Here’s a little glimpse into the attitude of our elected representatives. In this video from the Clinton years, Congressman Pete Stark of California gets increasingly agitated, condescending and rude as a reporter challenges him on the wisdom of deficit spending:
Hat tip Zero Hedge.
I glanced at Mr. Stark’s wikipedia page, and he is an interesting congresscritter. He’s an MIT engineering grad, an atheist, and he voted against both Iraq wars and the Patriot Act — just knowing those facts, I wouldn’t have guessed he was such an arrogant, ignorant prick. Oh, and like so many Democrats, he spoke out against Bush’s deficits but has no problem with his own party’s spending, like the socialized health care he supports. Here’s a quote from the Bush years:
“Republicans sure don’t care about finding $200 billion to fight the illegal war in Iraq. Where are you going to get that money? Are you going to tell us lies like you’re telling us today? Is that how you’re going to fund the war? You don’t have money to fund the war or children. But you’re going to spend it to blow up innocent people if we can get enough kids to grow old enough for you to send to Iraq to get their heads blown off for the President’s amusement.”
That’s great — now if he’d just say the same about Obama’s Afghanistan efforts and deficits.
One more thing about this guy: he and Congressman Defazio were the geniuses behind the “Trader Tax” proposal to put a 0.25% tax on the notional value of all market transactions, as a way to “make Wall Street pay for Wall Street’s bailout.” He didn’t care that traders are not “Wall Street” and received no bailout.
Yep, I’ve seen that yesterday on Peter Schiff video blog. Truely unbelievable.
Re deficits, Mish pointed out that Krugman has had the exact same behaviour
Yeah, it’s not just the Dems either — it’s standard politics: when the other guys are spending money, talk about the deficit. When you hold the purse, deficits are investments.
And it’s not the politics, since Krugman is not affiliated with any party (AFAIK, maybe I’m wrong).
I meant: “it’s not JUST the politics”
Krugman is a socialist, Keynesian hack. He’s completely political. He wants to make the US into Denmark, but with higher taxes.
Haha. Why did you pick Denmark?
I just recently read Uruguay’s sad story, narrated by Hazlitt. I think that’s where most countries are headed now.
If you haven’t read it, I suggest you do
Here’s the latest update: http://www.lewrockwell.com/reisman/reisman35.html
Because Denmark has the highest income taxes in the world. I hadn’t read Uruguay’s story before, just Argentina’s. Yep, I think our future has elements of South America in it.
http://mises.org/books/manwelfarestate.pdf
pages 148 to 158.
truely amazing thing in Uruguay, worth the read.
Guys, I think we just need to realize the truth and take all the party politics out of it. Dems=GOPs. Of course, Ron Paul is different but Americans do not want truth and real change. They want to go back into the fantasy of the Credit Matrix.
As Friedman said when Nixon defaulted on the dollar convertability of the dollar “we’re all Keynesians now”. What does this mean? It means we are all con men now, willing participants in a global Credit based Ponzi scheme. To be honest I was a bit moved by Pete Stark in the video. He started off with strong “debt=wealth” mantra but if you noticed he was nearly in tears at the end of it. He sobbed though his threat to throw the reporter out the window if he “didn’t get the F out of here”.
I sense that Stark is very conflicted here, probably because he knows that the Great American Scampire is on its last legs. The whole economy is one big debt driven Ponzi scheme and it is becoming more and more difficult for the Ponzi operators to conjure up new “financial innovation” in order to keep the plate spinning. That means the whole government is in trouble because there is nothing like financial ruin to awaken the sleeping, well armed masses.
It’s coming folks. It’s on rails. No, we are not different than any other nation whose fiat currency has gone bust.
