Milton Friedman
I'm taking classes (on the Internet) from Dr. Robert Shiller
at Yale. The Internet is wonderful is it
not? Well of course, that is yes and
no. If you are the Greek Government at
the moment, the Internet is not wonderful as the Greek government shut down
public TV but cannot shut down the Internet.
Dr. Shiller was mentioning Dr. Friedman (http://en.wikipedia.org/wiki/Milton_Friedman)
yesterday and his research on consumption analysis. When studying for my PhD, I studied Dr.
Friedman and I was wondering (from Dr. Shiller's remarks) did we as a people
once love Dr. Friedman, and did politicians follow his advice?
He is remembered for remarks like this: "if you put the
federal government in charge of the Sahara Desert, in five years there would be
a shortage of sand". And I would
add, there would not be any more water either. He also said: there is
"nothing so permanent as a temporary government program". Those statements resonate with the people who
produce.
Dr. Bernanke, under President George W. Bush, had a
temporary program that was going to save us all. It was a temporary kick-start into the next
century building a new utopia. Of
course, under President Obama, Dr. Bernanke's program has become a permanent
fixture, and the people of the US have become financial drug addicts where it
is nearly impossible to "wean" the addict off the stuff.
Friedman and the 1990's
The Organization for Economic Co-operation and Development
(OECD) use to quote Dr. Friedman a lot. (OECD
was founded in 1961 to stimulate economic progress in world trade, and is made
up of 34 countries). OECD use to use Dr.
Frienman about how important it was to guarantee capital against monetary
erosion. Paying a country's debt was
important, and reducing taxation was good for the economy.
Oh, that is so old school now. During this time, Europe had a recession (not
a minor one - a major one), and the fear of China's rise probably gave rise to
the political will to create the EU.
2000's (or thereabout)
Somewhere in Bush's regime we decided to like the Ivy league
schools Economists (Harvard, Yale, Princeton) and sort of dropped the old
Friedman (University of Chicago), and we did not pick up on Dr. Thaler
(University of Chicago) as his theories of behavioral finance and Behavioral
Economics were too complex.
Under Obama (and Dr. Bernanke) we've became obsessed with
inflation; obsessed with monetary value; obsessed with exchange rates. Yes, we cut our exchange rates to look like a
PIG with lipstick, and have succeeded in postponing depression even if we
cannot really get the economy kick started.
The consumer ends up with rising prices (while the government insists
inflation is going down; has anyone looked at gasoline prices at the pumps
recently in The Bernank world?). We also
end up with more people on government roles through welfare, food stamps, and
early retirement. The producers end up
with more people to pay for and more people to print money for just to stay in
the World game; not to really make a difference.
Currently (2013)?
There is a conundrum: Interest rates have collapsed as they
stand at about .25% on May 2013. At the
wholesale level (which has not been passed on if I go shopping) inflation is
down, and deflation is still alive and well as debt still must be paid (even if
the USA Federal Reserve thinks they can buy all the debt and ... well who knows
what they think about paying it off).
The debt ceiling has had to be raised every single year
since the "Big" Subprime crisis of the George Bush era and the even
greater crises of 2008 and the "great recession".
Here is a humorous and scary way to view the USA debt. http://demonocracy.info/infographics/usa/us_debt/us_debt.html Of course it is not meaningful because if you
are like me, you cannot fathom what that pile means. Then again, I don't have
any hundred dollar bills I carry around either, but I think the old German's
when they were hauling around wheelbarrows full of money to buy bread may
relate -- but they are for the most part passed on to a better world.
The immediate debt of the USA is approximately $17 Trillion
dollars. The Federal Reserve and Social
Security owns 65.8% (or in other words financed by you the Tax payer). That means 34.2% is owned by other countries
-- mostly by China and Japan. Estimates
by Shiller and others suggests that without QE, foreign governments would own
more than 41%. The only country that
could have financed that debt was China (and that is questionable they could
even if they would have agreed to do so).
