinkmanship” press release by the U.S. Department of the Treasury, major media began to repeat the highly dubious risks outlined by the department without reading carefully exactly what it contained. The headline and opening paragraph were all that the echo chambers needed:

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Summers is out, Yellen is in, the Fed rolls on

Just when it appeared that Larry Summers had the nomination for the next Fed chair all wrapped up, Summers called the White House on Sunday and told his good friend, President Obama, that he was withdrawing his name from consideration. He then sent a formal withdrawal letter to the president:

I have reluctantly concluded that any possible confirmation process for me would be acrimonious and would not serve the interest of the Federal Reserve, the Administration or, ultimately, the interests of the nation’s ongoing economic recovery.

The president dutifully responded with the appropriate accolades:

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Obamanomics is to Blame for Worst Recession since the Great Depression

When libertarian scholar Peter Ferrara asked rhetorically in Sunday’s issue of Forbes, “Economically, Could Obama be America’s Worst President?” he relied heavily on statistics provided by the chief enabler of the Great Recession,

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The Modern German Economic Model is a Myth – revised and updated

Dessau, a small and steadily shrinking town in the German state of Saxony-Anhalt in what used to be East Germany, is doing the best it can. Ten years after the fall of the Berlin Wall the anticipated “miracle” enjoyed by West Germany following World War II failed to materialize for Dessau and so it is in the process of demolishing some 10,000 empty homes and

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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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More Evidence the Recession Has Started (Again)

Despite his firm defense of his call that the US economy entered into another recession in July this year, Lakshman Achuthan of the Economic Cycle Research Institute (ECRI) continued to be scorned by his critics. Joe Calhoun, writing in his letter to Alhambra Investment Partners’ clients on Sunday, December 9th, said that although Lakshman Achuthan of ECRI “has a flawless record of predicting US recessions…there is one problem with his call: he’s been making it for over a year now…the jury is still out.”

On Tuesday the jury came in: the National Federation of Independent Business issued its Optimism Index and noted that it decreased an astonishing 5.6 points to 87.5, the lowest reading since March of 2010 and the biggest monthly drop going back to 1986. In addition, eight of the measure’s ten components also dropped, confirming that the slowdown is being felt across nearly every facet of the 733 businesses surveyed for the November index.

The drop exceeded the 5.4-point decrease that was reported in October 2008 following the collapse of Lehman Brothers and the 5.2-point decline in September, 2001, following the terrorist attacks on the World Trade Center.

In its press release, the NFIB noted that data from Hurricane Sandy had been removed to avoid skewing the numbers, but the remaining data “makes clear that the election was the primary cause of the decline in [small business] owner optimism.” Said NFIB’s chief economist Bill Dunkelberg, author of the report:

Something bad happened in November—and based on the NFIB survey data, it wasn’t merely Hurricane Sandy. The storm had a  significant impact on the economy, no doubt, but it is very clear that a stunning number of owners who expect worse business conditions in six months had far more to do with the decline in small-business confidence.

Nearly half of owners are now certain that things will be worse next year than they are now. Washington does not have the needs of small business in mind. Between the looming “fiscal cliff,” the promise of higher health-care costs and the endless onslaught of new regulations, owners have found themselves in a state of pessimism…

When queried about general business conditions – “Do you think that six months from now general business conditions will be better than they are now, about the same, or worse?” – those expecting better business conditions fell by 37 points.

The index reported that small business owners were reducing their plans to make capital investment and build inventories because they expected lower retail sales. Consequently the owners surveyed held out little prospect for increased earnings over that period.

On Friday, December 7th, the Thomson Reuters/University of Michigan consumer sentiment survey reported that consumer confidence also fell significantly in November, reaching a four-month low at 74.5, down from 82.7 the previous month. Economists surveyed by Bloomberg had estimated the index would come in at between 80 and 88. The index also showed consumer expectations for the next six months also touching one-year lows, down to 64.6 from 77.6 in October.

These reports came in on top of the Institute for Supply Management’s Purchasing Managers Index (PMI) which fell in November to its lowest level in over three years.

Economic historians shouldn’t be surprised about the new recession indicated by these reports. The same thing happened in the middle of the Great Depression.

The recovery from the Great Depression had begun and by the spring of 1937 industrial production, profits and wages had reached 1929 levels. But in the summer (coinciding, interestingly, with ECRI’s call that the new US recession started in July 2012) the economy fell off the cliff, with industrial production dropping a heart-stopping 30 percent while durable goods declined even more. Producers pulled in their horns, cutting inventories and capital expenditures, just as are now being reported by the NFIB.

