Thursday, December 30, 2010
Thursday, December 16, 2010
Recently, the Chairman of the Federal Reserve, Ben Bernanke, announced the Fed’s plan to initiate further quantitative easing in an attempt to help stimulate the economy. This is now the fifth time the government has tried to stimulate the American economy since the initial decline in 2008. Starting with Bush’s Economic Stimulus Act of 2008, TARP, Obama’s American Recovery and Reinvestment Act of 2009, the first attempt at quantitative easing (pumping over a trillion dollars by buying treasuries from the financial institutions) in 2009, and now the second attempt of quantitative easing to the tune of $600 billion. This has been a parade of Keynesian failures, one right after another; except, of course, TARP’s success at inducing moral hazard by bailing out the large corporations via the American taxpayer.
These misguided policies aimed at promoting recovery by spending are based on a fundamental misunderstanding on what the real problem is and how we got here. In order to first understand what went wrong with our economy, we need to first have an understanding on how an economy experiences sustainable growth.
Imagine a small business owner making widgets and selling them from his home. At this point, he is capable of producing 4 widgets an hour. Desiring to expand his business, he decides to invest. However, in order to invest in his business he must first abstain from current spending. The business owner will have to be thrifty and put up with a lower satisfaction of present living conditions (i.e. not buying frivolous things, saving on energy etc.). After there is enough saved, the owner invests in capital equipment to help produce more widgets at a lower cost. Now he can produce 6 widgets an hour, thus providing the market with more goods at a lower price, while at the same time allowing the business owner more profit to then reinvest further.
In a very small nutshell, this is how an economy grows: NOT by spending, but by saving and investment. If no one ever saved to invest, but only spent everything one had, we would still be in the Stone Age. This desire to save is dictated by an individual’s time preference. A high time preference represents demand for present goods, whereas a low time preference represents demand for future goods, i.e. investing for a future return. In a free market, with free banking, the interest rate on loans would be based on the amount of savings available. The more savings there are the lower the interest rate, and vice versa. And the amount of savings available is dictated by the individual’s time preference. This allows for the interest rate to fluctuate freely based on the market, quickly snuffing out any investment boom before it gets out of hand by raising the interest rate in accordance with the now diminished savings available.
So what went wrong with our economy?
Essentially, this market process is not allowed to happen due to the monopoly called the Federal Reserve, which bases its interest rates arbitrarily. This manipulation of the interest rate distorts the economy and leads to these boom-bust cycles. Around a decade ago, in order to recover from the dot-com bust, Greenspan had the brilliant idea to artificially lower the interest rates in order to stimulate the economy. This persistent lowering of the interest rates for several years, mixed with bad Congressional policy to promote housing, flooded the housing market with money, raising the production and prices of housing, fueling the bubble.
Initially, this was seen as great for the economy. However, because the interest rate was artificially lowered, it did not reflect the aggregate time preferences of individuals within the economy. Therefore, the rate of spending was not slowing down to provide for adequate savings. Investors were taking out loans and investing at an artificially lowered rate. The structure of production was perverted, with investment projects underway that should not have been, while at the same time an increase in present spending as a consequence of inflation.
All booms, once started, are going to end on way or another, either through a total collapse of the currency and economy, or from the raising of the interest rates by the central bank. Fortunately, America’s case happens to be the latter. Once the interest rate is raised, the malinvestments are revealed, forcing the investors to liquidate, or abandon altogether the projects that were underway. Once this occurs there is a process of reallocation of capital, resources, and labor to reflect the actual demands of the economy. Unfortunately, those in power want to keep the binge going by pumping the economy with even more easy money slowing down the necessary process needed for real growth. In addition, due to rigid labor laws and government regulations, our economy becomes less adaptive and more incapable of fixing itself within any reasonable amount of time.
