If Raising Taxes Would Get America Out Of Trouble, WHY IS THE EURO ZONE IN SUCH DEEP SH!T???

A friend of mine (we’ve corresponded enough and seen the world the same way enough that I believe “friend” applies) from Sweden commented on my article, “Barack Obama, America’s First Downgraded President.”  In part of his comment, he said of his native Europe:

The leftwing liberal press in Sweden is doing everything to blame the crisis in the U.S. on the Tea Party movement and on the Conservatives’ refusal to raise taxes. As if the Europe’s high taxes are of any help in the Euro zone?

Left Liberal reforms require increased taxes, which then are followed by new leftwing liberal reforms that require even higher taxes, and so on. When the politicians begin to solve problems with tax increases, there will be no stopping as more and more people switch from financing their wellbeing by themselves, to expecting the state to offer it for free or almost free.

Obama and his supporters are leftwing liberals who want to transform the American system to a European kind of model, which means high taxes, big public sector and many more living on welfare and on the state’s expense. I say – do never go along with it, it does not solve any problems with overspending and using taxpayers money without any respect for its actual value.

In those European countries, where it is not possible to charge high taxes from the population, politicians “solve” it by taking large loans. You could say that the socialist and leftwing liberal politicians buy their positions of power with borrowed money. Now it is no longer possible. Europe is full of Obamas and Pelosis, and these have not only ruined their own countries but are about to ruin even Germany, Holland and probably also us in Sweden.

Europe taxes the bejeezus out of EVERYTHING:  “Take a look at the current European tax rates below which range from 59.6% to 83%. The European VAT tax (Government Sales Tax) ranges from 16% to 25%.”  And that’s just for starters; they also pay at least TWICE as much on gasoline and diesel because they massively tax energy, too.  And of course there are just ALL KINDS of other taxes and regulations that amount to massive hidden taxes in the Eurozone.

Democrats are out there just flat out rabidly DEMONIZING Republicans and particularly Tea Party caucus members as “terrorists” because we wouldn’t hike taxes.  In the article my friend Penumbra added his own insights to, I had said the following:

Obama and the Democrats are like addicts, blaming everybody but themselves for their failures and the chaos and disaster those failures have caused. The obvious fact of the matter is that the stock market took a huge hit for two reasons which both have “Democrat Party” written all over them: 1) the utter failure of European socialism at a time when Obama and the Democrats are still determined to follow this completely failed model here:

Markets worldwide were on edge over fiscal weakness in Italy and Spain and the eurozone’s ability to contain more crisis, as the two countries’ borrowing costs surged in recent days.”

and 2) the “let’s just create more money out of thin air” model otherwise known by the technical name of quantitative easing (i.e., QE1, QE2, and apparently soon-to-be QE3). Here’s how THAT very NON-Tea Party bankrupt and bankrupting policy will end:

We have officially crossed into the realm of abject fiscal and moral lunacy under Obama. We are now borrowing more than our entire economy is worth. Obama is borrowing 43 cents out of every dollar he is spending; he is deficit-spending $4.1 billion every single DAY; he has increased the size of government by 27% over George Bush (according to the CBO) and he is utterly determined to keep spending more and more and more.

In May of this year, Obama submitted a budget that would have added $12 trillion to our debt. It was so insane in so many ways that not even one single DEMOCRAT would vote for it in the Democrat-controlled Senate. Obama’s reckless and immoral budget failed by a vote of 97-0.

That’s not some right-wing talking point. That’s the TRUTH. Obama is an embarrassment. He is a disgrace.

Let’s take a moment to contemplate what Obama has done:

  • Trippled budget deficits since he took office
  • Gave us a failed $862 Billion stimulus package that the CBO said actually cost taxpayers $3.27 TRILLION.
  • Spent tens of billions in GM/Chrysler bailouts that were basically fascist (the corporatist state). See here and here.
  • Increased the size of government by 25%
  • Gave us chronic unemployment at Great Depression levels of 18%
  • Gave us a Debt/GDP ratio WORSE thanthe Great Depression
  • That in addition to two EXTRA wars in addition to the two he promised to get us out of and lied. The Libya war that he said would take “days, not weeks” has now dragged on for more than five months with no sign of ending
  • And now he’s given us a credit downgrade for the first time in American history

Obama will say ANYTHING. He is an abject liar and a fool who says one thing and then does another before saying something else entirely. Unfortunately, the pathologically biased mainstream media reports Obama’s constantly shifting rhetoric as if it had anything whatsoever to do with actual reality.

As an example, Obama repeatedly called for huge tax hikes in this debt ceiling deal on top of the $500 billion in tax hikes he got as part of ObamaCare. But listen to his own words in 2009: “You don’t raise taxes in a recession.”

The fact of history is crystal clear: Tax Cuts INCREASE Revenues; They Have ALWAYS Increased Revenues. Versus tax hikes, which reduce revenues and reduce GDP. As the National Bureau of Economic Research put it, “Tax changes have very large effects: an exogenous tax increase of 1 percent of GDP lowers real GDP by roughly 2 to 3 percent.”

And yet what do Obama and the Democrats keep doing? Obama is back to the same utterly failed Marxist class warfare tactics that have failed before. In the 1990s, Democrats imposed a “luxury tax” on items such as yachts, believing that the wealthy “could afford it.” Maybe they could and maybe they couldn’t, but the FACT was that the rich STOPPED buying yachts. As in stopped completely. As in NOBODY bought a yachtwith that damn tax on it. The Democrats finally rescinded that stupid tax two years later after destroying the yach building and yacht maintenance industries and killing over 100,000 jobs. Rich people weren’t hurt at all; ordinary people were devastated.

And now Obama wants to do the same thing with corporate jets that previous Democrats did to yachts. And they only people who will get hurt if Obama gets his way are the companies that hire people to build and maintain those jets and the workers themselves who will lose their jobs and their livelihoods. And the only thing that is stopping this rape of businesses, workers and the economy that depends on workers and businesses are Republicans. Even if many of the very people who are most hurt by Democrats Marxist class warfare policies are too stupid to know it.

