All Posts Tagged With: "Federal Reserve"

David Stockman is Right, and We Should Probably Be Afraid

Iowa Politics Money Chess TaxesFormer Michigan Congressman and Reagan Budget Director David Stockman’s new book “The Great Deformation” provoked a flurry of insult and ridicule when it first came out back in April. I’m late to the party because as a law school graduate I spend all of my spare cash on liquor; in fact, I have not yet read the book. Fortunately for me, book tour promotional speeches are readily available on Youtube, and Stockman has no instinct for holding back.

Here is the gist; the Bretton Woods Conference made the dollar the reserve currency of the world, it was gold-based until 1971 when Nixon decided to let it float free, allowing the US to run endless trade deficits with mercantilist, export-led industrializing countries in East Asia. Along …


College, Politics, and Wagnerian Opera

Upon realizing that the carnality which he desired was beyond his reach, the grubby, dwarfish Nibelung named Alberich cursed love itself in order to steal from the Rhine maidens the magical Rhine gold, which he fashioned into a ring which granted to its wearer the power to rule the world. Thus, the Ring of the Nibelung became an object of envy and the obsession to obtain it became the quest of heroes and gods.

To the baby boom generation, a college diploma was the Ring of the Nibelung; a mystical object which granted you the power to rule your world. It was something to be quested for; sacrifices along the way would be proven worthwhile in the end.

Then, it all changed. The problem is, …


Dr. Bernanke’s Fed Funds Patent Tonic with Opium

If you look at the weekly price chart for either gold or silver for the week ending January 27, 2012, you can make out a distinct “J” shape in prices of both metals. Tuesday the prices were suppressed, and then on Wednesday they spiked upward. You can actually pinpoint on the charts the moment the Federal Reserve announced its intent to keep the Federal Funds Rate at nearly zero percent until late 2014.

Low interest rates are supposed to spur economic growth, or at least that is what the textbook for my International Political Economy course said, so what could possibly be wrong with low interest rates?

Of course, low interest rates provide an incentive to borrow money. However, they also form a powerful incentive …


On National Debt, Default is Inevitable

Much attention has been focused on the size of the national debt as a whole; roughly $14.4 trillion. That number is astonishing, but the sheer size of the debt actually hides the true horror which is in store for the economy and future generations.

The debt has many component categories, the largest of which is called Marketable Debt. That means the portion of the debt that was issued in treasury securities that can be sold in the secondary bond market, and it is around $9.2 trillion. The rest is Non-marketable, and held mainly by the Social Security Administration through bonds that cannot be sold.

The Marketable Debt also has its own sub-components, based on the type of security that was sold to incur the debt …


Dear Republican Candidates: It’s Monetary Policy, Stupid

At barely five feet tall and armed only with a Ph.D in economics, Milton Friedman hardly had the look of a hero set out to save a nation. Yet, Professor Friedman predicted with near perfection the disastrous economic situation the United States is enduring today. He did this with a simple idea – the Quantity Theory of Money.

MV = PQ. This is the simple mathematical formula which explains the death of American prosperity. Where M is the supply of money, V is the velocity that it circulates, P is prices, and Q is the quantity of transactions. Simply put, if the government prints more money, prices go up unless the number of transactions also increases. Too many dollars chasing too few goods, as they …


Pondering the Passion for Paul: Ron Hits Town as Iowa Campaign Hits Stride

On a macro level the last few weeks of the Ron Paul Presidential campaign have been a little bumpy. The turbulence was provided by a much publicized exchange with WHO Radio’s Simon Conway and rough national television interviews with MSNBC’s Chris Mathews and Fox News’ Chris Wallace. The fact that the Mathew’s interview would be contentious was likely known, but having Chris Wallace, on Fox News Sunday, aggressively infer that the “general welfare” clause was valid justification for unlimited Federal government involvement had to come as a shock (I know I was shocked).

If one thought that would dampen his supporters’ enthusiasm, a few minutes spent at the Paul campaign headquarters in Ankeny on Monday would be enough to prove them mistaken. In fact the …


The Big Spanking

Our grandchildren were over last weekend–two boys ages 5 and 3.  At one point the 3-year-old was telling me about being disobedient and how Daddy had to give him a big spanking.  Now I know my son and I’m sure that he was providing gentle discipline, but the point wasn’t lost and can be applied to last week’s election.

Much has been made of the Republican’s gains in the House and Senate, and their effective control of Congress.  This was clearly a repudiation of the Obama, Reid, and Pelosi policies of economic stagnation.  Make no mistake about it, this was about the economy.  The Democrats insistence on spending taxpayer’s money ineffectively, squandering it, actually, passing huge and unpopular bills, and their complete lack of caring …


Are Things Looking Up?

The Dow had it’s record highest point gain today up almost 940.  Although it was up a bit today, Oil prices have been retreating and have been steadily below $90/bbl for several days.  And have you noticed the price of gasoline has also been declining?

Of course, we all know it’s not over yet, but it’s good to see some positive signs.  Unfortunately, the price of diesel fuel has not come down with trhe price of gasoline, apparently due to supply issues worldwide.  And this will keep the price of consumer goods general higher.  Seems like this ought to be a priority, and not just now but for the long-haul, that is to ensure that the availability of fuels needed to transport goods (diesel being …


2008 Election Thoughts

I’m tired of everyone dumping on George Bush.  I’m the first to admit that he has some serious leadership deficiencies, but he is the President and won the job fair and square twice, despite what the Libs think.  As President, he deserves our respect, just like Nixon and Clinton did.  For eight years, I had to  suck it up and respect a man who molested women half his age in his office.  Nearly all the issues Bush has had to deal with are a direct result of Clinton policies and Democratic bungling, particularly as it relates to Fannie Mae and Freddie Mac and “mark to market” accounting standards.  (For more information, see Brian Wesbury’s column in the Wednesday, October 1,  Wall Street Journal.)  For those


Critical Thinking Skills

At 6:00 this morning I was in the middle of my daily 15 minute workout routine, watching CNBC’s Squawk Box and trying to get a read on the markets.  If you’re unfamiliar with this show, it’s hosted by Joe Kernan, Becky Quick and Carl Quintinilla.  If my local cable provider would broadcast Fox Business, I’m sure I’d watch that, but as it is, I’m stuck with CNBC.

It’s your typical morning talk show, except with a business twist.  Mr. Kernan tends to be the conservative of the three and while I generally agree with his viewpoint, every once in a while I’m reminded that this is the sister network to MSNBC and NBC.  Today was my reminder.

They were discussing yesterday’s congressional hearings and testimony …