Our Dismal Economic Stagnation … Diagnosing The Slowest Recovery Since The Great Depression

The Bureau of Economic Analysis has reported that in the first quarter of this year, the U.S. economy declined at a 0.7 percent annual rate. Although growth may be higher for the rest of the year, this is another reminder of how slowly the economy has grown during more than five years of economic recovery from the recession of 2008-09. The rate of economic growth for the 23 quarters since the second quarter of 2009 is the slowest for any economic recovery since the Great Depression. These results are not due to bad luck; they are due to bad policy—particularly the Federal Reserve’s enormous expansion of the monetary base and the near doubling of the federal government’s debt since the end of 2007, both of which have been supported by the Obama administration.

In response to the financial crisis of 2008, the Federal Reserve used newly created money to purchase hundreds of billions of dollars of mortgage-backed securities and government debt. Because much of the newly created credit was used to buy the bad loans that were the cause of the financial crisis, less money was available to invest in productive capital, which would have contributed to job creation. The resulting low interest rates also made it easier for the government to borrow and spend on boondoggles such as “cash for clunkers” and to expand programs like unemployment compensation and food stamps. Instead of creating jobs, extended unemployment compensation and increased eligibility for food stamps made it easier for unemployed workers to turn down job opportunities.

Keynesian economists like Paul Krugman argue that the recovery would have been stronger if the government had provided more economic stimulus spending. In their view, more government spending was needed to increase demand for goods and services and create more jobs, which in turn would have had a multiplier effect on the output of the economy. They ignore the fact that someone has to pay for the additional government spending; and as a result, fewer resources are available for private-sector firms to invest and create jobs.

Recessions can eliminate the excesses caused by a credit-fueled economic boom. Without bailouts, firms that borrowed heavily to invest in unprofitable projects would be forced to liquidate those investments. Declining demand during recessions leads to falling prices, which give incentives for consumers to buy more of the goods and services they want, thus leading to the creation of new jobs. Economic stimulus spending and Federal Reserve monetary expansion prevented prices from falling and capital from being reallocated to produce the goods that consumers wanted. The Troubled Asset Relief Program (TARP) funneled government money to firms that took too much risk and should have gone bankrupt while the Federal Reserve used newly created money to rescue banks from the consequences of reckless lending.

The policies that caused the financial crisis and the bailouts and unprecedented monetary expansion that followed were chosen by the Federal Reserve, the Bush administration, and the Congress to benefit politically powerful interest groups that included financial services firms and wealthy investors. Barack Obama had an opportunity to repudiate these policies when he took office. Instead, he not only supported them but also expanded them. In addition, he reappointed Ben Bernanke as chairman of the Federal Reserve Board of Governors in 2010, in spite of the irresponsible policy choices he presided over during the financial crisis.

Bernanke’s policies emphasized helping banks, particularly the large money center banks, whose balance sheets were loaded with bad mortgages and other toxic assets. By keeping interest rates close to zero, monetary policy under Bernanke made it much more difficult for ordinary Americans to save for retirement. This policy did, however, enable large banks’ profits to soar so they could offset their losses during the financial crisis.

Although his first campaign was all about change, President Obama, as much or more than his predecessors, supported bailouts, subsidies, and regulation that rewarded politically powerful businesses and created obstacles for responsible entrepreneurs. These included the practice of allowing small businesses to bear the full consequences of their losses, while firms the government deems too big to fail won special benefits if they were mismanaged. To this fiscal folly he added health care reform, which was designed in such a way as to enhance the profits of large insurance companies while its mandates discourage job creation.

The slow recovery since 2009 is the consequence of Federal Reserve monetary policy and a series of ill-conceived policies by the federal government, most of which began before Barack Obama took office. By endorsing and in some cases expanding these policies, President Obama must bear some of the blame for the results. Instead of correcting the bad policies that caused the crisis, he used the crisis as an excuse to expand the government’s control over the economy, further hampering the ability of businesses and entrepreneurs to create jobs and restore economic prosperity.