It’s not enough to say that the Democrats’ thesis is false; the Democrats’ thesis has been utterly refuted before the world’s very eyes in Europe.  Our problem isn’t that we’re not enough like Europe; the very failure of Europe itself proves that our problem is that we’re already TOO MUCH like Europe.

We’ve got the second highest corporate tax rate in the entire world right now; and the United States is literally more communist than China now in many ways.  I submit that you must have both a mental and a moral problem in order to think raising those taxes and increasing regulations will somehow make our problems go away.  And yet that is precisely what Democrats foolishly believe.

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21 Responses to “If Raising Taxes Would Get America Out Of Trouble, WHY IS THE EURO ZONE IN SUCH DEEP SH!T???”

  1. Rodney Jr Rondeau Says:

    I don’t think that liberalism is a problem per se. I think that the democrats have tried to implement keynesian ideas through a neoclassical prism. The US is the monopoly issuer of a nonconvertible fiat currency. It can never run out. It spends money by changing numbers in bank account. It taxes by doing the same. This notion that social security is going broke or that there is too much debt is nonsense. If we balance the budget where is the money going to come from. Bank credit? I don’t think that that is the answer. The truth is the government needs to start replacing demand by spending. fast. The economy is going into the toilet. The more we follow the voodoo prescription the faster it goes down. Can you not see the parodox of thrift or that by accounting identity government debt is the mirror of private sector wealth and government sector surpluses are the mirror of private sector debt. I can produce the sector balances to prove it.

  2. Penumbra Says:

    I am your friend, Michael, you can count on that. We share the same values and I support your views.

    The so called market is not impressed by Obama’s and EU’s economic reforms. The markets are realists and they know that big depts are not solved by even bigger depts, and that there are fundamental weaknesses in the modern liberal system, which approaches Marxism, getting closer and closer to Marxism for each day. The markets want to see what probably is the only solution – deep political reforms of the SYSTEM, which means drastic cuts of government spending and bringing people back to the reality. People must learn again how to finance their lives with their own work. People must return to the good old Christian values, take care of themselves and their families, bring up their children properly…. or to face serious consequences.

  3. Michael Eden Says:

    Penumbra,

    I’ve enjoyed every opportunity at discussion with you that we’ve ever had. And I’ve many times marvelled how I can encounter a Christian believer who can come from ANYWHERE on this earth and have an instant and special bond. There was a time when I probably would have assumed that I would have much more in common with someone from Sweden (part of my own heritage is from Sweden) than from China or Africa. But, sadly, due to the loss of Christianity in Northern Europe in particular, that is not true. So I have rejoiced that God has His people even in (spiritually) cold Sweden, and allowed me to chat with a friend and brother in the Lord Jesus whom we share in common.

    I might have a slightly different views on the market (or not, as you don’t touch on this). On my view, the “realism” of the markets is often blinded by its short sightedness and amoralism. On my view, the markets would embrace Marxism if they could make a profit from it. And too often (as in the specific example of quantitative easing) the markets have rallied due to policies that are anything but laissez-faire/capitalist. Many investors see short term profit and jump in only to leap right back out after they’ve made their money. But their investment actions end up justifying awful policies.

    Now to what I KNOW we agree on: the capitalist system actually derived from Christianity; it began and flourished (just like science, btw) in “Christendom” as an outgrowth of Christian principles.

    A couple of paras from the article I link to above:

    Supposing that capitalism did produce Europe’s own “great leap forward,” it remains to be explained why capitalism developed only in Europe. Some writers have found the roots of capitalism in the Protestant Reformation; others have traced it back to various political circumstances. But, if one digs deeper, it becomes clear that the truly fundamental basis not only for capitalism, but for the rise of the West, was an extraordinary faith in reason.

    A series of developments, in which reason won the day, gave unique shape to Western culture and institutions. And the most important of those victories occurred within Christianity. While the other world religions emphasized mystery and intuition, Christianity alone embraced reason and logic as the primary guides to religious truth. Christian faith in reason was influenced by Greek philosophy. But the more important fact is that Greek philosophy had little impact on Greek religions. Those remained typical mystery cults, in which ambiguity and logical contradictions were taken as hallmarks of sacred origins. Similar assumptions concerning the fundamental inexplicability of the gods and the intellectual superiority of introspection dominated all of the other major world religions.

    I have a book by Rodney Stark (For the Glory of God: How Monotheism Led to Reformations, Science, Witch-Hunts, and the End of Slavery) that I found deeply insightful.

    People don’t realize just how rich and in fact blessed the Christian worldview and the life it enables truly is. They falsely think it’s boring, or that it prevents them from reaching their potential, etc. And of course human beings can’t reach their full potential WITHOUT Jesus and the Word that is all about Him.

    Any “One Nation Under God” flourishes.

    Another example of this flourishing is that the only successful and enduring democracies have resulted from “Christendom.”

  4. Michael Eden Says:

    Rodney,

    I would agree with you about “liberalism” if we are talking about “classical liberalism.”

    Here’s a very quick link I found to point out that classical and modern liberalism have little in common, and that “liberalism” in the modern sense is anything but enabling. The second link on the hit list also looks pretty interesting.

    John Locke wrote that liberty is “to follow my own will in all things, where the [natural law] rule prescribes not; and not to be subject to the inconstant, uncertain, unknown, arbitrary will of another man: as freedom of nature is, to be under no other restraint but the law of nature” (Second Treatise on Government).

    And the words of John Trenchard & Thomas Gordon added, “By liberty, I understand the power which every man has over his own actions, and his right to enjoy the fruit of his labour, art, and industry, as far as by it he hurts not the society, or any members of it, by taking from any member, or by hindering him from enjoying what he himself enjoys. The fruits of a man’s honest industry are the just rewards of it, ascertained to him by natural and eternal equity, as is his title to use them in the manner which he thinks fit: And thus, with the above limitations, every man is sole lord and arbiter of his own private actions and property. A character of which no man living can divest him but by usurpation, or his own consent” (Cato’s Letters, No. 62).

    Any nation that becomes redistributionist, and seizes the results of one man’s labor to give to another, that is not “liberalism” in the classical sense.

