The Brothers Austrian

Wendall Wilkie Uncategorized austrian school, Change, obama, Rand Paul, ron paul

For those that do not follow David Rosenberg of Glusken Sheff (formerly the chief economist of Merrill…I wonder if Merrill Lynch management/board ever read his “Morning Market Memo”?…I am going speculate the answer is no!) had an observation today that I want to share in regards to Canada’s tax the rich policy in the 1990’s:

House Democrats, led by Charlie Rangel, are setting a course to apply a 1% surtax on married couples making $350,000 or more; raising to 2% for those earning in excess of $500,000; and 3% for anybody with audacity to be pulling in more than a cool million (someone has t o pay for Obama’s $550 billion health plan.) We saw this ’soak-the-rich’ strategy happen in Ontario in the early 1990’s and it let to (i) the brain drain (ii) capital flight; (iii) eroding productivity growth and lower standards of living and (iv) a currency depreciation.

But then again who carries about productivity? The scary part is that the soak the rich legislation will surely pass through the House in whatever form it comes. Politicians, they are Robin Hood’s of the USA, playing the ‘good guy’ in their own a fairy tale.

Wendall Wilkie Government Spending, Taxes, Uncategorized brain drain, David Rosenberg, obama, Rosenberg

A while back President Obama asked his cabinet to cut $100 million in expenditures.   Most people laughed, but some lauded the measure in spite of its token size.

Now, we hear that an Obama supported plan to erase that savings by giving all Federal workers four weeks paid time off after the birth or adoption of a child.  This plan will cost $140 million.  That you can even propose such a ridiculous idea at a time like this is so incredibly maddening and it’s no surprise that I have major issues with this plan.

My qualms center on three main points: 1) four weeks is too long; 2) the employee sacrifices nothing; 3) government has no money for the program.  Of course, the most devastating impact of this legislation may come from the potential it has to set a precedent for future action (in the private sector).

Granted, this is one of many additional expenditures created since the cost cutting news spectacle, but I thought it was illustrative to show just how quickly those savings could be erased.

Teacherman Government Spending cabinet, expenditures, federal workers, obama, paid time off

The Obama administration told the American taypayer this weekend to just accept it.

First and foremost is the acceptance of General Motors bankruptcy.  The American taypayer now has an 60 percent ‘equity’ investment in the company.  Sweeet.

Next, and perhaps the president needed to pad his May expenses a little bit, but his excessive ‘date’ to New York City cost the American taxpayer a pricey penny.  How many press and media members needed to follow this ‘event’?  One, two, ten, one plane full, how about two planes full.  Just accept it.

I couldn’t believe how lame McCain’s celebrity ads were when he ran them during the campaign, but perhaps he was onto something….

Any ideas for what we’re to accept next.

Teacherman Government Spending, Interventionism bankruptcy, general motors, investment, mccain, obama, taxpayer

Will U.K. lose there AAA rating? Will the U.S. lose its AAA rating? Will the FED take a hint from the market? Will Obama and his Dems and the spend happy Republican pals get the point? Not likely.

Is this the start of what Teacherman was talking about?

Wendall Wilkie Federal Reserve aaa rating, fed, obama

Word finally came down that the insurers will be bailed out; clearly, the insurers have become that buzz phrase known as ’systematically important’.

Did are the insurers take excessive risk or were they incestuous with the banking/brokerage partners? If you ever get bored, go to the EDGAR website and look at see who actually owns all the financials ‘preferred stock’ … (will save you time — the insurers own a ton). Who owns the insurer stock and banking common stock? Let’s go one step further, who were the biggest buyers of the RMBS and CMBS that the Citi’s and Lehman’s were packaging up?  You guessed it, the insurers or should I say the so called “smart money”.

Last year Allianz infused over billion into HIG … oh how nice of them! I wonder how much HIG stock Allianz holds? 4.5 million shares as of 12/31. I wonder how much in HIG bonds PIMCO holds?

Who is managing the boat loads of toxic debt that you, the tax payer, now owns? You guessed it, the PIMCO’s of the world.

I wonder how many people at PIMCO share an alma mater with late, great GWB or our dear friend of capitalism, President Barack Obama?

Seems to be some sort of fraternity that us common folk have trouble getting into.

Systematic? Yah, I guess there is something very systematic about what’s going on.

Is it the difference between Pepsi and Coke or perhaps is it better to say Pepsi and Coke are both COLA.

