Disney Continues to Prioritize Left-Wing Culture, Anti-Free Speech Legislation

Lifelong family-oriented supporters of the Walt Disney Company will be sad to learn that Disney is no ally to traditional social values.  2ndVote currently scores the Walt Disney Company at a measly 1.67 — and we’re not optimistic about that score improving in light of the company’s brainwashing of little children with an episode of their famed Muppet Babies television show promoting gender confusion.

There are several problems with Disney’s decision. First, biologically, there are just two sexes. Second, Disney should focus on wholesome entertainment, not overtly political social activism. Third, Disney has actively engaged on the issue of gender identity in a way which attempted to restrict the rights of millions of Americans.

We’ve been tracking Disney’s actions against traditional American values for years. In 2016, the company stood against North Carolina bill HB2, claiming that allowing business owners to choose their own bathroom policies was bigotry. Disney canceled events, costing local business owners a lot of money. More recently, Disney endorsed the Equality Act – a bill that has nothing to do with equality, and everything to do with pushing a very specific cultural agenda. Religious organizations would be under threat because of the Equality Act – a clear violation of Basic Freedoms found in the First Amendment.

When Disney puts its financial resources behind movements that seek to compel anti-American values, Americans suffer.  These movements are potentially harmful to everything from freedom of speech to religious liberty.  The next time you’re looking to enjoy some family-style entertainment, consider an alternative to Disney which won’t play against your traditional values.

The trick to the entertainment industry is that Hollywood Studios (owned by Disney), Universal Pictures (1.00), Netflix (2.29), and other top entities also rank poorly on the 2ndVote scale. They simply don’t support America’s constitutional and human freedoms of religion, speech, firearms, etc. Therefore, we encourage you to support regional theme parks like Kentucky Kingdom (3.00) and Six Flags (3.00) instead. As for digital entertainment, organizations like PureFlix (3.73) have the kind of wholesome, fun entertainment that Disney used to prioritize. We urge you to spend your hard-earned money with those organizations, and contact Disney and urge them to return to entertainment, not left-wing politics.

EDITORS NOTE: This 2nd Vote column is republished with permission. ©All rights reserved.

Capitalist Giant American Express: Capitalism Is Racist

My latest in PJ Media:

What could be more capitalist than American Express? After all, the credit card behemoth made $2.3 billion in profit last quarter alone.  Since the social media giants are massive corporations, too, and they seem to be all in on the woke corporate nanny state, why not Amex? Christopher F. Rufo of the Manhattan Institute revealed in the New York Post Wednesday that Amex invited Khalil Muhammad, a professor at Harvard Kennedy School and the Radcliffe Institute and the great-grandson of the founder of the Nation of Islam, Elijah Muhammad, to give a lecture to employees on “race in corporate America.”

Yes, Amex is pushing critical race theory (CRT) in a big way. Rufo notes that the company established an “Anti-Racism Initiative” last year after the death of George Floyd, and since then has been “subjecting employees to a training program based on the core CRT tenets, including intersectionality, which reduces individuals to a tangle of racial, gender and sexual identities that determine whether he is an ‘oppressor’ or ‘oppressed’ in a given situation.”

Employees were made to enter their “race, sexual orientation, body type, religion, disability status, age, gender identity [and] citizenship” onto “an official company worksheet” and use this data to determine whether they were “privileged” or “marginalized,” no doubt in full accord with the Left’s hierarchy of good to evil, in which white American males are the carriers of the original sin of racism. Amex offers resources (including, of course, the timeless classic writings of Ibram X. Kendi) to “learn about covert white supremacy” and take up “the lifelong task of overcoming our country’s racist heritage.” Some of the featured resources call for efforts to “force white people to see and understand how white supremacy permeates their lives.”

As in other places, the CRT training at Amex identifies even the renunciation of racism as racist, stigmatizing as “microaggressions” phrases including “I don’t see color,” “We are all human beings” and “Everyone can succeed in this society if they work hard enough.”

Everyone can succeed in this society if they work hard enough, but Khalil Muhammad, Harvard professor, was having none of that and was determined to make sure the Amex employees, or at least the white male ones, became aware that they were racist oppressors. He told his captive audience of credit card wonks that capitalism was “founded on racism” and that the Western world had been profoundly influenced by “racist logics and forms of domination” for centuries. “American Express,” he declared, “has to do its own digging about how it sits in relationship to this history of racial capitalism.” He laid the guilt on extra thick: “You are complicit in giving privileges in one community against the other, under the pretext that we live in a meritocratic system where the market judges everyone the same.”

There is more. Read the rest here.

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EDITORS NOTE: This Jihad Watch column is republished with permission. ©All rights reserved.

An Ivy League Analysis Just Destroyed Biden’s Biggest Argument for the Bipartisan Infrastructure Bill

Here’s why the plan would create zero jobs, on net.

The bipartisan infrastructure legislation moving through Congress could end up on President Biden’s desk before we know it. The $1 trillion bill has reportedly cleared major hurdles in the Senate and will soon land before the House of Representatives. The president would almost certainly sign the bill, which has his support, and its bipartisan passage would represent a political victory for the Biden administration.

At least, at first.

The promised long-term economic benefits from the sweeping $1 trillion expenditure will likely never materialize, according to a new Ivy League analysis. This runs directly against the president’s promises that it would create jobs and stimulate the economy. Indeed, Biden has insisted that the government spending plan will “create millions of good-paying jobs.”

“This bill makes key investments to put people to work all across the country,” the president said. “It’s going to put Americans to work in good-paying union jobs building and repairing our roads, bridges, ports, airports.”

He additionally claimed that the plan is a “blue-collar blueprint” for economic opportunity because, supposedly, 90 percent of the jobs created “will not require a college degree.”

This rhetoric is likely to appeal to many Americans. But the aforementioned analysis, by the Wharton Business School, pours cold water on the president’s rosy promises. In stark contrast to “millions” of good jobs created, the Ivy League analysts project that the plan would have a net zero effect on employment, wages, and economic growth over both the medium-term (by 2031) and the long-term (by 2050).

Despite these meager results, the legislation would still add a whopping $351 billion to the national debt. For context, that’s roughly $2,449 in new debt per federal taxpayer.

Why would the plan create zero net jobs?

Well, as the analysts explain, it would indeed create some jobs via public works investment. This is what Biden and other advocates focus on. But there are also significant costs, since the resources invested in government infrastructure spending are ultimately not going toward private-sector investments that would otherwise have occurred. When the Wharton analysts compared the outcomes with these costs in mind, they found no actual net benefit.

This revealing analysis reminds us of the timeless principle explained by Henry Hazlitt in his classic work Economics in One Lesson. The scholar explained why public works schemes are not inherently the job-creating programs that politicians claim.

The politicians, like Biden in this case, focus on the tangible, seen benefits of their proposed spending like the infrastructure jobs created. But they routinely overlook, downplay, and deny the unseen costs of such projects, misleading the public by only presenting them with half of the cost-benefit analysis. Hazlitt aptly explained this phenomenon with the example of a government bridge-building program.

“For every public job created by the bridge project a private job has been destroyed somewhere else,” he wrote. “We can see the men employed on the bridge. We can watch them at work. The employment argument of the government spenders becomes vivid, and probably for most people convincing. But there are other things that we do not see, because, alas, they have never been permitted to come into existence.”

“They are the jobs destroyed by the [money] taken from the taxpayers,” Hazlitt continues. “All that has happened, at best, is that there has been a diversion of jobs because of the project. More bridge builders; fewer automobile workers, radio technicians, clothing workers, farmers.”

Of course, this debate over job creation exists as just one part of the infrastructure debate. Biden is still free to argue that his proposed spending is otherwise necessary. But modern Ivy League analysis and timeless economic principles alike debunk the president’s argument that the bipartisan infrastructure bill will create millions of jobs.

*****

This article was published on August 9, 2021 and is reproduced with permission from FEE, Foundation for Economic Education.

 

A China In A Bull Shop

China has taken a number of steps of late to restrict enterprise. Press reports often phrase that there has been a “crackdown” on the private sector as if a private sector really exists in China.

In other cases, they have stepped in, as in the case of Hong Kong, to destroy freedom and the economic machine that made Hong Kong a vibrant hub of growth and innovation. As a result of these ideologically-driven steps, a number of markets have suffered some substantial sell-offs.

The result of these actions is some anomalies in world equity markets.  Most stocks markets remain in strong upward trends.  Not so those associated closely with China.

The FXI index of large-cap Chinese shares reached a peak in mid-April and is now down 30%, quite a bit more than the working definition of a bear market, which is considered anything greater than 20%.

China has also taken steps to restrict cryptocurrencies, something we have long predicted.  GBTC representing the Grayscale Bitcoin Trust has now shed over 60% from its peak in March.  We are not saying China is the only factor in this case, but it is a substantial one.

The index representing the Hong Kong Hang Seng index has dropped more than 20% since its recent peak in March.

The China Index, which trades on the NYSE Arca, is now down 46% from recent highs reached in mid-February.

In short, quite a broad measure of equity indices that reflect investments related to China, or heavily influenced by China, are suffering some substantial losses.

Perhaps the Western love affair with Chinese investments will be shaken by such events, although even stories of slave labor and genocide don’t seem to make much of dent in the enthusiasm the West has shown for China.  One only has to look at American companies such as the NBA, NIKE, Disney, Apple, and Google, to see that slave labor, genocide, and the support of totalitarianism should not get in the way of making a buck.

Most investors perhaps don’t appreciate that a Chinese corporation is really quite different than a Western corporation.  The People’s Army usually has representatives sitting on the board of Chinese corporations, many “corporations” are state-owned, and Chinese “capitalists” serve at the pleasure of the Chinese government. In fact, one prominent billionaire was just sentenced to 18 years in prison for speaking out. One wonders why the terms “CEO”, “corporation”, “equity”, and “markets”, even are allowed to be applied to Chinese companies.

Industry moguls such as Jack Ma, have on occasion, “disappeared” for months on end, held in government detention until “disagreements” can be worked out.  Some never re-appear.

Most savvy investors don’t trust the economic numbers generated out of China anyway.

With the billions, the Chinese system is generating for the ruling class there, and the ruling class in most of the West, one wonders why they are doing what they are doing.

It would seem that maintaining tight control (ideology) is even more important than money.

Surprise, surprise, they are Communists!

We don’t pretend to be experts on all things internal to China.  Their system is a strange hybrid of free enterprise on a micro level, but a Communist tyranny on a macro level.  Such internal contradictions are bound to clash from time to time, and cause difficulty.  The problem for all authoritarian systems is maintaining control while at the same time producing enough economic perks to keep the people subjugated reasonably content with living without their personal freedom.

When you give people their economic freedom, they just might learn to like the idea of political and religious freedom.

You might remember the theory prominent among Progressives, some Conservatives, and many libertarians, that trade with China would moderate their behavior.  They would become more like us. That has not occurred.

In addition, they argued that increased commercial ties, guard against the chance of conflict because each party has too much to lose.  That has never been the case.   Those that assert that simply don’t know their history.

For example, before World War I, both Russia and Britain were huge trading partners with Germany, and Germany was a huge trading partner with them.  In addition, the heads of the three countries were closely related by blood, they were cousins.  They still went to war with each other.

Whatever is going on in China, it should serve as a warning to investors not to assume that business and finance terms, used by the press, represents the reality of the risks of investing in China.  It is vain of the West to think we can apply common business terminology and apply it to China and think it actually describes the way they operate.  You may wish to call a dragon and cow if you want, but reality says it’s still a dragon.

In China, one has all the normal risks of the cyclical nature of earnings, interest rates, currencies, and price fluctuations.  But in China, you also have significant political risk. It is not just corruption, it is an ideology that does not respect your life or your property.  And, the government does not want anyone or any company to challenge their authority.

A government that can forcibly sterilize women to destroy a culture, and use slave labor, is not likely to have much compunction about screwing you out of your money.

Maybe their brutal regime will look a bit different after investors have lost a lot of their money.

*****

Chart courtesy of stockcharts.com

The End of Bretton Woods, Jacques Rueff, and the “Monetary Sin of the West”

August 15, 2021 marks the 50th anniversary of the day President Richard Nixon “closed the gold window,” ending the postwar Bretton Woods international monetary system. It is an appropriate moment to reconsider the internal inconsistencies of the Bretton Woods system. As its contemporary critics understood, Bretton Woods was doomed to fail if it could not be fundamentally reformed. One of its chief contemporary critics was the French economist, Jacques Rueff.

Jacques Rueff

Rueff (1896 –1978) was the most important French classical liberal economist of his generation. As a young economist, he worked under Raymond Poincaré on the successful devaluation of the franc in 1926. He then worked on financial issues for the French embassy in London, where he observed first-hand Britain’s failed attempt to resume the gold standard after a wartime inflation, without devaluation against gold to match the wartime erosion of the pound’s purchasing power relative to gold (or enough deflation to raise the pound’s purchasing power back to that of gold’s). Rueff came to attribute the Great Depression to the failure to re-establish the classical gold standard after the war. Instead, an improvised and ever-changing “gold-exchange standard” allowed imbalances to build up until the financial system crashed. It was not the classical gold standard, but a gold-exchange standard mismanaged by central banks, that failed in the interwar period.

Rueff helped to organize the Walter Lippmann Symposium, an international gathering of classical liberals in Paris in 1938 to discuss Lippmann’s 1937 book The Good Society. The meeting has been seen as a precursor to the Mont Pelerin Society. He would later attend the first meeting of the Mont Pelerin Society. In 1939 he became Deputy Governor of the Bank of France, but was dismissed during the German occupation on account of his Jewish ancestry.

