The American Spectator

OBAMA’S LIGHTING THE FIRE
Re: Philip Klein’s The Great Obamaflation:

It doesn’t take tea leaves to predict the future with the current path. Mr. Obama has launched the train down the tracks, and the only way out of the mess created last week is to destroy the last of the producers by taxing them into oblivion. Kill the producers to support the non-producers. How very noble. While that plan is not working, flavor the solution with this brilliant spice: print more money. How else to reconcile the statements to be delivered on Tuesday to cut the now impossibly out of control deficit in half?

To ruin a country, destroy the livelihoods of millions, destroy the retirement plans of millions more, all because they can only spend money they didn’t earn, could not possibly earn, and could not possibly manage responsibly? What insanity is that? And what compounding of this insanity is the MSM doing in selling this suicide?
— Greg Mercurio
Vacaville, California 

This kind of article is timely and constructive although it misleads regarding inflation. Inflation is not a rise in prices as that is merely a symptom of inflation. Inflation is an expansion of the currency and/or money supply always accompanied by dangerous side effects. In the United States, money is based upon amortized GDP income streams or to be more blunt it is based upon taxes and debt. The asset is always the obligation of someone else and can never extinguish debt and thus must rise ad infinitum until the house of cards collapses.

This is why the banks are insolvent today. Nixon’s criminal act of failing to default on the dollar in 1971 when it was bankrupt put the day of reckoning out two generations but it has arrived with a vengeance. Obama’s tax and spend scam will ratchet the misery index upwards. You say that the stimulus package did not have a tax increase? I beg to differ. Every time the government goes to the credit markets to finance its activities it is imposing a stealth tax on the economy. It is sucking the life blood out of the producer sector to put it into dirigisme programs. They are usually of benefit to bureaucrats and politicians but no one else — you can’t trade a government program for Japanese cars. This is one reason why capital has fled America in a torrent. Any money coming in is used to buy cheap assets which have been degraded by regulatory, monetary, and tax policy. It is not to be confused with capital formation as the right wing quacks assert.

America has joined the ranks of third world countries and has yet to recognize its poverty. The present crisis is one of capital destruction — it is not primarily attributable to bad mortgages although the consequence of derivatives from that fiasco surely accelerated the financial implosion.

Sucking money out of the producer sector may or may not cause price increases depending upon whether the debt thus issued is monetized. So regardless of whether prices rise or fall we will always have inflation under the centrally planned economic system we have under the Federal Reserve and that inflation is always destructive. What I can guarantee is that with our current economic system we are headed toward economic oblivion. Capital has been destroyed on an unprecedented scale since 1971 and shows no signs of changing course because the politicians want continuously declining interest rates which we have suffered since 1980…unfortunately the consequent capital destruction has been masked by rising prices but we can sure see it in fleeing jobs.

The massive reallocations of capital which the Federal Reserve and congress oversee destroys markets and price signals. Under such circumstances economic activity must collapse. I don’t mean to be melodramatic but we are witnessing history. The great experiment in planned currency and economy is now swallowing America just as it did the USSR in the previous generation.
— David Bonn

Here’s the part that has me so upset and internally confused. Am I mistaken or just stupid in believing that we Americans have been creating jobs by the thousands every day for many years?

(Except that we’re creating more of them in nearly every other country in the world than in our own.)

Am I mistaken in believing that “capital” is the money that is used to build and maintain a business — and, as a direct result, jobs — and that we have been building capital by the millions every day for many years?

(Except that we’re either shipping our capital overseas, or feeding the increase of their capital by buying their goods while killing off our ability to manufacture them ourselves — spending more of our capital in every other country in the world than in our own.)

Am I just stupid in believing that we have been the absolute all-time master practitioner of “protectionism” — that pestilential bugaboo of the rest of the world — for many years?

(Except that we’ve been doing a better job of protecting the economies and the people in every other country in the world than in our own. Because they keep convincing us that it’s bad for us to protect our own economy and citizens.)

How do I categorize myself for believing that there is no ingredient in any of the Obama pies-in-the-sky that helps to ease even one of these economic burdens that we bear?