DaveT
Sorry, but you are barking at the wrong tree here :
a) I watched several of this Jan Helfeld video. He claims he is a Socratic questionner : he is not, he is just rude. Last time I checked Plato’s republic, Socrates was not interrupting his contradictor in the middle of his sentences. Sophistic questioning is a better descriptor of his technique, not something unexpected from an attorney by trade.
b) As Paracelse pointed out, the dose makes the poison. It applies also to debt, even from government. There is an optimal middle ground between a Ponzi economy and an economy where no economic agent trusts no one. A sustainable debt is a debt to fund investments that will generate more economic benefits in the future than the amount originaly disbursed. The interviewer behaves as if he ignores this obvious fact. Honestly, a congressman has no time to loose to explain such basic facts, I. You can label low tolerance to stupidity as arrogance if you want, but personally I understand perfectly Starks’s epidermic reaction, and would probably react the same way. Life is too short.
c) I am sure you and I differ in significant ways with Rep. Starks about what constitutes a profitable and legitimate public investment. We are probably more restrictive. Yet, on the “big ticket” obviously wasteful decisions :
- Irak War,
- Paulson’s “give me the money so that I can do what I want to rescue my Wall Street Pals” Act,
it looks to me that he was on the right side. In a non perfect world, being right for 80% of what is at stake is good enough for me.
Yes, the Demopublicans are the same as the Republicrats. It is a shame so many intelligent people on both sides are stuck in the old us vs them routine. Divide and conquer has worked wonders for America’s elite.
Stark is clearly a jerk (such condescension about where someone went to school is offensive in the extreme and very revealing), and he is flat out wrong if he thinks government spending produces anything. We could whittle the budget down by 95% and not miss a damn thing.
It’s nice that he voted the right way on some very important issues, but then, so did GWB (taxes). They are both scumbags.
More fundamentally Mike, what is the percentage of your wealth that doesn’t rely on a social contract (this is equivalent to debt ultimately) ?
- Bonds, shares and commodity certificates ? Obviously not, it is a pure paper construct.
- Your house ? No, it relies on a property title. Actually if property tax and fees are higher than rental yield, it can even be a liability instead of an asset ! This is the case in some places in Florida.
- Banknotes or Gold in your safe ? Unless you extract immediate economic utility by looking at your bullion or stack of paper money (a pretty sorry state of psychological affair if you ask me), the answer is no again. You are just expecting other people to attribute such value to the stuff that you can exchange it against enjoyable things, such as food.
All what is left is your car, furniture, clothes in your wardrobe, food in your pantry, and knowledge/abilities in your head. I hope for you the first three doesn’t amount to much of your assets, and that you will never have to monetize the latter (it is called debt slavery…).
So indeed, as a consequence of us humans being social animals, debt = fungible wealth, whether you like it or not.
“A sustainable debt is a debt to fund investments that will generate more economic benefits in the future than the amount originaly (sic) disbursed.”
WRONG!!! This is what the lying PhD eCONonists (AKA marketing agents for the Keynesian agenda) have been saying for years. They bring out fancy formulas and computer models and leverage theory to help market this lie.
Let’s go back to common sense for a second to see the real truth. Let’s cut through all the BS as ask ourselves this revealing question: Can ever increasing debt be the path to perpetual prosperity? We are told “yes, as long as the debt funds growth that exceeds the service on the debt”.
First and most obviously, when has government debt ever been used to fund growth? If you are honest about it you will admit that it’s used to fund BAIL OUTS, SUBSIDIES and ENTITLEMENTS. It’s used to fund OVERHEAD and BUREAUCRACY. There is no growth in these things.
But let’s say the government actually used the money the way you implied it does: to fund business which drives growth. Even in this case, IT’S STILL A SCAM. If it were not a scam then we would have invented perpetual, labor free prosperity. We could just borrow and borrow and borrow and grow and grow and grow forever. You really can’t believe in something-for-nothing economics, can you? Are people really so devoid of common sense?
As much as I would like it to be different, perpetual motion machines don’t exist either in physics or economics because it takes work in order to keep the plate spinning in a world that can never be free of drag. Debt based prosperity is the economic analog to a perpetual motion machine. It appears to work for awhile but then it is proven to be a lie, a trick.