After the Second World War, Rueff was a leading free-trade advocate while holding a variety of official positions in the French government, in the European Coal and Steel Commission, and on the European Court. When French President Charles DeGaulle returned to power in 1958, he appointed Rueff to chair a commission on fiscal and monetary reforms for France. The resulting “Rueff Plan” made the French franc freely convertible into dollars, ending exchange controls, after a sizable devaluation. The plan also included tariff reductions, the removal of business subsidies, and a halving of the budget deficit. In his obituary, the New York Times wrote that Rueff “was perhaps best known for his austerity reform program of 1958, which stabilized the French economy” at the outset of de Gaulle’s Fifth Republic, adding: “With adoption of the Rueff Plan, the French economy began a period of vigorous industrial and trade expansion and Mr. Rueff continued in prominence through the 1960s as a sharp critic of United States monetary policies and payments deficits.”

The Internal Contradictions of Bretton Woods

Rueff and the American economist Robert Triffin were the two most prominent analysts to identify the inbuilt problems of the postwar international monetary system established at Bretton Woods. Under the system, the currencies of other nations were to maintain fixed exchange rates with the U.S. dollar (they were redeemable for U.S. dollars, but not directly for gold). The U.S. dollar was the “key currency,” the only one directly redeemable for gold and against which a large gold reserve was held. The right to redeem, however, was limited to foreign central banks. U.S. firms and citizens continued to be legally barred from holding monetary gold. To get gold by redeeming U.S. dollars, a foreign central bank had to be willing to risk the disapproval of the U.S. authorities, at a time when the U.S. was providing Marshall Aid and defense against the Soviet Bloc.

Rueff saw in the Bretton Woods system, with the U.S. dollar the key currency, the same weaknesses exhibited by the gold-exchange system during the interwar period with the British pound and the U.S. dollar then sharing key currency status. Under the classical gold standard, every central bank (or banking system, if like the U.S. and Canada it had no central bank) held its own gold reserves. Under Bretton Woods, by contrast, non-U.S. central banks held only assets denominated in the gold-redeemable U.S. dollar (most importantly, U.S. Treasury bonds) as their reserves for maintaining a fixed exchange rate with the dollar.

This arrangement gave the United States what France’s Minister of Finance called an “exorbitant privilege.” The U.S. could acquire goods and services from the rest of the world merely by expanding the supply of dollars, with the bill coming due only in the indefinite future. The temptation proved irresistible. The Bretton Woods set-up was not incentive-compatible: It enabled the U.S. government to profitably issue the world’s reserve currency, with immediate benefit but little immediate cost to pursuing a monetary policy too expansionary to maintain its peg in the long run. Foreign central banks held dollar assets as reserves and therefore would gladly accept them—up to a point. (The foreign central banks did not hold Federal Reserve Notes or dollar checking account balances; they swapped those for interest-earning safe dollar assets.) The flow of dollars overseas meant that foreign monetary systems gained reserves and also could nominally expand, while (in contrast to the classical gold standard under which the U.S. would lose gold to settle its balance of payments) the U.S. did not need to contract. Thus the gold-exchange system, in Rueff’s words, “substantially impaired the sensitivity and efficacy of the gold-standard mechanism” at self-regulation.

Notice the qualifier in the previous paragraph: up to a point. The immediate postwar period was characterized by complaints of a “dollar shortage” in Europe as central banks tried to build up the dollar reserves that they need to peg their national currencies to the U.S. dollar. Over time, with the U.S. government happily printing dollars to export to Europe in exchange for goods and services, talk turned to the problem of a “dollar glut.” European central banks accumulated more dollar-denominated IOUs than they wanted. As Rueff later noted, the U.S. could even go somewhat beyond the willing-accumulation point to the extent that it could successfully use political or diplomatic leverage to discourage foreign central banks from redeeming its currency. But such diplomatic talk could not be effective forever as ongoing monetary expansion caused ever-growing reserves of dollars to pile up in European central banks.

Unlike Triffin, who favored patching over the problems of the Bretton Woods system with expanded IMF credit facilities, Rueff recommended eliminating its core contradictions by replacing the Bretton Woods gold-exchange standard with a full-fledged international gold standard of the classical pre-WWI sort. Each nation was to hold its own gold reserves. In this recommendation Rueff was nearly alone, joined by only one contemporary European economist, Michael Heilperin of the Graduate Institute of International Studies in Geneva. In the United States, the economic journalist Henry Hazlitt criticized Bretton Woods along lines similar to Rueff’s. International policymakers, of course, did not embrace Rueff’s analysis or recommendations.

The Unraveling of the Bretton Woods System

Gold drained from the U.S. Treasury throughout the 1960s as European central banks understandably redeemed some of their accumulating dollar inventories. Shrinking U.S. gold reserves in turn amplified redemptions: European central banks must have understood the growing danger of a devaluation of the U.S. dollar against gold as U.S. gold reserves ran out. A central bank left holding dollar assets when devaluation came would have redeemed too little too late.

The International Monetary Fund tried to paper over the problem by issuing “Special Drawing Rights” (SDRs) for use as international settlement media in lieu of gold. But the SDRs proved futile at stopping the drain of gold from the U.S. Treasury. When U.S. gold reserves fell critically low in August 1971, rather than tighten U.S. monetary policy, Nixon “shut the gold window,” severing the international monetary system’s last link to gold. An unbacked settlement system was tried in the Smithsonian Agreement of 1971, but it lasted less than 18 months before the world entered the modern era of outright floating fiat currencies.

Rueff’s 1971 book The Monetary Sin of the West (first published in French as Le Péché Monêtaìre de l’Occident) provides a scrapbook of the ever-worsening situation under the Bretton Woods system during its last decade. Rueff saw the imbalances building up in the 1960s as similar to those that built up prior to 1929, and feared a crisis of Great-Depression scale. The crisis that unfolded in 1971 was not a debt-deflation crisis, however. It turned out to be a debt-repudiation and inflation crisis.

In passing, Rueff perceptively argued that chronic crises are to be expected when a central bank is placed in charge of a gold standard. The market mechanisms of a decentralized gold standard coordinate money supplies with demands better than any central monetary planner can or will: “I do not believe, as a matter of fact, that the monetary authorities, however courageous and well informed they may be, can deliberately bring about those contractions in the money supply that the mere mechanism of the gold standard would have generated automatically.” In practice, the authorities delayed contraction, prolonging the boom until the necessary correction is a large painful shock, whereas a decentralized gold standard operates daily, slowly, and gradually to maintain equilibrium via the price-specie flow mechanism.

In a February 1970 article from Le Monde, included in The Monetary Sin of the West, Rueff warned that “if residual requests for conversion of dollars into foreign exchange or gold … were more than the United States could satisfy,” the American monetary authorities would have to close the gold window. As an accompanying footnote, inserted into the 1972 American edition, poignantly reads, “That happened on 15 August 1971.”

Rueff’s consistent prognosis that the Bretton Woods system could not survive in its then-current form, because other national governments would eventually be unwilling to continue accumulating piles of dollar claims, proved correct. On the other hand, Rueff consistently warned that another Great Depression loomed if the system was not promptly fixed in the manner he suggested. He wrote many times about a “catastrophe” in the works. After the fact, we know that these warnings were unduly alarmist. He failed to consider the exit strategy that Milton Friedman (16 years Rueff’s junior) proposed during the 1960s, even before the U.S. gold reserves began to run out, namely a move to floating exchange rates combined with a monetary rule for constraining inflation once the gold-redemption constraint was removed. No deflation was necessary.

Of course, Friedman only got the first half of his program. The de jure end of Bretton Woods ratified the de facto end (since the mid-1960s) of the Fed making monetary policy as though constrained by gold redeemability. No other constraint replaced it. Annual money growth (M2) hit double digits. The inflation rate, already rising, followed: it moved into double digits in 1974, 1979, and 1980. As it turned out, then, the Bretton Woods gold-exchange system ended in monetary expansion and the Great Inflation, not in monetary contraction and a Great Depression. One might say that the inflation merely postponed the recession to 1980-82. While it is true that 1980-82 was a relatively severe recession, it was nothing like the Great Depression.

*****

This article was published on August 14, 2021, and is reproduced with permission from the American Institute for Economic Research

Inflation Reaches 7.8%, The Highest Level Ever Recorded

Millions of Americans voted for Joe Biden because they disliked President Trump’s demeanor, and his temperament, and his tweets. Well, this is their reward. Record inflation, record deficit spending, open boarders, sky-rocketing crime, and the stability of the world in a freefall.

Inflation For Businesses Reaches 7.8%, The Highest Level Ever Recorded

By Daily Wire, August 12, 2021

Inflation for businesses reached a year-over-year rate of 7.8% in July — the highest level ever recorded.

On Thursday morning, the Bureau of Labor Statistics showed that the Producer Price Index — which tracks changes in input prices for businesses and other domestic producers — increased by 1.0% during the month of July alone.

According to the agency:

Nearly three-fourths of the July increase in the final demand index can be traced to a 1.1-percent advance in prices for final demand services. The index for final demand goods rose 0.6 percent. 

The index for final demand services rose 1.1 percent in July, the largest  one-month increase since data were first calculated in December 2009. Nearly half of the broad-based advance in July is attributable to margins for final demand trade services, which jumped 1.7 percent… Prices for final demand services less trade, transportation, and warehousing and for final demand transportation and warehousing services also moved higher, 0.6 percent and 2.7 percent, respectively.

The rise in transportation expenses matches the newest data for the Bureau of Labor Statistics’ Consumer Price Index, which was released on Wednesday. Over the past year, prices for used vehicles have increased by 41.7%; meanwhile, gasoline and fuel oil saw respective price hikes of 41.8% and 39.1%.

The year-over-year 7.8% rate marks the eighth consecutive month of increase for the Producer Price Index. In December, January, February, March, April, May, and June, the Producer Price Index reached annual rates of 0.8%, 1.6%, 3.0%, 4.1%, 6.2%, 6.6%, and 7.3%, respectively.

In June, Bill Adams — senior economist at PNC Financial Services Group — commented that “PPI matters much more than it usually does because inflation matters much more than it has for years.”

“We haven’t had an inflationary shock like this in a decade,” he explained. “We know we’re in the middle of an inflationary shock but what we still don’t know is how bad it is. That’s a big part of what we’re looking to these inflation data for.”

The main inflation index used by the Federal Reserve — which has not yet revised its near-zero interest rate target or scaled back its $120 billion monthly asset purchases — to make monetary policy decisions recently reached its highest level since the early 1990s. According to the Bureau of Economic Analysis, the Personal Consumption Expenditures Price Index has risen 4% between June 2020 and June 2021.

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EDITORS NOTE: This Geller Report column is republished with permission. ©All rights reserved.

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Bloated Bipartisan $1.1 Trillion Infrastructure Bill Is Neither Reasonable Nor Centrist

The bipartisan group of senators that just passed a $1.1 trillion federal infrastructure bill is attempting to sell it as a reasonable, centrist compromise. Yet it is neither reasonable nor centrist.

If approved by the House of Representatives, the bill would immensely expand the size and power of the federal government, waste hundreds of billions of taxpayer dollars on things that aren’t federal responsibilities, and promote expensive, far-left causes like climate change and taxpayer subsidies for green energy companies.

But that’s not all.

Take that $1.1 trillion infrastructure bill and add to it a second bill that’s more than triple the cost, waste, and government expansion—a $3.5 trillion budget bill (the largest in history) that “has to” be passed along with the infrastructure bill.

Improving America’s infrastructure is certainly a worthwhile goal. But this infrastructure bill won’t deliver on its promises because of its failure to properly prioritize projects. For example, things like mass transit and Amtrak would get about the same amount that’s allocated for highways, even though buses and rail account for only a tiny fraction of Americans’ travel.

The bill also includes exorbitant amounts of taxpayer-funded corporate welfare for the energy sector, including grants and loan guarantees for politically favored companies and technologies.

And the bill spends nearly $65 billion to expand broadband internet service. While improving broadband may be worthwhile, it’s not public infrastructure the way roads and bridges are.

Additionally, nearly $3 billion of that would go toward “achieving digital equity,” which includes ensuring that prisoners have high-speed internet. Is providing prisoners premium broadband a higher priority than directing those billions to fix crumbling bridges?

Lawmakers want to pay for the bill’s spending in ways that are inappropriate or will never raise the amount of money needed to cover its costs.

One of the worst pay-for gimmicks is known as “pension smoothing,” and it puts the costs on the backs of millions of the nation’s employees. The bill will allow corporations to reduce the amount they are required to contribute to their employees’ pension funds and instead use that money to increase their profit margins.

Why would politicians promote such behavior? Because while it shortchanges pension funds by about $9 billion, the federal government gets to tax the resulting corporate revenue.

But as bad as the infrastructure bill is, the really egregious part is that those controlling Congress have said that they won’t allow the bill to reach the president’s desk unless a $3.5 trillion budget package is passed along with it.

The budget package would be the largest tax-and-spend bill in history, and they propose paying for it by dramatically increasing taxes on businesses and investments—at the same time we are trying to spur a post-pandemic economic recovery.

You may remember that the tax cuts on businesses in 2017 led in part to the lowest unemployment rates in 50 years and higher wages for even the lowest income earners. This bill will reverse much of that.

Additional harmful elements of the $3.5 trillion plan (and there are many more than I have the space to mention here) include the largest expansion of welfare benefits since the 1960s.

