Blog description.

Accentuating the Liberal in Classical Liberal: Advocating Ascendency of the Individual & a Politick & Literature to Fight the Rise & Rise of the Tax Surveillance State.

Liberty and freedom are two proud words that have been executed from the political lexicon: they were frog marched and stood before a wall of blank minds, then forcibly blindfolded, and shot, with the whimpering staccato of ‘equality’ and ‘fairness’ resounding over and over. And not only did this atrocity go unreported by journalists in the mainstream media, they were in the firing squad.

The premise of this blog is simple: the Soviets thought they had equality, and welfare from cradle to grave, until the illusory free lunch of redistribution took its inevitable course, and cost them everything they had. First to go was their privacy, after that their freedom, then on being ground down to an equality of poverty only, for many of them their lives as they tried to escape a life behind the Iron Curtain. In the state-enforced common good, was found only slavery to the prison of each other's mind; instead of the caring state, they had imposed the surveillance state to keep them in line. So why are we accumulating a national debt to build the slave state again in the West? Where is the contrarian, uncomfortable literature to put the state experiment finally to rest?

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Monday, July 23, 2012

Austerity is Not Discretionary: Inter-generational Theft A Last Time.


A theme has been unwittingly working its way through my blog posts of the last week. It started with my retort to Chris The Fist Trotter’s boast of how the baby boomers were going to use democracy as a weapon to make tax slaves of the next, and the next, ad infinitum, generation - especially read the closing postscript from Maudlin, and figures from Mankiw in the first update. Then worked to a fuller expression in my partial refutation of The Cactus’s assertion that there was no inter-generational theft, namely, my position being that the welfare state was always an economic (and ultimately, moral) illusion from the inception of it, thus was knowingly based on a necessary higher tax take, certainly in dollar terms, for successive generations (along a trend line), and so, by definition, a theft of the future, and this is proven by the fact governments have, with few exceptions, always spent more dollars than they have been able to take in through tax, and, therefore, have always had to meet present unfunded commitments via borrowing, until, after seventy years of doing this, we arrive at the present inevitable stage we are witnessing of Western economic collapse under a Keynesian hubris of debt – and noting all the while our own National government, which according to its own Internet site believes in limited government, continues to borrow $300 million a week to fund the biggest government dollar spend, ever, and which grows under every Bill English budget, despite the rhetoric. And if you don't think we're undergoing an economic collapse, ask a Greek standing in a food line, or one of the over a million of American elderly who can't afford to stay in their homes anymore.

Thus it’s fitting that I complete the series by referring to an economist, which I’m not, on the topic of how this inter-generational theft, and the slow moving Keynesian train wreck, have been exacerbated by the outright political fraud and larceny of unsound money, over the harm of the just straight debt that has been accumulating under the incompetence of politicians, in a manner no responsible business or household could ensconce.

The interviewee is David Walker, the United States Comptroller General from 1998 to 2008, and you can watch a YouTube of the whole interview, and even better, a transcript for those of you who need text to truly comprehend ideas - like myself - at this link. To whet your appetite, I’ve copied some of the gems from it below; the title for this post comes from the second quotation:

… you can't live beyond your means because it's pleasant. It's not sustainable. Clearly the level of debt that we have is not sustainable. We have a whole generation – the Baby Boom – that's about ready to retire, and they have no retirement savings. We have a federal government that is bankrupt, literally. Its [debt is] $16 trillion and growing by a trillion a year. Something's going to give. We can't pay for all these entitlements. There won't be the revenue generation in the economy to do it.

So as a result of that, we are deluding ourselves if we think we can just continue to spend. Look at the GDP that came out in the first quarter of this year. It was only 2.2%. Most of it was personal consumption expenditure, and half of that was due to a drawdown of the savings rate, not because the economy was earning more income or generating more real output. It was because of a drawdown of savings. That is exactly the wrong way to go – an indication of how severe the crisis is going to be.

And:

… the clamoring and clattering that you hear from the Keynesians (or even mainstream media, which is pretty clueless economically) that austerity is bad, forgets the fact that austerity isn't an elective course. Austerity is something that happens to you when you're broke. And yes, it is painful and spending will go down and unemployment will go up and incomes will be impaired, but that is a consequence of the excess debt creation that we've had for the last thirty years. So austerity is what happens when you break the rules.

And somehow we have this debate going on. They're making a mistake. They chose the wrong strategy. Do you think Greece chose the wrong strategy with austerity? No. No one would lend them money. That's why they ended up in the place they were. Do you think that Spain today is teetering on the brink because they said, "Oh, wouldn't it be a good idea to have austerity?" No, they had a gun to their head. They were forced to do this because the markets would not continue to lend, and even now their interest rate is again rising. The markets are losing confidence, and unless the ECB prints some more money and bails them out some more, they are going to have austerity. So the austerity upon us is the backside of the debt supercycle we had for the past thirty years. It's not discretionary.

Finally:

The Fed has destroyed the money market. It has destroyed the capital markets. They have something that you can see on the screen called an "interest rate." That isn't a market price of money or a market price of five-year debt capital. That is an administered price that the Fed has set and that every trader watches by the minute to make sure that he's still in a positive spread. And you can't have capitalism if the capital markets are dead, if the capital markets are simply a branch office – branch casino – of the central bank. That's essentially what we have today.

Well worthy of a listen.

Postscript:

Stop the train, I missed Walker's best quotation: 

 This market isn't real.

Update 1:

As I said, we are witnessing a Western economic collapse: Spanish  hemorrhage going terminal:

 Spain is heading for a general bailout. It may not happen immediately, but that is what the figures suggest - that sometime in the autumn, maybe sooner, the country will need a full-blown rescue”

 

2 comments:

  1. It started with my retort to Chris The Fist Trotter’s boast of how the baby boomers were going to use democracy as a weapon to make tax slaves of the next, and the next, ad infinitum, generation – that post is worth a read, if I say so myself, (which I have to looking at my blog stats), especially the closing postscript from Maudlin, and figures from Mankiw in the first update - then worked to a fuller expression in my partial refutation of The Cactus’sinter-generational theft assertion (that there wasn’t one), namely, my position being that the welfare state was always an economic (and ultimately, moral) illusion from the inception of it, thus was knowingly based on a necessary higher tax take, certainly in dollar terms, for successive generations (along a trend line), and so, by definition, a theft of the future, and this is proven by the fact governments have, with few exceptions, always spent more dollars than they have been able to take in through tax, and, therefore, have always had to meet present unfunded commitments via borrowing, until, after seventy years of doing this, we arrive at the present inevitable stage we are witnessing of Western economic collapse under a Keynesian hubris of debt – and noting all the while our own National government, which according to its own Internet site believes in limited government, continues to borrow $300 million a week to fund the biggest government dollar spend, ever, and which grows under every Bill English budget, despite the rhetoric.

    That was an unfeasibly long sentence. ;-)

    ReplyDelete
  2. I learned to write by studying Francis Bacon :) And that sentence works.

    ReplyDelete