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Economics9698

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Thompson’s Rule to Balance the Federal Budget

Gresham’s Law, “bad money drives out good money (from circulation)”

Economists though the years have had simple economic rules that they attach their names to. There is:

CATO Scholar Dan Mitchell’s Golden Rule: “Good fiscal policy exists when the private sector grows faster than the public sector, while fiscal ruin is inevitable if government spending grows faster than the productive part of the economy.”

Okun’s Law when unemployment falls by 1%, GNP rises by 3%.

Gresham’s law “Bad money drives out good”

And so forth.

One of the debates that will intensify when the fiat currencies collapse around the world is how to keep federal governments around the world from exploiting their positions of power over the people. By this I mean running up the debt and creating invisible taxation in the form of inflation on the people.

Hopefully we will have competing currencies from private banks and this will not be a big issue, when money is based on hard precious metals it is very difficult for government s to run deficits, but if some countries remain on fiat money there is a way to discipline them, call it Thompson’s Rule.

It is relatively simple:

1. Restrict federal spending to a percentage amount. Here in the USA because we have income, payroll and corporate taxes but no value added tax (VAT) we have historically collected around 18% of the GDP in federal revenues. This has varied little since WWII with the exception of today and the late 40s. Other countries will have to evaluate this percentage on a country by country basis but keep in mind for ever 10% of government created the economy loses 0.5% to 1.0% in GDP growth per year. This adds up over time very quickly.

Currently politicians have a powerful incentive to create inflation to buy votes. By using the invisible inflation tax politicians can blame capitalist and rich people for rising prices.


2. Subtract two years from the budget year. 2013 – 2 = 2011. 18% of the nominal 2011 GDP.

Finished.

18% of the 2011 GDP is $15.075 trillion x (0.18) = $2.7135 trillion. Current tax receipts are $2.671 trillion with the resulting deficit of 42.5 billion. Quite a difference from the trillion dollar deficits we are currently running.

Let’s check a few years to make sure this works.

2000 GDP was $9.951 trillion x 0.18 = $1.79 trillion in spending for 2002. Taxes collected in 2002 $1.859 trillion for a modest surplus.

1990 GDP was $5.800 trillion x 0.18 = $1.04 trillion in spending for 1992. Taxes collected in 2002 $1.148 trillion for a modest surplus.

1980 GDP was $2.788 trillion x 0.18 = $502 billion in spending for 1992. Taxes collected in 2002 $617.4 billion for a modest surplus.

Most years tax collections are predictable, but when they are not if the federal government has already accumulated funds collected during good years running budget deficits for brief periods will not be as politically or economically damaging to a nation.


Most years there will be a surplus. Only in bad economic times like today will there be a deficit. If the federal government is forced to run a surplus in the good economic times then deficit spending will not be such a politically and economically traumatic event in the bad years. This is how a federal government is supposed to operate, evening out the business cycle.

A couple of more advantages to this system is if greedy politicians want to spend money to buy votes they are forced to pass legislation that grows the economy. The less the economy grows the less they have to spend.

Second this forces greedy politicians to look at the hidden inflation tax as a negative not a positive like today. If the value of 2011 money is diluted by inflation the politicians will have less to spend to buy votes. This is the reverse of the system we have today where politicians have every incentive to create inflation as a hidden tax on the gullible public.

I would argue that this is better than a balanced budget amendment. With a balanced budget amendment what is to stop politicians from passing a VAT and increasing spending to 25% or 30% of the GDP?

Voters?

Politicians will win that battle every time.

This system is simple and incentivizes politicians to control inflation and pass legislation that encourages economic growth.

If other economists want to steal this idea they are more than welcome.

The WWII Economic Myth

D-day June 6, 1944.

One of the big economic myths out there is that if it was not for the massive federal spending for the military during WWII we would still be in the Great Depression.

According to the myth after the 1929 stock market crash, capitalism failed, and FDR with his great economic central planning saved the day. There is usually no explanation of why if FDR was inaugurated in 1933 we were still in a depression in 1940 with unemployment at 14.6%. During those years the textbooks focus on the central planning work programs and regulations like the SEC and the WPA.