    And from there I would argue that the policies of our modern liberals and the policies of Keynesians are one and the same, with the latter economic philosophy derived entirely from the former political philosophy.

    I don’t know what to do with your statement that “” because it does not correspond with reality. Not only are the entitlement programs broke, but they are deeply and profoundly broke. And we have something close to $200 TRILLION in unfunded liabilities when these entitlements are included.

    Boston University economist Laurence Kotlikoff says U.S. government debt is not $13.5-trillion (U.S.), which is 60 per cent of current gross domestic product, as global investors and American taxpayers think, but rather 14-fold higher: $200-trillion – 840 per cent of current GDP. “Let’s get real,” Prof. Kotlikoff says. “The U.S. is bankrupt.”

    Writing in the September issue of Finance and Development, a journal of the International Monetary Fund, Prof. Kotlikoff says the IMF itself has quietly confirmed that the U.S. is in terrible fiscal trouble – far worse than the Washington-based lender of last resort has previously acknowledged. “The U.S. fiscal gap is huge,” the IMF asserted in a June report. “Closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 per cent of U.S. GDP.”

    This sum is equal to all current U.S. federal taxes combined. The consequences of the IMF’s fiscal fix, a doubling of federal taxes in perpetuity, would be appalling – and possibly worse than appalling.

    Prof. Kotlikoff says: “The IMF is saying that, to close this fiscal gap [by taxation], would require an immediate and permanent doubling of our personal income taxes, our corporate taxes and all other federal taxes.

    “America’s fiscal gap is enormous – so massive that closing it appears impossible without immediate and radical reforms to its health care, tax and Social Security systems – as well as military and other discretionary spending cuts.”

    He cites earlier calculations by the Congressional Budget Office (CBO) that concluded that the United States would need to increase tax revenue by 12 percentage points of GDP to bring revenue into line with spending commitments. But the CBO calculations assumed that the growth of government programs (including Medicare) would be cut by one-third in the short term and by two-thirds in the long term. This assumption, Prof. Kotlikoff notes, is politically implausible – if not politically impossible.

    One way or another, the fiscal gap must be closed. If not, the country’s spending will forever exceed its revenue growth, and no one’s real debt can increase faster than his real income forever.

    Prof. Kotlikoff uses “fiscal gap,” not the accumulation of deficits, to define public debt. The fiscal gap is the difference between a government’s projected revenue (expressed in today’s dollar value) and its projected spending (also expressed in today’s dollar value). By this measure, the United States is in worse shape than Greece.

    You then proceed to say that we need more of the hair of the dog that bit us.

    We tried it your way, Rodney. And the result was $862 billion (actually $3.27 TRILLION) in government spending that produced NOTHING. We sucked hundreds of billions, in fact trillions, from the private job-creating economy and gave it to the government to squander. And what do we have to show for it but a giant mountain of debt that you insanely trivialize?

    The policies of stimulus spending started by FDR have ALWAYS failed massively. And in fact FDR prolonged the Great Depression by SEVEN YEARS with the very policies that you now embrace.

    FDR’s own Treasury Secretary points this abysmal failure out. Notice his opening words and how they refute your words, “The truth is the government needs to start replacing demand by spending”:

    We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong… somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises… I say after eight years of this Administration we have just as much unemployment as when we started… And an enormous debt to boot!” – Henry Morganthau, FDR’s Treasury Secretary, May 1939

    In April 1939, unemployment was 20.7%

    Even Obama’s former top economic adviser acknowledged the failure of FDR’s policies: ““Never forget, never forget, and I think it’s very important for Democrats especially to remember this, that if Hitler had not come along, Franklin Roosevelt would have left office in 1941 with an unemployment rate in excess of 15 percent and an economic recovery strategy that had basically failed.”

    There are, as they say, lies, damn lies and statistics. And whatever statistics you think you can produce simply fly in the fact of the reality that we experienced in the 1930s when FDR tried it your way and in 2009 when Obama tried it your way.

  5. Brian Tweed Says:

    Cool blog with great info

  6. Rodney Jr Rondeau Says:

    you still do not get it. Prof. kotlikoff has a gap between his head. he likes to compare the government to a household when there is no comparison. The government is the issuer of money. The fiscal gap will not widen like he says. maybe someone should call him and let him know the gold standard was abandoned forty years ago. Hence, this country will NEVER run out of money. You seem to be confused about how the monetary system operates. Government spending is not constrained by revenues. That may be what you have been taught but operationally that is not what happens. governments spend by adding reserves to the banking system. it taxes and borrows to remove reserves. It happens in that order and for that reason alone. they remove money from the system and hence demand to make room for government spending. I am not saying that we should spend irresponsibly as inflation is the only concern. But never bankruptcy. Greece is not like the us. its better compared to a us state. A currency user. It is important to note that if you removed the word debt from that debt clock and inserted world us dollar savings it would still be correct. to the penny. us debt and defecits are equal to private financial assets. Money is debt or credit depending on you posistion in the transaction. tell me if the government is going to tax all that it spends. where is all the demand going to come from. I don’t beleive in the confidence fairy. this is something i am passionate about. please excuse my tone.

  7. Rodney Jr Rondeau Says:

    you also seem to like to point out all of fdrs shortcomings. yes things were not great. they were also not getting worse. the whole world was in that sort of condition and some places worse. isn’t it possible he didn’t spend enough. america exited the depression with 120% debt to gdp. maybe the spending on the war did the trick. maybe it was that the rest of the world was in ruins. the fact is. it was probably both.

  8. Rodney Jr Rondeau Says:

    the obama stimulus was a joke. i don’t see how giving the banks 700b was supposed to help anything but the banks balance sheets and ceo bonuses. we should have invested in our infrastucture. something that would have some benefit.

  9. Penumbra Says:

    Michael,

    Yes, it is great to exchange views with a Christian brother, far away yet close.

