Europe’s Barbarians Inside the Gate
Mario Draghi riles Germany with QE overkill
Markets threw a tantrum because they did not get instant gratification, but the ECB's radical stimulus is unprecedented
By Ambrose Evans-Pritchard
The far-reaching moves come despite signs that economic growth in the eurozone is picking up, and ignores vehement protests from German-led hawks that quantitative easing at this late stage is doing more harm than good.
“Abundant liquidity will continue for a long, long time,” he said.
Markets were betting on even more largesse, and reacted badly to the package of measures.
Many funds had expected an increase in the volume of QE purchases to nearer $80bn and an even deeper cut in the deposit rate, beguiled by the ultra-dovish rhetoric of top ECB officials over recent days.
Germany’s DAX index of equities and France’s CAC 40 both fell 3.6pc, the worst drop since August. The FTSE 100 dropped 2.3pc to 6,275.
Yields on 10-year German Bunds spiked violently by 19 basis points to 0.66pc, with even more drastic reversals in Italy and Spain.
An estimated €300bn of eurozone debt trading at negative rates has turned positive again within a single trading day, reducing the total to €2.2 trillion.
“Markets want immediate gratification. A lot of traders had large positions and they got caught out,” said David Owen, at Jefferies.
“But when things settle down in a couple of weeks, people will realize that what happened today is highly significant. The ECB is adding another $360bn to its balance sheet and is now reinvesting its portfolio, like the Bank of England. This is a big deal,” he said.
The ruckus on trading floors had echoes of August 2012, when Mr Draghi launched his back-stop plan for Italian and Spanish bonds (OMT), ending the eurozone debt crisis at a stroke. Markets sold off in a knee-jerk fashion at first but soon changed their mind as the significance sunk in.
Mr Draghi said QE has been an unqualified success but the summer storm in emerging markets and China diluted the effects, while the commodity crash has made it even harder to fight deflation. Inflation is still stuck at 0.1pc, leaving little safety margin against an external shock.
Photo: Xing Guangli/Xinhua Press/Corbis
“We are doing more because it works, not because it fails,” said Mr Draghi, insisting that the eurozone would have been in outright deflation this year without QE.
Yet it is far from clear whether the region needs radical stimulus as far ahead as 2017, given that the ECB itself is predicting above trend growth of 1.7pc next year. Euroland is already benefitting from a near perfect storm of positive shocks.
Fiscal austerity is finally over. The euro has fallen 13pc in trade-weighted terms since April 2014. Oil prices have plummeted from $114 a barrel to $43 in 18 months, giving consumers a shot in the arm.
“It’s going to be harder and harder for them to follow through on QE,” said Simon Smiles, from UBS.
He said business sentiment in the eurozone is rising briskly and Spain is beginning to display pre-Lehman forms of overheating. The eurozone’s PMI services index rose to a 54-month high in November.
“This is hardly an environment for further exceptional accommodation. We think the talk in the markets is going to switch to when the ECB turns, perhaps by the end of the first quarter,” Mr Smiles said. UBS said the euro is seriously under-priced, with fair value near €1.25.
Click here: source: tradingeconomics.com
The money supply is catching fire. Narrow M1 – cash and checking accounts – is rising at a blistering pace of 11.8pc. The transmission mechanism is damaged and the lag times are unpredictable, but this could set off a sharp pick-up in economic growth next year.
The broader M3 measure is rising at 5.3pc. In Germany it has reached 8.5pc and may soon hit double-digits, a threshold likely to set off alarm bells in Frankfurt. Jens Weidmann, the head of the Bundesbank, has warned repeatedly over recent days that there is no justification for further stimulus.
“The longer that extreme monetary policy continues, the less it works and the greater the risks and spillover effects that come into play. We shouldn’t forget that the measures already taken require time to work their full effects,” he said.
The Bundesbank warns that negative rates are causing serious problems for savings banks and smaller lenders, and make it much harder for insurance companies to match their maturities.
Hans Werner Sinn, from the Germany’s IFO Institute, said Mr Draghi has given up trying to conduct a responsible monetary policy and is engaged in a covert rescue of ailing banks and governments. “The ECB has turned into a bail-out machine,” he said.