Anyway, so in 1941 the USA began preparations for the possible entry into WWII and on December 7, 1941 we were officially at war. The economy was saved at last by massive federal planning and spending. There is usually an economic endorsement of this planning is needed for a modern economy to exist. Without this central planning evil capitalist would employ children in steel mills and we would revert back to the darkest days of the industrial revolution. This is the standard version of economic history in just about any textbook in any high school in America.

100% propaganda and balderdash.

Briefly, Hoover plunged the economy into the depression with higher taxes 25% to 63%, the Smoot-Hawley tariff bill, increased spending, 48.9% by 1932 with, of course, the ensuing deficits. He also organized agricultural cartels that worked to fix prices of basic food products at artificially high price levels establishing the USDA to serve as the price enforcement police. Fought against price reductions in crude oil when huge deposits were discovered in West Texas, and largely unknown in any history books, fought for high union wages and demagogue companies that cut wages even though prices of goods and services were plummeting.

FDR, 1933-44, is portrayed as a economic hero who saved America from the Great Depression, yet in 1940, after seven years of FDR economic policies, unemployment was 14.6%.


FDR was the same as Hoover to a large extent. He raised taxes to 79%, confiscated gold from the people, devalued the dollar from $20.67 to $35 for an ounce of gold, or 69%, with the predictable inflation passed along to Main Street America at a time they could least afford it, passed pro union legislation making wages in many industries noncompetitive resulting in the predicable layoffs, and for good measure the Federal Reserve doubled the reserve requirement for banks.

One minor economic myth about the Federal Reserve from 1929 to 1933 is that they reduced the money supply; the usual number is 27%. This is completely false. The money supply was indeed rapidly shrinking but only because of the incompetence of Hoover and fear that the banks had overextended their balance sheets. Both 100% correct. The reality, according to the Federal Reserve, is that the monetary base, the money used to increase loadable funds to the public, was increased from $6.1 billion in 1929 to $7.6 billion in 1933 by the time FDR was inaugurated.

The textbooks never tell these stories, or that the Federal Reserve created the stock market and real estate bubble of 1925-29 by increasing the money supply 61.8%. The standard textbook tells of capitalism mysteriously exploding in 1929 and our wise overlords steering the economy back to health with great public’s works programs, regulations, and finally WWII spending.

Herbert Hoover, 1929-33, justifiably gets the blame for the Great Depression because of his poor economic policies but his policies are almost identical to FDR’s.


The results of this successful propaganda campaign are remarks like the following appearing on a newspaper message board:

“In my opinion we can out grow the deficits if we can get the economy running at full capacity and growing. It is how we took care of the deficit after WWII which was a much bigger piece of the GDP than the present deficit.”

This thinking embraces the standard Keynesian economic thought we have today where if the government just spent enough money the economy would grow.

But isn’t this what happened after WWII?

Not even close.

There is simply no way the economy would have recovered after WWII if the federal government would have continued spending money and consuming resources. The official White House record on this is very clear.

Spending and Deficits.

1940 spending $9.7 million. 1940 federal consumption, percent of the GDP 9.8%. 1940 deficit -3.0%

1943 spending $78.6 million. 1943 federal consumption, percent of the GDP 43.6%. 1943 deficit -30.3%

1945 spending $92.7 million. 1945 federal consumption, percent of the GDP 41.9%. 1945 deficit -21.5%

1948 spending $29.8 million. 1948 federal consumption, percent of the GDP 11.8%. 1948 surplus +4.6%

The percent of the economy going to federal consumption in 1943 was an astonishing 43.6%. In real terms of the 1940/1943 comparison the public consumed $91.5 in 1940 compared to $86.6 million dollars worth of goods in 1943. In 1943 people had LESS to consume than before the war even though GDP had increased an astonishing 96%. This should be obvious, if the federal government increases its consumption of goods and services there is less in the private sector to meet the needs of the people. In real terms you may have had a job in WWII but you definitely consumed less.

By 1948 consumption had increased to $237 million, a 174% increase in consumption with a reduction in federal spending by 68%, from $92.7 million to $29.8 million. Clearly the economic lesson of WWII is when the federal government finally let go of the American people with poor central banking, poor economic regulation, less federal spending, and budget surpluses the economy responded with a huge economic boom.

The post WWII economic boom lead to the baby boomer generation, 1946-64.


