An Economy without a Parachute

The power of the blogs; someone on someone else’s blog points to someone else’s blog….

… and you find a gem.

http://charlesrowley.wordpress.com/

Charles Rowley is the Professor of Economics at George Mason University (the pre-eminent American school of Austrian economics.)

I don’t know Prof. Rowley but he writes brilliantly and informatively.

I don’t always agree with the good Prof. and hope to engage him on some trigger points in the future.

He posted on Obama’s cynicism regarding his budget and in a reply, Maggie questioned my short opinion.

Here is the thread (sans the Professor’s post).

I believe as the Buchanan and Wagner quote reveals, Obama had no choice.

To do otherwise, he would not have been elected – but he has been elected, and will do as he must – bread and circuses.

The choices available to the American public and Obama (and anyone else who would take government office) is precisely the same as a man who jumped out of a plane without a parachute as he falls to earth – no choice whatsoever to avoid a crushing end.

Maggie Says:

First of all, you have not addressed the content of the blog posting. You talk about no choice but I disagree that there was no choice.

Second, what has been pursued can only lead to total economic disaster in the long term. The form of spending undertaken by the Obama Administration and the Democratic Congress is a disgraceful disregard for good fiscal management. The “stimulus” bill at the beginning of 2009 was nothing more than pork. The Congress did not even bother reading the legislation before it was passed.

Third, the “crisis” was not something that appeared overnight, and it had its beginnings in an act that was signed off by Carter. Then in the 1990s a certain man from Chicago (Obama) successfully lobbied the Congress to allow for an amendment to that act which permitted the bundling of the risky mortgages and which set up the hedge funds where these risky assets were traded in a futures exchange. (AIG trading). When Bush, through John McCain and others attempted to do something about the situation that was bubbling the Democrats voted down the legislation. This meant that no reform was possible because the Democrats had control of the Congress.

The situation which had some similarities to the beginning of the Great Depression (but nowhere near as severe) went out of control when someone instigated a run on the banks. This led to the disastrous TARP program, as well as the GM and Chrysler bail-outs. None of these bail-outs were strictly necessary. They have provided an excuse for a government takeover and interference in the banking sector as well as in the motor vehicle production sector of the economy.

Fourth, the kind of measures that Obama is trying to ram through Congress are going to do nothing to decrease the deficit. They will instead increase the deficit to completely unacceptable levels well into 2020 and beyond. With regard to “healthcare” the first step should have been tort reform. Since healthcare is the province of the States the attempt to ram anything through Congress is indeed unconstitutional… especially the mandates complete with penalty provisions. In light of the recent Citizens United case, it will be interesting to see what will happen if and when such legislation is challenged through the Supreme Court, not because of the First Amendment but because of the existence of penalty provisions.

Fifth, Cap and Trade measures are not necessary. Plus to date no one has provided accurate data as far as the creation of future “green jobs” are concerned. So far it is all pretty much illusory. Add to that the fact that the wind turbines actually fail during winter then you might as well say “Houston we have a problem” (and a big one at that). In other words these alternative ideas are pretty much too expensive and elusive.

Sixth, there were alternatives, especially measures such as lowering company tax rates that could have led to new hiring of permanent workers. However these kind of measures were not considered.

The 2010 budget is very flawed as well. The budget forecasts rely upon income that is illusory at this point in time.

Obama has been making deliberate choices and these choices have been harming the US economy. His spending sprees are getting out of hand. Most of the money has been handed to unions such as the SEIU as well as funding to ACORN and the Auto-workers. In fact the main beneficiaries of the GM and Chrysler deals have been the auto workers unions, to the detriment of the bondholders ( which included teachers unions in other states).

Hi Maggie,

Though I agree in our universe and by human action there is always “a choice” – such a statement would say a man with a gun to his head has a choice to accept the bullet or give up his wallet and therefore had “a choice”.

The choice for Obama is simple, and analogized by a typical war-time situation. “Either you order the attack or I’ll find someone to replace you who will order the attack”.

The situation will always conclude with an attack.
It cannot be otherwise.

The person who would not attack is removed, and will continue to be removed until someone is found to order the attack. It is a simple flowchart loop:

“(1)Ordered attack -> no ->new person > goto (1) :
: if a yes, then (2) attack. Stop.”

The only way the ‘program ends’ is with an attack.

This is the same situation with Obama – and each and every other politician who would come after him – it makes no difference who sits in The Great Big Chair. Therefore, we can say – with complete certainty – the conclusion of destruction, even if it comes sometime in the future.