As the former Virginia Secretary of Health and Human Resources who successfully reformed the state’s welfare program in the 1990s, I can say without hesitation that the policies created by this welfare expansion will harm both recipients and society. They discourage recipients from looking for work, promote even more dependency on government, and create generational poverty.

The budget agreement would also make much of the Green New Deal climate change agenda a reality, providing huge amounts of taxpayer-funded corporate welfare to favored green industries, even though the science shows that such initiatives actually generate few environmental benefits.

The bill would also expand government subsidies for the Affordable Care Act and expand control over existing health programs, moving America that much closer to government-run health care and reducing consumer choices.

Moreover, it would give amnesty to illegal immigrants. Apparently, in Washington’s upside-down world, amnesty is now considered a budget item.

Besides all the abominable policies, the trillions in new taxes necessary to fund both bills would cripple the American economy.

President Joe Biden says the tax increases would be borne by businesses and the rich, but raising taxes on businesses hurts all Americans, especially poor and working families. The simple fact is that companies have to pay for higher taxes somehow, and they usually do it by charging higher prices, lowering wages, or investing in operations and jobs overseas where taxes are cheaper.

In the end, this massive two-bill package would increase costs for American families, chase jobs out of the country, add trillions to the debt, and concentrate more power in the federal government. It’s filled with false promises of new “free” benefits that are only possible through higher costs and less liberty for every American.

*****

This article was published on August 11. 2021 and is reproduced with permission from The Daily Signal.

The Great Keynesian Coup of August 1971: Fifty Years Later

On August 15, 1971, the last remains of what had been a magnificent monetary system died a terrible death, and the American academic, political, business, and media elites led the cheers. The Dow Jones Average jumped by more than 32 points the next day. A de facto national default was spun as a great liberation from a tyrannical financial arrangement that had plagued humanity for generations. A half century later the disinformation continues, as intellectual bankruptcy parallels the financial bankruptcy of that event.

I write, of course, of the decision by President Richard Nixon to officially close the “gold window,” through which the US government was obligated to sell its gold stores to foreign governments at $35 an ounce, which even then was a bargain. As Nixon’s regime encouraged the Federal Reserve System to inflate the dollar to pay for its bloated military and welfare spending, as had the Johnson and Kennedy regimes before him, it became apparent that the US dollar was quickly losing value. The United States was in rapid decline—and the dollar was falling with the nation’s prestige.

What happened? There are several accounts, and I will give the main ones, ending with the Austrian perspective. The first will be the Keynesian, the second the monetarist (Chicago school), the third the supply-side version, and the fourth from the Austrians. Before doing that, however, I will give a brief account of the events that began with the Bretton Woods Conference in 1944 and ended in national disgrace, an ignominy that even now the official American narrative refuses to recognize.

The Bretton Woods Conference didn’t occur in a vacuum. Just a month before, Allied troops had secured a beachhead in France and had begun to slowly push the German army eastward. Across the European continent, armies from the Soviet Union were slowly destroying the Axis forces from the other direction. In the Pacific, US bombers were beginning to lay waste to Japanese cities, and the Japanese armies were suffering defeat after defeat. Final victory for the USA and its allies would not come for another thirteen months, but even in July 1944, it was clear how the war would end.

The US State Department explains the stated purpose of the conference: to help reestablish trading relations in the postwar world:

The lessons taken by U.S. policymakers from the interwar period informed the institutions created at the conference. Officials such as President Franklin D. Roosevelt and Secretary of State Cordell Hull were adherents of the Wilsonian belief that free trade not only promoted international prosperity, but also international peace. The experience of the 1930s certainly suggested as much. The policies adopted by governments to combat the Great Depression—high tariff barriers, competitive currency devaluations, discriminatory trading blocs—had contributed to creating an unstable international environment without improving the economic situation. This experience led international leaders to conclude that economic cooperation was the only way to achieve both peace and prosperity, at home and abroad.

Some cynicism can be excused if one sees a disconnect between the high-minded rhetoric of the documentand the actual policies of the Wilson and Roosevelt administrations that played a major role in creating the calamities from 1917 to the end of World War II. But then, it is a rare occurrence when government bombast and the truth intersect. Not surprisingly, Bretton Woods was an attempt by governments to deal with the previous disastrous results of intervention by imposing even more intervention.

In his classic What Has Government Done to Our Money, Murray N. Rothbard (who will figure heavily in my interpretation of the August 15 events) describes the Bretton Woods Agreement:

While the Bretton Woods system worked far better than the disaster of the 1930s, it worked only as another inflationary recrudescence of the gold-exchange standard of the 1920s and—like the 1920s—the system lived only on borrowed time.

The new system was essentially the gold-exchange standard of the 1920s but with the dollar rudely displacing the British pound as one of the “key currencies.” Now the dollar, valued at 1/35 of a gold ounce, was to be the only key currency. The other difference from the 1920s was that the dollar was no longer redeemable in gold to American citizens; instead, the 1930’s system was continued, with the dollar redeemable in gold only to foreign governments and their Central Banks. No private individuals, only governments, were to be allowed the privilege of redeeming dollars in the world gold currency. In the Bretton Woods system, the United States pyramided dollars (in paper money and in bank deposits) on top of gold, in which dollars could be redeemed by foreign governments; while all other governments held dollars as their basic reserve and pyramided their currency on top of dollars. (p. 99)

To put it another way, the Bretton Woods Agreement really was a scheme to give the appearance of “sound money” all the while ensuring that the sound money regime that existed prior to the outbreak of World War I would not be reinstituted. Furthermore, Henry Hazlitt, who then was writing editorials for the New York Times (how the mighty have fallen!), saw through everything and predicted that the new monetary arrangements would lead to disastrous consequences. He wrote:

The greatest single contribution the United States could make to world currency stability after the war is to announce its determination to stabilize its own currency. It will incidentally help us, of course, if other nations as well return to the gold standard. They will do it, however, only to the extent that they recognize that they are doing it not primarily as a favor to us but to themselves.

But Hazlitt knew that governments in 1944 were institutionally incapable of returning to sound money and that the elites in government, academe, and the media were hostile to anything but fiat money. Ultimately, Hazlitt and the NYT would part ways over his disagreements with the Keynesian economic views of the era. The NYT would continue to endorse monetary socialism and today features Paul Krugman, who has all but endorsed the money printing of modern monetary theory. In other words, Hazlitt predicted the demise of the Bretton Woods accord twenty-seven years before it officially collapsed.

As previously noted, the US dollar was set as the world’s “reserve” currency and it was set at $35 per ounce of gold, which meant that foreign governments and central banks could purchase US gold at that price if they wished to redeem their dollars on something other than dollar-denominated goods and assets. Rothbard points out that because the agreements set the currency exchange values at prewar levels, the dollar was undervalued and European currencies overvalued, thus increasing the demand for dollars.

(For reasons of length, I do not cover the Marshall Plan and how international monetary policies fit into trying to make it work. Suffice it to say the Marshall Plan has been given far too much credit for Europe’s postwar recovery. In many instances, it actually impeded recovery and it was only after the governments of Western European nations eased the economic controls set during Nazi occupations that Europe had a true economic recovery.)

The purposeful devaluing of the US dollar provided incentives for the Federal Reserve System to inflate the dollar, which it did in the postwar years and beyond (and is doing with a vengeance today). Because the law forbade Americans from buying and owning gold (with some exceptions for jewelry and official coin collections), the US government did not have to worry about its inflationary policies creating a domestic run on its gold reserves. That would not be the case overseas, however.

American economists and politicians embraced Keynesian theories that emphasized expansive government programs financed through deficit spending. The few dissenters such as economists Ludwig von Mises and F.A. Hayek were dismissed as “mossbacks” and “reactionaries,” as the American media, academic, and political establishments saw the New Economics as a gateway to easy prosperity.

European governments, and especially the French government led by Charles de Gaulle (who was advised by the classical gold-standard economist Jacques Rueff), by the 1960s began to purchase US gold in earnest. In the early postwar years, it made sense to hold officially undervalued dollars, but in less than two decades, the dollar had become hopelessly overvalued relative to most European currencies. Lyndon Johnson’s Vietnam war and his Great Society welfare programs had to be financed, and the government chose inflation. Buying US gold at what was a bargain price was a way that foreign governments could do an end run around a monetary exchange system that was becoming increasingly unbalanced.

In 1968, the US government tried to put together a stopgap measure to stop the gold hemorrhage. (Rothbard goes into the details of the measures, noting that they were doomed to fail because they were based upon faulty economic analysis.) By trying to sever the link between the US dollar and gold sold on the free market, the Johnson administration claimed that the new measures would force down the price of gold to less than $35 an ounce, making US stores an unattractive buy.

As any competent Austrian economist would predict, however, the runs on US gold did not diminish but rather intensified, and by the summer of 1971, the US economy was stagnant, prices were rising, and President Nixon on August 15 announced his “Phase One” economic plan of price controls and temporarily closing the gold window. Again, any competent economist would know that this move would end in failure, but the move initially was popular in the media and with the public. Gene Healy writes:

There was no national emergency in the summer of ’71: unemployment stood at 6 percent…. Yet, after Nixon’s announcement, the markets rallied, the press swooned, and, even though his speech pre‐empted the popularwooned, and, even though his speech pre‐empted the popular Western Bonanza, the people loved it, too—75 percent backed the plan in polls.

On the monetary side, the next step was the implementation in December of the Smithsonian Agreement, which raised the official price of US government gold to $38 an ounce and allowed some flexibility in the fixed exchange rates, but in the end, the combination of US inflation and economic stagnation on the home front would lead to the total collapse of fixed rates. By 1973, the dollar was hopelessly overvalued and ultimately the present system of floating exchange rates prevailed.

Keynesian Policies

One of the most famous statements to come from this episode of “Nixon Shock” was the president’s statement to his advisers, “We are all Keynesians now.” It also was the most accurate statement anyone in the government would make. In one action, Nixon cut ties to gold, what J.M. Keynes had called “that barbarous relic.” The devaluation of the dollar would help exports, and Nixon saw government intervention as necessary to “balance power” between labor unions and corporations.

In fact, his Federal Reserve chairman, Arthur Burns, already had announced his fealty to Keynesian economics, and Nixon himself had surrendered any previous notions of free markets to Keynesian-inspired policies. The PBS Commanding Heights series reported:

[W]hatever the effects of the Vietnam War on the national consensus in the 1960s, confidence had risen in the ability of government to manage the economy and to reach out to solve big social problems through such programs as the War on Poverty. Nixon shared in these beliefs, at least in part. “Now I am a Keynesian,” he declared in January 1971—leaving his aides to draft replies to the angry letters that flowed into the White House from conservative supporters. He introduced a Keynesian “full employment” budget, which provided for deficit spending to reduce unemployment. A Republican congressman from Illinois told Nixon tthat he would reluctantly support the president’s budget, “but I’m going to have to burn up a lot of old speeches denouncing deficit spending.” To this Nixon replied, “I’m in the same boat.”

Whatever fiscal discipline Nixon had promised during his political campaign was out the window. Even if his enemies in the academic and political worlds (and they were legion) would always hate him, nonetheless he was giving them what they always had wanted: government control of the economy. Not surprisingly, while his policies were politically popular at the beginning, the 1970s ultimately became known for stagflation (simultaneous increases in unemployment and inflation—something Keynesians claimed was impossible), gasoline and natural gas shortages (due to price controls), and a general feeling of despair.

Democrats ultimately would drive Nixon from office three years later, but they endorsed his economic policies, and especially his penchant for price controls. President Jimmy Carter would push his wage-price “guidelines” in an unsuccessful attempt to bring down double-digit inflation, and when Senator Ted Kennedy ran for the Democratic nomination in 1980, he made price controls the centerpiece of his economic policies.

Ironically, Carter and the Democrats did embark on a supply-side venture of their own, deregulating the financial and transportation sectors and laying the groundwork to deregulate telecommunications. Thus, the party of the New Deal actually undid part of the legacy of Franklin Roosevelt—and actually provided a long-run boost to the economy, all the while being ignorant of their accomplishments.

Supply-Siders

While the group of economists that called themselves supply-siders raised important issues about how government intervention into the economy was causing stagflation and other economic ills, nonetheless their statements on Nixon’s actions were shortsighted. During the 1980 presidential campaign in which Ronald Reagan cast his lot with supply-side economics, Jack Kemp, who championed the supply-side policies in Congress, declared that Nixon’s error had been to go to floating exchange rates instead of holding to the fixed rates of the Bretton Woods accord.

Nixon’s actions, as dishonest as they were, did not occur in a vacuum. Holding to fixed exchanged rates and a (very) modified gold standard would have required the kind of fiscal and monetary discipline that had no t existed in Washington since the Great Depression and certainly was not going to begin in August 1971. We should be clear: Nixon did not unilaterally destroy a productive arrangement. Nixon’s actions unwittingly exposed the bankruptcy of US government policies even though he would spin it as the US fending off an unjustified foreign attack on the dollar and on US gold supplies.

During the era of the international gold standard that fell apart in 1914, currency rates were fixed, but not against each other but rather to a measure of gold. Any attempts to game the system—as the US government did on a regular basis in the postwar years—would have quickly been detected, with gold outflows ultimately helping to counter cheating. Although the Bretton Woods accord was created to emulate the old gold standard with its fixed rates, it ultimately failed because governments are destructive. By summer’s end of 1914, the governments of Europe had gone to war and destroyed an international gold standard that took decades to build. In 1971, governments armed with Keynesian dogma laid waste to an economic system almost as surely as the Guns of August brought Western civilization to its knees.