Please feel free to verify this publicly available data using the White House Historic Data Tables and the Federal Reserve Economic Data web sites.

Economic policy is two parts, fiscal and monetary. Both can be mismanaged as is what happened from 1929 to 1940. Having sound fiscal and monetary policies means people can make a decent honest living without government assistance.

To simplify good fiscal policy is when the federal government sets spending limits as a percent of the GDP, say 18%, and sticks to a budget. There is no magic money fairy. Federal spending comes from taxes, borrowing, or printing money. The federal government may provide desirable programs but they are not free, they cost society resources that must come from the productive private sector of the economy.

Sound monetary policy is even simpler, stop printing money, stop setting artificial interest rates, stop setting the reserve requirement for banks. Artificially low interest rates are preventing the economy from recovering today and set the stage for the housing boom and bust in 2003-04 when the federal funds rate was lowered AFTER the 2001 recession to 1%. It is that simple, stop printing money for Wall Street and politicians, stop artificially interfering with interest rates, let banks manage their own reserves.

The politicians and economists who work predominately for government universities try to confuse the public about the subject of economics. The ulterior motive is greed and power. Wall Street benefits by the central bank indirectly stimulating stocks and increasing liquidity in member banks like Goldman Sachs and JP Morgan. Politicians benefit by having their budget deficits monetized by the Federal Reserve. The loser is the public who pays for this theft with taxes and inflation.

Are Banks Gambling Excess Reserves?

In this graph the red line is costumer deposits and the blue line is bank loans. In a normal banking environment they are roughly 1 to 1, banks want to make loans from their deposits. Loans lending peaked out in 2008 and is still below the 2008 level despite deposits increasing $2.133 trillion in that time. Where is the money going?

When banks get deposits they are allowed to loan out 90 cents of every dollar. If a bank loans out 80 cents and keeps the legally required 10% as reserves the additional 10% not loaned out is classified as “excess reserves” or money that could be loaned out but is not due to the banker’s assessment.

A typical place for a bank to put these excess reserves would be in short term deposits at the Federal Reserve, the private “bankers bank” established in 1913. Typically the bank would receive a very low interest rate of, say, 0.07%, for a three month bond.

Traditionally banks have held almost zero excess reserves because of the financial penalties of having that money sitting idle doing nothing and losing value. With today’s historically low interest rates not exceeding inflation holding idle cash at 0.07% yields a negative return on investment. For instance a bank holding $100 at 1% with an inflation rate of 2% would lose $1 and at the end of the year and only have $99 in principal.

So why are excess reserves at historic highs of $1.5 trillion and by different accounting method $2.1 trillion?

This amounts to a staggering 13% of the GDP. If this money were lent out there would be $2.1 trillion in new loans. Why would banks be so willing to intentionally lose money?

It makes no sense.

In normal economic conditions banks do not want excess reserves because the interest rate paid on these deposits is typically less than what can be obtained loaning the money out for housing, cars, commercial construction, and other ventures. Why would banks want to have $1.5 trillion representing $1.5 trillion in loans sitting idle losing principal because of inflation?

Some might say banks are scared of the investment prospects available, certainly plausible. Others might say they are afraid of loaning money out at 3.5% with the possibility of inflation increasing in the near future making low interest long term loans a money loser.

But what about the possibility of the banks using those excess reserves as collateral and investing the money in the stock market or other risky ventures?

This practice is known as “rehypothecation” or the practice by banks and brokers of using, for their own purposes, assets that have been posted as collateral by their clients. Normally clients who permit rehypothecation of their collateral may be compensated either through a lower cost of borrowing or a rebate on fees.

But what if the client is the Federal Reserve?

It is no secret the Federal Reserve has been expanding the money supply dramatically since 2008. Member banks have been recapitalized with newly created cash. Some of this newly created cash was authorized by congress with the 2008 TARP bail out and other Federal Reserve programs like the various quantitative easing monetary expansions.

If you were in the banks position of getting essentially “free” cash what would you do?

Many people would take their “free” cash and gamble it away. What is there to lose? You are playing with the houses money, right?

As disturbing as this is the financial web site Zero Hedge has reported that JP Morgan did just this. To quote ZH:

JPM used its $423 billion “deposit to loan gap” to fund a $323 billion internal prop trading book.”

