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: Keynesian

Something is Wrong When A “Fine Arts” Major Has to Defend Social Security

This article was published by The McAlvany Intelligence Advisor on Monday, June 6, 2016:  

Following President Obama’s statement last Wednesday that Social Security benefits ought to be expanded and made more “generous,” someone at the Washington Post thought it would be a good idea to tout the wonders of that welfare state program. Rather than pick someone with some credentials as an economist, even a liberal one, the Post instead picked Jared Bernstein (above) to do the honors. Which he did:

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Trump Suggests National Debt “Deal,” Media Calls It “Fanciful” and “Dangerous”

This article appeared online at TheNewAmerican.com on Monday, May 9, 2016:  

A snippet from Donald Trump’s conversation with CNBC on Thursday raised the ire of numerous media commentators, who called Trump’s plan “unprecedented” (CNBC), “fanciful” and a “threat” (New York Times), and “tantamount to a debt default” (Yahoo Finance). Others called his remarks “reckless,” while Tony Fratto, a former Treasury official in the George W. Bush administration said, “This isn’t a serious idea — it’s an insane idea.”

What sparked the ire? The initial impetus was when Trump said, “[The U.S. Treasury is] paying a very low interest rate. What happens if that interest goes up two, three, four points? We don’t have a country. I mean, if you look at the numbers, they’re staggering.”

Indeed they are. The U.S. Debt Clock shows the national debt closing in on $20 trillion, while the economy is slumping along, with a GDP at just over $18 trillion. Put another way,

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Nothing is Likely to Change in Brazil

This article was published by The McAlvany Intelligence Advisor on Wednesday, April 20, 2016: 

One of Warren Buffett’s favorite expressions is “when the tide goes out, everyone will see who’s been swimming naked.”  In Brazil the tide went out at the start of the Great Recession and now the whole world can see who was swimming naked.

When President Lula was elected in 2002 the commodity boom was underway, and Brazil was enjoying the ride. Its major exports are soybeans, sugar, and iron ore, and under Lula Brazil’s GDP was running 10 percent a year. Lula implemented major expansions of the welfare state, including putting in place such generous pension plans that state workers could retire at age 54 for men and at age 52 for women at 90 percent of their final pay. The average Brazilian’s household income rose, and statists worldwide pointed to Brazil’s success story, naming it as one of the BRIC countries that would soon overtake the developed nations of the world, and doing it while expanding government spending.

But when Dilma Rousseff took over in 2011 the Great Recession was revealing the true nature of spending far beyond the ability of the economy to sustain it. In 2014 the government’s finances were in such dreadful shape that

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Goldman Sachs’ Warning Dents Crude Oil Price

This article appeared online at TheNewAmerican.com on Wednesday, April 13, 2016:  

The price of crude oil, which reached $65 a barrel a year ago, fell below $30 in January with expectations that its decline wouldn’t end until it hit $20, or even lower. But hopeful optimists see light at the end of the tunnel — this coming from next Sunday’s OPEC meeting in Doha, Qatar (photo above) — where an agreement to freeze production at current levels will be on the table, bid crude higher in an almost straight line. On Tuesday NYMEX crude hit $42 a barrel, a 40-percent jump from January’s lows.

A note from Goldman Sachs on Tuesday provided a sobering view:

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Credit Rating Agencies Finally Reacting to China’s Economic Implosion

This article was published by The McAlvany Intelligence Advisor on Friday, April 12, 2016:  

English: World countries by Standard & Poor's ...

English: World countries by Standard & Poor’s Foreign Rating. Legend: Green – AAA Turquoise – AA Lighter blue – A Darker blue – BBB Purple – BB Red – B : Grey – not rated, (Photo credit: Wikipedia)

First it was Fitch. Late last year it downgraded China’s sovereign debt by two notches, from AAA to A, which, according to its own definition, signals debt that is “more vulnerable to adverse business or economic conditions than is the case for [the two] higher ratings.”

In early March, Moody’s Investors Service got on board, knocking China’s debt rating down by one notch, followed by Standard and Poor’s on Thursday, which kept China’s rating at AA but with a negative outlook.

Translation: something’s coming.

Said S&P:

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Standard & Poor’s Downgrades Chinese Sovereign Debt

This article appeared online at TheNewAmerican.com on Thursday, March 31, 2016: 

Cover of "Coming Collapse of China"

The last of the three credit rating agencies to recognize China’s ongoing economic implosion, Standard & Poor’s, downgraded its rating on Chinese debt modestly on Thursday. The agency maintained its AA rating (one notch below its highest) but changed its outlook to “negative,” meaning another downgrade is possible within the next 12 months. It said:

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Another Keynesian Failure: Brazil

This article was published by The McAlvany Intelligence Advisor on Monday, March 28, 2016:  

John Maynard Keynes Русский: Джон Мейнард Кейн...