    Maybe I expressed myself clumsy regarding the market. The market is driven by two basic instincts – greed and fear. Nothing that I admire. Not at all my ethics. However, greed and fear have made the actors on the market sensitive to political issues. So I regard the market as a sort of sensor of the political situation in the world. In recent days, it did not matter what Obama, FED or ECB said – the market was not satisfied because it knows that the political system does not work properly and needs to be reformed even further. But it also overreacted, as usual, and the dealers acted as a herd of scared cattle. Not worth much of respect, but it puts pressure on the politicians which otherwise will continue to spend money that do not exist so that they can be reelected.

    We are talking about global crisis, but it is not. It is mainly a crisis of the western world. It affects all economies because the western world has such a big part of the total economy of the world, but still, the problems are within our countries. And there are two ways to go: more of liberal reforms requiring even higher taxes or return to the old conservative values that made us what we became – the world’s leading culture.

    What happens in the USA affects the whole western world, even ideologically (although no one would admit it here in Europe). More of liberal reforms, higher taxes, more of governmental control, bigger public sector in the US will motivate our politicians to keep the system as it is, over here. Less of all that in the USA will put pressure on our politicians as well. So, in that respect, the Tea Party and the republicans are doing a great job, even for us conservative Europeans, although not many will see or admit the relationship.

    Thanks for the link. In discussions with atheists or religiously indifferent people (lots of them here) I often meet two claims: “Jesus Christ was a communist, the first one in the world” and “the European culture was at the top during the pagan Roman rule while Christianity brought it into darkness”. So I need all arguments against such talk that I can get.

    P.S. When I mention “liberalism” I mean modern liberalism. Classical liberalism is something else. I would be happy if we returned to classical liberalism here in Sweden.

  10. Penumbra Says:

    Rodney Jr Rondeau: “The government is the issuer of money. The fiscal gap will not widen like he says. maybe someone should call him and let him know the gold standard was abandoned forty years ago. Hence, this country will NEVER run out of money.”

    Issuing money without coverage in actual production of goods and services will only create inflation. And what happens if China decides to stop buying US bonds? Who will finance the great unbalance between import and export?

    Sorry sir, but I do not believe a word of what you are saying. It seems as you think that the US government is in control of the economies of all countries in the world. USA is a great nation but you cannot go on like this for ever.

    And the path downward began when US abandoned the gold standard, although maybe it is not the main reason for the modern crisis.

    There is only one way out of this and it is spelled hard work, competitive industry, even more hard work, competitive educational system and more hard work on the top of that. High taxes and too generous social benefits, financed by the government, are not motivational in this respect.

  11. Michael Eden Says:

    Rodney,

    It is interesting that you would wave your hand at inflation the way you did at the very end of your given your determination to create more of it in spades.

    I am frankly rather stunned by the madness of your statement, “the gold standard was abandoned forty years ago. Hence, this country will NEVER run out of money.”

    Let me just say two words: “Weimar Republic.” Let me go on and say Hungary, Angola, Argentina, Zimbabwe, etc. etc. etc. There were all kinds of nations that abandoned gold or any other standard and printed their own money that discovered how truly wrong you are in your ideas.

    To put your “print money” analogy back into a household one, it still applies rather well: I can write you a check. And I can buy a great big checkbook and write all kinds of checks. So what if I’m broke? I can write that check whether it is valuable or whether it is worthless. If it is worthless, it usually doesn’t take very long before no store will accept it. Before long I might walk into a store and see my picture somewhere testifying to that effect. The same thing has happened in a long list of nations who were as profoundly dumb as you seem to be now.

    You are clearly the ignorant one here. Every single time the government creates more money, the money that we have in our banks and in our wallets becomes less valuable.

    You are pushing money printing way too far. I have heard that objects with mass have their own gravitational field, but that doesn’t mean that there are chihuahuas floating around fat women. If you try to count on printing money to get out of spending problems, you will find yourself with a dollar that is absolutely worthless. Just as so many other nations have found.

    What do you DO with money, you bozo? Can you eat it? Do you make clothing from it? Do you build money-mobiles that drive around by burning money? No. You exchange it for goods and services. X much money for Y much goods and services.

    Are goods and services infinite like you seem to think the money supply is? Not on my planet it isn’t. So what happens when I have more and more dollars chasing after the same amount of goods and services? The goods and services become more and more and more expensive in terms of the number of dollars it costs to buy them. That is something called “inflation” which invariably becomes “hyperinflation” when people like YOU get involved with the system. It happens 100% of the time.

    We went off the gold standard in 1973. In 1970, you could buy a Chevelle 454 SS for around $3,000. It was one of the great muscle cars of its time, and it is STILL one of the great all time muscle cars. Today these cars go for HUGE money. But what would you expect to pay for a comparable car today? Not $3,000 but at least $30,000. Or an even better example: you could buy a Rolls Royce Silver Shadow brand spanking new for a little over $10,000. What kind of car could you buy today for $10,000?

    We built the space shuttle with 1970s technology. And what do we have to replace it with now? We can’t afford it!!!

    That inflation is a real bitch when you get to know her, to put it crassly. And she’s responsible for a lot more of America’s problems than you clearly understand.

    Now, a few of things here:
    1. YOU DID NOT BOTHER TO DEAL WITH THE PRIMARY THESIS OF THIS ARTICLE: WHICH IS IF HIGHER TAXES ARE SOMEHOW THE ANSWER FOR AMERICA’S PROBLEMS, WHY HAS THAT SAME HIGH TAX POLICY FAILED IN EUROPE??? I get very pissed off very quickly with people who are either too ingorant or too dishonest to engage in my actual argument.

    2. FURTHER, LET ME EXPLODE YOUR THESIS A DIFFERENT WAY: IF WE CAN SIMPLY PRINT MONEY, THEN WHY IN THE HELL ARE WE EVEN BOTHERING TO TAX AT ALL? WHY DOESN’T THE GOVERNMENT JUST PRINT MORE MONEY INSTEAD OF TAXING? I dare say one finds very quickly that Government spending MOST CERTAINLY IS constrained by revenues when actually confronted with reality.