Monetarists

When Nixon announced the imposition of wage and price controls, Milton Friedman of the University of Chicago loudly denounced them as an “utter failure.” However, as Rothbard wrote, Friedman was not unhappy to see the last ties of the dollar to gold broken. As an outspoken advocate of floating fiat exchange rates, Friedman for years had denounced gold ties to the dollar, as Rothbard explains:

Since the United States went completely off gold in August 1971 and established the Friedmanite fluctuating fiat system in March 1973, the United States and the world have suffered the most intense and most sustained bout of peacetime inflation in the history of the world. It should be clear by now that this is scarcely a coincidence. Before the dollar was cut loose from gold, Keynesians and Friedmanites, each in their own way devoted to fiat paper money, confidently predicted that when fiat money was established, the market price of gold would fall promptly to its nonmonetary level, then estimated at about $8 an ounce. In their scorn of gold, both groups maintained that it was the mighty dollar that was propping up the price of gold, and not vice versa. Since 1971, the market price of gold has never been below the old fixed price of $35 an ounce, and has almost always been enormously higher. (pp. 109–10)

In Friedman’s defense, the floating exchange rates didn’t cause the inflation of the 1970s. However, those floating rates imposed no financial discipline on the US government, and when things went south presidential administrations blamed foreign governments. When the dollar fell against European currencies in 1978, President Carter signed off on a scheme in which the Federal Reserve System underwrote a massive purchase of dollars in order to prop up the currency. Not surprisingly, the arrangement failed to strengthen the dollar over time.

Austrians

While Keynesians and monetarists might look down on gold as money (or any monetary ties to gold), Austrians are not afraid to face the ridicule from elites. More than anyone else, however, Austrians such as Rothbard understood completely what was happening in 1971, and they were not fooled by the government’s various monetary tricks as were others. Rothbard writes:

All pro-paper economists, from Keynesians to Friedmanites, were now confident that gold would disappear from the international monetary system; cut off from its “support” by the dollar, these economists all confidently predicted, the free-market gold price would soon fall below $35 an ounce, and even down to the estimated “industrial” nonmonetary gold price of $10 an ounce. Instead, the free price of gold, never below $35, had been steadily above $35, and by early 1973 had climbed to around $125 an ounce, a figure that no pro-paper economist would have thought possible as recently as a year earlier.

Far from establishing a permanent new monetary system, the two-tier gold market only bought a few years of time; American inflation and deficits continued. Eurodollars accumulated rapidly, gold continued to flow outward, and the higher free-market price of gold simply revealed the accelerated loss of world confidence in the dollar. (pp. 104–05)

The American economy and the dollar rebounded during the 1980s in part because of lower tax rates and in part because of the deregulatory efforts instituted by the Carter administration. Unfortunately, the favorable economic conditions did not lead to fiscal soundness, but, instead, seemed to encourage even more reckless behavior in Washington. For the last twenty-two years, the economy has seen one financial bubble after another: first the tech bubble of the late 1990s, then the housing bubble that burst in 2008, and now a combination of housing and equities seems to be rising well out of synch with market fundamentals.

As they did in 1971, the elite economists of our day are the cheerleaders for fiscal foolishness. Lest one believe I am exaggerating, this is from a recent column by Paul Krugman in the New York Times, which lost its way editorially after the editorial leadership pushed out Henry Hazlitt. Endorsing the so-called Infrastructure Bill, Krugman writes:

Imagine, to use a round number, that the federal government were to go out right now and borrow $1 trillion—and that it were to do so without making any provisions for servicing the additional debt. That is, it wouldn’t raise any taxes or cut any spending to pay off the principal; it wouldn’t even do anything to cover interest payments, simply borrowing more money as interest came due.

Under these circumstances the debt would grow over time. But it wouldn’t grow very fast: The current interest rate on long-term U.S. debt is less than 1.2 percent, so after a decade the debt would have risen only about 13 percent.

And debt growth would be vastly outpaced by growth in the economy: The Congressional Budget Office projects a 50 percent rise in dollar G.D.P. over the next 10 years. Debt wouldn’t snowball; relative to the economy, it would melt.

So the fact that the infrastructure bill would, in practice, pay for public investment with borrowed money isn’t anything to worry about. If the investment is worth undertaking—and it is—we should just do it.

One can imagine that Krugman would have championed Nixon’s moves, from abrogating the Bretton Woods Agreement to imposing wage and price controls. To a Keynesian like Krugman and those that came before him, the economy works best when governments spend recklessly with no constraints.

Austrians know better. The collapse of the monetary order in 1971 reflected the massive dislocations and malinvestment of resources that ultimately turned the decade into one crisis after another, and the current economy is facing risks of even greater magnitude. Unfortunately, Keynesians rule the day, just as they did fifty years ago. As Charles-Maurice de Talleyrand wrote of the Bourbons in the years after the French Revolution, “They learned nothing, and they forgot nothing.” One can say the same for the Keynesians. A half century after The Crisis, Keynesians seem hellbent on creating new crises and printing money to “fix” them.

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This article was published on August 10, 2021 and is reproduced with permission from the Ludwig von Mises Institute.

Phoenix Is Nation’s Fastest-Growing Big City; Nearby Buckeye’s Population Explodes

The U.S. Census Bureau released its official data Thursday, reflecting its 2020 headcount. It confirms estimates showing Arizona’s capital city grew faster than any other of the country’s major population centers.

Phoenix grew by 11.2% from 2010 to 2020, trading places with Philadelphia for the fifth-largest city in the nation. There also was a trend of the fastest-growing municipalities being located just outside of a major population center. Buckeye, Arizona, grew faster than any other city with a population more than 50,000. The Phoenix suburb grew by nearly 80%, to 91,000, over the past decade.

Data on the nation’s more than 331 million residents was delayed because of the COVID-19 pandemic and arguments over deadlines at the federal level. The Census Bureau released information about each state’s number of Congress members earlier in the year. Officials originally planned to release the final data from last year’s headcount “near the end of September,” but a lawsuit from the state of Ohio led to a negotiated release date of Aug. 12.

The data reflects earlier releases, describing slowing population growth at a national level, with the Southwest and Mountain West regions gaining population at the highest rates. The Midwest and Northeast regions saw the most stagnant growth.

West Virginia, Mississippi and Illinois were the only states to lose population over the past decade. Arizona’s official population is now 7,151,502.

The nation’s slowing growth rates were more pronounced at the county level, according to census officials.

“Metro areas are even more prominent this decade as the locations of population growth amidst otherwise widespread population decline,” said Marc Perry, a senior demographer in the bureau’s Population Division.

Thursday’s data release is in “legacy format” that is abstract to anyone but the most experienced census data users. This format requires special templates a pedestrian spreadsheet user couldn’t easily manipulate. The agency will release a more user-friendly form of the information next month.

The latest census data uses a new technique called “differential privacy,” which creates what officials call “statistical noise” at a granular level that keeps an individual’s personal data from being deduced using census information.

“The data we are releasing today meet our high-quality standards,” said James Whitehorne, chief of the Redistricting & Voting Rights Data Office.

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This article was published on August 12, 2021, and is reproduced with permission from The Center Square.

The 50 Year Anniversary of The Great Monetary Upheaval

We are about to reach a milestone that is little considered by the public at large. It was 50 years ago, on August 15, 1971, that President Richard Nixon decided to take the US off the last remnant of the gold standard.

The facts are, as you will see, that a number of very important relationships and trends changed with that ill-fated decision. We invite you to visit a fascinating website https://wtfhappenedin1971.com/. or view the accompanying video. You must spend some time on the site to fully appreciate the enormity of the change generated by this monetary decision.

We don’t know the people who put this remarkable data set of charts together, but they have found quite an amazing number of trends that seem to shift substantially, right around the date of “closing the gold window.”  And regrettably, most of those trends are bad trends for the nation.

What does “closing the gold window mean”? It means dollar holders could no longer redeem their paper currency for gold. That in turn means, the US government was no longer constrained in how much it spent or went into debt. It is truly a watershed event.

A little background is due.

The United States had been on a bimetallic standard (gold and silver) for most of its history. That meant the currency was “backed” by precious metals. In reality, usually gold was behind only about 40% of the money supply, and both the money supply and the supply of gold fluctuated.

Rather than get into the weeds about the mint ratios between gold and silver and other complications, we will just call the system we had the gold standard.

The system had sufficient gold that most people if they desired, could exchange their paper dollars for gold and silver any time they wanted. This was true of dollar holders inside the country, and those outside the country. People had confidence that money would hold its value and that government would financially behave itself.

If chronic inflationary policies were pursued by the government,  domestic money holders would “vote” by converting their paper to metal.  This contracted gold reserves, which served as base money, and the money supply would contract, ending the inflation.

In international terms, a country with a chronic trade deficit would lose gold reserves to foreigners who distrusted the policies, which likewise would contract reserves, lowering prices levels in the offending nation and bringing international trade balances back into balance.

In short, the classic gold standard was an automatic equilibrating mechanism, driven by voluntary action of market forces and a free people, which kept governments from running large fiscal deficits, chronic trade deficits, and using currency depreciation as a matter of policy.

This automatic system was preferred because political authorities had historically abused the monetary system for their own ends so frequently, that political management of money was not trusted.

Based on this history, people trusted the mechanism of the gold standard more than they did the discretionary management of politicians.  As you can see below in the chart, that trust was completely justified.

Most people knowing that the gold was there and that they could test the system at any time, had confidence that the dollar was “as good as gold”, and therefore were content to conduct the bulk of their commercial business in paper money, which actually functioned as warehouse receipts for the gold that stayed in the US Treasury.  Thus, a gold standard does not require all transactions to take place with physical metals being exchanged.  Analog or digital receipts for gold and silver worked fine, as long as people knew the gold was there in the event they desired to convert to the real stuff.

There had been temporary suspensions of this “convertibility” during the Civil War and such, but the system was quickly reinstated.

During most of this period, the price level in the US, and in other nations adhering to the international gold standard, fluctuated very little. A dollar worth x today would be worth x tomorrow, and five years from now, or fifty years from now. It was not uncommon to have gold clauses in long-term bonds and mortgages, meaning in the event of inflation, the creditor could be repaid in gold.

The result of all these arrangements was monetary stability. Here is a chart from the website previously cited.

Notice that whatever inflation we had was closely associated with wartime expenditures, and even then, it was modest and temporary. The pattern was to pay for the war, go through a period of austerity, and get back on track to near-zero inflation.  Other than those minor fluctuations, it created centuries of stability.

However, Progressives disliked the gold standard for the same reason they disliked the restrictions of the Constitution. Like the effort to wriggle out of Constitutional limits to government size and power, they also wanted to wriggle out of the constraints of the gold standard.

A government that is limited in spending will be limited in size. Those that wanted a very large government, particularly one that would engage in redistributing income from one group to another, needed to break out of the bonds of both the Constitution and the gold standard.

Other critics of the gold standard noted that we had periodic booms and busts, and if the currency were made to be “elastic”, these fluctuations could be modulated. We would no longer have periods of high unemployment or so-called financial panics, or so they contended.

Progressives also had great faith in government experts and chafed under both Constitutional and institutional arrangements like the gold standard that limited their discretionary power.  They wanted a currency that was managed by men to harness the government to “help” people.  They wanted to do “central planning”, to harness the economy for their political ends.

So, it is not coincidental that the process of turning the Constitution into a “living, breathing document” corresponded with a number of steps to break down the classic gold standard.

In the case of gold, it really started after World War I, as Progressives took us to a “gold exchange standard”, a gold standard in form but not substance.

This was followed by FDR officially making gold illegal in 1934, and suspending the ability of citizens inside the country to convert their dollars to gold or to enforce gold clauses in contracts.  This was done to inflate the currency to supposedly combat deflationary depression.

However, the ability of foreigners to convert their dollars to gold was maintained.

Another adjustment came in 1944 with the founding of the International Monetary Fund, at the Bretton Woods Conference. Since the dollar remained convertible for international trade, the dollar was made the lynchpin of a new system where every other currency would be “backed” by dollars, which by extension, was theoretically “backed” by gold.

By the late 1950s, and accelerating sharply thereafter with Kennedy’s New Frontier and Lyndon Johnson’s Great Society, Democrats put the nation into a system of “guns and butter.” In short, it put the nation into long wars in Vietnam with huge military expenditures, while growing the welfare state at home with huge new expenditures.  By 1965, silver was removed from the monetary system.

Inflation acts rather like a compound interest curve in reverse, with money purchasing power falling at a faster and faster rate.

Deficits both fiscal and in trade began to grow much faster than gold reserves, and some nations took note and suspected the US could not meet its commitments. They began to convert their dollars to gold while they could.

They proved to be correct. The US defaulted unilaterally on its solemn treaty obligations because the outflow of gold became torrential. At the time of Nixon’s decision, he left a good deal of the decision-making in the hands of his Democrat Treasury Secretary John Connelly, the same Democrat governor of Texas shot in the car with President Kennedy.

Contemporary records show officials thought it would be temporary, and the U.S. as it had in the past would reinstate even this modified gold standard. The financial system groaned under the strain and price inflation began to become elevated and persistent. By the late 1970s, inflation reached levels of 10-12% per year.

However, in reality, after August 15, 1971, the country never looked back. No serious attempt was ever made to restore the previous system. We stumbled into an entirely “managed” system by experts who purportedly would act in the public interest and not be influenced by partisan politics or intellectual fashion.

