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Trouble in Paradise

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All relationships hit rough patches. There is no better proof of this than in our schools. One day the happy young couple is oblivious to the rest of the world as they are lost in each other’s loving gaze. By the next day, usually after the boy has done something stupid, all bets are off on whether the relationship was ever meant to be. Yelling, screaming, and a blatant rejection of the boy’s physical advance are telltale signs that there is “trouble in paradise.” Unfortunately, it seems the United States is playing the part of the boy in a similar scenario with its economic partners.

It is no secret that the Federal Reserve and/or the Treasury Department has printed or committed over $12 trillion to “stimulate” the economy. Of course, no one should expect that the government is done with its spending binge. All signs point to more massive expenditures, albeit in more creative ways, in the future. Janet Yellen, president of the San Francisco Fed and a voting member of the U.S. central bank’s policy-setting Federal Open Market Committee in 2009, told the Forecasters Club of New York, “I’m convinced this is no time to relax our efforts.” In fact, recently, Bernanke and his central economic planners, announced that the Fed would purchase (print money) more than $1.25 trillion in government bonds and mortgage backed securities — all in an effort to lower interest rates further, unfreeze credit markets, and get Americans to spend like drunken sailors again. Naturally, the Keynesian’s believe this is the award winning recipe to produce a prosperous economy. Apparently, they have not been paying attention to the world economy since the 1930s.

But, some folks have been paying attention to that economy for the last eighty years or so and know that the answer to solving our current crisis is not more of the same Keynesian policies that got us into this mess. Ironically, some of these folks know more than our policymakers even though they come from traditionally command economy societies. Take Czech Prime Minister and current European Union president, Mirek Topolanek for instance. Last week, at an EU gathering he characterized U.S. government economic plans as “a road to hell” claiming that Washington’s massive stimulus packages and banking bailouts “will undermine the liquidity of the global financial market.” According to Topolanek, “We need to read the history books and the lessons of history and the biggest success of the EU is the refusal to go this way.” These remarks, coming from a man who use to live in a centrally planned society, speaks volumes about how Washington is pursuing the wrong course of action by attempting to spend our way out of the economic crisis. In any event, the sharp comments of Toplanek may indicate trouble in paradise ahead for the U.S. and her European trading partners

The slights to U.S. economic policy did not stop there. While Topolanek railed against overuse of the printing press by the Fed, the Chinese central bank proposed replacing the U.S. dollar as the international reserve currency with a new monetary unit not connected to any country. The Chinese have become very concerned about what American inflation will do to the value of their assets ($800 billlion in reserves) and they are also sick and tired of the reckless fiscal and monetary policies of the U.S. government in the last year but also since President Nixon closed the gold window thirty-eight years ago. It is obvious that Uncle Sam has become addicted to the Chinese financing our never ending debts. This was made abundantly clear when Secretary of State Clinton practically begged the Chinese government to continue buying treasury bonds on a recent trip to that country. Make no mistake about it, the Chinese have performed the role of enabler to the U.S. government’s spending sprees for some time. Only now have they realized the peril they put their economy in doing so. Given Washington’s penchant for spending and Beijing’s apprehension that the plan will work to revive the economy, the relationship between the world’s two superpowers seems to be headed for a falling out — trouble in paradise.

By agreeing to accept the U.S. dollar as the international reserve currency through the Bretton Woods agreements, the whole world essentially bought into a Ponzi scheme known as the U.S. government. With authority granted by the U.S. government, the Federal Reserve Bank has always been there for us. It has artificially lowered interest rates to keep phony booms from ending. It has bailed out insolvent banks to protect our assets. It has printed money and issued bonds to foreigners in order to preserve our standard of living. Never mind that we have piled up a mountain of debt in the meantime. Keynesians tell us that huge debts don’t matter anyway. Tell that to our trading partners. It might restore the peace and end the trouble in paradise.