    3. SINCE I ACTUALLY AGREE WITH YOU TO A LIMITED EXTENT THAT WE CAN PRINT MORE MONEY, WHY IS IT THAT YOU SUPPORT A LIAR AND A FOOL BY YOUR OWN THESIS? BARACK OBAMA KEPT FEARMONGERING THE TERM “DEFAULT” WHEN AS YOU YOURSELF POINT OUT WE COULD HAVE PRINTED MORE MONEY AND THUS PAID OUR BILLS. SO WHY DON’T YOU FIND OBAMA’S STUPID TACTIC INSANE AND EVIL??? FURTHER, SINCE THE DEMOCRAT PARTY KEPT USING THE TERM “DEFAULT” WHICH YOU SAY WE COULDN’T EVEN POSSIBLY DO, AND SINCE THE REPUBLICANS SAID REPEATEDLY WE WOULD NOT DEFAULT, THEN IF YOU ARE NOT A REPUBLICAN YOU BECOME A HYPOCRITE AND A FOOL BY YOUR OWN ARGUMENT.

    Finally, the United States is different than any other nation on earth for a reason you don’t even seem to know: because it is the reserve currency of the planet, and because all commodoties are bought and sold in US dollars. But that is now about to change because in fact the United States has been pursuing the very reckless policies you advocate. China, Russia, India and Brazil and other nations are joining the International Monetary Fund in beginning to call for a NEW currency as the reserve BECAUSE OF OUR RECKLESS SPENDING. Our credit downgrade will escalate that wildly.

    And when that happens, we’re going to be utterly screwed. And we’re going to WISH we were Greece.

    Lastly, I see reality

    Boston University economist Laurence Kotlikoff says U.S. government debt is not $13.5-trillion (U.S.), which is 60 per cent of current gross domestic product, as global investors and American taxpayers think, but rather 14-fold higher: $200-trillion – 840 per cent of current GDP. “Let’s get real,” Prof. Kotlikoff says. “The U.S. is bankrupt.”
    Writing in the September issue of Finance and Development, a journal of the International Monetary Fund, Prof. Kotlikoff says the IMF itself has quietly confirmed that the U.S. is in terrible fiscal trouble – far worse than the Washington-based lender of last resort has previously acknowledged. “The U.S. fiscal gap is huge,” the IMF asserted in a June report. “Closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 per cent of U.S. GDP.”

    This sum is equal to all current U.S. federal taxes combined. The consequences of the IMF’s fiscal fix, a doubling of federal taxes in perpetuity, would be appalling – and possibly worse than appalling.

    Prof. Kotlikoff says: “The IMF is saying that, to close this fiscal gap [by taxation], would require an immediate and permanent doubling of our personal income taxes, our corporate taxes and all other federal taxes.

    “America’s fiscal gap is enormous – so massive that closing it appears impossible without immediate and radical reforms to its health care, tax and Social Security systems – as well as military and other discretionary spending cuts.”

    He cites earlier calculations by the Congressional Budget Office (CBO) that concluded that the United States would need to increase tax revenue by 12 percentage points of GDP to bring revenue into line with spending commitments. But the CBO calculations assumed that the growth of government programs (including Medicare) would be cut by one-third in the short term and by two-thirds in the long term. This assumption, Prof. Kotlikoff notes, is politically implausible – if not politically impossible.

    – and compare it with your ravings, and just have to laugh.

  12. Michael Eden Says:

    Rodney, as to your 5:52 comment,

    First of all, see my article here on who’s saying what about FDR. You might be surprised to find that both FDR’s own Treasury Secretary nor Obama’s top economic adviser recognized that FDR’s New Deal/”stimulus” policy completely and utterly failed. Larry Summers recognized what is widely recognized today: that if it hadn’t been for WWII, FDR would have been pissed upon by history as the worst failure America ever had.

    I provided a comment to that article that has links to some very good articles and sources. They make for very good reading.

    Now, as to this idea that Obama is doing what FDR did, here’s an interesting and rather sobering thought that refutes your “we should have spent more in stimulus” bullcrap from NPR:

    Obama, of course, has said the economy made him do it. But the average inflation-adjusted deficits through Obama’s first two fiscal years will be more than ten times higher than the average inflation-adjusted deficit during the Great Depression. Even as a percentage of the gross domestic product, the average deficits in Obama’s first two fiscal years will more than three times higher the average deficit during the Great Depression. The fact that Obama’s deficits have, by any standard, more than tripled those of the Great Depression, cannot convincingly be blamed on the current recession.

    So Obama has spent more than TEN TIMES MORE than FDR did in the Great Depression AND THE SPENDING FAILED. When will you people give up on your stupid spending and get a clue???

    There are at least three reasons that the WWII spending cannot possibly be duplicated now, and would be sheer madness as a model for us if it could:

    1) We had no choice but to undertake that spending in a TEMPORARY effort to defeat the most evil and violent regimes in history. We won the war and then we ramped down dramatically. To make that kind of spending normative would make one almost as crazy as Hitler.
    2) Who owned the US debt during WWII? The American people. The United States was borrowing from its own people. That is so radically different from today – when we’re borrowing from CHINA – that it isn’t even funny. Back then AMERICA had the wealth it needed; today CHINA has the wealth America needs.
    3) In WWII, the United States possessed the greatest industry/manufacturing in the history of the world. We’ve got a tiny fraction of that capacity today. America truly COULD produce its way out of problems. Now we CAN’T.
    4) The American people were fully committed behind the project of WWII and the debt that it incurred. If you think the American people are just as fully committed to Obamanomics or Keynesian economics you are magnificently deluded.

  13. Michael Eden Says:

    As to your 5:56 comment,

    You are demonstrating your ignorance. The $700 billion that went to the banks was the TARP program under George Bush, not Barack Obama. You remind me of what Reagan said about liberals: “It’s not that they don’t know anything; it’s just that everything they know is wrong.”

    And second, if ANY of the massive spending was good, it was that TARP spending. And that is the case BECAUSE it strengthened the banks. If you actually bothered to read or even watch the financial programs you would know that the biggest reason that this current huge economic crisis isn’t as bad as it was in 2008 is because the BANKS are in much better shape:

    Wild gyrations in the stock market. Big banks holding risky bonds. Fear that toxic assets will contaminate banks and freeze up credit on both sides of the Atlantic.