What a cruel joke that turned out to be.

Tracing back to the Progressive project of the Federal Reserve in 1913, the current dollar is worth just 3 cents on the 1914 standard.  As the chart shows, we moved from monetary stability to permanent instability.  Only in Washington would that be considered good management.

Progressives did achieve, with help of many Republicans, a giant intrusive government, that spends most of its efforts moving money from one group to another. However, the promised economic stability never materialized. The faulted gold standard actually showed shorter and more shallow economic fluctuations than those that followed under the managed system. Thus, we wound up with both chronic inflation, economic instability, and a government so large it menaces our freedom.

Since 2000, the Federal Reserve has gone well outside of its traditional functions and began to buy huge quantities of government debt, all with money created out of thin air. This so-called “Quantitative Easing” has allowed a spendthrift Congress to develop even bolder spending plans. Further, any attempt to scale back their purchases of bonds threatens the stability of the financial markets, most of which have now become overvalued and addicted to a regime of ever-expanding credit at zero interest rates.

The nation is now embracing the principles of Modern Monetary Theory, which basically posits that the government can pay its bills by printing money. Taxes are used to remove money from circulation at a time when inflation is deemed out of hand by the experts.

Citizens are given an interesting choice: choke on inflation or high taxes.

But this is neither modern nor a cohesive theory. It is simply a high-tech version of the fiscal excesses of the Revolutionary War with the destruction of the value of money (not worth a Continental), the Civil War Greenback, or the actions of numerous Roman politicians, European and Asian kings, and contemporary Third World dictators.

We are now at a point where it seems if you are not spending a Trillion dollars, it is hardly worth cranking up the Congressional law-making machine. As a republic, we are even giving bananas a bad name.

Checks are sent out to the public, with money printed out of thin air, all in the name of Covid relief, or equity, or global warming. But while money can be created out of thin air, real production of goods and services cannot. So, we have too much money chasing too few goods, or classic monetary inflation.

With Congressional backbone missing, the Constitutional limits on government ignored, and no gold standard, we now are living the life feared by advocates of the gold standard. They argued at the time, that lacking a constraining institution, the public would soon learn to vote themselves unlimited benefits from the public Treasury.

The inflation genie is now out of the bottle as our managerial elites have lost all semblance of fiscal probity.

In the words of James Madison in Federalist #51:

But what is government itself, but the greatest of all reflections on human nature? If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself. A dependence on the people is, no doubt, the primary control on the government; but experience has taught mankind the necessity of auxiliary precautions.

The auxiliary precaution insofar as government finance was concerned, was the strictures of the gold standard.

The last remnant of that restraint was abandoned 50 years ago, on August 15, 1971.

Infrastructure Bill Makes Wasteful Spending, Fiscal Irresponsibility The New Norm

Chock Full of Waste, Woke Virtue Signaling, and Earmarks, This Bill Is Not Fully Paid for and Not the Reasonable Approach to Infrastructure That Americans Were Sold.

The U.S. Senate passed the Infrastructure Investment & Jobs Act in a 69-30 vote. This $1.2 trillion bill goes far beyond investments to fix outdated and crumbling roads and bridges. The Congressional Budget Office (CBO) scored this bill and found that—in contrast to the claims of the bill’s negotiators—it isn’t fully paid for and will add $256 billion to deficits over the next ten years. In addition, it lays the groundwork for a partisan $3.5 trillion social welfare bill that would dramatically expand the scope of government, and includes government-provided universal Pre-K, taxpayer-paid-for community college, and amnesty for millions of illegal immigrants.

Patrice Onwuka, director of the Center for Economic Opportunity (CEO) at Independent Women’s Forum, issued the following statement:

“Americans support fixing our roads and bridges. In true Washington fashion, this bill hides massive, wasteful spending under the guise of repairing our critical basic infrastructure. Worse, it uses a racial equity lens to benefit some Americans over others.

“This infrastructure bill provides hundreds of billions of dollars for senators’ pet projects that go beyond basic infrastructure, unequally benefits cities over rural areas in spending initiatives such as broadband investments, promotes a woke agenda, introduces costly mandates including breathalyzers for every new car, and imposes radical environmental regulations that will hit lower-income Americans and do nothing to actually address climate change.

“To make $1.2 trillion palatable, bipartisan negotiators told the American people time and again that this plan was fully paid for. The CBO confirmed that is simply not true. Knowing that we are adding over $250 billion to the deficit, these senators cosigned a new level of fiscal irresponsibility that sets the tone for out-of-control spending for years to come.”

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The article was published on August 10, 2021 and is reproduced with permission from the Independent Women’s Forum

The Real Cost of Public Debt Is Not a Dollar Amount; It’s Freedom

As the United States’ national debt soars above $29 trillion, the Congressional Budget Office (CBO) warns that Congress will run out of cash by the fall unless the debt ceiling is raised. Talk about debt has always been a contentious issue in policy. Recently after the pandemic, however, such talk is becoming more rampant in academia. Indeed, several academics have written books, directed at the general public, arguing that the amount of debt needn’t be of concern.

For example, last year Stephanie Kelton published a book titled The Deficit Myth, arguing for the use of monetary policy to offset the costs of debt for the purposes of macroeconomic stability. Moreover, this fall a book titled In Defense of Public Debt will be published that makes a different, yet similar conclusion as Kelton’s book: public debts provide a means for macroeconomic stability—in this case, amid times of emergencies and crises.

The model underlying macroeconomic stability is an aggregative framework that sums up all the costs and income/output for a given economy. Using this type of model, some macroeconomists argue that (internally held) public debts are of no concern in the aggregate, due to the law of large numbers: the costs of public debt are canceled out by (predicted) benefits.

Does this sound strange? Is an aggregate model truly appropriate for a world of heterogeneous people? Among others, Nobel Laureate in Economics Friedrich Hayek said that one of the downfalls to the macroeconomic framework is that it hides the differences among microeconomic data—which, in the case of public debt, are the costs imposed on people.

Some estimates have calculated the cost of the debt per person to be $87,000—an exorbitant amount. To be sure, this figure does not consider that individuals in younger generations will likely not receive Social Security or Medicare, due to the funding running out and the population rising. If such phenomena occur, the cost to these individuals in these generations will be higher. Additionally, there is even a more important cost when we seriously take the claim that, in the aggregate, the costs of public debt are canceled out by the gains from public debt.

Namely, such canceling out means that some people receive a net benefit from public debt, while others receive a net cost. In other words, costs are not spread equally among people, ever, at any point in time. Seeing public debt in this way, we realize it is a means of wealth redistribution for whom the government favors—the elite—at the expense of the others—the masses. Such an argument has recently borne out with empirical proof.

It is this redistribution that I find to be the real cost of public debt. This redistribution is forced on people outside of the elite—some of whom are not yet born, and, thus, have not consented to this redistribution. As such, the real cost, due to force, is a loss of liberty—a cost which may be unmeasurable. In what follows, I expand on this argument.

Winners and Losers from Public Debt: Insights from Public Choice

A student of law or government might question whether the United States Constitution is supposed to protect against elitism. Indeed, the idea of ‘checks and balances is to limit one group oppressing another, through ‘power checking power.’ However, over time, these checks and balances have eroded. Public debt has been one of the causes of such erosion. To show this, let’s look at some insight from public choice theory.

First, we can recognize that humans are tribal creatures and form groups with whom they have common interests. William Riker discussed how groups, or coalitions, form around special interests up to a certain size that allow them to influence policy. Indeed, usually, these coalitions are kept relatively small. Among other reasons, small groups allow for everyone in the group to reap a higher reward.

This brings us to the concept of concentrated benefits and diffused costs, developed by Mancur Olson. The theory explains that coalitions can reap benefits for a long period of time because the costs are dispersed among the masses. Such cost dispersion means that the cost imposed on each individual person is so small that there is no incentive to remove such costs—indeed, there might even be a disincentive to do so!

To tie these two concepts together, I now bring in the theory of ‘Baptists and Bootleggers,’ developed by Bruce Yandle. Such a theory argues that there are coalitions of ‘Baptists’—those who claim to try to make the world a better place by imposing regulations—who are always accompanied by coalitions of ‘Bootleggers’—those who benefit from such regulations. To be sure, some of these relationships often have unintended consequences.

To apply this to public debt, those who tout public debt to cause ‘macroeconomic stability or benefit the least-well-off are ‘Baptists,’ while the elite who receive benefits from regulations are the ‘Bootleggers.’ But why has this persisted?

First, using the Baptist and Bootlegger logic, we recall that since people are emotional, they want to help others. On a related note, because the costs of public debt are not only dispersed among the individuals in the present, but also those of future generations, the masses don’t have an incentive to change anything. Indeed, the most cost-effective thing for them to do is keep pushing these costs off onto future generations.

Using such logic, we see that the ‘power checking power’ aspect of checks and balances does not occur because there is no incentive to check the power; rather, there is a disincentive to do so! Thus, by distorting incentives, public debt erodes one of the main methods by which our Founders drafted for us to prevent tyranny.

Such a situation is reminiscent of Alexis de Tocqueville’s quip about the type of democratic despotism that we must fear: that which is insidious because we become complacent and inactive. This might be why Benjamin Franklin, when leaving the Continental Congress and was asked by a woman “Dr. Franklin, what form of government have you given us?”, he responded, “A republic, ma’am. If you can keep it.”

Conclusion: A Return to Jefferson

In a letter to James Madison, Thomas Jefferson proposed that we change the Constitution every generation—which, at that time, due to Jefferson’s calculations, was 19 years. Jefferson proposed this, in my reading, because he foresaw that public debt—the excesses of spending over revenues—can lead to bondholders (elite) controlling the masses. Indeed, he stated that ‘the Earth belongs to the usufruct of the living,’ and, as such, constitutions and debts should be consented to by those living—rather than imposed on by those from previous generations.

What I sought to do here is to provide more analytical rigor to Jefferson’s argument. I suggest we take Jefferson’s argument seriously, and not only argue against public debt as a means to macroeconomic stability, but also one that can be measured in dollars. Liberty is not measurable in dollars; it is priceless. As such, we should argue against any infringement on liberty—in this case public debt—for that reason.

Notes:

1.) The $29 trillion national debt figure excludes unfunded liabilities, which are estimated to be around $72.5 trillion.

2.) Curiously, Kelton’s book addresses issues of debt more than those of deficits, but the book title uses the word “deficit,” without distinguishing between the two.

*****

This article was published on August 4, 2021 and is reproduced with permission from AIER, American Institute for Economic Research.

Delta, Southwest, and American Airlines Allow Employees to Remain Unvaccinated After United Airlines Issues its Dictatorial Vaccine Mandate

Time to change your frequent flier miles airline.

After United Airlines Issues its Vaccine Mandate, Delta, Southwest, and American Airlines Allow Employees to Remain Unvaccinated

By: Red State |  Jennifer Oliver O’Connell | August 11, 2021:

In a surprising move, the CEOs of Delta Airlines, Southwest Airlines, and American Airlines have decided they will not require existing employees to get the COVID-19 vaccination

From CNN:

The CEOs of Southwest Airlines, American Airlines and Delta Air Lines say they are not requiring unvaccinated employees to receive the shot, breaking with United Airlines’ mandate that workers get vaccinated by October 25 or face getting fired.

In an internal memo obtained by CNN, Southwest Airlines CEO Gary Kelly said the airline will “continue to strongly encourage” that workers get vaccinated, but the airline’s stance has not shifted.

“Obviously, I am very concerned about the latest Delta variant, and the effect on the health and Safety of our Employees and our operation, but nothing has changed,” Kelly said.

United, on the other hand, issued its own mandate requiring all 67,000 of its U.S. employees to become vaccinated against COVID-19 by October 25, or face termination. Frontier and Hawaiian Airlines have followed in the footsteps of United, mandating all employees receive the vaccine or lose their jobs.

Both Southwest and Delta rushed to reassure its employees that it had no plans of changing its policy, even after the United decision.

The New York Daily News reported,

In a memo, Southwest made it clear to employees that its stance has not changed despite United’s decision, according to CNN. American also will not be changing its vaccine requirements.

In May, Delta began requiring new employees to get vaccinated, but allowed current employees to remain unjabbed. The company’s CEO told CNBC it was difficult to require shots without full Food and Drug Administration approval.

The Delta CEO went on “Good Day New York” with the news that 75 percent of its workforce had already been vaccinated, even without a company-wide mandate.

New employees for Delta and United will be required to obtain the COVID-19 vaccination as a condition of employment. American and Southwest Airlines have not made any new employment changes.

In a statement, American Airlines said there was “no update at this time” to its vaccination policy. “We are strongly encouraging our team members to get vaccinated, and we are offering an incentive for those who do.”

EDITORS NOTE: This Geller Report column is republished with permission. ©All rights reserved.

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The Investor’s Dilemma Part II

“Think of the tulip bubble. It’s very easy to look back at that episode and throw stones: ‘How could anyone in their right mind ever consider paying almost one million dollars for a single tuber?’ one might ask even as he lives in a glass house represented by his trading portfolio made up of shitcoins or memestocks worth, in aggregate, tens of billions of dollars despite zero fundamental value. What at first seems absurd becomes commonplace when it is validated by general acceptance. ”   Jesse Felder of the Felder Report

The dilemma is that conservative investors who used to make some decent money in bank deposits, money market funds, and bonds, can’t find a real yield that is positive above inflation and at this point in the business cycle they are taking increasing risks with default and adverse moves upward in interest rates.