Zero Hedge investigated JP Morgans financial report and discovered the astounding $100 billion dollar loss and the likely source of the funds.


What happened next is well-known to all: JPM’s Bruno Iksil, together with Ina Drew and the rest of the CIO group (all of whom have since been dismisses), decided to put on a massive bet amounting to over $100 billion (and potentially much greater – sadly there still has been no full disclosure by either the bank nor regulators just what JPM was invested excess deposits in) in notional across the credit spectrum (the one place where a position of this size could be established without becoming the entire market, although by the time it imploded Bruno Iksil was the market in IG9 and various other indices and tranches). The loss was just as staggering, and amounts to what is one of the largest prop bets gone horribly wrong in history.”

Does this make more financial sense for a bank than to have money sitting idle losing principal?

The old cliché comes to mind “if it’s too good to be true it probably is.”

The problems for banking and the economy is this practice of having money in two places at the same time dramatically increases financial risk and the possibility of collapse. If some of the people holding the bets in the stock market call in their bets the whole system collapses. Boom. The house of cards comes tumbling down. 1929.

Zero Hedge writers pen their blogs under the pseudonym of Tyler Durden of Fight Club fame to remain anonymous.


This is what is occurring in Europe today. Banks have loaned out real estate properties and other collateral two, three, four times, and all it takes is one margin call to bring it all crashing down. The end result when the financial Ponzi scheme does come to an end is 26% unemployment in Spain and Greece. The current 11.8% unemployment rate for the EU countries is at a historic high and the deleveraging has many more years to run its course. Deleveraging can be extremely painful.

What this means in America is that the trillions of newly created money from the 2008 TARP legislation, quantitative easing, and money creation from federal debt that has been monetized by the Federal Reserve has not made it to Main Street, in fact bank loans are DOWN from 2008. The newly created money is either sitting idle losing principal or most likely a much worse fate, it has been gambled away with the possibility of catastrophic losses in the future.

Getting “leveraged up” is good for the bankers’ profit margins but creates financial instability when depositors demand their money.

Sound banking practices would require banks to issues currency backed by gold or silver. Require banks to get permission from borrowers to lend out their money. This shifts the financial scales in favor of the saver who now can demand more compensation for their money. This would dramatically transform America from a spending and consumption society to a saving and investing society.

We have not been on any form of a gold standard since 1971. In that time we have had the S&L boom and bust, Nasdaq boom and bust, the housing boom and bust, and now the money bubble boom and bust. Each one more damaging than the last one.

In addition to the financial instability created by the Federal Reserve and fiat currency rules there is the corruption of the way money is distributed by the Federal Reserve to the federal government and favored Wall Street firms. The Federal Reserve is in a position to pick winners and losers and has the means to finance those choices with an unlimited supply of newly created cash. JP Morgan, Goldman Sachs, and European interest own the Federal Reserve, not the people of America. The Federal Reserve is a private for profit bank that acts in the interest of its owners and member banks.

There most likely will be another monetary imposition in the very near future. Some are putting the date around September 2013. Others economists have predicted 2014 or 2015. Everyone with any comprehension of banking would certainly admit by the end of the decade the world financial landscape will be dramatically different.

The pattern over 41 years since 1971 is inescapable. Our banking system needs to be replaced. We need to get back to sound money.

When the USA went off the post Civil War “greenback” fiat money in 1879 and returned to sound money backed by gold the economy grew 84% in the next decade. 8.4% per year. The best period of economic growth ever recorded for America.

We need to return back to sound money and prosperity. We need to come together as Democrats and Republican and demand sound money backed by gold and silver.

Fascist America and Forming a New Conservative Party

Why do American’s dismiss Libertarian Gary Johnson as a presidential candidate?

It is official; the Republican leadership in congress gave in once again to Obama and the Democrats in financial negotiations on taxes and spending cuts. This has become such a predictable pattern the Republicans should just adopt a new name for their political party, the Washington Generals, the opponent of the Harlem Globetrotters that never win. The reasons for the defeats go way past election results, central banking, Wall Street, military power, world politics, but the bottom line is 40% of the country has no political representation in Washington DC. We are ignored once the representatives are seated into positions of power.