    Wall Street is having a flashback to the panicky days of September and October 2008, when Lehman Brothers collapsed and American International Group needed a bailout that became the biggest on Wall Street – $182 billion.

    This time investors are worried that Europe’s debt crisis could slam an already weak U.S. economy. But few analysts think it will do as much damage as the collapse in home prices and mortgage-backed securities did in 2008, when they caused a credit squeeze and banks feared lending to each other.

    Compared with the fall of 2008, “our larger banks are in pretty good shape,” says Philip Swagel, a former Treasury official who is now an economist at the University of Maryland. “They’ve rebuilt their capital positions. The institutions that are exposed (to European debt) are in much better shape.”

    In 2008 we were in a giant crisis, and no one knew what to do or how bad it could get. A lot of conservatives were opposed to TARP on the simple grounds that they are opposed to government spending/bailouts in general. I personally had no idea what to do at that point.

    But the banks were helped in clearing their portfolios of toxic assets and they are now better capitalized with better lending policies and higher reserves. And they probably wouldn’t be there without TARP.

    And they are in that shape because of TARP.

  14. Michael Eden Says:

    Essentially, “capitalism” was the result of the Christian demand for an institution that channeled depraved and selfish human desire toward the betterment of society. Atheists don’t understand this: selfishness is not in the system; it is an inherent part of human nature after the Fall. You’re going to have it in ANY human system. And the fact that every single communist state/society has been INCREDIBLY corrupt ought to prove that to them if they are capable of learning.

    The effect of capitalism is to steer and channel human greed such that, through the “invisible hand” (as CHRISTIAN Adam Smith put it) of competition, the energies of the capitalist would produce the abundance from which all of society would benefit.

    I go into business. Why? To make a profit. How greedy of me! And yet I hire workers – which is good for them. And because I want that profit I produce goods and services that others need. And because there are a lot of other greedy sonofaguns out there who are doing what I’m doing I need to sell my product for a reasonable price.

    When you remove the incentive of profit, there is no sufficient reason to produce anything. And when you kill the spirit of competition that capitalism uniquely creates and fosters, there is no reason not to act like a monopoly (which is usually a very bad thing).

    In other words, capitalism understands that humans are evil, and then proceeds to channel the evil within man to the best possible end in a fallen world. And it’s success everywhere it has ever been tried versus the massive failure of its opposite is crystal clear proof of its superiority.

    It is shocking how stupid even the smartest liberals are. In despising God, they despise reality. They will themselves to become stupid, and they replace reality and common sense with theories that, however “sophisticated”, don’t work in the real world that God made. God did not design the world to work for demonic agendas; communism proves that.

    As an illustration, let’s take the easiest comparison of all: let’s compare South Korea to North Korea. Same people, same basic land and same basic resources. Yet one is absolutely thriving (and quite Christian, btw); the other is a hellhole.

    And socialists respond, “Let’s be more like those wonderful North Koreans! They’re doing things RIGHT!” It’s 2 Corinthians 4:4 in a nutshell: “The god of this age has blinded the minds of unbelievers, so that they cannot see the light of the gospel of the glory of Christ, who is the image of God.”

    I googled the words “Acts 5 not communism” to find the following few links:

    http://www.cogwriter.com/news/church-history/ucg-jesus-and-early-christians-were-not-communists-or-socialists/

    http://www.studytoanswer.net/contemporary/christian_communism.html

    http://www.theprophecyblog.com/?p=5751

    http://strictlygospel.wordpress.com/2011/07/24/the-early-church-was-not-communist-and-neither-was-jesus/

    It always amazes me how every religion and every worldview attempts to reshape Jesus into their OWN image.

    And it is always a joy to talk to a smart person who worships Jesus AS JESUS REVEALED HIMSELF.

    Liberals did with the word “liberal” what we just talked about them doing with Jesus; they took the word and then poured their own false content into that word to create something CALLED “liberalism” but which is anything BUT. Same as their “Jesus” and same as their “Christianity.”

    God bless.

  15. Michael Eden Says:

    Penumbra,

    Thanks for your involvement. I think we dovetailed one another’s points quite well as I see what you wrote.

    The idea of the gold standard and whether we should be on or off it is an interesting one.

    We clearly both agree that we need to be on SOME kind of standard that “standardizes” our currency relative to some kind of substantial value.

    The only problem with gold is that there may not be enough of it to serve as such a standard.

    As an American, I very much like the US dollar being the reserve currency. As a fair-minded human being, I very much realize that we have sure abused the privilege that status garnered us.

    And if we lose it, we are truly screwed, because I don’t think the American people are capable of disabusing themselves of their entitlement mindset – which entitlements we would almost INSTANTLY lose if we had to compete for currency the way everyone else does.

  16. Rodney Jr Rondeau Says:

    I never said that the government should “print money”. they never in fact do that. monetary base is disbursed by banks as they draw down their reserve accounts. governments spend by crediting accounts with reserves. always. I am not trying to say that governments should spend just because they have the ability to. I am saying with the current output gap inflation is not going to be a problem in the short to medium term. Ben Bernanke has already proved this. when the government spends it creates net financial assets. when it taxes it destroys them. all those little peices of paper in savings accounts around the world are government defecits. That is what the national debt is. there are two sides to an accounting equation. Paying off the debt means the private sector will be drained of their savings. do you see what i am trying to tell you. All money is created by the government through spending. if the government taxes all that it spends that means that there is none left over for saving or disposable income. just enough to pay taxes. you say that the spending did nothing. nothing but prevent a banking collapse and shore up aggregate demand enough to prevent a nasty deflationary spiral. Had obama or bush not spent that money what do you think would have happened. You appear to acknowledge that the spending worked in that instance. I’m sorry i did not comment on your topic.

    taxes drain aggregated demand. once taxes get high enough, you create disincentive to produce leading to smaller collections and reduced aggregated demand. I would have commented but I was shocked to realize through all you hyperventillating debt hysteria that you have no clue how the monetary system actually works. by the way. the reason governments tax is that it gives the currency value. when you accept money you accept it because you can use it to extinguesh a tax liability. otherwise it would have no value. these peices of paper represent credit and debt. they do not have to have value in themselves. they are just an accounting tool. i pay you i am you debtor till you spend it you are my creditor. you seem to be confusing the movie ticket for the performance.