Second, I wholly agree with you – but more.

It will be a disaster.

It cannot be otherwise.

On my blog, my first post was titled “How to avoid Economic Collapse” – but the conclusion was – it was futile. It will happen, there is nothing anyone can do to stop it, and it cannot be avoided.

Therefore, as individuals, wasting time and energy in trying to figure out politically how avoid the inevitable will only make it worse, because all your effort – in the political sphere – will result in “other” people replacing “these” people, but the choices that brought the new people and the choices that remain for them are exactly the same choices the current people had and have. Nothing can nor will change.

Further, and worse, you will have wasted such time and energy that could have been used to prepare for the collapse.

The best we can do right now is educate our fellow men to such inevitability so that they too can prepare, and – as importantly – provide a new foundation principle from which to rebuild after the collapse.

We must educate our neighbors to the reason of the collapse and offer a principled alternative – based in freedom – and away from the centralist mindset that tries to control by manipulation that which cannot ever be controlled.

Third, the “crisis” was not something that appeared overnight, but it did not start with Carter.

It started arguably in 1865, but perhaps the seeds were planted in 1787. But by 1913, it was well entrenched and by 1936, it was immovable.

The encroachment upon the freedom of men is slow – every generation has just a little bit taken away, not so much as to irritate to revolt – but enough to push. The new born generation grows up experiencing nothing else, and they then, too, have a small little bit taken away, not so to irritate to revolt, and a new generation is born into that, and so on.

A few hundred years later, the People find themselves bound in chains and falling into a destiny of disaster with no recourse. And they are confused.

When did this happen? Who did it? And the best they can do is go back but a couple of decades not realizing the very long, slow but steady erosion of what they thought was freedom.

Your fourth point, and again I agree. But there is nothing he can do.

If he cuts spending, he will hurt a great number of people somewhere and he will have violent revolt on the streets. Nearly every American receives some money from the largess of government.

Who are you going to place the Great Suffering upon with any budget cuts? Do you really believe these people will roll up into a ball in a corner and die quietly?

He has as many choices as a man falling without a parachute. Commit suicide while still airborne or die by the crushing stop in the end.

Fifth, Cap and Trade will not go through.

The Global Warming hysteria is dying. All this chit-chat is merely rhetoric to try to prevent erosion of his voter base and nothing more. Politicians all over the world are pulling out the wagons and heading to a different pasture.

The US will never act alone in this matter and China, India and Australia – just to name a few – are abandoning any Cap/Trade or action on Global Warming. The US will be thus saved from this insanity as well.

Sixth, such methods as you advise is merely whistling past the grave yard.

The problem is far deeper and systemic. Tax cuts without equal budget cuts simply transfers the economic shortfall away from tax receipts and into debt, T-bills, and currency inflation.

And since, as point #4, budget cuts are impossible, transferring shortfalls into currency inflation significantly increases the chance the economy will fall into hyper-inflation; and the consequence of hyper-inflation on an advanced economy based on a high division of labor will be equal to the devastation of a nuclear war.

You will die.

Millions will die.

It may even cause the end of Western Civilization.

Yes, the budget is flawed. Any budget he or anyone else could produce is flawed – there is no budget for the government that could be produced that isn’t flawed.

Any and all political choices lead to economic devastation and political unrest.

Get used to it, get ready for it, and prepare the best you can.

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5 Responses to “An Economy without a Parachute”

  1. G-Man Says:

    I guess like any person, I would like to hear some better news. But it is what it is, and this prediction is growing into a unstoppable train, with more and more telling of it. The only time frame I’ve read is 2011 – 2013 on the dollars collapse, which would make sence as I figure a crisis of this nature would be used a National Emergency, possibly Marshal Law, and the main reason (in my cospiracy theory thoughts), the cancellation of the 2012 elections, if not all future elections thereafter.

    I got to learn to make my own beer! Fast 🙂

    G!

  2. Birdman Says:

    Wow! Well written and enjoyed this article thoroughly. This gives me more motivation to break away from all the politics and start really preparing.

  3. csm Says:

    Hi BF, found you the other day. I see you’re staying on message. Hope all is well for you and yours. You might find this interesting: c http://www.informationisbeautiful.net/visualizations/the-billion-dollar-gram/

  4. TexasChem Says:

    The Euro is going to collapse first and that will save the dollar!

  5. Watch Shrek Says:

    I tend not to write comments on posts, but your blog post urged me to commend your efforts. Thanks for writing up this great read, I will surely favorite your site and visit once in awhile. Happy blogging.

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