John Maynard Keynes

Boiled down to its most crude elements, Keynesianism, according to Antony Mueller at the Mises Institute, is “the economic policy doctrine of growth by spending.” Since 2003, when the current political party in Brazil, first headed up by Lula and now by Dilma Rousseff, came to power, it installed it in spades. For a while it seemed to work: demand for Brazil’s raw materials: oil, iron ore, and agricultural products grew as China (also pursuing the “growth by spending” mantra) also grew.

But the boom, which at one point included Brazil as one of the BRIC (Russia, India, and China) nations that would soon overtake the developed world, went bust.

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Evidence Mounts for U.S. Recession in 2016

This article appeared online at TheNewAmerican.com on Monday, March 14, 2016:  

Nearly everyone with an opinion is warning about the increasing probability of the United States entering a recession — two quarters of negative growth — before the end of the year.

Cabinet - Class Photo, 1984: Front row: David ...

President Ronald Reagan’s former budget director David Stockman (middle, left) has been negative on the economy for months, noting in early February that

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The Best Evidence Yet of a US Recession This Year

This article was published by The McAlvany Intelligence Advisor on Monday, March 14, 2016:  

The best evidence comes from the US Treasury with its daily report of tax receipts from wages and salaries. It’s pure, it’s timely, and it’s free of massaging and/or manipulation. And it’s ugly.

John Williams, the skilled and capable economic statistician whom the establishment economists love to hate, author of ShadowStats.com, has built a graph (see source below) showing

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Maduro’s Venezuela: Proof that Socialism is a form of Mental Illness

This article was published by The McAlvany Intelligence Advisor on Friday, February 19, 2016:  

Craig Andresen, writing for the National Patriot, described socialism as a mental disorder:

Socialism is a disease. It’s a mental affliction and it causes those infected with it to lose their minds.

 

It’s also contagious.

Now there’s proof positive:

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Saxo Bank’s Outrageous Predictions for 2016

This article was published by The McAlvany Intelligence Advisor on Tuesday, December 22, 2015:  

Every year about this time the Copenhagen-based Saxo Bank offers up its most outrageous predictions for the coming year. Some of them are doozies:

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The Biggest BRIC is Falling

This article was published by The McAlvany Intelligence Advisor on Monday, September 14, 2015:  

Collection of Chinese renminbi yuan banknotes....

Collection of Chinese renminbi yuan banknotes.

In his 2001 paper “Building Better Global Economic BRICs,” chairman of Goldman Sachs Asset Management Jim O’Neill developed the acronym for Brazil, Russia, India and China. He made the case that the BRICs symbolized the shift of global economic power away from developed nations, estimating that they might overtake the G7 nations – Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States – as early as 2027.

Modifications were necessary to dampen O’Neill’s enthusiasm, with GS recalculating that it wouldn’t happen before 2050. By December 2012 the Council on Foreign Relations, in itsForeign Affairs publication, was forced to refute even that modest projection:

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Chinese Economy, Stock Market Continue to Crater

This article appeared online at TheNewAmerican.com on Monday, September 14, 2015:  

News that China has offloaded more than $100 billion of U.S. Treasuries in August to support its currency and its cratering stock market caused many observers to raise concerns about China waging an “economic war” against the United States. It’s a threat the Chinese last expressed during the 2012 presidential election, that Beijing would “use its financial weapon to teach the U.S. a lesson” if it insisted on flouting Chinese interests, i.e., by selling arms to Taiwan, for example.

It now appears that the shoe is on the other foot. The Asian tiger is now a pussy cat, as its economy continues to crater and the Chinese central bank moves to weaken its currency and shore up its stock markets.

In the days following Beijing’s surprise announcement on August 11 that it was devaluing its currency by two percent, the yield on the U.S. 10-year Treasury note jumped 10 percent, from

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Trump Calls Drop in Chinese Currency “Devastating”

This article appeared online at TheNewAmerican.com on Wednesday, August 12, 2015:  

In an interview at CNN, Republican presidential candidate and billionaire businessman Donald Trump was aghast at the decision by China’s central bank to allow the country’s currency to more closely reflect its real value by letting it drop by more than two percent:

They’re destroying us! They keep devaluing their currency until they get it right. They doing a big cut in the yuan, and that’s going to be devastating for us.

This was echoed by Thomas Gibson, head of the American Iron and Steel Institute: “Our government must address the massive damage that China’s undervalued currency is causing to our nation’s manufacturing sector, especially the steel industry.”