  17. Michael Eden Says:

    Rodney,

    Obviously, the government DOES print money. I’ve got some bills in my billfold to prove it (even though they are too few and too small in denomination).

    Your point here amounts to a rather trivial technicality. Yes, we are moving increasingly toward a cashless society. I pay most of my bills online, and write checks for the remainder. No actual “money” changes hands in either case, and yet we all know that money changed hands, don’t we???

    So, yes, the government is “printing” fewer dollars, but it is “creating” more dollars than ever before in history. The Fed creates money by adding a bunch of zeros in its computers and buys then Treasuries with those newly created dollars. These dollars are now in a bank account of the previous owner of the Treasuries purchased by the Fed as much as my dollars are in the accounts of the companies I pay my bills to. The client who the had those dollars may have purchased equities or commodities with them increasing the price of the equity or commodity and passing those dollars along to the previous owner of the equity or commodity. But when the Fed invents dollars out of thin air, those dollars keep moving a few times and the effects were higher commodity prices, higher equity prices and a weaker dollar. The Fed and the US government wins; everybody else loses.

    The argument that the Fed hasn’t “printed money” when in actual point of fact via QE1 and QE2 increased the money supply by $1.2 TRILLION (at $600 billion a shot) is simply asinine. Don’t waste anybody’s time with that.

    You still don’t get it. Your entire view toward currency is incorrect. If your view were right, then the tiniest nation on earth could be just as rich as the richest nation. All it would have to do is “invent” trillions of dollars of currency. And as you point out, they wouldn’t even have to buy a printing press to do that; just enter a number with a whole bunch of zeros. Rather, whether we are on the gold standard or not, a nation’s currency must be tied to something: GDP, asset values, etc.

    Ben Bernanke hasn’t “proven” anything. Or am I wrong in my reading of the last Fed report that says we’re doing these unprecedencted things because we’re STILL in such deep crap that started on his watch and has gotten far WORSE on his watch. He’s on his 2nd term as Fed chair; he began his first one in 2006. At this point it’s rather difficult to give Bernanke a whole lot of confidence or credibility with a straight face. Let Ben Bernanke turn this Titanic around and I’ll let you get away with saying “Ben Bernanke has already proved this.” But at this point all he’s “proven” is that everything he’s done is failing wildly.

    Further, when you state that I “appear to acknowledge that the spending worked in that instance,” you’re taking my “acknowledgment” a rather long ways. All I said was that if ANYTHING actually helped us, it was TARP, and most definitely NOT Obama’s wildly failed stimulus. And from there, I don’t really know. As I said, most of my fellow conservatives were quite opposed to TARP at the time it was going down. For my part I had no idea what we needed. You end up having to rely on the same total bullcrap argument that Obama is pimping now: state that the stimulus succeeded in preventing a depression and then put the onus of proof (i.e., proving a negative) on the other side.

    On that view, we should all celebrate George Bush as the greatest president and the greatest leader in human history, because if it hadn’t been for Bush, space aliens would have invaded and annhiliated planet earth. And of course if you can’t prove that space aliens wouldn’t have invaded without Bush, then Bush remains as the unquestioned hero of the human race. It’s a ridiculous argument, and I can’t believe Democrats are still out there pimping that stupid line that Bush saved us from the Great Depression.

    Did the stimulus work? No. Obama said that unemployment would be about 6% by this if he got his stimulus. He got it. It didn’t happen. In fact, unemployment is actually HIGHER than Obama’s experts said we would have had if we’d done NOTHING. So by the stimulus pusher’s own predictions and models, the stimulus HURT.

    Then you’ve got FDR Treasury Sec’y Morganthau saying, “We have tried spending money. We are spending more than we have ever spent before and it does not work…” You’ve got Obama’s former TOP economic adviser admitting, “Never forget, never forget, and I think it’s very important for Democrats especially to remember this, that if Hitler had not come along, Franklin Roosevelt would have left office in 1941 with an unemployment rate in excess of 15 percent and an economic recovery strategy that had basically failed.”

    Stimulus failed.

    This incredibly flawed Keynesian boondoogle was based on a terribly flawed “multiplier model”:

    The mistakes began as soon as the new administration entered office. Then, two of its main economic advisers, Christina Romer and Jared Bernstein, estimated a multiplier effect from government spending of up to 1.55. That is, for every $1 the government spent, the economy would grow by as much as $1.55.

    But a study by the International Monetary Fund debunks the idea. As noted by Stanford University economist John Taylor, the IMF study shows a multiplier of just 0.70 — that is, for every $1 the government spends, the economy sees just 70 cents in activity.

    And the fact that the Obama stimulus failed in spite of the fact that Obama spent TEN TIMES more than FDR did on his New Deal stimulus program ought to be more than enough to put this fraud into its grave forever. At some point the rational man acknowledges failure. But Keynesian basically have a fanatic religious commitment to their ideology; it is a blind faith commitment. The IMF model was right; the Obama-Romer model was desperately wrong. Where we are right now versus where Obama told us we’d be PROVES it.

    Yesterday, the Treasury Secretary of the UK had this to say:

    Those who spent the last year telling us to follow the American example with yet more fiscal stimulus need to answer this simple question: why has the US economy grown more slowly than the UK’s so far this year?
    More spending now, paid for by more government borrowing and higher debt, would lead directly to rising interest rates and falling international confidence that would kill off the recovery not support it.

    Instead, we’ve got to work hard to have a private sector that competes, that invests, that exports.

    In today’s world, that is the only route to high quality jobs and lasting prosperity.

    Gosh, that was the SAME EXACT QUESTION I’M ASKING IN THIS ARTICLE. Apparently, the Treasury Secretary (technically the Chancellor of the Exchequer) of the UK is just as ignorant as I allegedly am. You on the other hand, for all your hoity-toityness, have never bothered to try to ANSWER that fundamental question.