Both German members of the ECB opposed the new measures, and were almost certainly joined by hawkish governors from the Netherlands and the Baltics. They may have stopped Mr Draghi going even further. “The ultra doves lost the argument,” said Frederik Ducrozet, from Pictet.
Gabriel Stein, from Oxford Economics, said the ECB is right to ice the cake until recovery is entrenched, even if only as an insurance policy. “This was definitely warranted. There have been too many false dawns,” he said.
“The great recession took a huge bite out of the eurozone economy, and there is still a lot of slack."
Tim Congdon, from International Monetary Research, said the region will languish in semi-slump whatever the ECB does as long as banks are being forced to their beef up their capital buffers and restrict credit.
Lenders must raise the ratio of "loss-absorbing capacity" to 16pc of risk assets by the end of the decade under new global rules. “This condemns Europe to a further five-year sentence of low growth,” he said.
For Mr Draghi, it is a day he would probably rather forget. He delivered exactly what he promised yet for mysterious reasons the markets concluded otherwise. Sometimes you just can't please them.
Fed Policy: Unsafe At Any Speed?
by: Eric Parnell, CFA
A notable exchange to say the least that warrants a closer review, particularly the response from Chair Yellen.
Before even considering the content of Chair Yellen's reply, it is worth it to question the following.
Why exactly is Ms. Yellen and/or her staff spending the time crafting a response to Mr. Nader's letter anyway? It would be one thing if Ms. Yellen was a financial blogger or Mr. Nader's elected representative, but she is the Chair of the U.S. Federal Reserve. Whether I agree or disagree with the content of Mr. Nader's letter, it seems that her and her staff's resources could be better spent on other endeavors. Sure, the transparency and consideration to respond to such letters is certainly appreciated, but where now is the line drawn. Will she be responding to trolls next?
One of the issues associated with Chair Yellen submitting a signed open letter response to Mr. Nader is that it leaves her reply subject to critique. And to this point I am inclined to provide some selected observations.
First, Ms. Yellen concedes the fact that at least some savers have suffered hardship at the expense of the Fed's monetary policy since the outbreak of the financial crisis more than seven years ago. The justification for the zero interest rate policy for so many years has been the emphasis on restoring the economy to prosperity so that it can support higher returns. I agree completely with the intent, but it immediately raises an important question. Is a wait of more than seven years and counting an acceptable length of time for savers still suffering at the hands of Fed policy to wait for the economy to restore itself to prosperity. After all, for many retirees, seven years represents a meaningful portion of an individuals life span in retirement. Yes, zero interest rate policy has been the Fed's dogged solution, but is it not reasonable to consider whether a different policy approach might have returned our economy to prosperity more quickly?
Ms. Yellen continues in her letter by reviewing the state of the economy in the immediate aftermath of the financial crisis. Indeed, the unemployment rate did rise to a peak of 10% by October 2009 and has been falling ever since. And yes, resulting lower mortgage rates have provided support to a housing market that was left decimated by the housing bubble that was left unchecked by this same monetary policy institution in the years leading up to the crisis.
That is, of course, for those lenders in the post crisis period that were actually able to qualify for the loans at these lower mortgage rates. And while home prices have recovered, they remain -13% below the levels from nearly a decade ago in early 2006. As for the housing market itself, it's recovery over the last seven years has brought it back to levels today that would have represented cyclical lows during past housing market downturns. Hardly anything to build an open letter victory lap around.
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The more dubious statement from Ms. Yellen comes at the end of her second paragraph:
"Americans generally have benefited, most particularly lower- and middle-income people affected disproportionately during the downturn."
This particular comment raised an eyebrow.
First, to suggest that lower- and middle-income people have been the primary beneficiaries of the Fed's zero interest rate policy since the financial crisis is disingenuous at best. One has to look no further than real median household income in the United States since the outbreak of the financial crisis to see that the average American have not necessarily thrived under the current monetary policy regime and that an alternative approach might have served them better.