The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by WesternJournalism.com.

This post originally appeared on Western Journalism – Equipping You With The Truth

What’s On The Back of Islamic State’s New Gold Coin Reveals Its True Goal, And It’s Scary…

Photos have surfaced of gold coins purportedly minted by the Islamic State. Imagery on the currency show the intentions of the group.

One face of the coin has a map of the world, with an Arabic phrase on the flip side which reads: “The Islamic State — a caliphate based on the doctrine of the prophet,” according to the BBC.

According to the Telegraph, an anti-ISIS activist by the name of Abu Ibrahim Raqqawi, who lives in the ISIS-controlled city of Raqqa in Syria, posted photographs of the coins on his Twitter account on Monday.

ISIS chose to call its currency the dinar, inspired by the original dinar issued during the Caliphate of Uthman in 634, according to Britain’s Daily Telegraph. Uthman was a friend of Muhammad and one of the earliest converts to Islam.

Under his leadership, the caliphates stretched over much of the Middle East including the entire Arabian Peninsula as well as modern day Iraq, Iran, and Syria. It went as far east as Pakistan and as far west as Tunisia on Africa’s northern coast.

Image Credit: Wikipedia - Islamic Empire during Uthman's reign - circa 644 A.D.

Image Credit: Wikipedia – Islamic Empire during Uthman’s reign – circa 644 A.D.

The reported value of ISIS’ gold sovereign dinar is $139.

“The purchasing power of the money they’re emitting will be wholly dependent on what the purchasing power of gold, silver and copper are,” Steven H. Hanke, professor of applied economics at Johns Hopkins University, told the Financial Times.

The Telegraph reports:

[The Islamic State] is striving to establish a completely self-sufficient state, and oil production will be part of achieving that. It is unclear how the group will be able to resource enough of the precious metals to ensure widespread distribution of the coins.

However, paying from it will not be a problem. Isil is thought to make as much as £2 million [currently $3.1 million] a day from the oil refineries under its control in Syria and Iraq, as well as receiving funding from supporters in the Gulf.

They are thought to earn up to £5 million [$7.8 million] a month through extortion of local businesses as well as millions from selling off looted artefacts. In the past year they are estimated to have made £40 million [$62.8 million] from taking hostages, with each foreign hostage thought to be worth £3 million [$4.7 million].

h/t: The Blaze

This post originally appeared on Western Journalism – Equipping You With The Truth

Will Seizure Of Russian Assets Hasten Dollar Decline?

While much of the world focused last week on whether or not the Federal Reserve was going to raise interest rates, or whether the Greek debt crisis would bring Europe to a crisis, the Permanent Court of Arbitration in The Hague awarded a $50 billion judgment to shareholders of the former oil company Yukos in their case against the Russian government. The governments of Belgium and France moved immediately to freeze Russian state assets in their countries, naturally provoking the anger of the Russian government.

The timing of these actions is quite curious, coming as the Greek crisis in the EU seems to be reaching a tipping point and Greece, having perhaps abandoned the possibility of rapprochement with Europe, has been making overtures to Russia to help bail it out of its mess. And with the IMF’s recent statement pledging its full and unconditional support to Ukraine, it has become even more clear that the IMF and other major multilateral institutions are not blindly technical organizations, but rather are totally subservient lackeys to the foreign policy agenda emanating from Washington. Toe the D.C. party line and the internationalists will bail you out regardless of how badly you mess up, but if you even think about talking to Russia you will face serious consequences.

The United States government is desperately trying to cling to the notion of a unipolar world, with the United States at its center dictating foreign affairs and monetary policy while its client states dutifully carry out instructions. But the world order is not unipolar, and the existence of Russia and China is a stark reminder of that. For decades, the United States has benefited as the creator and defender of the world’s reserve currency, the dollar. This has enabled Americans to live beyond their means as foreign goods are imported to the U.S. while increasingly-worthless dollars are sent abroad. But is it any wonder after 70-plus years of a depreciating dollar that the rest of the world is rebelling against this massive transfer of wealth?