Non-historians, however, will likely take little comfort in any of these reports. Most will feel like the Great Recession never ended, despite the announcement by the National Bureau of Economic Research (NBER) on September 20, 2010 that its “committee determined that a trough in business activity occurred in the U.S. economy in June 2009. The trough marks the end of the recession that began in December 2007 and the beginning of an expansion.”

Perhaps the NBER committee will review the latest report from the 733 small business owners surveyed by the NFIB and alert the media that that expansion has faltered, sending the US economy back into recession once again.

 

 

 

 

 

Victory for the Attack on the Middle Class: They’re Poorer

Empty Pockets

Empty Pockets (Photo credit: danielmoyle)

I’m sorry to bring bad news to you on this gorgeous Saturday morning, but I take comfort in the fact that you’re probably already aware of both sides of this title: there is an attack on the middle class, and it is succeeding.

A burgeoning and healthy middle class has historically been the bulwark of freedom in America. With hope and aspiration of a better day coming, they represent the strongest part of society interested in maintaining and strengthening its freedom. Not just economically, but in all other ways as well. That’s why the welfare statists have targeted the family with interventions and promises designed to make them more dependent upon the state. The War on Poverty has successfully managed to all but destroy black families.

And now the numbers are showing up on America’s white middle class as well. This article references a study done by New York University economics professor Edward Wolff which proves it. Writes Wolff in his abstract,

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Skyscraper Announcement Confirms Impending Chinese Recession

Empire State Building all

Empire State Building all (Photo credit: Wikipedia)

I thank Gary North for alerting me to this. It’s far more than just historical coincidence. The announcement that China is going to build the world’s tallest building is a strong indicator that it is going into (if it hasn’t already gone into) recession. Tall buildings signal the top.

Mark Thornton, a senior fellow at the Ludwig von Mises Institute, wrote about this in July, 2004:

This 4th of July will mark the groundbreaking of the Freedom Tower at ground zero of the World Trade Center. The design of the building calls for a height of 1,776 symbolic feet, which will capture the title of world’s tallest building when it is completed in late 2008 or 2009.

Groundbreakings, opening ceremonies, and certainly July 4th are all causes for celebration, but the Freedom Tower may be a signal that something much more sinister is afoot. For more than a century there has been a correlation between the building of the world’s tallest building and severe economic downturns.

That correlation is eerie, but here it is:

The correlation is as follows. The announcement and groundbreaking for the world’s tallest building takes place at the end of a long boom or sustained bubble in the economy. The stocks go into a
bear market; the economy goes into recession or worse. The building is completed. The economic turmoil that ensues is either severe, drawn out, or as in the case of the Great Depression, both.

There’s this:

The Panic of 1907 which helped bring about the Federal Reserve Act was signaled by the building of the 612 foot Singer Building completed in 1908 and the 700 foot Metropolitan Life completed in 1909. There was only a short, sharp downturn in 1913 when the 792 foot Woolworth building was completed, as the establishment of the Fed and WWI intervened.

And then this:

The Great Depression was signaled by a series of three record-breaking skyscrapers. The 927 foot Wall Street building was completed in 1929; the 1046 foot Chrysler Building was completed in 1930; and the 1250 foot Empire State Building was completed in 1931. The Great Depression helped bring on Roosevelt’s New Deal.

And this:

The 1970s were characterized by high rates of unemployment and inflation. This “stagflation” was signaled by the building of the 1368 foot high World Trade Towers which were completed in 1972 and 1973. The Sears Tower set a new record at 1450 feet when it was completed in 1974.

Then Thornton explains why the correlation is valid, in economic terms. Faulty price signals at the top of a boom cause bad decisions to be made, often very bad:

At first glance the association of record-setting skyscrapers and economic crisis would seem to be a spurious correlation. Surely, the building of such skyscrapers does not cause economic crisis. However, there is good reason to believe that skyscrapers and crisis are linked via the business cycle. Long periods of easy credit create economic booms, particularly in investment, speculation becomes pronounced, and entrepreneurs lose their compass of economic rationality and make big mistakes. The biggest mistakes — record-setting skyscrapers — comes toward the end of the long boom and signal the bust. (my emphasis)

The Chinese economy, like ours, has been running on paper money for years and giving out false and misleading signals to investors. They have made the mistake which I characterize as “straight line thinking in a curvilinear world.” Here’s a link to the announcement that not only are they going to build the world’s tallest building, they’re promising to do it in 90 days!

Stay tuned and watch for the coming recession in China.

The Story Behind Black Friday

Black Friday shoppers at Walmart

Black Friday shoppers at Walmart (Photo credit: Wikipedia)

As usual, there’s more to the story than meets the eye. Retailers discovered the benefits of promoting Christmas shopping earlier and earlier, pushing Franklin D. to move Thanksgiving Day back a week:

Before 1930s: Unwritten Rules

In the early 1900s it was an unwritten rule that no retail store would promote Christmas items until after Thanksgiving. (Wow, can you imagine?) Instead of holiday sales in October, companies would spend lots of money on parades the day after Thanksgiving.

