For the past several weeks the tea party movement has been widely maligned as radical and dangerous. For example, former President Bill Clinton, in a speech and a New York Times op-ed, has cautioned that supporting tea parties could unleash violent militias. The Southern Poverty Law Center released a report claiming they are “shot through with rich veins of radical ideas, conspiracy theories, and racism.”
It wasn’t Colonel Mustard in the library with the candelabra. And contrary to recent press reports, it wasn’t Prince Alwaleed in the desert with a cartel. It was, in fact, Dr. Bernanke in the temple with the printing press. And since Dr. Bernanke is, in effect, the dollar incarnate — the walking embodiment of the soundness of our currency — if the dollar does die, it will not have been murder. It will have been suicide.
It was because of a woman named Bertha Kinsky. She was a pacifist and a free-thinker (which means anti-religious). He fell in love with her, and they married, but she left him. He was wealthy, but not intellectually respected. He inherited his father’s industrial business, which was, horror of horrors, an arms manufacturer. He was not a college graduate, but he learned chemistry anyway and developed dynamite, and became one of the wealthiest men in the world. He went on to write poems and anti-Christian plays, but they never respected him. She never really respected him. Alfred Nobel had money, but not status.
The easy-money advocates had a tough summer. In August alone, the price level increased almost half a percent, raising the average annual rate of inflation for the past three months to almost 5 percent. Wholesale prices, especially of raw materials, have also been moving upwards, as has the “prices paid” index of the Institute for Supply Management’s survey of the manufacturing sector (the service sector has had more mixed recent results). Across the board, the stats show a broad consensus that we have switched from a deflationary trend to an inflationary one.
Perhaps no controversy in recent years illustrates more clearly the dismal state of American civics education than the controversy pertaining to Barack Obama’s birthplace. People who are woefully ignorant of Article 4, Section 1 of the Constitution of the United States again are locked in mortal combat with people who are woefully ignorant of Article 2, Section 1 of the same document. The only good outcome that one can hope for in this struggle is that they both lose.
It’s not enough for most people to know what the unemployment rate is and whether it’s going up or down. It’s not enough for investors and entrepreneurs living during some of the strangest times in American financial history. And it’s not enough for citizens trying to decide whether the policy proposals now in Washington are worthy of their support. If you fall into any of these categories, you need to know more about the labor market than the headline numbers. In particular, you need to know the JOLT.
Back in 2006, when the federal-funds rate peaked at 5.25 percent, several economists writing for National Review Online argued that the Federal Reserve was too tight. We also held that the gold price, which was climbing higher at the time, was not an unerring Polaris around which all other inflation indicators (such as exchange rates, nominal interest rates, and yield curves) must revolve. We wrote that the system was running the risk of too little liquidity, not too much.
We bought almost 3 billion dollars worth of semiconductors on average over the past three months. We’ve been trending up since February. This is how the economy is managing to recover despite the hostile business environment and despite a ten percent unemployment rate. As we pointed out last week, the business community is neither hiring, nor firing. Labor markets are frozen in regulatory amber; this will be a Jurassic Park recovery. How can we grow without more people working? The answer is: Instead of more people working, we’ll get the same number of people to do more work. Rising average employment compensation per hour paints a picture that shows layoffs have been focused toward the bottom of the economic ladder. Teen unemployment, for example is running at roughly one in four—thanks to Congress’ new $7.25 minimum wage.
Today we saw the release of two piece of important employment data: the Challenger, Gray & Christmas monthly survey of lay-offsand the Monster Employment Indexwhich measures on-line want ads. The latter is an improvement over traditional want ads which were showing declines due to loss of market share to the web rather than actual job opening declines. Just because companies were not recruiting by printing their ads on dead trees doesn’t mean they were not hiring. But even in the world of friction-free job recruiting, they are indeed not hiring. The index showed only on up month out of the last eight, and even now with the economic picture improving, job recruiting is still dropping. Why?
It’s never a good sign when your Treasury Secretary announces a plan to overhaul the financial system and the market plunges 200 points that same day. But that’s what happened on Monday to President Obama.
We’re going to need another Jack Kemp. We’re in the same mess now as we were when he rose to prominence in the 1970s: rising taxes, energy rationing, and a misguided belief that we can counter all of that with the printing press. We’re going to need someone who can understand the fundamental truth of the Laffer Curve, and still has the charisma to lead men and women in the political sphere.
This week, I watched with amazement Larry Kudlow’s joust with Congressman Brad Sherman about accounting. Sherman was fresh from his Stalinist show trial of bank CEOs. Having spent the afternoon berating the banks for having the audacity to pay a dividend to their beleaguered shareholders, Sherman went on to lecture Kudlow about the same topic. Larry pointed out that the money for the dividends didn’t come from TARP and so it is really none of congress’s business. Sherman said that, because dividends come from “capital,” that indeed it was taxpayer money.