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Also, it has clearly been by Chair Yellen's own admission the highest income individuals that have benefited most from the Fed's zero interest rate policy since the financial crisis. For example, during a speech on economic opportunity and inequality sponsored by the Federal Reserve Bank of Boston just over a year ago on October 18, 2014, Ms. Yellen openly and candidly lamented how "the past several decades have seen the most sustained rise in inequality since the 19th century" and that "by some estimates, income and wealth inequality are near their highest levels in the past hundred years, much higher than the average during that time span and probably higher than for much of American history before then." And she also cited during this same speech the stock market as a primary culprit for this widening inequality gap, particularly since the outbreak of the financial crisis. With all of this in mind, how is it then that lower- and middle-income Americans have particularly benefited from the Fed's zero interest rate policy when the income and wealth inequality gap are near their highest levels in the past century caused by a soaring stock market?
But it is in her next paragraph from her reply letter where arguably the most important points for scrutiny are raised. In the letter, Ms. Yellen raises the following:
"Would savers have been better off if the Federal Reserve had not acted as forcefully as it did and had maintained a higher level of short-term interest rates, including rates paid to savers? I don't believe so. Unemployment would have risen to even higher levels, home prices would have collapsed further, even more businesses and individuals would have faced bankruptcy and foreclosure, and the stock market would not have recovered."
Ms. Yellen's point here is notably imperceptive and in my view completely misses the point as to why so many Americans that follow the Federal Reserve are disgruntled with how the Fed has managed monetary policy in the post crisis period. I would contend that most are in full agreement with the Fed's swift policy response to the financial crisis in late 2008 and early 2009.
From my own perspective, I not only fully agreed with the Fed's implementation of what is now known as QE1 and the alphabet soup of special programs that were implemented at the time, but I would go so far as to credit the Fed with saving the global economy from total collapse. So in this regard, I completely agree with Ms. Yellen that the Fed was correct to have acted as forcefully as they did at the time. But this is not the argument.
Instead, at issue is how the Fed has managed monetary policy in the years since they succeeded in pulling the global economy back from the abyss. For when the Fed launched into these extraordinarily aggressive policy responses to the financial crisis back in late 2008 and early 2009, they did so with the following explanation. The Fed first needed to stabilize the financial system, and once it did it would move to slowly dismantle the too big to fail financial institutions as well as determine what the appropriate penalties would be on those bad actors that caused the financial crisis. So in short, the objections to the Fed's response to the financial crisis is not what was done in response to the crisis, but instead what has been done since the crisis.
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By the summer of 2010, the Fed had succeeded in pulling the global economy back from the brink. Was it perfect? No, but one should not expect conditions in a capitalist system to be perfect and rosy at all points in time. But by the Fed's own beloved metric in the U.S. stock market, the S&P 500 Index (NYSEARCA:SPY) had been returned to 2005-2006 levels just prior to the 2007 peaks. The Fed's quantitative easing program had drawn to a close and presumably the markets would be left to stand on their own and undergo a much needed cleansing phase to wash the excesses that had been built up during the housing bubble from the financial system in a controlled and orderly way. After all, this is what the Fed had promised us when they engaged in their great rescue plan only 18 months earlier.
Also, this would have been the time to begin contemplating how the bad actors would be penalized for nearly breaking the global financial system with their absurdly reckless behavior during the housing bubble.
But the second part of the bargain is not what we received from the Fed. Instead, the Fed did the total opposite. Instead of allowing the economy to cleanse, addressing the structural problems associated with these large at risk financial institutions, and moving to punish bad actors, the Fed instead decided to pour on more with the launch of QE2 in the second half of 2010. And in the years since, the Fed has piled on more and more and more stimulus despite the fact that the Fed had already essentially stabilized the economy so many years before.
And it is to this point where the dissent against the Fed is sourced for so many. For by continuing their zero interest rate policy for more than five years longer than arguably necessary, they have essentially created a brand new crisis threat by encouraging the same undue speculation and risk taking that led to the bursting of the technology bubble and the housing market collapse related financial crisis over the past decade and a half. And the Fed has done so at the expense of the savers that have been repeatedly told to wait and absorb the near zero interest rates on their savings for so many years to encourage this same speculative behavior once again. Fool us once, fool us twice, but fool us three times?