Currently, Bernanke and Obama believe that spending more money through stimulus packages and quantitative easing is what is necessary to fix the economy. This is absolutely wrong. The Federal Reserve, headed by Ben Bernanke, is doing the exact same thing that got us into this mess in the first place – expanding credit through the lowering of the interest rate in an attempt to prop up the prices of housing and goods in our economy. This inflationary policy punishes savers and incentivizes people to spend, exactly when we should not be. The housing market needs to hit bottom by reaching a market clearing price, allowing the excess houses that were built to be bought up. At the same time, Obama’s deficit spending only devalues the dollar more, and further deincentivizes the proper reallocation of our economy that is necessary. They are essentially trying to maintain the economy to the previous boom levels, not realizing that the economy should never have been at that level in the first place! The problem with the economy is the malinvestments and misallocations of resources that took place during the boom, not a sudden loss in aggregate demand as the Keynesians would tell you. It was the boom that should have never taken place; it was the distortion that should never have been. The economy was a house of cards, built off of “wealth” that was created out of thin air by the Federal Reserve, and it was coming down one way or another.
In order to stop these boom-bust cycles, the production of money should be put in private hands, allowing for competing currencies which incentivizes commodity money and allows the interest rate to fluctuate with the market, not the whims of a central planner. The housing boom would have never taken place if it were not for the Fed’s inflationary policies. Honestly, how can we say that we have a free market when the entire life blood of our economy is essentially socialized? In addition, cutting taxes, significantly cutting government spending, and deregulating the economy is vital if we are to have a prosperous and robust free economy.
This was a very condensed version and analysis from the Austrian school of economics’ perspective. If you are interested in learning more about theories on the business cycle, and other free market concepts, I highly recommend visiting www.mises.org.
Brodie is a graduate student at UMKC studying political science. He enjoys economics.
Sunday, November 21, 2010
Monday, October 11, 2010
Friday, September 10, 2010
Today, the UMKC College Republicans successfully planted 3,000 flags to commemorate the victims of 9/11. All 3,000 flags were up by 8:00AM. The 3,000 flags represent the 2,977 people that were tragically killed when our country was sucker punched 9 years ago tomorrow.
Our chapter is more than proud to stand with conservative college groups across the county in pledging to Never Forget. I encourage participants to change your profile picture to show your friends the patriotism of UMKC. Pictures are attached for your reference. If you would like to see the tribute, please go to the quad at 53rd and Rockhill.
A special thanks goes out to the Kansas City Star, as well as various television news outlets for their generous coverage of the project. Please look for the reports on the news tonight and in the paper tomorrow.
In accordance with Code, the flags will be removed before night fall. If you would like to join us in respectfully removing them, members will be present at 6:30PM.
God bless America.
UMKC College Republicans, Chair
Missouri College Republicans, Secretary
Thursday, September 9, 2010
From personal experience, I know that there are seven stages in the grieving process.
The first stage is shock and denial.
At 7:45am central time, an American Airlines jet crashed into the North tower of the World Trade Center. Eighteen minutes later a second hijacked United Airlines jet crashed into the South tower. All of us remember where we were when we heard the news.
The second stage is marked by pain.
As I watched in utter disbelief that day, I couldn’t help but cry. Many questions filled my mind, but most stinging was the simple question of, “Why?”
The third stage is marked by anger.
Many people will never make it past this stage, including myself. Our anger towards those who hate us out of jealousy has fueled our efforts to exterminate terrorism worldwide.
The fourth stage is characterized by feelings of depression and loneliness.
We will never get back what we lost that day. The victims and their families have suffered the most and deserve your thoughts and prayers.
The fifth and sixth stages involve working through the pain.
As America rebuilds and remembers, we are hopeful for the future. There has not been another attack on U.S. soil in nine years largely due to the efforts of President Bush. We have aggressively targeted al-Qaida and the Taliban and stabilized many of the regions in the middle-east that harbor these groups.
The seventh and final stage is marked by hope.
I believe that as a nation, we are in this stage. The 9/11 Memorial and Museum is scheduled to open on Sept. 11th, 2011, ten years to the day after the attacks. The five story waterfall surrounded by acres of trees will provide visitors with a tranquil surrounding in which to mourn all that was lost that September day.
