The Economy: More Gloom and Doom from the New York Times. Raise Taxes!!

Some background:

Karl Marx was essentially correct in his notion that the history of the world is grounded on class struggles. Given the bell-curved distribution of talents and accidents of geography this becomes a truism if certain rigid political boundaries are constructed between the class distinctions and definitions. In the human state, envisioning the ground state, thus the very genetic tree of the left, the bottom level is based on the ‘poor.’ The poor are very ubiquitous thus forming a convenient assemblage of victims anywhere or anytime to illustrate and thus intimidate those of higher, economically speaking, classes. The politicians owe more to the poor than the reverse case. [Proof for this: why don’t the poor become middle class or rich?] All that is necessary to prove inequity and other unfavorable traits of those who have something of value is to show frightening pictures of those who have nothing. Shame and indignation are them heaped upon those with wealth. The problem of ‘Children starving in Korea,’ a favorite 1950s slogan, has been half solved by capitalism. Marxism owns the other half. This is the best argument for those who would be advocates for the poor (a phony tenet given their histories) and works by pointing out that if you have something greater, in terms of money, housing, cars, etc, than those below the median then this wealth was noticeably obtained unfairly and a political solution is needed to ‘fix’ this problem with a redistribution of wealth program.

Conclusion: We can presumably cure poverty by raising taxes in all cases. No matter that such attempts never seem to help those mired in the lower rungs of the economic ladders, the quest for money by leftist politicians is thus self-justifying and self perpetuating. The poor remain poor and the leftists get something sometimes.

The progressive pitch:

The quest for the disgusting wealth of the successful [1]is ennobled by the political left even as they ignore the obvious fact that their elites are the first to enjoy the fruits of easy money they extracted from the rich. In Russia the Bolsheviki were able to help out the poor by living in the finest homes, drinking the best wine and eating off the finest porcelain dishes as they celebrated the new ‘equality and justice’ for the masses. The fact that the very poor they were saluting were actually worse off than before the glorious revolution was drowned out by songs and slogans about the revolution and some good caviar. George Bernard Shaw moaned about equality as he relaxed on the French Rivera or at his splendid castle in Ireland.[2]

In the West, in most places, the cudgels and firing squads and gulags have been replaced by the progressive tax base. China finally stopped shooting capitalists and embraced them for the cash expediency. “Progressive’ is Stalin’s word for those in America who would follow the precepts of the Communists as the call for high taxes is specified in the Communist Manifesto. Thus it falls to the progressives to gather the taxes and give some of the loot to the poor. This is known as grunt and grab. The poor never seem to get much and that is strange.

The difficulty for the left is that there are too many ‘rich’ in the United States, a place where capitalism has been demonstrated to be the best possible mechanism for generation of wealth for mostly all except the criminals and drug addicts and lazy. We have no reason to speculate why people flock to the US for a better life. This status of richness offers a serious challenge to the left as their voter base seems to be sensitive to wealth as well, so the message to be tailored carefully. This is more severe when their victims finally have something of value and resist tax increases. The left will never confess that ALL the tax revenues derive from taxes on corporations (or other businesses unincorporated) and from salaries and fees paid by those groups. Thus, the financial well being of the society is due to capitalism not politics.

The general theory of money and wealth was described by Adam Smith [3] [4] in The Wealth of Nations about 1776 and has accurately described how humans interact in large groups where there are many buyers and sellers and all are willing to trade when satisfied. He also argued against selfishness and advocated government intervention to help with problems such as the poor in his book, The Theory of Moral Sentiments. This stilted view that Smith and Ronald Reagan advocated laissez faire (hands off) ecnomics is unfounded. Comments by Smith in his books are taken out of context to convince the mentally disnimble[5] that socialism is really the best method of government where the government admisteres the prices and ignores the supply and demand market forces.[6] This view is amplified in mantra and song every time there is some natural fluctuation in markets, products, debt and wealth. Any deviation in the status quo is a cause celebre initiate a crusade. As such, the progressive left can only scrounge for new and novel ways to get control over business and raise taxes as high as possible even though their social programs and spending are counterproductive to society.

Today’s article by the New York Times:

With this background, we need to inspect the current screed by the New York Time’s most famous non-econimist Paul Krugman. Today, we can start with his current article entitled Betting the Bank[7]

“Today, the Fed is indeed desperate,…” [all quotes unless otherwise noted reference Betting the Bank  By Paul Krugman unless otherwise footnoted and emphasis in color and italics are mine. ]

Well, now that sets the stage for action.

“And if I’m right [more properly read left here] about that, there’s another implication: the ugly economics of the financial crisis will soon create some ugly politics, too.”