I applaud Ms. Yellen and the Fed for their priority to use monetary policy to foster economic expansion and stable prices. And I commend Ms. Yellen in particular for her progress in directing monetary policy from the beginning of QE3 tapering nearly two years ago to the point where the Fed is considering raising interest rates as soon as next month. But if it turns out after one or two rate increases that the Fed is forced by the economy to reverse course on policy, it is my hope that they will consider policy prescriptions other than lowering rates back to zero and engaging in yet another round of QE4 asset purchases. For while QE1 and its associated programs did splendidly in rescuing the global financial system, the efficacy of the various stimulus programs that have followed are far less clear. In fact, it could be argued that these post 2010 programs have proven more detrimental than helpful to the economy and the financial system.
So while QE and zero interest rates may be great for rescuing an economy, it may not be the best approach for generating a robust sustained recovery. Decades of experience in Japan provide evidence to this latter point. And after seven years now of following the same script with an economy that remains sluggish at best, perhaps at minimum the consideration of a new and decidedly different monetary policy approach to the problem may finally be warranted.
The Trouble With Interest Rates
J. Bradford DeLong
When a government agency imposes a rent ceiling, it prohibits landlords from charging more than a set amount. This distorts the market, leaving empty apartments that landlords would be willing to rent at higher prices and preventing renters from offering what they are truly willing to pay.
The Collapsing Global Trade
By: Chris Vermeulen
The global economic trade is down 8.4 percent so far this year. Among the many economic indicators that experts use to gauge the health of the world economy, the Baltic Dry Index (BDI) usually goes unnoticed. This Index offers an indication of the global demand and supply of major stock materials that are used by manufacturers at the beginning of production. And the shocking truth is that the index has been plummeting to reach a new low not seen before.
BDI is often considered a good indicator about the state of the global economy. Economic pundits consider the index as a crystal ball to provide insight about the general direction of the global economy.
An upward trending BDI indicates strong global demand of commodities. A high BDI reading shows that producers are purchasing more raw materials, which in turn is indicative of growth in global economic activities. On the contrary, a downward trending BDI indicates slowdown in economic activities.
Just a month ago, BDI was showing a reading of 950, but now it has fallen all the way to 498. And when you look at the trade numbers of specific countries, the significance of the numbers become quite apparent.
US Economic Data Indicative of Imminent Global Meltdown
WARNING: The latest economic data released by the US Census Bureau shows that inventories increased again, wholesales declined again, and the inventory-to-sales ratio has reached the levels that were last seen just after the 2008 global meltdown.
Inventory-to-sales ratio is an important figure that shows how long the merchandise remained hung up before being sold. This ratio has been getting worse with each passing month. This recent spike to 1.31 in August this year is the same level it had reached after the economic crises began in 2008.
Wholesale merchants are hit the most with the increase in inventory-to-sales ratio as it has tied up their capital. When they are unable to get rid of the inventory, they resort to slash orders.
This creates a chain reaction affecting every member in the supply chain that may lead to disastrous consequences. The effects can range from business cycle recession similar to one occurred in 2001 to a general global crises as seen in 2008.
This is extremely bad in my opinion as it means the world is scrambling to save money and not buy anything extra as they/we all fear something big and bad is going to happen eventually.
Just imagine how slow sales will be and how high this inventory ratio will be once the next major financial crisis hits...
The dismal figures shown by Cass Freight Index (CFI) also point to an imminent collapse in global trade. The index has been used since 1990 to show monthly North American freight volumes and costs. Latest CFI figures show a declining trend of both shipment and expenditures which can be seen in the graph below.
During the past four years, both freight volumes and expenditures remained low in the US. The index levels have been below even the 2013 levels for past several months. In October this year, the shipment index stood at 1.092, which represents a year-to-year decline of 5.3%. Moreover, the index level has declined 4.7% as compared to the previous month.
