Friday, July 20, 2012

VIDEO: Castrating The Fed Is The Only Way Out Of The Economic Depression

VIDEO: Castrating The Fed Is The Only Way Out Of The Economic Depression
Lew Rockwell recently posted a Casey Research interview of former United States Comptroller General David Stockman in which the former head government accountant discusses why the economy is stuck in a multi-year depression. According to Mr. Stockman, Fed-enabled debt--sovereign and consumer--prevents recovery, and the only way the economy can recover is through a painful period of austerity. According to the former CG:
 I don't think we are at the beginning of the recovery. I think we are at the end of a disastrous debt supercycle that has gone on for the last thirty or forty years, really. It started when Nixon defaulted on our obligations under Bretton Woods and closed the gold window. Incrementally, year after year since then, we have been going in a direction of extremely unsound money, of massive borrowing in both the private and the public sector. We now have an economy that is saturated with debt: $54 trillion or $53 trillion – 3.5 times the GDP – way off the charts from where it was for a hundred years prior to the beginning of this. The idea that somehow all of that debt is irrelevant, as the Keynesians would tell us, is fundamentally wrong – and the reason why the economy can't get up off the mat.
We're doing all the wrong things. We're adding to the problem, not subtracting. We are not allowing the debt to be worked down and liquidated. We're not asking people to save more and consume less, which is what we really need to do. And so therefore I think policy is just making it worse, and any day now we will have another recurrence of the kind of economic crisis we had a few years ago.
Mr. Stockman made a salient point that should be made common knowledge: Since its creation in 1913, Fed money printing has caused periods of economic malaise in this country:
The greatest period of growth in American history was 1870-1914 – the Fed didn't exist. Right after 1870, when we recovered from the Civil War we went back on the gold standard. It worked pretty well. World War I was a catastrophe for the financial system. The Fed financed it, but I don't give them any credit for that, okay? We shouldn't have been in that war. It was a stupid thing to get involved in. But once we got involved in it, the Fed printed money like crazy, it facilitated borrowing, set the groundwork for the boom of the 1920s and the collapse of the 1930s.
The former Comptroller General hammered home the point that the Fed has been propping up the stock market:

...then the crisis came in September, 2008. They panicked and pulled out the stops everywhere. As I said, tripled the balance sheet in thirteen weeks, [compared to what] they had done in 93 years. They are now at a point where they don't dare begin to reduce the balance sheet, begin to contract, or they'll cause Wall Street to go into a hissy fit. They are afraid to death of Wall Street going into a hissy fit, so essentially, the robots and the boys and girls and the fast-money traders on Wall Street run the Fed indirectly.

Clearly, Stockman isn't fond of the Fed's board of directors:
 So no wonder we are in totally uncharted waters, and it's being run by people who are clueless as to how to get out of the corner they've painted this country into. They really ought to be run out of town on a rail.
Watch the video. It's well worth your time:

Tuesday, July 17, 2012

Sad Images Of Hugo Chavez's Trolleybus

Curious to see what the Venezuelan town I studied in looks like in its second decade of Chavez rule, I pulled up some recent photos from Google maps. Among other surprises, I was surprised to see that the government had built a trolleybus system in the neighborhood I stayed in. Clearly the work of socialists, the system is ostentatious and contrasts greatly with its impoverished surroundings. But pretentious design aside, what struck me was that the neighborhood looked much poorer than it did when I was there. I don't have a scanner, so I can't upload photos of the area from 1998, but I can attest that the privately-owned buildings in the background didn't look nearly as bad before the socialist government took over.

This is the trolleybus stop closest to my host family's neighborhood. The structure is made of stainless steel and likely cost more than what the typical Venezuelan earns over a lifetime. I used to get haircuts and buy guitar strings in the shopping center in the background. The center was well-maintained back then.

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Sad Images of Hugo Chavez's Trolleybus - Estacion Alto Chama


Here's a closer look at the shopping center. Notice the hand-painted sign and trash on the ground. This was actually a pretty nice place to shop 14 years ago.

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Sad Images of Hugo Chavez's Trolleybus - Alto Chama

Here's a view from the other side of the station. Notice the Venezuelan flags everywhere. Also notice that Chavez changed the stoplight colors to match the colors of the Venezuelan flag. Only in a socialist country...

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This is a terminal station. The ostentatious design couldn't contrast more with the decrepit houses in the background. The decrepit houses are actually part of my good friend's neighborhood. The area didn't look so bad when I used to visit.
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Sad Images of Hugo Chavez's Trolleybus - Terminal Ejido

Here's a closer look at the terminal. Straight out of a utopian socialist fantasy. Tragic considering the poverty that surrounds it.

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Sad Images of Hugo Chavez's Trolleybus - Terminal Ejido 2