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About Kenn Jacobine

  • That same Czech politician you praise for knowing more about the American economy than the Americans do has been threatening the new government of Mr. Netanyahu to accept a terror state in Judea and Samaria or else. There is a limit to the wisdom of these Old World polticos talking from their grave mounds over Jewish blood shed in Europe (no, I will not forgive the bastards – ever!).

    Nevertheless, as you so rightly point out, Kenn, the United States is due for a fall – big time. And that collapse will drag Europe over the same Falls of Financial Disaster. The faster Israeli businessmen divorce themselves from both America and Europe (and China – you can’t afford to have them dictating policy here) the better we here will all be. That’s going to be a very tough pill for Israelis who think the United States is the be all and end all of the world to swallow. The idea that we have to make it alone by ourselves will be an even tougher pill to swallow. Too many Israelis remember how bad the food rationing was in the early 1950’s before the hated West Germans stepped in with money and food.

    But, unfortunately, we in Israel will have to go it alone in a world out to kill us. It’s sounds ironic and contradictory – but in my gut, I know I’m right. And the fools who think they know better (“no man is an island, Ruvy”) – are all wrong.

    My advice to one and all. Sell your currency and stock holdings, buy gold coins (and a troy scale), guns, bullets, flour, canned food, bottled water; stock up on as much medicine as you can get your hands on (if you need it) etc. And be ready for the worst.

    Oh, and one last thing – learn how to pronounce this word “YÜAN”.

  • By the way, Kenn. Someone at Desicritics asked me to write an article on Chinese influence in South and West Africa. Given that this is your neck of the woods, you could probably talk about it a lot more intelligently than I could in an article. I did promise the person who invited me to write on the subject that I would contact someone more qualified than myself on the topic.

    You are one of the two or three people here who could handle the topic rather well.

    If you wish to write such an article for Desicritics, all you need do is go here and follow instructions. The publisher of Desicritics, Aaman Lamba, is a friend and associate of Eric Olsen (BC’s publisher) and used to write for Blogcritics himself.

  • The more I see this mess the more I think a natural burn progression should have happened. Sure, the wildfire would seem devastating at first, but eventually everything would come out greener than before.

  • It won’t be “greener,” Joanne. I think it will eventually be more mellow and anesthetic. Once the bad guys are weeded out, they’ll have a “happy pill” for us to swallow. One international law, one international currency. And yes, Ruvy, even Israel will eventually become part of this one-world community.

  • Arch Conservative

    It’s quite obvious that Barry isn’t content being President of the USA. He wants to be king of the world.

    It’s his rightful destiny. Just ask him. I’m sure he’d telly ou so.

  • Bliffle

    Kenn, your poor scholarship sometimes throws your whole argument into question. In particular, your clear ignorance of Keynes in this statement is laughable:

    “…get Americans to spend like drunken sailors again. Naturally, the Keynesian’s believe this is the award winning recipe to produce a prosperous economy. Apparently, they have not been paying attention to the world economy since the 1930s.”

    Even a superficial reading of Keynes shows that sometimes he says to use the spending gas and sometimes the saving brake. But various detractors, usually slandering Keynes on their path to slandering FDR, might convince the ignorant, eager to accept secondhand opinions, otherwise.

  • Bliffle,

    They can try to slander Keynes (because of FDR) all they want. Still the greatest mind in economics in the 20th century. So I wouldn’t worry about Keynes’s place in history. He’ll survive.

  • Kenn Jacobine

    Bliffle and Roger,

    You guys are clearly products of our state run school system. I don’t blame you directly for your reverence of FDR because of that. However, look at the facts – FDR was elected in 1932 and the Great Depression did not end until the earliest 1939. Why? It was primarily because of gov’t intervention – make work programs, cartelization of industry, Fed policy, and yes, stimulus programs. And don’t say it lasted so long because Hoover did not act early enough – see my post “Hoovernomics Revisited”.

    As to Keynes – “Still the greatest mind in economics in the 20th century.” If you follow the mainstream media, although they don’t mention him by name, they are all strong advocates of his markets are flawed and gov’t must step in to prime the pump with cash to get consumers to spend again mentality. The politicians love this philosophy because it allows them to give their constituents what appears to be something for nothing. But, believe me friends, it is an illusion. We are broke because of this “..greatest mind in economics in the 20th century”. The bills are going to come due and soon.