Expenditure index also showed a declining trend standing at 2.435 in October that represents a decline of 8.7% as compared to previous year. In many ways, the declining CFI levels hints of a general slowdown in the US economic activity that promises to have deep consequences both locally and in the global arena.
China Export and Imports are Collapsing - A Danger Sign for World Economy
The economic picture of our biggest trade rival, China, is looking bleak as well. The country is being plumetted by two forces: declining competitiveness due to increase in wages and weak global demand. The red dragon at the moment is no longer looking as vicious as it seemed during the first half of this new millenium.
Chinese exports plummeted to $192.41 billion, declining 6.9% in October as compared to a year ago. Exports peaked in December last year when they stood at $227.5 billion and have fallen 15.4% since then. The imports also decreased closing at $130.8 billion in October, which represents an whopping 18.4% decrease compared to last year.
The dismal economic figures in both the US and China give indication of an imminent collapse in global trade with servere consequences. Economic figures in the Euro area also paint a bleak picture about the state of the world economy. Learn more about this in my book.
Should We Brace Ourselves for the Next Global Meltdown?
Maersk CEO, Nils Smedegaard Andersen, told Bloomberg that the global economic growth is declining, and that the figures are much worse as forecasted by the IMF and others. Contrary to what we may have been led to believe, the state of most of the world economy is in dire state.
If the economy was really doing well as suggested by President Barrack Obama and others, then why is the largest shipping line, Maersk, scaling back at capacity and eliminating jobs?
Why is Target suddenly closing stores in the US? And most important of all, why are the largest banks in the west laying off thousands of workers?
All of this points to just one fact that the next global economic meltdown is upon us. What we are seeing are the precursors of a collapse in global trade. The declining trade and economic activities in the US, China, Europe and other many other regions that we have not touched point to the beginning of a crisis that will soon be making headlines of most newspapers around the world.
Saudi Arabia: The wake-up call
The faces of the three leading men of Saudi Arabia stare down at visitors on the streets of Riyadh: King Salman is in the middle, flanked on one side by his nephew, crown prince and interior minister, the 56-year-old Prince Mohammed bin Naif; on the other is his favourite son and deputy crown prince, the 30-year-old Prince Mohammed bin Salman. Ask any Saudi where power is concentrated today, however, and they will point to the younger royal.
Never in the kingdom’s history had so many royal decrees been issued at once, with dozens of new officials appointed to government.
“Until recently we had several independent power centres in Saudi Arabia, with each senior prince taking decisions, and there was no long-term planning. Now you can have a united decision-making process — but the big concern is that a lot of power is with one prince,” says a Riyadh-based analyst.
The government has slashed public spending by a quarter, raised $27bn through local debt issuance this year and is considering an international bond programme in 2016. The swingeing $80bn in cuts, bringing spending down to $267bn, will be followed by more austerity next year as the government looks at a budget of $229bn-$240bn.
“Spending was completely out of control and oil prices were going down so we looked at everything,” says one official.
Among the priority targets are energy subsidies that cost the treasury 13.2 per cent of gross domestic product, less than half of which go to households. Officials are studying ways of raising non-oil revenues via government fees and a sales tax. But they will broaden existing welfare payments to redistribute money to poor and middle-class Saudis who will be hit hardest by higher electricity, water and petrol prices.
Sceptics say promises of reforms have been made in the past but not delivered. Arbitrary decision-making and the absence of checks and balances in the system also undermine fiscal discipline: when King Salman took over he announced a salary bonus for public sector employees and utilities investment totalling an estimated $30bn.
An ingrained administration that is resistant to change is a further impediment. When the royal court this year asked for proposals for cuts to departmental spending, most responded by asking for a 25 per cent increase in allocations.
“This [situation] presents a unique opportunity to accelerate the diversification of the economy,” says Masood Ahmed, director for the Middle East and Central Asia at the International Monetary Fund.
“Achieving that goal will require both bold reform decisions and sustained and effective implementation,” he warns.
There are signs that government cuts are damaging business confidence. The private sector, dependent on government spending, is reeling from the sharp retrenchment. “The business community feels there are too many sudden changes in regulations and where we’re going. We need stability in the way we move forward,” says Lama al-Sulaiman, vice-president of the chamber of commerce in Jeddah.