The Europeans tried to form their own competitor to the dollar, and the resulting euro is collapsing around them as you read this. But the European Union was never considered much of a threat by the United States, existing as it does within Washington’s orbit. Russia and China, on the other hand, pose a far more credible threat to the dollar, as they have both the means and the motivation to form a gold-backed alternative monetary system to compete against the dollar. That is what the U.S. government fears, and that is why President Obama and his Western allies are risking a cataclysmic war by goading Russia with these politically-motivated asset seizures. Having run out of carrots, the U.S. is resorting to the stick.

The U.S. government knows that Russia will not blithely accept Washington’s dictates, yet it still reacts like a petulant child flying into a tantrum whenever Russia dares to exert its sovereignty. The existence of a country that won’t kowtow to Washington’s demands is an unforgivable sin, to be punished with economic sanctions, attempting to freeze Russia out of world financial markets; veiled threats to strip Russia’s hosting of the 2018 World Cup; and now the seizure of Russian state assets.

Thus far the Russian response has been incredibly restrained, but that may not last forever. Continued economic pressure from the West may very well necessitate a Sino-Russian monetary arrangement that will eventually dethrone the dollar. The end result of this needless bullying by the United States will hasten the one thing Washington fears the most: a world monetary system in which the U.S. has no say and the dollar is relegated to playing second fiddle.

The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by WesternJournalism.com.

This post originally appeared on Western Journalism – Equipping You With The Truth

Could ‘Caitlyn’ Jenner Become The First ‘Woman’ In More Than 100 Years To Cash In Like This?

It’s being touted as a big, historic change — the Treasury Department’s planned redesign of the $10 bill to include the image of a notable woman in U.S. history. So, it occurred to me that — given the adoration and notoriety (among liberals and progressives, at least) of the celebrity formerly known as Bruce, the change to our legal tender could recognize the change to the tender parts of ‘Caitlyn’ Jenner…as well as to the national conversation about “trans” this-and-that that his/her transformation has sparked.

As USA Today reports, the image of a historical female figure in the American pantheon of women who made a difference will appear on the $10 bill in about five years. Obama’s Treasury Secretary, Jack Lew, is not saying who will be prominently displayed on the paper currency instead of the etched likeness of Alexander Hamilton — that decision has reportedly not been made yet.

And We, The People, are supposedly able to sound off with our suggestions.

Now, please understand, I am not advocating that the leading advocate of “transgender rights” be rewarded with his/her pic on the good ole sawbuck. And I do understand that the rules say that no living person may appear on a bill such as the $10.

But given President Obama’s well-known propensity for doing what he wants and ordering his lieutenants to carry out his executive orders — regardless of the rules or the regulations or the laws or the Constitution — I’m simply wondering out loud, so to speak, whether seeing Caitlyn on the currency is a totally far-fetched idea. Is it any more far-fetched than the hero status that Jenner has achieved by doing what he and his physicians, make-up artists, publicists, promoters, etc. have done?

In the USA Today article about the upcoming change to the $10 bill — a modification that would see “the first woman on new paper currency since Martha Washington appeared on a $1 silver note in the late 1800s” — it’s noted that the current occupant of the $10 oval, Alexander Hamilton, isn’t going away.

“The first Treasury secretary played a leading role in developing the nation’s financial system, and has been on the $10 since 1928. And there he’ll remain, either on the reverse side or in a separate series of bills,” says USA Today.

Still, as The New York Times points out regarding the woman thing, the head of the Treasury has hinted that someone like Caitlyn J. should be the candidate for the currency…as long as that someone is no longer walking the earth.