John McIntyre of RealClearPolitics and I were both on Larry Kudlow’s radio program on Saturday afternoon. Larry asked us both the same question: “Is there anything that Obama could say on Tuesday that will make you feel good about where he is taking the country?”
There was a good Wall Street Journal piece this morning on Satyam [SAY 1.36 -7.99 (-85.45%) ]… which by the way is Sanskrit for ‘truth’. The CEO puffed up both revenues and earnings and margins over the past several years.
“Since you ask me what I wish, gentlemen, that is my answer. I don’t make merry myself at Christmas and I can’t afford to make idle people merry. I help to support the establishments I have mentioned: they cost enough: and those who are badly off must go there.'’ “Many can’t go there; and many would rather die.'’ “If they would rather die,'’ said Scrooge, “they had better do it, and decrease the surplus population.”
Who died and made the National Bureau of Economic Research boss? During the past two days my in-box has been flooded by NEWS ALERT: RECESSION OFFICIALLY STARTED IN 2007 or some simulacra thereof. So who made the NBER the Supreme Court of recession calls? I asked them. The answer was not really confidence inspiring.
It’s astonishing and a little horrifying that America’s elites know so little about their country’s history. Case in point: Jared Bernstein of the Economic Policy Institute. Jared is an influential left-ish economic polemicist and a sometime adviser to Barack Obama on economic affairs. I’ve debated with Jared dozens of times over the past several years, but what happened this week was especially disturbing.
“Never give in–never, never, never, never, in nothing great or small, large or petty, never give in except to convictions of honour and good sense. Never yield to force; never yield to the apparently overwhelming might of the enemy.”
To the annals of contra factual history which range from Churchill’s “What if Lee had won at Gettysburg”, to SNL’s what if Napoleon had a B-52 bomber, I have my own addition: What if Steve Forbes had won the primary and general elections in 2000? How would the world differ from the world we live in now?
Barack Obama is a Fabian socialist. I should know; I was raised by one. My Grandfather worked as a union machinist for Ingersoll Rand during the day. In the evenings he tended bar and read books. After his funeral, I went back home and started working my way through his library, starting with T.W. Arnold’s The Folklore of Capitalism. This was my introduction to the Fabian socialists.
If you do (and maybe it’s you), please let them know about a couple of Harry Potter discussions we are sponsoring at St. Stephen’s Church in McKeesport. My good friend John Granger, who has written several wonderful books about the Harry Potter novels, will be our guest speaker. John has just finished a book about the deeper theological and philosophical themes in Harry Potter. He is also writing a book about the many ways in which J.K. Rowling has incorporated the great themes of English literature into her stories as well. Instead of the Harry Potter books becoming ‘gateways’ to the occult or youth culture rebellion, they turned out to be ‘gateways’ to William Shakespeare, Jane Austen, Charles Dickens, Dante and Plato.
BenchMark Financial has asked me to do a presentation and to lead a discussion about our current economic turbulence. The event will he held in downtown Pittsburgh at the Rivers Club on the evening of October 23rd. Even though it is sponsored by BenchMark you are quite welcome to attend even if you are an advisor or client with another firm.
You don’t hear many references to the New Testament in financial journalism these days. Maybe that’s part of the problem. Larry Kudlow is a notable exception. Over the past week in the midst of numerous pieces of bad news, Larry has made continual reference to ‘financial mustards seeds of hope’ in our financial markets. What does that mean?
Forget the pundits — look at what happened to the Intrade political futures market, tracing Sarah Palin withdrawal futures in real time, as Palin debated Joe Biden. They are now lower than Biden withdrawal futures.
Ron Paul says that the Paulson plan is unconstitutional. So does Michele Malkin. Newt Gingrich hinted at constitutional problems but said outright that the plan was un-Republican. I heard a southern House Republican tell Larry Kudlow that the plan was unconstitutional and unprecedented.
As of this writing, the modified Paulson plan has been voted down by Congress and the Dow has taken the largest one-day plunge in history. All of this could have been avoided as recently, even, as a few weeks ago. It could still be solved, but it’s going to take at least one more upgrade for the Paulson program to get it to work.
I just got off the phone with Ed Lazear (Chairman of the President’s Council of Economic Advisors), and he made a good case for the severity of the crisis, esp. negative interest rate on t bills. It got bad last week. The sun turned to sackcloth, moon ran blood red, burning hailstone, etc….crazy stuff. Something had to be done.