    In the same article that I linked to above re: the multiplier effect, you’ve got this interesting piece of history:

    Even Europe Sees What U.S. Doesn’t
    Posted 06/23/2010 06:49 PM ET

    Economics: You know you’re way out of bounds, economically speaking, when the spendthrift European Union rejects your advice to spend more. But that’s exactly what happened to the White House.

    In advance of the G-20 meetings in Canada, President Obama politely asked the EU to boost its spending, the classic Keynesian response to an economic slowdown, despite the region’s out-of-control deficits and debt. The EU’s response: A not-so-polite, “Are you nuts?”

    In a letter to G-20 members last Friday, Obama wrote “we should reaffirm our unity of purpose to provide the policy support necessary to keep economic growth strong.” But German Chancellor Angela Merkel all but told the U.S. president to take a hike, saying spending cuts were “urgently necessary” and that such cuts “won’t put a brake on the world’s economic growth.”

    Meanwhile, Britain unveiled an austerity budget to cut real spending at some government agencies by 25% over four years. Even France has announced a freeze in government spending from 2011 to 2013, and President Nicholas Sarkozy has axed this year’s Bastille Day celebration at the Elysees Palace.

    Why the sudden austerity? Governments across Europe finally realize their fiscal problems are due almost entirely to excessive spending, and budget-slashing is the order of the day. Yes, they’re also raising taxes. But the emphasis is on cutting.

    Obama and his economic advisers seem strangely isolated from this. They’re still wedded to the now-discredited theories of Lord Keynes and the notion that a dollar spent by government creates more than a dollar of real economic output. This so-called “multiplier effect” is a myth, though it’s treated as if it were real.

    The fact of the matter is that we’ve LONG had the proof now that the countries that did big stimulus programs have struggled FAR MORE than the countries that didn’t.

    And here’s more on Obama’s “stimulus” as “a way to hell.”

    Now, I’m getting tired of your arrogance given your repeated demonstration of your own ignorance (example, when you the master of finance didn’t understand the difference between the TARP and the stimulus). I’ve given you time to make whatever point you were trying to make. I’m through arguing with you.

  18. Penumbra Says:

    Rodney Jr Rondeau,

    Maybe I do not understand your reasoning fully, but it sounds very much like pure magic.

    Money, whether paper or electronic signals in a computer, represents a value. A value is the result of work or a natural resource. When you get money, it is because you have created value through your work or you have sold a natural resource. There is no other way to making money. Borrowing money is the same as giving a promise to do a job in the future that creates the corresponding value, including interest and maybe a profit.

    To incur debt to such an extent as the U.S. government means that future generations of Americans must create the values that your government have borrowed, or start selling its natural resources. United States purchased Alaska from Russia. I know it’s unrealistic, but as a joke – future Americans might be forced to sell Alaska to China, or give it as a kind of security.

    You can not create money out of nothing, just like you can not create energy from nothing. What you are talking about looks more like some kind of a financial perpetual motion to me.

  19. Michael Eden Says:

    Penumbra,

    I am more than a little puzzled where Rodeny thinks he’s going, myself.

    I was frankly baffled why he thought he should choose an article as his launching pad that had little to do with Federal Reserve monetary policy to begin with.

    I DO know that Zimbabwe used to think the SAME stuff about money that Rodney thinks. Apparently, he will need to learn the same hard lesson the same hard way that they did to have his opinion changed.

    My main concern – to actually talk about global monetary policy – is that the world remove the US dollar as the reserve currency. For the last sixty years, the dollar has been the monetary backstop of the world. It has enabled all currencies to come together for exchange; if one currency is worth a or .b dollars, and another currency is worth c or .d dollars, then you can determine what any currency is worth relative to another. That is why ALL commodities are bought and sold in US dollars.

    The problem is that we have terribly abused that status. We have taken illegitimate advantage of it by essentially trying to do the very thing that Rodney has been suggesting. No other society on earth – in the HISTORY of the earth – could possibly have gotten away with as much as we have for as long as we have. Because no other currency in the history of the world has held this exalted status of “the reserve currency” as ours has (yes, the had been the pound sterling, but it never had the reach/scope that the dollar has held – AND THE POUND STERLING WAS ESTABLISHED ON A GOLD STANDARD.

    It wasn’t until after the gold standard broke down that the pound sterling lost its place in the world.

    By printing money, or in any way expanding our money supply, America does more than merely reduce the value of everyone who had dollars in savings; they make commodoties more “expensive” because the value of a barrel of oil doesn’t stay the same in dollars when we expand the dollar; takes more money to buy that barrel than it did before.

    If the world throws off the dollar as the reserve currency, we will all of a sudden find that our many past sins have caught up with us. “Our chickens will have come home to roost,” as Jeremiah Wright put it. Our dollar will dramatically decline in value, and it will cost us massively more in interest to finance our gigantic debt.

  20. Penumbra Says:

    Michael,

    The day we lose the connection between money and work is probably the day when our civilization is over. Intresting discussion, though. But it breaks my heart to see the US in such a bad shape.

  21. Michael Eden Says:

    Penumbra,

    I’m glad it does break your heart; it breaks mine, too.

    I know there has been a longtime anti-American spirit that has developed in Europe.

    Here’s why YOU are so right and THEY are so wrong.

    When Charles de Gaulle threw NATO out of France and asked the United States to get its military forces out of France in 1967, Lyndon Johnson was president. And Dean Rusk had the responsibility of figuring out how you did that. You get everyone out and move them and all of that. And he went to President Johnson and he said, Mr. President, I’m leaving to go meet with Charles de Gaulle to make the final arrangements on our removal from France. And he got to the Oval Office door and LBJ said to him, “Dean, you ask that SOB if he wants us to bring the graves home from Normandy.”

    A great America has been great for the free world. And of course as a morally intelligent human being, you know that.

    What would have happened had there been no America to send its sons across the oceans to far flung lands to fight for freedom? What would have happened had there been no America to stand against Soviet communist expansion in Europe and Chinese communist expansion in Asia?

    We’re likely about to find out. Because America is on its way down.

    And yeah, it breaks my heart.

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