In closing, I ask that you take a break in the next few days from the hustle of everyday life to remember the victims that died on September 11th, 2001 at the hands of radical terrorists. I hope that you will thank God for the fact that you are still breathing and living in the greatest nation in the history of mankind; it’s a privilege that no one should take for granted.
Thursday, August 26, 2010
January 20, 2009. It was the day “the rise of the oceans began to slow and our planet began to heal,” in the words of King Barack himself .
An estimated 1.8 million Americans, intoxicated with media hype and campaign rhetoric, made their pilgrimage to Washington.
The coronation ceremony was a hangover from the media blitzkrieg that precipitated Obama’s ascendancy to the throne, but like any other drunken orgy, the fun quickly gave way to feelings of guilt and remorse.
The majestic sheen of the genie lantern of liberal public policy started to wear off.
The 69 percent approval rating Obama received the first week of his presidency waned over time.
Promises of bipartisanship, integrity, and post-racial unity gave way to a very different reality, one in which partisan attacks and smear campaigns vilified Republicans as “racist” and “bigoted.”
The heinous crime? Opposing Barack Obama for his support of the Healthcare Reform Bill .
It’s good to know that real racism has been trivialized by leftist opportunists who equate it to moral, rational, common-sense opposition to a socialist takeover of the healthcare industry.
But healthcare reform was only the tip of Obama’s iceberg of arrogance.
Most alarming is the Obama administration’s attempt to run the press from the White House.
The “tolerant” liberal champions of diversity made it their prerogative to silence their dissidents on the right.
Obama excluded FOX News from certain White House press conferences and quit providing guests to “FOX News Sunday” because the network fact-checked a White House official .
Liberals love to champion First Amendment rights and claim Constitutional outrage when someone asks a proposed mosque to move a few blocks away from a site where thousands lost their lives to radical, Jihadist extremists (the words “Jihad” and “Islamic extremist” have been banned from national security documents by the Comrade-in-Chief himself ).
But when it comes to freedom of press and other First Amendment rights for people who aren’t picketing military funerals, flying planes into buildings, or defending either of the two aforementioned groups, the Constitutional crusaders on the left have gone AWOL.
Time and time again, the Obama administration and Democrat-controlled Congress have shown their apathy to the consensus of American people who oppose raising taxes, oppose socialized medicine, oppose Cap and Trade, oppose bailing out failing private sector businesses, oppose adding to the national deficit, and oppose building a 13-story middle finger pointed at the graves of the 9/11 attack victims and their families and friends.
Americans were duped by Obama and his empty campaign promises.
I, unfortunately, was among them. Healthcare reform looked appealing. My mother died from metastasized cancer five years ago, and my family didn’t have health insurance. My dad was self-employed, and we didn’t have any health problems in our family history.
If we had Obamacare, I reasoned, maybe the doctors would have caught my mom’s cancer early on and she could have been saved.
Then I sat down and did my research. No one had actually read the healthcare reform bill, and the changes it made would only displace, and not reduce, the costs of healthcare.
My family would have made too much money to be eligible for the public option, and the taxes my dad was paying on his family business would have undoubtedly gone up.
In addition, cancer research and survival rates in countries with socialized medicine lag behind research and treatment in the United States .
The evil capitalist bastards that ran Shawnee Mission Medical Center actually waived a good portion of my mom’s costs because my family did not have insurance. Imagine that!
Had Obamacare been in place five years ago, my mom wouldn’t have been saved, our taxes would have gone up, Shawnee Mission wouldn’t have waived a dime of the costs, and we would still have been required to purchase healthcare insurance.
Freedom is what makes America great, but it is literally being imploded by the Obama administration’s leftist policies.
Never before has the federal government mandated that all citizens buy anything.
The Obama administration’s rhetoric boils down to a full-blown attack on the American people and our way of life, but then again, I’m just another “typical white person” “clinging to guns and religion.”
It’s been two years since Obama capsized the nation with his empty promise of hope, and the change we’ve seen so far has been horrific.
It’s time for the silent consensus of voters to stand up to the madness and insanity and say “NO!” to the policies of Obama, Pelosi, and Reid and vote for real change in November.