For most investors, that leaves two other choices – real estate and the stock market. There are more possibilities like gold, which we personally like, (especially after this last decline in price) but gold is considered a “hedge” by most money managers, not a primary investment. It is regarded as a means to diversify holdings in mainstream investments like stocks, bonds, and real estate.

But our dilemma continues to widen. Both real estate and the stock market have done extremely well and are now in the ionosphere of historic value. That of course does not mean these markets are about to reverse course, but it is likely one would be buying quite late in the game after a lot of appreciation has already occurred. Clearly, the later you are to the game, the greater the risk of buying near a top and suffering the consequences.

Those of you who follow the column of Wolf Richter in The Prickly Pear have seen his charts on the housing bubble. If not, look them up by pushing the ARCHIVES button at the top of the page or search at FIND GREAT CONTENT at the bottom of the homepage.

There are other sectors in real estate other than single-family homes such as multi-family, self-storage, industrial, office, and retail. We can’t get into each sector in detail but there are likely opportunities for the expert. But housing seems to wag the entire real estate dog. When it goes, likely because of the leverage (the amount of debt used to underpin prices), it can cause difficulties in the entire sector.

And these other sectors have their own problems. How does office space look now that many have learned to work from home? How does retail look in a slump and if we have another lockdown? Will online shopping continue to kill brick-and-mortar retail? How does industrial property look if we have a recession?

Many people felt owning rental properties would be the key to the kingdom.  However, when the CDC can invoke an unconstitutional edict creating a moratorium on paying rent, and the President of the United States continues it in spite of what a Federal Court has ruled, you have to wonder how secure your property rights are.  Without secure property rights, what do you own?

In short, real estate has its own set of dilemmas, especially in a questionable recovery.

This leaves the stock market as one of the better places to be. Unlike real estate, it is a liquid market that is easy to get in and out of. Prices are transparent. This and other factors have created what some call TINA, or “there is no alternative”.

As a result, very positive investor flows continue into stocks and their performance has been good, perhaps too good.

Traditional metrics such as price to book value, price to sales, market cap relative to GDP, Tobin’s Q ratio, and quite a few others, are registering historically high values. Bulls argue that these historic indicators are no longer valid because we live in a new era of government stimulation and rapid technological change.  Perhaps they are right.  However, it is worth noting that “new era thinking” has been present in all past bubbles, and they all ended the same way…in disaster.

The market is priced pretty much to perfection. Maybe perfection is what we will get, and everything will be great but that seems unlikely. Biden wants to raise taxes substantially and is running very inflationary policies. Rising interest rates would also be negative for stocks.

The economy has been on life support for some time, elevated by extraordinary, dare we say unprecedented, fiscal and monetary stimulation from the government. There is so much distortion in the system with zero interest rates and liquidity flowing like wine, that it is hard to make sense of it. There is such a departure from historic values that the more history you know, the less money you would have made.

Those with more experience actually have been at a disadvantage. They have felt reticent to chase a market this expensive, but newcomers, not knowing much history to calibrate their expectations, have done better.

That itself is a problem. A market that has a high degree of borrowed money with record-high margin debt and undisclosed amounts of loans against the value of stocks (so-called security-based lending), could be vulnerable if stocks were to have a bear market, which is normal and frequent in history. If the collateral value of stocks were to decline enough to endanger the loans, this could cause forced selling, which tends to have a cascading effect as one investor’s need for cash causes another person to receive a margin call.

Recently, we have seen the entrance of large numbers of new investors, apparently flush with stimulus money and bored with being kept at home during the lockdown. We are not talking about a small increase either.

James Stack, an independent money manager in Montana, who also writes an investment advisory called Investech, notes that heavy public participation has always been a hallmark of speculative frenzies. As just one example, Reddit forum members have been involved in some recent sharp movements in particular stocks. He notes just one year ago, there were about 1.3 million members. Today, there are 11 million members.

He notes as well that members of the Robinhood platform which caters to new, smaller investors (and just went public), have grown from virtually zero in 2018 to now about 18 million members.

Individual factors that make up each stock cycle can change but there have always been underlying factors to consider.  The standard factors have been tax policy, regulatory policy, the rate of economic growth, the level of interest rates, corporate earnings, and inflation levels.

Looking at each of these, not all of the trends look that great, but you must make your own evaluation.

Clearly, the entrance of the government into the job of manipulating interest rates and new tools to drive liquidity have been new and powerful factors in the landscape since 2000. How long can we keep up massive FED buying of debt, the suppression of interest rates to near zero and record government deficits?

Besides the problems of extreme mass psychology, financial leverage, and overvaluation, the market is now suffering what some call divergences. It means that stocks within a given index, are no longer moving together. Often divergences are the first signals that something may be going on with the momentum of the market. It is not obvious in the index itself, it is rather an internal deterioration of momentum.

We don’t have room for a detailed discussion but the broader average, the NYSE, shows that only about 40% of stocks within the average are above their 50-day moving average. Just back in June, over 75% of stocks were above the 50-day average. So fewer and fewer stocks are participating, all the while the market is going to new highs. That basically tells us that a handful of mega-cap stars are holding the market afloat while a clear majority of stocks in the index are in trouble. This concentration is itself a problem with an estimated $10 trillion now in just seven big-tech stocks, with the rest of the S&P 500 coming in at $36 trillion.

Besides the divergences, the domination of the index by so few reduces the “diversification” of the index, undermining the very purpose to be indexing.

This divergence may well clear up, but with valuations so high, and psychology so distorted, that deteriorating momentum could become a problem.

Bulls argue that liquidity is plentiful, the investment choices are few,  thus TINA reigns supreme and markets will just keep climbing. Indeed, that is what they have been doing.

Bears suggest that serious divergences are forming, unhealthy concentration is present, momentum is flagging, overvaluation is extreme with the liquidity spigots already wide open. It is hard to imagine rates lower, and fiscal and monetary stimulus any more liberal than they are today.

So, the dilemma for stock buyers seems to be this: stocks have been working well, but are very expensive by historic standards, and there are clear signs of public mania and signs that divergences are forming.

This recalls the statement made by Charles Prince, Chairman of Citigroup in front of a Congressional committee investigating the crash of 2008. The chairman was questioned as to why the bank suffered such losses. He said, “as long as the music is playing, you’ve got to get up and dance.” Unfortunately, Citi danced so long, they could not find a chair when the music stopped and required another taxpayer bailout.

Who will bail us out? Who will bail out the government?

There is pressure on money managers, and individuals, to stay heavily in markets that are working because of the lack of alternatives elsewhere. Desperation to find a real return above inflation is driving investors to take risks they otherwise would not consider.

Indeed, the investor’s dilemma is that there are no easy solutions, just tradeoffs that you must weigh and consider.

For the FED, their dilemma is to keep liquidity growing and risk inflation or begin to raise interest rates and reduce liquidity and risk bursting the bubble they have assiduously blown.

Increase your situational awareness. Be aware we are now in a range, in a variety of markets, where overvaluation and a high degree of public speculation are present. Consult at least quarterly with your financial adviser.

It is said that history repeats itself. That seems true. What is more remarkably repetitive, is that people fail to learn from history and that failure to learn is what seems repeated.

 

 

 

The Investor’s Dilemma Part I

“In essence, financial technology is a time machine we have built ourselves.  It can’t move people through time, but it can move their money.  As a result, it alters the economic position of our current and future selves. It also changes the way we think. Finance has stretched the ability of humans to imagine and calculate the future.  It has also demanded a deeper understanding and quantification of the past because history is the fundamental basis for making future predictions.  Finance has increasingly made us creatures of time.  Financial architecture exists in-and shapes- the possibilities of the temporal dimension. ”  William Goetzmann from Money Changes Everything

Let’s suppose for the sake of argument, you had a sum of money to invest right now. What would you do with it?

Whatever argument you might make to justify a new investment, it is the same argument one would have to make to remain with your current investments, right?

So, what are the current circumstances? Why is this a dilemma? Why is this period in our history perhaps more difficult than others, from an investment perspective?

Many of us have idle money and don’t want to put it at high risk. We leave it in a money market mutual fund or a deposit at an insured banking institution. But yields are virtually at zero interest rates and with inflation pushing 6% by government figures, and likely higher by more realistic computations, that means a depositor is getting record negative rates, that is an actual return well below the rate of inflation.

At a 6% negative yield, you have a compound interest curve in reverse working, meaning the value of money will fall in purchasing power in half in just 12 years. So, cash is not a good place to be for the intermediate to longer term. However, in the short term, you may have to accept negative yields to keep money safe and readily liquid.

You could argue this rate of inflation is “transitory”, the buzzword of the day. But you don’t know that. And, if inflation were to fall back to say the 3% range, your return is still negative in real terms. You still get cooked by inflation, just not as fast.

If inflation were to collapse, the forces likely in play are a severe recession, which has its own sets of risks.

It certainly qualifies as a dilemma to accept negative returns, just to be safe.

Maybe we can do better in bonds?

Except for government bonds, you now have introduced some risk of default. It may not be terribly high, but it is there. In addition, unless you go out for much longer maturity, there is not that much higher yield than cash. Certainly, at current rates of inflation, the real yield is negative even if you go out 20 years, and even if you take the credit risk and buy so-called junk bonds, the yield is negative if inflation stays at 5-6%, or goes higher.

Thus, you still get a negative yield, and unlike cash, you now are taking a substantial risk with quality and default risk, and time risk.

The time risk comes in three forms. The longer you stay in the bond, the more inflation eats your lunch, which is easy to understand. But now you have other risks to capital in two forms: default risk and market risk.

Market risk? The basic thing you must understand about bond prices is they move inversely to interest rates. Rates go up, bond prices go down. Rates go down, bond prices go up. The longer the time period on the bond (duration), the more exaggerated is the swing in price.

Well, with rates near zero, unless nominal rates (the published rate) go deeply below zero, there is not much chance of making appreciation in bonds at this point in history. The big decline in rates from almost 20% in 1982 to the present, is over. Stick a fork in it, it’s done.

With inflation rising and debt loads in both the public and private sector rising wildly, it is more likely at some point interest rates start to rise. If that happens, the drop in the value of the bonds you hold will easily exceed what paltry interest you are collecting.

The probability that bonds will underperform is also an issue for portfolio design.  For years, 60% stocks, and 40% bonds have been recommended as a foundation for retirement planning.  Yet if interest rates ever rise above zero, which at some point they surely will,  that standard equation will have a difficult time providing decent results.

In short, the dilemma is that conservative investors that used to make some decent money in bank deposits, money market funds, and bonds, can’t find a real yield that is positive above inflation and at this point in the business cycle they are taking increasing risks with default and adverse moves upward in interest rates.

The zeal for yield may well force investors to take more duration risk, and more default risk, than the likely return. That too is a dilemma as well.

Was It Always This Way?

How well can anyone remember past Federal Reserve Chairs? There was Volcker, who allegedly solved the inflation crisis by raising rates and bringing about a recession. After Volker there was Greenspan who is still referred to as “the Maestro.” Followed by “Helicopter” Ben Bernanke… a name he probably doesn’t appreciate much. After Ben came Yellen and now Powell. With each new Chair came a bigger and bigger balance sheet and expansion of central bank powers. We now live in an era where the Fed garners a significant amount of attention; but was it always this way?

Roughly every 6 weeks the world waits to see what the Fed will say, closely listening for clues as to what they might do next. A significant amount of our time and decision making is heavily wrapped around this elusive club of central planners who create money at will and determine the benchmark interest rate for an entire nation.

As per usual, leading up to the main event, the economic news headlines are abuzz with mounting speculation as to the decisions to come out of this Wednesday’s Fed meeting. CNBC notes that:

While no action is expected, there could be some mention of the central bank’s possible wind down of its bond program. That could move the markets since the tapering of the central bank’s bond purchases is seen as the first step on the way to interest rate hikes.

As per usual, leading up to the main event, the economic news headlines are abuzz with mounting speculation as to the decisions to come out of this.

While no action is expected, there could be some mention of the central bank’s possible wind-down of its bond program. That could move the markets since the tapering of the central bank’s bond purchases is seen as the first step on the way to interest rate hikes.

The article goes on to say that the Fed may take a year to eventually scale back its $120 billion a month bond purchase to zero, which should then open the door to rate hikes.

Reuters notes a new dilemma on the horizon: a Fed that is now facing higher than expected price increases, accompanied by “slow annual economic growth” (which it blames on supply chain problems) and the rise of the delta variant. No definitive answer was given, but it’s believed that:

Things could play out in a way they didn’t expect.

The Fed could always shrink its balance sheet quicker than expected, but the opposite can easily come true and it could find reasons to increase its asset purchases. If an expansion of the balance sheet were to happen this year, it would definitely be something “they didn’t expect,” but still a move that cannot be put past the Fed given how nimble they are to act when circumstances change(according to them).

As the world waits, various stock market indices flirt around all-time highs, house prices continue to increase and inflation calculations continue to read red hot, while it was announced just last week that the recession officially ended in April 2020… over a year ago.

But was it always like this?

Did the world always wait to see what the Fed would say or do, speculating the effects on asset and general prices? Given the monumental growth of the balance sheet, the percentage of debt to national debt held, and its robust set of assets like mortgages debt and corporate bonds, it’s safe to say the role the Fed has played in our lives has increased with each passing Fed Chair. Combining its power with the digital age, it’s no wonder not a day passes on any business news channel where “the Fed” is not mentioned in some capacity.