What can we do?

In an ideal world the “Tea Party” representatives would form a third party made up of the 100 or so congressional representatives that are willing to break with the Republican leadership. This would force the Republicans who pretend to be conservative, but have more in common with Democrats, to form a “center-left” collation to pass legislation much like European legislative bodies do with multiple parties join together into voting blocks. This would allow a true separation of the candidates and the ability of the average voter to distinguish between a real conservative like Ron Paul and a phony conservative like John Boehner.

The evidence since 1947 is overwhelming that taxing the rich does not balance the budget. What is overwhelmingly clear is that spending less DOES balance the budget and creates good economic conditions for job and tax collection growth.


Why is this so important?

Our nation has entered into the last stages of fascism. Both parties have supported this path since Hoover and FDR of the 1930s, both parties are guilty. The only way to avoid a repeat of Germany 1933-45 is to go all out to defeat fascism here in America by any means necessary.

That means renouncing the programs that transfer power to the federal government such as social security, Medicare, education, transportation, and banking regulations, everything that allows centralized planning needs to be opposed. This means conservatives have to stop giving capitalism lip service and embrace the free enterprise system.

We need to understand government produces nothing; they can only create poverty, death, and destruction.

Mathematically that would read: GDP = Consumption + Investment – Government spending + (Exports – Imports) or Y = C + I – G + NX.

Government is legalized theft, nothing more.

Honorable people and societies do not glorify theft, they punish it.

Let’s hypothetically pretend what the worst case scenario is:

China will surpass the USA in GDP in the next five to 10 years.

Russia has never sided with the USA since WWII, why would they change if there was a confrontation between the USA and China?

How hard would it be for China and Russia to get twice defeated Germany to switch alliances and align against the USA?

The Republican Party has become the Washington Generals of the political world. They win political battles every two or three decades and only by chance.


France, never a reliable friend of the USA.

It is not impossible that the European countries would find that they have more in common with the future economic powers in Asia and Russia with its vast energy resources than with the economically fading USA?

Europeans and the rest of the world are acutely aware that the USA’s share of the world GDP has shrunk from 31% in 2000 to 21% today. What will that share, and power, be in 2020?

Printing and borrowing money results in consumption, not investment and production.

What will China, Russia, Brazil, Singapore, and India’s (BRICS nations) share of the world GDP be in 2020?

Would the Middle East Islamic countries find more in common with the Asian economic powers and Europe once the petrodollar is replaced with real money, gold or silver?

Ask yourself if you are a Middle Eastern oil exporting country would you secretly desire dollars that are being devalued by the Federal Reserve or gold which has held its value for centuries?

If China, Russia, and Germany offered the chance to get silver or gold for your oil would you take it?

Most Americans cannot imagine the world changing so radically but things can change very quickly. With the Federal Reserve more concerned with bailing out member banks and cleaning up surplus housing stock there is little attention being focused on the unintended consequences of those actions that devalue the dollar and open the door for the demise of the dollar, and the nation.

America is bogged down in political stupidity. So was Germany from 1933 to 1939 before WWII. Hitler did not build his utopia overnight, neither has Obama. It took Hitler six years before he was ready to conquer the world, Obama is in year four.

Conservatives need to understand the signs of fascism and fight it. Here are the signs of fascism according to Lew Rockwell, truly one of the great economic thinkers alive today.

Two of the great economic thinkers of the 20th century, Murray Rothbard and Lew Rockwell. Lew Rockwell produces the Lew Rockwell show daily at http://www.lewrockwell.com/lewrockwell-show/


1. The government is totalitarian because it acknowledges no restraint upon its powers.

Obama is already exercising unprecedented power signing a record number of executive orders, 145 at last count, 290 for Bush, compared to one for Nixon and three for Ford. The executive branch certainly is not respecting rule of law, only making the laws as they see fit.

2. Government is a de facto dictatorship based on the leadership principle.

The best example of this is the complete lack of independence displayed by the Supreme Court in the Obamacare decision. Rumor was there were five votes to overturn Obamacare. The White House simply pressured someone somewhere to get Justice Roberts to change his vote and Obamacare was upheld. Something as blatantly unconstitutional as forcing people to buy a product upheld in the highest court in the land because of the whims of the dictator. Shameful.