The converse of this would be to presume that we could avoid ugly politics in good economic times. Check out some political history for the embedded fallacy here.

“To understand what’s going on, you have to know a bit about how monetary policy usually operates.

The Fed’s economic power rests on the fact that it’s the only institution with the right to add to the “monetary base”: pieces of green paper bearing portraits of dead [add white, ed] presidents, plus deposits that private banks hold at the Fed and can convert into green paper at will.”

Financial theory explained:

This is clumsy reference to the process of the Federal Reserve Bank. The notion that the central bank just prints money willy-nilly is false. There is a strict accounting system where Congress has to pass appropriations bills and the ‘printing’ of paperbacks is for currency only. What he means here is that the Fed can set interest rates and control the money supply via the federal banking system. There are other Open Market Operations such as buying and selling bonds and other methods as well. Each new dollar that finds it way into the banking system is permutated through several banks and ‘creates’ new money because the banks must hold some of it, say 5%, in reserve on deposit at the fed, and can loan out the rest. So, if all banks had a 5% reserve rate, a dollar loaned out would be reduced to $.95 for the first new dollar and then for the second bank $0.90 then $0.85 and so on. The partial sums are added and after 8 months, or so, approach the reciprocal of the reserve rate or $1/ (.05) or now $20. Thus, a new dollar may generate $20 in new money. The best monetary policy was started during the Carter Admin where the money supply was not allowed to expand any faster than the real growth thus containing inflation. This was known as Monitarism.[8] Who knows what is going on now, but the spending is out of control [Congress] and money is apparently needed to rescue the banks. That is what Krugman is saying here.

Returning to the article:

“This process can be almost magical in its effects: a committee in Washington gives some technical instructions to a trading desk in New York, and just like that, the economy creates millions of jobs.

But sometimes the magic doesn’t work. And this is one of those times.”

The process works well. The outcome is what Krugman is infatuated with. Here is an opportunity for more political control of the economy.

“So Mr. Bernanke and his colleagues have been doing the usual thing: printing up green paper and using it to buy bonds. Unfortunately, the policy isn’t having much effect on the things that matter. Interest rates on government bonds are down — but financial chaos has made banks unwilling to take risks, and it’s getting harder, not easier, for businesses to borrow money.”

Let us all recall that the politicians have hammered the banks and other institutions to make ‘loans’ to those with lousy credit ratings for political reasons. The crisis here is related to worthless mortgages forced upon the banks by politicians and laws. Many that bought homes had no good reasons [except political and greed based] to do so and their mortgages are just mostly lost money to the banks. Recall that the former New York State Governor (hooker Customer #9) and Krugman have called for the banks to guarantee New YorkState and New Jersey municipal loans and take the risk [9]with the threat that the in insurance cronies in the states would force the banks to take the risk. Also:

““With major bond insurers hobbled by an ill-advised foray into subprime mortgage territory, Mr. Buffett made a tough offer [10]aimed at the biggest and healthiest chunk of their ailing business. The insurers either turned Mr. Buffett down or haven’t responded, which puts the onus on them to devise their own rescue plan. Mr. Spitzer on Thursday gave the insurers five more days to do just that. If they fail, they face a potential breakup by New YorkState’s insurance regulator.”[11]

Returning to the article:

“The next steps will be up to the politicians.

I used to think that the major issues facing the next president would be how to get out of Iraq and what to do about health care. At this point, however, I suspect that the biggest problem for the next administration will be figuring out which parts of the financial system to bail out, how to pay the cleanup bills and how to explain what it’s doing to an angry public.”

Taken at face value and transliterated for all this means:

 Use taxpayer money to subsidize mortgages for people who made a bad investment.

This is just another tax on the ‘rich’ as those citizens in the upper half of the median pay 96% of all the federal taxes. This is a way of trolling for votes.

Could we have expected the New York Times—aka the Walter Duranty Papers [12]—to have suggested anything else?? The politicians forced these mortgages upon the banks with threats and now, as usual, want the benefit of being ‘concerned’ and ‘caring’ and want to fix the nasty old capitalists as Eliot Spitzer wanted to do until he was undone by some hooker.

Conclusion:

When leftist politicians meddle with the banking and currency system the outcome is always the same: Disaster. The opportunity here is to blame Bush and take control over the banking system and raise taxes! Would we expect anything else from the NYT or one of their parrots? We can always excuse the drooling leftist tax mongers by being sensitive to their plight and acknowledging that they have no other options other to grunt and grab money from others.

rycK

Comments: ryckki@gmail.com