Private sector growth, which has this year fallen to 2.9 per cent from 5 per cent last year, is crucial for creating employment for the hundreds of thousands of Saudis who enter the job market every year, especially given the limits on expansion in the public sector.
The ruling family, backed by the clerical establishment, have for decades provided jobs and a cheap cost of living for their subjects in return for loyalty to the tribally based, authoritarian system of governance. At the height of the unrest that swept the Arab world, the government showered the population with salary increases and new social spending while cracking down on dissent. Five years on, moves to change the social contract threaten to upend that delicate balance of power as regional threats abound.
Human rights groups say the government continues to use the judicial system to stifle dissent by jailing Shia and pro-democracy activists for anti-government activity, as well as religious crimes such as apostasy or insulting Islam. The number of executions this year has risen to the highest level in two decades, prompting increasing scrutiny of the tough judicial system that mirrors some of the punishments meted out by Isis in the areas it controls in Syria.
Spectre of Iran
The new Saudi regime boosted its popularity in the first months in office with the launch of a bombing campaign in Yemen as Houthi rebels moved south after taking over the capital Sana’a.
Mohammed bin Salman was cast as the warrior flexing his military muscle to counter Iran’s expansionist designs on the Arab world. Despite doubts in western capitals about the extent of Iranian support for the rebels, Riyadh was convinced that Tehran was using the Houthis to create a proxy force on Saudi Arabia’s borders.
“There’s a lot of frustration about how they’ve run the campaign,” says a senior western official amid concerns that jihadis have exploited the conflict to widen their presence in the country.
Observers say the Yemen campaign has also reinforced anti-Shia sentiment in Saudi Arabia, where a Shia minority in the eastern province already feels marginalised. “Support for the campaign has been partly built on sectarianism and hatred towards the Shia,” says one Riyadh-based observer.
The monarchy must also manage the impact of change on the relationship between rulers and ruled.
Saudis are subjected to restrictions on free speech but they are active users of social media and public opinion cannot be ignored. There is growing awareness of corruption and the excessive spending of the royal elite, which could derail attempts to impose more austerity.
Saudi Arabia is in desperate need of reform but the sweeping changes envisaged take the kingdom into uncharted territory, creating demands for popular representation, which has no place in the monarchy’s vision of the future.
Spain Yesterday, Syria Today
Putin’s Syrian Roulette
Military defeat, combined with worsening economic conditions, would likely turn much of the public – and more than a few of his cronies – against him.
Seeking a Saviour
by Jeff Thomas
It’s an unfortunate truth that, when people are worried about the future, they often put their faith in politicians to somehow make everything better.
Politicians, of course, are famous for promising panaceas for whatever is troubling voters, and they even invent new troubles to worry about, presenting themselves as the only ones who can solve these woes.
Not surprising then, that, over time, any nation may slowly deteriorate into a population of nebbishes who turn to their government to do their thinking for them and take responsibility for their futures.
In the last year, the world has seen many elections in which the top spot (president, prime minister, premier, etc.) was contested. In Brazil, socialist President Dilma Rousseff was returned, but almost immediately ran into trouble over a failing economy, scandals, and corruption charges. In less than a year, her popularity sank to the lowest level for any Brazilian president on record.
In the UK, conservative Prime Minister David Cameron was returned, which immediately triggered riots in London by the anti-austerity crowd. He will soon be facing increasingly angry voters of all stripes who are boiling over with the dramatically worsening immigration question. In addition, he’ll soon be facing a referendum on the UK’s membership in the EU - an eventuality he’s been postponing for quite some time.
In Canada, voters have chosen to oust the conservatives and return to the golden promises of the Trudeaus. The Canadian dollar dropped immediately. Justin Trudeau plans a vast programme of public spending in the face of a declining economy, but hasn’t offered any explanation as to how this can be paid for.
Argentina has just had its election. The departing Peronist, Cristina Fernández de Kirchner, has passed the baton (and a failing economy, rapidly declining peso, and civil unrest) to the more conservative Mauricio Macri.