It’s difficult to say how sentiment towards the Fed was several generations ago. But if the former Fed Chairs and their escalating level of intervention under each tenure is used as a measure, then our future becomes certain. Any talk of tapering the balance sheet, raising rates, or getting back to some sense of normal will be nothing more than a “transient” phase at best.

*****

This article was published on July 29, 2021 and is reproduced with permission from the Ludwig von Mises Institute.

More Government Debt As Far As The Fiscal Eye Can See

For the last two years, the federal government has been legally at liberty to borrow any amount of money necessary to cover its deficit spending under the Bipartisan Budget Act of August 2019. Unless Congress extends this Act or raises the official debt limit, starting on August 1, 2021 Uncle Sam will only be able to spend what he takes in, in taxes. The thought of living within a balanced budget sends a frightening shiver down almost every politician’s spine.

In its July 2021 report on the “Federal Debt and the Statutory Limit,” the Congressional Budget Office (CBO) explains that at the time the Bipartisan Budget Act was passed in the summer of 2019, the Congressionally approved debt limit stood at $22 trillion. The Act specified that that debt level would come back into effect as of July 31, 2021, plus any and all additional debt accumulated between those two dates. As of June 30, 2021, the federal government had added an extra $6.5 trillion of debt over the previous two years, bringing the outstanding national debt to over $28.5 trillion.

Through various budgetary gimmicks similar to those used by the U.S. Treasury in the past when the debt ceiling has been reached and before Congress has lifted that limit to a higher level, the CBO estimates that the Treasury has enough cash on hand and the potential for internal account juggling to keep spending more than will be taken in as taxes until October or November, or about halfway through the first quarter of the 2022 federal budget year that begins on October 1, 2021. After that, the president and the Congress would have to operate within the collected tax revenues.

Clearly, this is a fate worse than death to those in the halls of political power who win and hold government office by promising to various constituent groups that they will happily spend other people’s money on them if only they will contribute dollars for election campaigns and cast their ballot for them on Election Day.

Trillions of Deficit Dollars and Even More to Come

In the 2020 federal government fiscal year that ended last September 30, 2020, total government spending came to $6.55 trillion, with total tax revenues of $3.42 trillion. The budget deficit for the last fiscal year, therefore, came to $3.13 trillion, equaling almost 15 percent of U.S. Gross Domestic Product (GDP). Of course, it could be said that 2020 was an exceptional year due to the Coronavirus crisis and the devastating effect that the government shutdowns and lockdowns had on the economy, and the extra government spending that attempted to counteract the economic recession caused by the draconian restrictions that the federal and state governments had willfully imposed on the lives of everyone in the country. (See my article, “Government Policies Have Worsened the Coronavirus Crisis”.)

For the current 2021 fiscal year that ends on September 30th, the federal government outlays will come to even more, totaling $6.85 trillion, with projected total tax revenues of $3.84 trillion, and another budget deficit of over $3 trillion. For the upcoming 2022 fiscal year, the CBO projection is for $5.54 trillion of federal spending and estimated tax revenues of nearly $4.4 trillion, still leaving a budget deficit of $1.15 trillion.

Looking over the next ten-year period of 2022-2031, the Congressional Budget Office, in its July 2021 Updated Budget and Economic Outlook report, anticipates $1 trillion-a-year deficits for almost each fiscal period. Over the next decade, the government in Washington, D.C. will spend over a total of $63.4 trillion, and collect in taxes a sum totaling more than $51.3 trillion. Due to the deficits incurred each year to cover the gaps between annual expenditures and taxes collected, the total addition to the national debt will come to nearly $12.1 trillion. So, by the end of the government’s 2031 fiscal year, the national debt will stand well over $35 trillion.

Debt Interest Costs and the Fiscal Burden of Entitlements

The CBO also highlights the fact that 45 percent of all that additional accumulated debt between fiscal year 2022 and 2031 will be monies that the federal government will have had to borrow to pay the interest on the national debt. That is, the federal government will be adding about $5.4 trillion to the government’s total debt just to finance the interest charges on all the existing national debt accumulated over the earlier years and decades.

Out of that total of $63.4 trillion of federal expenditures over the coming decade, the CBO calculates that more than $45 trillion of it will be outlays on “mandatory” or “entitlement” spending, or 71 percent of all spending. Around 35 percent of these “mandatory” outlays will be on Social Security and 45 percent on health care expenditures (Medicare, Medicaid, etc.), alone.

“Discretionary” defense spending for the coming ten years will make up 18 percent of government expenditures. Before fears are expressed about American national defense being “starved,” in 2019 U.S. defense expenditures came to $778 billion. The combined defense spending by the eleven closest defense-spending countries around the world came to $761 billion. That is the U.S. spent three percent more on defense spending than all of those other governments put together (China, India, Russia, the UK, Saudi Arabia, Germany, France, Japan, South Korea, Italy, and Australia).

Fiscal Churning is Really Mostly About the Redistributive State

Current projections suggest that U.S. GDP may total $21.5 trillion at the end of 2021. That means that between 2022 and 2031, based on the CBO estimates, the federal government will spend the equivalent of three of this year’s GDP. And over 70 percent of all that government spending will be on the redistributive “churn;” that is, taxing large numbers of “Peters” to transfer all that money to a sizable and growing number of “Pauls.” All those “Pauls,” therefore, who have that degree of direct dependency on government spending for significant portions of their standards and qualities of life.

But it should be kept in mind that the CBO, in its past forecasts, has frequently underestimated the actual growth in government spending and borrowing. Thus, given current and expected mandatory “entitlement” spending under existing legislation, plus, the present pushes for increases in that spending in the years ahead, these numbers are only likely to get even larger, given contemporary political and ideological trends among both Democrats and Republics, among “progressives” and “conservatives.”

Total Spending as a Measure of Governmental Burden

Nobel economist Milton Friedman (1912-2006) often emphasized that what mattered when looking at government fiscal policy is not whether that government covers its expenditures through taxes or by borrowing, but, instead, by the total amount of the country’s income and resources that are taken and used by that government. Suppose that there was a government that spent $2 trillion and maintained a balanced budget by taxing the citizenry an equivalent amount versus a government that, instead, spent $3 trillion, but only taxed its citizens $2.5 trillion by making up the rest through deficit spending by borrowing a half trillion dollars. Which government would be the more fiscally burdensome on the citizens of that country?

If the government taxes the citizenry, the dollars collected, and the real resources those dollars have buying power over in the marketplace, are transferred from private sector hands to the hands of Uncle Sam, who then decides what they will be used for.

But this is no less the case when the government borrows dollars in financial markets to cover part of its expenses in excess of collected taxes. Instead of a private borrower borrowing those dollars and using the real resources those dollars can buy in the marketplace for investment, capital formation or other purposes, the government borrows them and uses the real resources that can be bought with them for its own politically-oriented goals and ends.

Either way, the total amount of the income and resources of the society transferred out of private hands and into the hands of the government is represented by the total spending by that government, even if only part has been taxed and the rest has been borrowed.

America’s Earlier Unwritten Fiscal Constitution

However, while it may be true that whether the government taxes or borrows the taxpayer-citizens are poorer by that total amount, it is nonetheless the case that government following a balanced budget rule versus a budget deficit expedient has a huge political difference on the institutional ease or difficulty of government growing over time.

Nearly 45 years go, James M. Buchanan (1919-2013), and his colleague, Richard Wagner, wrote a book on Democracy in Deficit (1977). They pointed out that during the first 150 years of the United States, the federal government followed what they referred to as an “unwritten fiscal constitution.”

There is nothing in the U.S. Constitution that requires the government to annually balance its budget. Such a balanced budget “rule” for managing the government’s spending and taxing was considered a way to assure transparency and greater responsibility in the financial affairs of government.

It was argued that a balanced budget made it easier and clearer for the citizen and the taxpayer to compare the “costs” and “benefits” from government spending activities. Since each dollar spent by the government required a dollar collected in taxes to pay for whatever the government was doing, the citizen and taxpayer could make a more reasonable judgment whether they considered any government spending proposal to be “worth it” in terms of what had to be given up to gain the supposed “benefit” from it.

The trade-off was explicit and clear: any additional dollar of government spending on some program or activity required an additional dollar of taxes, and therefore, the “cost” of one dollar less in the taxpayer’s pocket to spend on some desired private-sector use, instead.

Yearly Balanced Budgets and Budget Surpluses After Emergencies

Or if taxes were not to be increased to pay for a new or expanded government program, the supporter of this increased spending had to explain what other existing government program or activity would have to be reduced or eliminated to transfer the funds to pay for the new proposed spending.

There was an exception to this balanced budget rule, and that was a “national emergency” such as a war, when government might need large amounts of extra funds more quickly than they could be raised through higher taxes.

But it was also argued that once the national emergency had passed, the government was expected to manage its finances to run budget surpluses, taking in more than it spent each year. The surplus was to be used to pay off the accumulated debt as quickly as possible to relieve current and future taxpayers from an unnecessary and undesirable burden.

Amazingly, in retrospect, this actually was the fiscal rule and pattern followed by the United States government throughout the nineteenth century and into the twentieth century until the Great Depression in the 1930s.

The Keynesian Call for Budget Deficits to “Stimulate” the Economy

However, starting with the 1930s, this unwritten fiscal constitution was permanently overturned as part of the Keynesian Revolution that originated with the publication of John Maynard Keynes’s, The General Theory of Employment, Interest, and Money (1936). It was argued that the government should not balance its budget on a yearly basis. Instead, the government should balance its budget “over the business cycle.” Government should run budget deficits in “bad” years (recession or depression) and run budget surpluses in “good” years (periods of “full employment” and rising Gross Domestic Product).

This new “rule” of a balanced budget over the business cycle became a generally accepted idea for fiscal policy among many economists and government policy makers. However, there has been one major problem with this alternative conception of the role and method of managing government spending and taxing: During the 76 years since the end of the Second World War in 1945, the U.S. government has run budget deficits in 64 of those years and had budget surpluses in only 12 years.

Hence, as Buchanan and Wagner referred to it, “democracy in deficit.” With the elimination of the balanced budget “rule” as the guide for fiscal policy, it has been possible for politicians to create the economic illusion that it is possible to give voters “something for nothing” – a “free lunch.”

The Fiscal Illusion of Giving Voters Partly “Something for Nothing”

Politicians have been able to offer more and more government spending to special interest groups to obtain campaign contributions and votes in the attempt to be elected and reelected to political office.

They can offer benefits in the present in the form of new or additional government spending, but they no longer have to explain where all the money will come from to pay for it. The “costs” of that deficit spending is to be paid for by some unknown future taxpayers in some amount that can be put off discussing until that “some time” in the future.

Thus, politicians can supply benefits in the present – “now” – to targeted groups whose votes are wanted on Election Day, and avoid answering how the money will be paid back (with interest) because that can be delayed until the future – a period later in time, years ahead, when someone else may hold political office and will have to deal with the problem.

The Moral Dimension of Government Debt Financing

There is an additional moral dimension to the issue of government deficit spending and its resulting accumulation of debt. This was a theme especially addressed by James Buchanan.

Normally, when a private individual or enterprise undertakes debt financing of some portion of his current expenditures, the legal obligation to pay back the contracted principle and interest falls upon the borrower. If he defaults or passes away before repayment of all that had been borrowed, creditors have a lien on the borrower’s positively valued assets.

The “benefits” of having the use of a greater sum of money in the present than his own income would enable him to spend, and imposes on the borrower a “cost” of an obligation to pay back the loan out of his future income and assets. The cost and the benefit are linked together within the same person.

It is not the same, Buchanan argued, in “The Deficit and Our Obligation to Future Generations” (1987), with government deficit spending and repayment of accumulated debt:

“If I borrow $1,000 personally, I create a future obligation against myself or my estate in the present value of $1,000. Regardless of my usage of the funds, I cannot, by the act of borrowing, impose an external cost on others. Unless I leave positively valued assets against which my debts can be satisfied, my creditors cannot oblige my heirs to pay off their claims.

“By contrast, suppose I ‘vote for’ an issue of public debt in the amount of $1,000 per person. I may recognize that this debt embodies a future tax liability on some persons, but I need not reckon on the full $1,000 liability being assigned to me. If I leave no positively valued assets, the government’s creditors can still enforce claims on my progeny as members of the future-period taxpaying group.

“Further, the membership in the taxpaying group itself shifts over time. New entrants, and not only those who descend directly from those of us who make a borrowing-spending decision, are obligated to meet debt, interest and amortization charges.

“In sum, the institution of public debt introduces a unique problem that is usually absent with private debt; persons who are decision makers in one period are allowed to impose possible financial losses on persons in future generations. It follows that the institution [of government] is liable to abuse this and overextend its borrowing practices. There are moral and ethical problems with government deficit financing that simply are not present with the private counterpart.”

Government debt is a way to impose part of the cost of what special interest group voters and politicians want “today” on those who “tomorrow” will have to be taxed to pay back the borrowed money.

Even if a current recipient of such governmental deficit spending largess is, himself, one of the future taxpayers, he is usually likely to have received a greater benefit than his personal portion of the future tax burden. Suppose that he is a farmer, for instance, who receives “today” $100,000 from the government for not growing a crop. When “tomorrow” comes and taxes have to be raised to pay back that $100,000 to the creditors who lent that sum to the government, that particular farmer’s additional tax burden will be a small fraction of that total amount.

To continue with the same example, many farmers who may have benefited from agricultural price-support programs decades ago have passed away. The burden of paying back whatever portion of that farm price-support spending originally financed by deficit spending now falls upon others who may not have even been born at the time the recipient received this special privilege from the government.