Trump failed to make clear exactly who “us” is. By allowing the yuan to be valued daily as the market deems it, rather than having it arbitrarily pegged loosely to the value of the dollar, every consumer at Walmart is going shortly to see a sign in their window:

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Greek Vote the Death Knell for the EU?

This article was published by The McAlvany Intelligence Advisor on Wednesday, July 8, 2015:  

English: Nigel Farage at Lord's cricket ground...

Nigel Farage

Nigel Farage, named “Briton of the Year” in 2014 by the London Times, has finally found his voice. He noisily departed the Conservative Party in 1992 after the signing of the treaty that created the European Union to start his own UK Independence Party (UKIP). His criticism of the EU has been steady ever since, culminating in his eulogy on Monday: “The European Union is Dying Before our Eyes.”

According to Farage, Sunday’s referendum in Greece sealed its death warrant, even if somehow the Greek PM Alexis Tsipras is able to come to terms with the troika and have them turn on the financial spigot once again: “It [was] a crushing defeat for those Eurocrats who believe that you can simply bulldoze public opinion.” He added,

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Mainstream Economists, the Herd Instinct, and GDP

This article first appeared at The McAlvany Intelligence Advisor on Wednesday, May 20, 2015:

It’s no surprise, really. Most mainstream economists look at the world through Keynesian lenses, they attend the same conferences, read the same reports, are employed by companies in the same industry, hold degrees from the same universities, and are rewarded for having a view that doesn’t stray from the norm, even if that view is wrong. It’s a perfect reflection of the herd mentality: the impulse or tendency toward “clustering,” reflecting the need for conformity. It’s how economists make weathermen look good.

If their view turns out to be wrong, they adjust, slowly. If they are challenged or threatened,

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China’s Economy Continues to Implode

This article was first published by The McAlvany Intelligence Advisor on Friday, May 8, 2015: 

English: Scatter graph of the People's Republi...

Wolf Richter is one observer of the present world economic scene who hasn’t had his mind altered by drinking the Kool-Aid ladled out in Washington and in the economics departments of so many colleges and universities. After holding a number of C-level positions (CEO, COO, etc.) in large and successful private companies, he chucked it and went to live for a while in Switzerland. He started a blog with the ghastly name of Testosterone Pit, which he thankfully changed to Wolf Street last summer.

He has been watching economic events unfold (and unravel) in China for some time, but the latest from the Shanghai Containerized Freight Index (SCFI) so startled him two weeks ago that he thought it was either a misprint, or that the index would bounce right back from its precipitous fall.

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China Export Shipping Declines by Two-thirds

This article first appeared online at TheNewAmerican.com on Thursday, May 7, 2015: 

Two weeks ago the Shanghai Containerized Freight Index (SCFI), which tracks shipping rates from Shanghai to the world, fell off a cliff: down a breath-taking 67 percent from a year ago. Wolf Richter thought it was a statistical fluke.

It was no fluke. In the next two weeks the SCFI for Northern Europe fell another 14 percent, an all-time low. Wrote Richter: “Something big is going on in the China-Europe trade.”

The collapse is being echoed by other indexes reflecting the breathtaking decline in China’s exports. For example

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Do Negative Interest Rates Portend a Negative Economy?

This article first appeared online at TheNewAmerican.com on Monday, May 4, 2015:

Last Thursday the London Daily Telegraph’s assistant editor, Jeremy Warner, reported an astonishing statistic: Almost a third of all government debt in the eurozone is paying negative interest rates. That’s more than $2 trillion in government bonds, and, it appears, investors are happy that they aren’t paying even more.

Fifty percent of French bonds now trade with a negative yield, while 70 percent of Germany’s bonds trade at a negative yield. More remarkably, in Spain, which was on the verge of insolvency just a few years ago, 17 percent of its government bonds now trade with a negative yield.

This is counterintuitive, which explains why Keynesians, those who believe that “demand” in an economy can be artificially increased by manipulating taxes and the money supply, have no explanation for it. In theory,

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More Keynesian Insanity: Negative Interest Rates

This article first appeared at The McAlvany Intelligence Advisor on Monday, May 4, 2015:

There’s a corollary to the insanity rule. It’s called the Keynesian Corollary: When something doesn’t work, do more of it. When history is written about the coming Second Great Recession, historians will likely note July 2012 as the turning point. That was when Mario Draghi, head of the European Central Bank (ECB) said during a panel discussion that the ECB “is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.”

Other historians might list that as one of the top ten “famous last words” ever issued by a human being. Since that moment bond yields across the world have dropped, and dropped, and dropped. On Thursday Jeremy Warner, the London Daily Telegraph’s assistant editor, announced that

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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.