You can still see evidences of these parades today in the Macy’s Day Parade and others. Retail stores would sponsor giant parades the day after Thanksgiving and you could bet that one of the final floats in the parade would include Santa Claus, reminding all people to buy their Christmas gifts from the sponsoring store.

But then an interesting concept began to emerge: today we call it “crony capitalism.” It’s the conjunction of interests of some/many in the private sector seeing the advantages of

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The Impact of the Technology Explosion

Compaq Lunchbox Computer

Compaq Lunchbox Computer (Photo credit: Accretion Disc)

Mark Perry brings it, again. He compares the costs (in dollars and, more importantly, in hours of labor) of buying computer technology in 1984 and that same technology today. It’s astonishing what he has discovered:

Measured in time worked, the average American in 2012 would only have to work about 27 hours (about 3.5 days) at the average wage today of $19.79 to purchase [an] HP laptop and [a] SanDisk flash drive, compared to the five months of work in 1984 to purchase the “cutting edge” portable computer and external disk drive of that era.

Today’s laptop is 6 times lighter and 62,500 times faster than the 1984 portable computer, while today’s flash drives store thousands of times more data than the external drives in 1984.

Let’s consider that again: three and one-half days’ worth of labor to purchase today what five months of labor would buy in 1984, but we’re buying much more horsepower today for that three and one-half days!

Perry says that we’re not surprised because the improvement didn’t happen overnight, it happened over the last 29 years, so we become immune to it, and even expect it. Why not? Why not wait until the iPhone 5 comes out? It’ll be a quantum jump ahead of the iPhone 4. We expect it.

And there’s the impact on our

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What’s to Blame for the Slow Economic Recovery?

Obama: Jesus would back my tax-the-rich policy

(Photo credit: porchlife)

What’s remarkable in this article is not what is said (with which I agree ) but who is saying it: Jerry Dwyer used to work at the Federal Reserve Bank of Atlanta, while James Lothian used to work at Citibank/Citicorp. These are Keynesian guys who have worked in the belly of the beast, and yet have seen the light!

The economic recovery is historically very slow:

Our current recovery has been the weakest since at least World War II.  Thirty-nine months since the recovery started in June 2009, job growth has been  only 2 percent. During the average recovery since 1970, job growth over the  first 39 months has averaged over 8 percent. The current recovery has failed to  keep up with the growth in the working age population. Unlike past recoveries,  much of the drop in the unemployment rate simply reflects people giving up  looking for work. And there is no doubt there was a financial crisis.

But blaming it on the financial crisis is merely political cover for the Obama administration to assume unto itself more powers and excuses to use them, all in the name of

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Obama Intends to Bring Down Capitalism

ENEMY OF THE ECONOMY

ENEMY OF THE ECONOMY (Photo credit: SS&SS)

I have great respect for the work done by the Cato Institute. I attended one of their week-long economic seminars a couple of years ago, thanks to my generous brother, and was greatly impressed and informed by their work. I still refer to the copious notes I took there.

But Alan Reynolds fails to see that Obama intends the results of his actions. Reynolds explains Obama’s actions through abysmal economic ignorance:

In a recent Wall Street Journal op-ed (November 2) President Obama wrote that “in the eight years after” Bill Clinton left office, “we followed a different path. Bigger tax cuts for the wealthy we couldn’t afford. . . . The result of this top-down economics? Falling incomes, record deficits, the slowest job growth in half a century, and an economic crisis . . .”

Obama had taken up that theme during the first presidential debate, arguing that “The approach that Governor Romney’s talking about is the same sales pitch that was made in 2001 and 2003, and we ended up with . . . the worst financial crisis since the Great Depression.”

This is a remarkably imaginative theory — albeit one that reveals appalling economic illiteracy. Who else would have imagined that the housing bust and subprime-mortgage crisis were actually caused by cutting the top two tax rates in mid-2003?

He goes on say that at least Obama is consistent in his

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Uncertainty: Free Market Bugaboo

Imprimis: John Steele Gordon

[During the Great Depression] unemployment, over 25 percent in 1933, was still at 17 percent as late as 1939. Indeed, in 1937, when the economy suddenly turned south again, there was a problem: what to call the new downturn. Most people thought the country was still in a depression, so that word wouldn’t do. But economists, delighted to have a problem that they could actually solve, came up with the word “recession,” and that’s what we have been using ever since.