    The greatest minds in economics of the 20th Century were Hayek, Mises, Hazlitt, and Rothbard. Their scholarship was based on reason and logic, not something for nothing emotion like Keynes.

    This current crisis will discredit once and for all Keynes. The problem is the msm, and the central bankers, and political elites will continue to propagandize the public to believe that capitalism is at fault and Keynes was “..greatest mind in economics in the 20th century”.

  • Kenn,

    You know nothing about my educational background. The “FDR infamy” is rather recent in coming as history is being written and re-written, usually by the winners. And Keynes, although known mainly for his interventionist policy in dealing with prolonged business cycles, made economics the modern science it is today – mainly through invention of key economic concepts. So his status in that field is comparable to that of Newton or Einstein.

    Be that as it may, the present crisis may no longer be resolvable by Keynesian or any other method. I believe we are witnessing the breakdown of the capitalist system; and whatever order and stability will come about, it’s not going to be in the form we’re familiar: I predict a form of statism, with considerable control over corporate activity, slowly spreading into globalism, one- world government, uniform currency, international law, and all the accoutrements.

    So in the final analysis, it won’t be Keynes’s failure when this crisis shall be fixed by the strongman – i.e., dictatorial measures – but the failure of the system.

  • Bliffle

    Kenns once interesting articles have degenerated as he sinks into traditional straw horses and slanders. For example , he states:

    “You guys are clearly products of our state run school system.”

    Really? And how would you know that? And to what purpose?

    “I don’t blame you directly for your reverence of FDR because of that.”

    Oh, I get it. It’s a condescension double-header. He gets to slander both the auditor and FDR in one stroke. How clever he thinks he is.

    How stupid.

  • He’s getting ideological, pure and simple. When you’re running out of ideas, or persist on holding on to what’s stale and obsolete, what other recourse is there?

    It’s the problem with all conservatives. The ossification of the brain cells. They can spew their dogma until challenged. But when challenged, since they can’t reconcile it in terms of any logical or sensible system of thought, they have no choice but to resort to what the simple Simon says, or cheap shots.

  • Kenn Jacobine

    Now Bliffle,

    Excuse me for a moment if I sound like one of my middle schoolers – you started it. I quote, “Kenn, your poor scholarship… “your clear ignorance of Keynes…” So am I to just let these vicious attacks on my fragile self-esteem go or defend myself?

    I am a product of the public schools myself and have taught in one. I know that generally speaking, FDR is a much revered icon of the NEA types and U.S. history teachers in particular. I also know that a lot of Americans have followed this blind faith in the deity of FDR to our countries detriment. One of my purposes in writing is to dispel these myths so we can deal intelligently with the problems we face. of course, whenever someone says anything bad about FDR his bleeding heart admirers seem to just come out of the woodwork.


    You are mistaken. I am not a conservative. I am a libertarian. So your generalizations and the generalizations of most democrats about conservatives do not apply to me. Funny how when someone disagrees with your positions they are labeled “ideological” and their ideas are labeled “dogma”. Not everyone who disagress with you is part of a “vast right-wing conspiracy”.

  • Kenn,

    I apologize for responding in the heat of the moment. I didn’t mean to cast any aspersion as to your education, knowledge of the facts, or less than honorable intentions. Dispelling myths is a noble enterprise, so how can I argue with that. Let’s just say that we have a disagreement about Keynes and leave it at that. I happen to view his interventionist policy as secondary and merely a consequence of his thought. And yes, he was an innovative thinker, practically affecting a break from the classical theory into modernity. Alfred Marshall was another.

    Furthermore, I don’t regard your views as part of the “right-wing conspiracy.” I don’t believe there is any such thing. But yes, people do get ideological about such matters and we had better face it. All too often, reason serves no other purpose than the affirm us in our positions which have deeper, metaphysical and/or emotional bearings. Sad but true.