The reason is simple: new value is only achieved from doing work. It cannot be conjured into place via money tricks. Like any con job it can APPEAR to work for awhile but it will eventually be found to be a Madoff.
Again, the reasons why it can’t work are clear: if you never use the profits from your debt-purchased capacity in order to pay off the debt then you never really have earned any wealth because you owe all the gains to someone else. Also, debt increases the money supply causing the price of things to go up. The prices go up slightly faster than the money supply increases. It means you have to take on more and more debt just to maintain the status quo – never mind “growth”. And then of course there is the interest to pay which is rapidly becoming a significant portion of the entire federal tax take. Add it all up and it takes an exponentially growing debt in order to maintain the status quo and at some point it can’t even do that: there comes a time when more debt has not only DIMINISHING BUT NEGATIVE returns.
So, pull your head out of scam land because it’s just going to blow up in your face sooner or later, and it’s looking like sooner.
DaveT
DaveT
“when has government debt ever been used to fund growth?” : Not too difficult : most of the roads your car are rolling on have been funded by debt ; without it, your transportation cost and economic opportunities would certainly be lower. Bridge to nowhere are wasteful, but the roads that you and I use are useful (I assume you do not live in that little island in Alaska…). We probably agree that a good chunk of government expenses and investment are wasteful, but it is a stretch to claim that 100% of public investments belongs to this category.
“New value is only achieved from doing work”. I totally agree with this statement. However, most of the value is generated by economic agents working together (you know, pin factory story and the like…) and, crucially, not necessarily at the same time. Essentially, the people that are building the road to your house have to trust that you will be going to pay them back once economic opportunities become available to you, I.e. when the road is finished !
Put more simply :
Give credit to no one, and you will be very poor.
Give credit blindly to everyone, and you will end up very poor too !
Optimum is in the middle. We are certainly beyond it (I.e. aggregate financial wealth went way too high, by a factor 2 or 3), and thanks to a majority of people sharing your extreme attitude, and resource depletion, we may swing violently beneath it. The 80 to 90% real loss peak-to-through brought forward by the host of this blog are realistic in that instance. This is the point where investing will become extremely profitable.
“he is flat out wrong if he thinks government spending produces anything. We could whittle the budget down by 95% and not miss a damn thing”
I could assure you that without food stamps and other subsidies there would be bread lines and massive homelessness. Even Mish acknowledges that welfare programs mask a great depression.
Most (or a large portion) of the private sector’s “wealth” is in value transference capital. Of course, the state does have value transference capital, but at least in European welfare states, at least the value transference capital is just to build or maintain social capital. (One possible trend that might deplete social capital in Europe is increased immigration.)
Mike, just out of curiousity, how popular are right-wing populist countries in Europe (I suppose social mood in Europe is rather glum now)? Are political parties more vocal about immigration. I suppose that is one area where right-wing policies appeal to most people, as I doubt many people would want to trim the welfare state there.
Even Mish acknowledges that welfare programs mask a great depression.
“Mask” is the operative word here. Since those programs are being funded by debt issuance, they amount to nothing more than pushing today’s problems out to tomorrow (along with the compound interest). They will have to be abandoned when further federal debt issuance is no longer possible.
I like Bob Hoye’s saying: in a depression, “government ‘safety nets’ will be as useful as an umbrella in a crowbar storm.”
Sure, to cut spending by 95% at once would make a big splash, but just think of the instant wealth creation and change of psyche that would result after the very rapid deflationary phase. People would again get to keep what they earn for themselves and their families and would feel responsible for their own fates. Private charities would boom along with business, as everyone would be freed from bureaucracy. The US would be a free country again, and there is no better recipe for real wealth creation and a prosperous middle class. The top 1% uses government to hold its position — without that support, creative destruction would again allow easy upward mobility for individuals and new enterprises, and the 21st century would boom even faster than the 19th.