What is the ethics, James Buchanan asked, of a fiscal system under which incentives exist and come into play that enable the current generation of taxpayers and recipients of government programs to shift part of the burden to pay for them to future generations? Is that a culturally and economically healthy legacy to leave to our children and grandchildren?

The Importance of Balanced Budgets and Debt Limits

This is why it would be desirable to incorporate a balanced budget amendment into the U.S. Constitution. It would not guarantee that government did not tax and spend more. But it would impose a greater clarity and transparency to the fiscal dimension of government decision-making that would make it far more difficult for those offering other people’s money in exchange for votes to do so without having to also explain who would be paying for the favors and privilege given to some, and how much they would have to pay.

Imagine if members of Congress and the President had to tell their constituents that this year’s $3 trillion of deficit spending was going to have to be covered, instead, by an increase in taxes by that amount. Or, another way of putting this, there was to be a per capita increase in taxes of almost $9,100, given the slightly more than 330 million people in the United States. Or, since only about half that number in terms of households pay taxes, each household’s per capita tax burden would be increasing by around $18,000 this year to balance the budget. And that, similarly, the $12.5 trillion of CBO projected additional debt over the next 10 years would be avoided by sufficient increases in taxes to make the national debt no worse than it stands right now in 2021 at about $28.5 trillion.

No talk about “taxing the rich” would be able to hide the fact that even if such a tax increase were to fall disproportionately more on the “one percent” income bracket, that a very wide band of the American middle class would still see their tax obligations rise significantly. It would be very clear, very soon, that the government-provided “free lunches” are, in fact, very costly.

In lieu of adding such an amendment to the Constitution, the next best thing would be for the Congress not to raise the federal debt limit. I have no illusions that the members of either major political party in Congress have the courage or the self-interest to do so. But the fact is that if Congress were to ever have sufficient pressure from voting constituents to just say, “NO,” that very act would impose a balanced budget on the federal government. Once Uncle Sam had reached the hard debt limit after all his internal accounting finagling, he would then only be able to spend what he had taken in, in taxes, given any “rollover” in refinancing existing debt that came due.

For this to be ever possible, there will have to be a strong educational and political campaign to reawaken an understanding among the public that deficit spending is merely a sleight-of-hand that siphons off wealth and resources from private uses in the present no less than if taxes had been increased in the here and now, and shifts the cost of doing so to the same or different voters in the future who will be obligated to make good on what was borrowed and spent in the past that is currently our present.

Such an effort should be considered an essential element in the intellectual battle for an eventual repeal and retrenchment drive that can begin to reverse the size and scope of Big Government, to start the process of restoring and improving upon a society of freedom grounded in individual rights and economic liberty.

*****

This article was published on July 28, 2021 and is reproduced with permission from AIER, American Institute for Economic Research.

 

DEATH BLOW: Democrat Regime To Mandate Vaccine Passport and Masks In Restaurants And Gyms on Dying New York City

Markets tanked on the news.

The Democrats have waged war on this once great city — and now they are going for the kill.

NYC to mandate proof of vaccination for many indoor settings

By Nolan Hicks and Sam Raskin | NY Post August 3, 2021 |

New York City will mandate proof of vaccination to enter certain indoor businesses — including restaurants, entertainment venues and gyms — and deny entry to those without the jab, Mayor Bill de Blasio will announce Tuesday.

The initiative, to be dubbed the “Key to NYC Pass,” marks a significant escalation of the city’s efforts to curb the recent uptick in COVID-19 cases driven by the Delta variant, and will launch in mid-August and enforcement will begin in September following a public service announcement campaign, administration officials said.

The program is modeled after the vaccine passport programs rolled out in France and other European countries, according to de Blasio administration officials.

New Yorkers will be required to show either the state’ “Excelsior Pass,” the city’s new vaccine pass or Center for Disease Control’s paper vaccine card, as proof of vaccination, officials told The Post.

Unlike the newly released rules for city workers, those who are unvaccinated will not have an option to receive a COVID-19 test, administration sources said. The restrictions will not apply to outdoor dining, sources said.
An attendee shows her proof of vaccination.
The “Key to NYC Pass” is part of the city’s initiative to curb the recent uptick in COVID-19 cases driven by the Delta variant.
Getty Images

City Hall officials said de Blasio will announce more details on the vaccine requirement during his regular mid-morning virtual press briefing on Tuesday.

In recent days, de Blasio has repeatedly floated the possibility of ramping up restrictions and vaccine requirements. He mandated in late July that all public health system employees get their shots or receive a weekly coronavirus test — and then expanded the requirement for the entire city workforce.

“We’ve got to shake people at this point and say, ‘Come on now.’ We tried voluntary. We could not have been more kind and compassionate. Free testing, everywhere you turn, incentives, friendly, warm embrace. The voluntary phase is over,” de Blasio said on MSNBC last week. “It’s time for mandates, because it’s the only way to protect our people.”
Excelsior Pass app.
The Excelsior Pass app provides digital proof of COVID-19 vaccination or negative test results.
SOPA Images/LightRocket via Getty Images

During an appearance on CNN, the mayor left the door open to soon imposing vaccination requirements to enter city bars and restaurants.

“Given everything we’re learning, all options are on the table,” he said Friday. “I keep saying we’re climbing the ladder in terms of more and more mandates.”

And on Monday, the mayor hinted at the Big Apple moving toward a “reality” in which those who do not get vaccinated are barred from certain settings.

“More and more, there’s going to be a reality where, if you’re vaccinated, a world of opportunity opens up to you. If you’re not vaccinated, there’s going to be more and more things you can’t do,” de Blasio said during his virtual press briefing, when he announced that the city will only hire vaccinated workers and advised all New Yorkers to wear masks in indoor, public settings.

“I say that to say, go get vaccinated, so you can fully participate in the life of this city, because that’s where things are going.”

RELALTED ARTICLES:

Andrew Cuomo Pushes Businesses to Discriminate Against Unvaccinated

‘State of Fear’: Are We Being Manipulated by Behavioral Scientists?

EDITORS NOTE: This Geller Report is republished with permission. ©All rights reserved.

Quick note: Tech giants are shutting us down. You know this. Twitter, LinkedIn, Google Adsense, Pinterest permanently banned us. Facebook, Google search et al have shadow-banned, suspended and deleted us from your news feeds. They are disappearing us. But we are here. We will not waver. We will not tire. We will not falter, and we will not fail. Freedom will prevail.<

Subscribe to Geller Report newsletter here — it’s free and it’s critical NOW when informed decision making and opinion is essential to America’s survival. Share our posts on your social channels and with your email contacts. Fight the great fight.

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President Trump Amends Big Tech Lawsuit as 65,000 Americans Submit Censorship Stories

I’m one of them!

Trump Amends Big Tech Lawsuit as 65,000 Americans Submit Censorship Stories

By Tom Ozimek, The Epoch Times, August 2, 2021:

Former President Donald Trump’s legal team has amended his class action lawsuit against Big Tech to incorporate additional class representatives and more censorship stories provided by everyday Americans.

According to the America First Policy Institute (AFPI), Trump’s July 7 lawsuit against Facebook, Twitter, and Google is adding ”additional censorship experiences” from some of the nearly 65,000 people who submitted them to the institute.

”Late last night, Amended Complaints were filed in the Big Tech lawsuits against Facebook, Inc., Mark Zuckerberg, Twitter, Inc., Jack Dorsey, Google LLC, and Sundar Pichai,” AFPI said in a July 28 statement.

“Since the initial filing on July 7, 2021, nearly 65,000 American people have submitted their stories of censorship through America First Policy Institute’s (AFPI) Constitutional Litigation Partnership (CLP) at TakeOnBigTech.com,” AFPI added.

Trump said at a July 7 press conference outlining his plans for the legal action that he expected thousands of people would join his lawsuit. Several people invited to speak at the press conference shared their experiences of what they said amounted to censorship by social media platforms.

“Joining us this morning are just a few of the many Americans who have been illegally banned or silenced under the corrupt regime of censorship,” Trump said at the time.

“These brave patriots are included in the lawsuit and thousands more are joining as we speak. Thousands more. They’re all wanting to join. This will be, I think will go down as the biggest class action ever filed,” Trump predicted.

AFPI said in its statement that Trump’s amended complaint includes “additional censorship experiences and incorporates additional class representatives, including Dr. Naomi Wolf and Wayne Allyn Root—individuals on opposite ends of the political spectrum who highlight the bipartisan need to protect the thoughts and voices of all Americans, regardless of political affiliation.”

Wolf, a longtime liberal and former adviser to the political campaigns of both Bill Clinton and Al Gore, told EpochTV’s “American Thought Leaders” in a recent interview that the growing number of people banned from Big Tech platforms is leading to a wave of self-censorship.

Wolf, who was banned by Twitter in June for allegedly sharing so-called misinformation about COVID-19 vaccines, said the “chilling effect” her ban has had on other journalists is evident because some have reached out to her directly.

“I’ve gotten so many emails from other reporters saying, ‘I really admire you, I’m so sorry you were de-platformed.’ And when I would say ‘well, can you say that publicly?’ They universally said ‘I would, but I’m really afraid of being de-platformed.’ And I’ve seen the self censorship that has gone on in the wake of some high-profile de-platforming of journalists,” she said.

Trump said at the July 7 press conference that his suit centers on protecting the First Amendment right to free speech.

“We’re asking the U.S. District Court for the Southern District of Florida to order an immediate halt to social media companies’ illegal, shameful censorship of the American people, and that’s exactly what they are doing,” the former president said.

“We’re demanding an end to the shadow banning, a stop to the silencing, and a stop to the blacklisting, banishing, and canceling that you know so well. Our case will prove this censorship is unlawful, it’s unconstitutional, and it’s completely un-American,” added Trump who himself was banned from major social media platform following the Jan. 6 Capitol riot.

Twitter, Facebook, and Google said in January that they banned Trump over his claims that the Nov. 3 election was stolen and alleged that he contributed to the Jan. 6 violence. Twitter executives have said Trump’s ban will be permanent, Facebook imposed a two-year ban on the former president’s account, and Google-owned YouTube has said it would curtail his suspension until it determines that “the risk of violence has decreased.”

Facebook CEO Mark Zuckerberg, Google CEO Sundar Pichai, and Twitter CEO Jack Dorsey were named in the lawsuits—as well as the companies themselves. Trump said the lawsuits will seek a court award of punitive damages over the suspension.

RELATED ARTICLE: CNN Forced to Apologize for Anti-Israel Falsehoods

EDITORS NOTE: This Geller Report column is republished with permission. ©All rights reserved.

Quick note: Tech giants are shutting us down. You know this. Twitter, LinkedIn, Google Adsense, Pinterest permanently banned us. Facebook, Google search et al have shadow-banned, suspended and deleted us from your news feeds. They are disappearing us. But we are here. We will not waver. We will not tire. We will not falter, and we will not fail. Freedom will prevail.

Subscribe to Geller Report newsletter here — it’s free and it’s critical NOW when informed decision making and opinion is essential to America’s survival. Share our posts on your social channels and with your email contacts. Fight the great fight.

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Remember, YOU make the work possible. If you can, please contribute to Geller Report.

The Most Splendid Housing Bubbles in America: July Update, Holy Moly

Raging mania house-price inflation.

House prices spiked 16.6% from a year ago, the biggest increase in the data going back to 1987, according to the National Case-Shiller Home Price Index today, which was for the three-month moving average of closed sales entered into public records in March, April, and May. But in some cities, the raging housing mania produced far wilder results. The metros here are in order of the biggest house price inflation since the year 2000:

Los Angeles metro: Prices of single-family houses jumped 2.1% in May from April and 17.0% year-over-year. The Case-Shiller Indices were set at 100 for January 2000. With the index value for Los Angeles at 347 in May, house prices have soared by 247% since January 2000, despite the Housing Bust in the middle, which makes Los Angeles the most splendid housing bubble on this list.

San Diego metro: The Case-Shiller index spiked 2.9% for the month and 24.7% year-over-year, the impersonation of the raging mania in the housing market. The year-over-year spike is the second hottest on this list, behind Phoenix. Prices in San Diego have skyrocketed 241% since 2000:

Sizzling “House-Price Inflation.” The Case-Shiller Index uses the “sales pairs method,” comparing the current sales price of a house to its price when it sold previously, and it includes provisions for home improvements. By tracking the amount of dollars required to buy the same house over time, the index measures the purchasing power of the dollar with regards to houses; it’s a measure of house price inflation.

All charts here are on the same scale as Los Angeles to show the relative heat of house price inflation in each market since 2000.

Seattle metro: House prices jumped 2.8% in May, and 23.4% year-over-year year, the third-hottest raging-mania annual house price inflation on this list. Since January 2000, house prices have soared 235%:

San Francisco Bay Area Houses and Condos: The Case-Shiller Index for “San Francisco” covers the five counties of San Francisco, San Mateo, Alameda, Contra Costa, and Marin.

Overall house prices spiked by 2.6% for the month, 18.2% year-over-year, and 218% since 2000. But by price tiers, prices in the “low tier” spiked by 20.2% year-over-year and are up 265% from January 2000 (black line). Prices in the mid-tier jumped by 22.1% year-over-year (light blue line); both far surpassed the increase in the high tier, up 17.1% year-over-year (green line).

Condo prices, however, have been waffling along since April 2018, not going anywhere. Here’s my detailed look at this split in the San Francisco market. Condos are denoted by the red line.

*****

Continue reading this article at Wolf Street.

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