Great Depression Bread Line

Great Depression Bread Line (Photo credit: martnpro)

The similarity to the “recession” of 1937 to our present circumstances scarcely needs mentioning. Roosevelt’s continued tinkering and illogical (ideological) interfering with the market trying unsuccessfully to correct itself meant that entrepreneurs were frozen into inaction—just like today.

Explains Gordon:

Usually, when there has been a steep decline in economic activity, recovery is equally steep. The valley is V-shaped. That is what happened in 1920, when there had been a severe post-war depression and then a strong recovery.

So why was the recovery so slow in the 1930s? One reason, according to an increasing number of economic historians, is that Franklin Roosevelt had a bad habit of changing his mind. While highly intelligent, he was no student of economics and seldom read books as an adult. So much of his program was, essentially, seat-of-his-pants policy…

But markets, which can function even in disaster with ruthless efficiency, hate uncertainty. When uncertainty regarding the future is high, they tend to tread water. As a result, there was what is known as a “strike of capital.” While corporations often had large cash balances—General Motors made a profit in every year of the Great Depression—and banks had money to lend, there was little investment and few loans made. Both the banks and the corporations were too uncertain about what the government was going to do next.

This surely sounds familiar: a “strike of capital” is what we’re seeing today.

Feisty, Fearless Economist Anna Schwartz Dead at 96

Anna Schwartz by David Shankbone

Best known as the co-author, along with Nobel Prize-winning economist Milton Freidman, of A Monetary History of the United States, 1867-1960, Anna Jacobson Schwartz died on Thursday, June 21, in New York City at age 96.

A brilliant economist in her own right, she provided the background, the research, and so much of the thinking behind the 859-page A Monetary History that Friedman claimed that “Anna did all the work, and I got most of the recognition.” Considered by many classical economists as the magnum opus on monetary policy (the impact of money supply on economic behavior), by itself it shifted the blame for the Great Depression from the statists’ claim that it was due to excessive laissez-faire capitalism in the 1920s to the interventions by the Federal Reserve that caused the Great Depression and that greatly exacerbated both its depth and duration. So powerful were the conclusions that one of the book’s chapters, “The Great Contraction, 1929-33,” was published as a stand-alone paperback in 1965, and the book itself was hailed by the Cato Institute as one of the most influential economics books of the 20th century. Even Federal Reserve Chairman Ben Bernanke admitted that A Monetary History “transformed the debate about the Great Depression.”

Accolades abounded following the announcement of her passing, even from those who parted ways with her on the role of central banking in a modern economy and the Federal Reserve in particular. George Selgin, a senior fellow at Cato, remembers Schwartz as being candid and uncompromising: “Anna never held a punch, and when she threw one, it landed square on target.” Robert Higgs, a scholar at the Independent Institute, noted, 

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Speech: Bernanke Fails at Transparency, Rails at Gold Standard

M6 - Money

When Federal Reserve Chairman Ben Bernanke donned his professorial cap and addressed 30 undergraduate students at George Washington University on Tuesday, he claimed it was all in the interest of transparency. According to the New York Times, “The Fed is concerned that it is neither loved nor understood by many Americans, and that public anger could lead to constraints on its powers.”

A close look at his actual presentation, augmented by slides, confirms his attempt to direct the students’ attention away from the Fed’s obvious dangers, faults, and failures and instead concentrate on its alleged virtues.

For example, his attack on the gold standard was filled with falsehoods and half-truths that failed to convince, only to confuse:

The gold standard as an alternative to a central bank: The gold standard sets the money supply and [the] price level generally with limited central bank intervention.

What the professor fails to state is that there is the gold standard and there is a paper standard that can only be enforced when a central bank is given a monopoly over what citizens may use as money. He fails to make clear that it’s the quantity of gold that “sets the money supply” and from that is derived the value of each piece, which is reflected in its purchasing power in the marketplace. It’s the citizen, freely accepting, using and exchanging gold for goods and services in the marketplace, who sets the price level. Buried in the comment “with limited central bank intervention” is the core of the problem: Bernanke doesn’t want people making those choices and decisions for themselves. Those decisions must be left to experts like

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Obamanomics, the State of the Union, and Reality

English: President Obama just about to deliver...

In his State of the Union address President Obama touted the “rebound” in the economy, taking credit for his administration’s policies in its recovery. He pointed to two years of job growth and the fastest job creation since 2005 but without putting such results in context.

Among the first to take umbrage at such omission was James Sherk, writing for the Heritage Foundation: “In normal economic times they [the results]would represent healthy growth, but in the aftermath of the worst recession in two generations they represent a historically slow recovery. New jobs have been created—but not nearly enough.”

This was echoed by the Congressional Budget Office (CBO) in its just-released study which noted, 

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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.