As for Social Security? There will not be any money by 2033,
and so the Republicans are calling for substantial cuts in benefits as
inflation grows faster than interest rates.
By 2016, the USA government and our President are telling us there will
not be any more money for those with disabilities (from Social Security or
Welfare).
Dr. Friedman?
Dr. Milton Friedman called for programs that made the
economic priority a fight against inflation and public deficits. Did we not (back in the '90s under President Clinton)
agree that the state must live within its means by making money so expensive
through high interest rates the Federal Government would not be able to
increase the deficits?
President Obama has proposed (and passed) increasing minimum
wages when Dr. Friedman (and Clinton) argued that unemployment was the result
of salaries that were too high. Dr.
Friedman (not Clinton) also suggested that too many social benefits would stop
unemployed workers from accepting employment at the real cost of labor (not
state mandated prices).
Dr. Friedman (love him or hate him) got it right without
much argument even from Dr. Shiller that temporary government programs
(borrowing from Social Security in the '60s and escalating the borrowing, QE
infinity, bailouts, unemployment benefit extensions, and so-on) would become
permanent.
And to prove how correct his insight was, just listen to
(and watch) the stock market, bond market and the talking heads on television
when the Federal Reserve suggests they might have to consider the eventual likelihood
of possibly cutting QE down a bit. That is a lot of adjectives to wade through
to come out the other side with: nothing definitive was said. Oh, the drug addicts just start screaming and
declaring the end of the world, blood in the streets, and all kinds of hell
happening, and the temporary government program becomes more embedded with each
scream.
The productive citizen of the USA can look back (and
forward), and maybe we can observe that we (yes all of us) got ourselves in this
mess. We thought everyone should vote
and make it count even if many of them did not work (never thinking that we
were going to have 50% of the people employed OR funded through welfare by the
Federal/State governments). Some of us
wanted our salaries to rise where we priced ourselves out of the labor market -
result computer jobs, engineering jobs and manual labor went overseas to India,
Asian tigers, and China. Some of us
wanted more benefits, and we voted in the champion of all benefits to the
People, President Obama. Some of us
wanted to be more competitive, and some of us wanted NO debt. We could not have
it all these things simultaneously. Something had to give, and it has -
CHANGE, Fear, Uncertainty, Doubt. And no American Citizen
(possibly even President Obama and Dr. Bernanke) understand what the
consequences of the "CHANGE" is or will be. None-the-less, Dr. Friedman would point out I
think (if he was alive), that government's temporary programs become
permanent.
FX Trading is Rigged
Traders of some of the world's largest banks manipulated the
foreign exchange rates. Now that is
important, as you know from reading my report on gold as money know that
foreign exchange is the way we trade between countries.
So here is a list of known market manipulation schemes by
the "BIG BANKS" on a world wide basis:
- · LIBOR Rates -- Barclays bank (and others) fix LIBOR rates http://www.fsa.gov.uk/static/pubs/final/barclays-jun12.pdf
- · ISDAFIX -- swaps http://www.bloomberg.com/news/2013-04-14/banks-drop-off-isdafix-panel-amid-rate-rigging-probes.html
- · Platts - oil prices - From The Financial Times Europe...
- · HFT - High Frequency Trading http://www.zerohedge.com/news/2013-06-11/hft-stock-manipulation-action
Of course, there are many people that are convinced that
Silver is rigged, and recently more and more people are suggesting Gold is
rigged also. There are lots of
conspiracy theorists that claim this is true, but few of the reports if any are
more than hearsay, wild conjectures or worse.
OK, in some general way, those of us not in the know can probably guess that almost everything is rigged in one way or another. Our jobs, if we decide to accept it, is to raise our children to the best of our ability to cherish honesty, integrity and human treatment. If we think about it, those attributes are so rare in our present society they cannot be valued by money.
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