3. Government administers a capitalist system with an immense bureaucracy.

Over the past three years, the bound edition of the Code of Federal Regulations has increased by 11,327 pages – a 7.4 percent increase from Jan. 1, 2009 to Dec. 31, 2011. In 2009, the increase in the number of pages was the most over the last decade – 3.4 percent or 5,359 pages.

Bureaucrats love controlling other people with oligopolies and regulations. It is much easier to control three or four companies than it is thousands with rules and regulations. In return for this central command and control from the bureaucrats the oligopolies receive special legislation that reduces or eliminates the competition. Dodd-Frank and Obamacare are textbook examples of fascism.

4. Producers are organized into cartels in the way of syndicalism.

When people think of cartels they think of the OPEC oil cartel. Most due to lack of economic understanding fail to realize the most successful cartels are in the United States of America and have been around for a century. We are not a capitalist country.

The first successful cartel was the banking cartel known as the Federal Reserve established in 1913. Hoover organized the farming cartel, the USDA, FDR unions, Bush pharmaceuticals, Obama more banking consolidation with Dodd-Frank, Obama health care insurance cartels with Obamacare, and the list is endless. We are not a capitalist nation and have not been since 1912.

Basically every piece of legislation that passes congress written by industry is a way to enhance the power of the selected few industry leaders and punish the lesser competitors. If we had a honest press this would be reported to the people, but alas the main stream media is owned by the select 0.01% with access to the financing and power.

5. Economic planning is based on the principle of autarky.

Autarky is defined as a nation or entity that is self-sufficient. Autarky is achieved when an entity, such as a political state, is self-sufficient and exists without external aid.

The reason this is important for Hitler or Obama is the military state must have resources to support militarism. If we need oil we invade oil producing countries to get it. Control of resources and a self sustaining economy are the goals of any fascist nation, not free trade.

6. Government sustains economic life through spending and borrowing.

In 2009 is when we went from big government to fascism. Prior to 2009 the most the federal government consumed, post WWII, was 23.5% of the GDP with a budget deficit of 6.0% in 1984 under Reagan. That number was reduced to 18.2% with a budget surplus of 2.4% of the GDP in 2000. In 2009 the USA officially joined the ranks of fascist governments by spending 25.2% of its GDP on the federal government with a budget deficit of 10.1% of the GDP, in peacetime. Since 2009 we have spent 24.1%, 24.1% and 24.3% of the GDP on federal budgets. With more social programs set to go forward in 2013 and 2014 the spending will increased and so will the budget deficits.

In the 67 years since WWII there is absolutely no evidence increased tax hikes will bring in more revenue as a percentage of the GDP. Tax hikes are used to get political concessions and power. Personal tax collection records are used to follow who is making what money. Hitler used this information to confiscate wealth from the Jews in the 1930s, enabling him to finance upwards of a third of his war machine with the stolen wealth of Jews.

No matter what the fiscal cliff negotiations turn out to be the federal government will continue to destroy economic activity with huge budget deficits and spending. With higher tax rates there will be less economic activity and less revenue collected. The only way to reverse budget shortfalls is to cut spending or steal more wealth like Hitler did.

7. Militarism is a mainstay of government spending.

To quote Lew Rockwell:

“Have you ever noticed that the military budget is never seriously discussed in policy debates? The US spends more than most of the rest of the world combined.

And yet to hear our leaders talk, the US is just a tiny commercial republic that wants peace but is constantly under threat from the world. They would have us believe that we all stand naked and vulnerable. The whole thing is a ghastly lie. The US is a global military empire and the main threat to peace around the world today.

To visualize US military spending as compared with other countries is truly shocking. One bar chart you can easily look up shows the US trillion-dollar-plus military budget as a skyscraper surrounded by tiny huts. As for the next highest spender, China spends 1/10th as much as the US.”

8. Military spending has imperialist aims.

Grenada, Nicaragua, Iraq I, Iraq II, Afghanistan, Libya, and untold silent CIA adventures.

What is it for?

Peace?

Security?

Oil and the maintenance of the petrodollar as the worlds reserve currency?

We are a fascist nation.

It took Hitler six years to get Germany completely under his control.