Reports the Times: “The only criterion under law is that the chosen person must be dead, but the Treasury said Mr. Lew was looking for a woman ‘who was a champion for our inclusive democracy.’”

So, maybe the following image would be more to Mr. Lew’s liking of an “inclusive champion,” as well as in compliance with the spirit of the law.

WJ images $10 Bruce

The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by WesternJournalism.com.

This post originally appeared on Western Journalism – Equipping You With The Truth

Monetary Reform In Iceland: Maybe There Is Still Hope?

Despite the barrage of catastrophic financial data throughout the Western world, there may be a glimmer of hope coming from the tiny Nordic island of Iceland.

It must not be forgotten that it was Iceland which was one of the first to feel the fallout of the financial crisis of 2007-08. Unlike most of the other nations, however, Iceland showed tremendous backbone and did not allow, for the most part, any of the NWO monetary agencies to intervene in its affairs. So, any Icelandic currency reform considerations must be taken seriously.

Instead of following in the global insanity of massive money creation, artificial suppression of interest rates, and all other sorts of tricks and gimmicks, Iceland is considering the prohibition of banks from artificially increasing the money supply through the fraudulent and evil practice of fractional reserve banking (FRB).

The Financial Times reports that the government in Reykjavik is contemplating “a complete ban on its banks creating krona when they issue new loans. Growth in the money supply would become a matter of government policy alone.” In the proposal under consideration, “the state has complete monopoly on legal tender. Banks can only lend what they have previously gathered in state money.” The Times adds: “Money created ‘out of thin air’ – the devilish secret at the heart of fractional reserve banking – becomes a relic of the past.” Oh, if it was only so!

Of course, the Financial Times gets much wrong in the story; but it does show that the monetary authorities of Iceland recognize that there is something radically wrong with the current monetary order, especially with FRB.

While Iceland’s proposal to eliminate banks from fractional reserve practices is commendable, the replacement of it by total governmental control would lead to similar, if not worse, problems. Under such a system, the money supply would be subjected to the whims of politicians who, no doubt, would expand it at the drop of a hat to gain and/or maintain their power among constituents. Such an arrangement should send chills down the spine of every native Icelander.

Economic theory has clearly demonstrated that a monopolist will exploit the privilege he is given, and the Icelandic government would be like any other monopolist. Monopoly control leads to higher prices and shoddy services. In the case of a money monopoly, the quality of money (its purchasing power) would drop.

A far sounder proposal for Iceland (and for the world at large) is to take away the power of both banks and governments to create money “out of thin air.” This would mean a complete “de-politicalization” of the Icelandic monetary order. A non-statist monetary system would surely be based on commodities – gold and silver – where the money supply would be determined by the amount of minerals mined, not by government fiat.

A metallic monetary standard naturally puts a limit on the amount of money in “circulation” since it has to be “produced.” Extracting gold and silver from the earth is an expensive process. Printing paper notes is virtually costless.

What Iceland (and, for that matter, the rest of the world) apparently does not understand is that economic growth is determined not by the amount of money there is, but the amount of genuine savings. If Iceland seeks economic well-being, it should undertake policies that increase savings.

There is a bigger hurdle that will most likely prevent either Iceland or any other nation from undertaking any meaningful monetary reform. FRB and central banking (which was created to legitimize fractional reserve banking) are the instruments where governments and the political elites derive much of their power. Central banks buy the public debt that allows government to spend recklessly without recourse. If this was taken away, and states had to rely solely on taxation, their power would be severely curtailed.

Iceland and the Western world’s financial doldrums will only be cured when FRB and central banking are eliminated. Prior to this, however, the public must be convinced that the only economically sound and morally defensible monetary order is one where money is fully redeemable in gold and silver. Until this is recognized, Iceland and the rest of the global economies will continue to stagnate and eventually collapse.

Aquinas@AntoniusAquinas

The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by WesternJournalism.com.

This post originally appeared on Western Journalism – Equipping You With The Truth