Wendall Wilkie Stock Market bailed out, financials, insurers, obama, pimco, preferred stock, toxic debt

This mission is for Obama guys!

In case you missed it, there was some hulla balloo in downtown New York City Monday when the federal government sent Air Force One (along with its paparazzi) on a secret mission.  It seems like the secret mission included a photo op flyby of the Statue of Liberty.  The planes logically took a path most similar to the ones taken on 9/11.  Genius.

Like any good Austro-libertarian I asked myself if a private company, say XYZ Company, would have the hubris to complete such a mission.  In all honesty you know what, perhaps it would.  It’s impossible to know for sure.  One thing that we do know is that there would be immediate backlash from potential consumers of XYZ Company.  In other words, they would be accountable.  In this case, however, other than some trumped up anger from the president (and likely a fired employee), the government will go unscathed.  After all. what can we really do?

To top all of this off, the government spent $328k on this folly.  That should sicken each and every one of you.  As Federal Reserve inflates our money supply by the trillion, the same government still has the pretense to send Airforce One on this special mission.  Can’t say I’m surprised.

Teacherman General, Government Spending 9/11, airforce one, Federal Reserve, government, money supply, obama

On April 9, President Barack Obama requested an extra $83.4 billion for the wars in Iraq and Afghanistan.  The president does not use the term ‘war on terror’, but that is just another semantic ruse that he has perfected.  This misallocation of additional funds, while not surprising, marks another sad day for peace and liberty.

Along these lines, I am amazed still to hear people discuss war spending as some sort of economic perquisite.  As most Austrians know, Frederic Bastiat’s broken window parable in That Which Is Seen and That Which Is Unseen (popularized by Henry Hazlitt) demonstrates this fallacy.  War spending represents money that cannot be allocated to other resources (food, shelter, technology, whatever).  While certain sectors of the economy benefit (my friend at Lockheed Martin perhaps), those immediate benefits are scored at the expense of the rest of the economic agents down the line.

Teacherman Government Spending afghanistan, bastiat, Hazlitt, iraq, obama, president, war

The Obama administration took steps over the weekend to reassure the Chinese government that its investment in US treasuries was sound.  The Chinese primier Wen Jiabao had shared his trepidation over the potential decline in the US dollar.  A former Chinese central bank advisor complained the administration’s reckless policies are eroding China’s investment in US treasuries.

We really have to stop and note the irony here.  We have a communist country chiding what is supposedly the world’s great bastion of capitalism on government spending.  Even more indicative of the situation is the clear power the Chinese government over this country, as the administration rushed to reassure the Chinese that all is well.  I doubt that China will dump its US treasuries en masse, but I think that this does signal that the credit gravy train for the US government may be coming to an end, let’s hope so anyway.  Admittedly, all signs up until now have pointed to the contrary as China has continued to gobble up treasuries in recent months.  There perhaps is some false hope that China’s reluctance to purchase US debt will keep government spending in check.  Ok, fine, keyword false.

Teacherman Government Spending, Inflation, Politics capitalism, china, communist, obama, treasuries

Jobs, Jobs, jobs politicians say. We must put the people back to work, however this is only temporary they say. Merely to fill the “gap” left by the private sector, but I would put this question to President Obama, whats your exit strategy? What jobs will the government provide that can be seamlessly absorbed by the public sector when the crisis is over?

Does the government have the foresight to train employees in area’s of business that the private sector will deem to be viable and productive in the future? Once the government builds their bridges and railroads where do the employees go from there? If the government can figure this all out maybe they can give me some stock tips while they are at it. I mean we all know how the government is a viable, efficient, and profitable entity that can balance a budget, so we will be ok, right?

Again, I don’t think that the government has an exit strategy for this mess. Once they start putting people to work it will be awfully hard (politically) to lay them off and let the private sector try to absorb them. These former government employees will not be trained in the skills they need to be useful in the private sector and they will continue to demand unsustainable wages. The government will succumb because ultimately these employees vote. This in turn will in turn increase the velocity of our country’s downward productivity spiral.

If the government wants to stimulate, I say pour money into mathmatics, science and law enforcment. Perhaps upgrade our rail system but thats it. Let prices come down, let banks fail, and watch productivity go up.

Wendall Wilkie Government Spending, Interventionism, Politics employment, government, jobs, obama, private sector, stimulus