Conservatives who believe in limited government need to understand we are at the 1935-37 Germany stage of fascism. It is not too late to change the course of history but time is quickly running out. The new tax hikes will further cripple the economy, more people will drop out of the workforce and become dependent on government, and the money bubble is entering the fifth year, historically the fifth year of monetary expansion, or in our case a monetary explosion, is not a good year, 1720, 1929, 2007. The time for half measures are over.

Think about if you were a parent in 1936 Germany and you could see into the future. In less than 10 years your country would be destroyed, your children dead on the battlefield or gang raped in brutal conditions by a foreign army, millions of your neighbors incinerated in bombing raids…what would you do?

This is the direction America is taking under this leadership, it can and will happen if we do not change course.

China is not our friend. Russia never was our friend. We have fought two wars against the twice defeated Germans. France has never been a reliable strategic partner.

When the petrodollar is replaced with gold or silver things could get very ugly for the USA…fast!

The first step in backing off of our road to fascism is to separate the pretend conservative politicians from conservative politicians. If that means losing power against the Democrats then so be it. If that means a “Tea Party” third party then that is what is needed. Whatever it takes.

The Washington General act is getting old, time for a change.

We the 40% need real representation in Washington, not the Washington Generals, who put up a pretend fight against the Democrats with the result being a loss every time. We need politicians who understand the road to serfdom and are willing to fight against it. We need victories by any means possible. We need leaders. Enough excuses, fight the fight or get out of the way.

Ask:

What is so terrible if there is no budget deal?

Let the automatic tax hikes and spending cuts go into effect. The key phrase being “automatic spending cuts.”

Why do we need to extend the debt ceiling?

The federal government collects $2.7 trillion in taxes, is this not enough to run a national government?

Why do we need to borrow, tax, or print another $1 trillion to pay who?

Why can’t the people receiving federal money sacrifice?

Why are the producers always asked to sacrifice?

If the economy implodes because of fiscal discipline imposed at the federal level then implosion came a few months early, let it implode, get it over with. It’s not the job of the federal government and Federal Reserve to “save” the economy. Central planning, USSR, communist China, Europe, always fails. The federal government will never save the economy, it can only tax, borrow, or get the Federal Reserve to print money. Only capitalism puts food on the table. The federal government produces nothing.

1936 Fascist Germany. That is where the USA is today.

Robert Higgs discovers Y = C + I – G + NX

Robert Higgs wants to re-write the GDP formula from Y = C + I +G + NX to a much more realistic Y = C + I – G + NX, where government is viewed as a liability and a negative contributor to the GDP calculation.

It was only a matter of time before someone noticed that changing the GDP calculation from Y = C + I + G + NX to Y = C + I – G + NX solves a whole lot of calculation problems on the cheap and makes a powerful statement, post Keynesian world.

Congratulations.

I have been writing about making this change for years.

The faster economists that push for this indefinably small but philosophically huge change in how nations calculated GDP the sooner we can get away from the insane notion that government contributes to the economy. So for me this is a good day, thank you Robert Higgs.

Before anyone thinks I came up with this idea it was Murray Rothbard that, to my knowledge, first understood the compete absurdity of the GDP equation as it is today. Rothbard is and always will be head and shoulders above the rest of us.

Here is Higgs blog as it appeared in Ludwig von Mises:

In the 1930s and 1940s, when the modern system of national income and product accounts (NIPA) was being developed, the scope of national product was a hotly debated issue. No issue stirred more debate than the question, Should government product be included in gross product? Simon Kuznets (Nobel laureate in economic sciences, 1971), the most important American contributor to the development of the accounts, had major reservations about including all government purchases in national product. Over the years, others have elaborated on these reasons and adduced others.

Why should government product be excluded? First, the government’s activities may be viewed as giving rise to intermediate, rather than final products, even if the government provides such valuable services as enforcement of private property rights and settlement of disputes. Second, because most government services are not sold in markets, they have no market-determined prices to be used in calculating their total value to those who benefit from them. Third, because many government services arise from political, rather than economic motives and institutions, some of them may have little or no value. Indeed, some commentators—including the present writer—ultimately went so far as to assert that some government services have negative value: given a choice, the people victimized by these “services” would be willing to pay to be rid of them.

Rest of blog here.