Do we see a pattern here? No, except in the sense that countries habitually put in a conservative for a while, tire of him, and replace him with a liberal, then tire of him, and replace him with a conservative.
None of these leaders will be the solution to the problems of their nations. In fact, they are the problem. Each of them (and many others around the world) offered dramatic, unrealistic campaign promises for ever-increasing largesse from the government. Each will increase national debt to maintain a government that’s already drowning in debt, in order to fulfil their promises, with an understood endgame that, at some point, the economy hits the wall. Citizens with opposing views of the reason for such problems are boiling over, as it’s become clear that there’s no money in the till to pay for such economically suicidal policies. Yet, each year, the spending worsens and so do the economic conditions for the average citizen.
And this is true whether we see Labour, Tory, Republican, Democrat, Democrata Progresista, or Federalista del Centro in power. At some point, it would be reasonable to expect the average voter to realise that it’s not only the opposition candidate that’s a danger, it’s also his own party’s candidate and, in fact, the entire political system.
What’s interesting is that, in many countries, grumblings can be heard to this effect - that “they’re all corrupt” - yet, immediately after making such statements, the average voter returns to the support of his party’s candidate, as he is “the lesser of two evils.”
And here we see a guiding principle of party politics. Do all you can to create the image of the opposing party as literally evil. Use the media to parrot that concept, on a daily basis. By so doing, it becomes unimportant who you run for office. Your party supporters do not vote for your candidate, they vote against the opposing party’s candidate. And that makes it possible to run a rutabaga for office and still win, if you can succeed in demonising the turnip the other party is running.
In the U.S., political candidacy is practically a national sport. The presidential competition begins as soon as the previous election has ended. (Candidate Hillary Clinton began the “I might be running” charade before the sitting president had been sworn in, in 2013, for his second term.)
In addition to the candidates pouring so much time into campaigning that those who already hold public office abandon their responsibilities in order to focus on the campaign, hundreds of millions of dollars are poured into each campaign. In the current U.S. election race, we observe Mrs. Clinton, a candidate with a dark past who has been described by the majority of American voters as a liar, and as dishonest and untrustworthy - an astonishing revelation until an even more astonishing truth sinks in - that many of those who see her in that light plan to vote for her anyway, in order to stop a Republican - any Republican - from attaining office.
And the Republican side is presently led by Donald Trump, a man famous for his quick temper, boastful comments, bullying presence, and egotistical will, in addition to having a long record of causing massive bankruptcies with his business projects.
Yet, his supporters are equally rabid in their belief that he is desperately needed to counter the dreaded Mrs. Clinton.
It’s hard to imagine that two candidates could be less qualified for public office. We might be forgiven if we conclude that there is no lesser of two evils in equations such as this one. There is only disaster in a red outfit versus disaster in a blue outfit.
In 1796, the young U.S.A. chose between John Adams and Thomas Jefferson for president.
Most Americans admired them both and it was a very close election. Both had been founding fathers and both contributed heavily to the cause of freedom that was so valued in the early days of the U.S.
But, in those days, the average American recognised that his freedom depended upon a small government. As Mr. Jefferson rightly stated, “A government big enough to give you everything you want is a government big enough to take away everything that you have.”
Indeed, the U.S. had come into being as a result of revolution against the government of King George of England, who had the temerity to raise the total tax level to about 2.5%.
But countries do seem always to decline over time. No matter how well-intended the original concept, no matter how productive the people, countries decline, and for the same reasons.
Governments (both liberal and conservative) constantly work to grow their own power and to extract as much wealth from their people as they can manage.
As stated at the beginning of this article, “It’s an unfortunate truth that, when people are worried about the future, they often put their faith in politicians to somehow make everything better.” By doing so, they make their own destruction possible.
But what’s one person to do? “You can’t fight City Hall,” as they say. However, in most countries, the U.S. included, it’s still legal to vote with your feet - to move to a different jurisdiction that has not gone so far into decline, where the taxation is low and the level of liberty is high. In any era, there are always jurisdictions that are freer than others. The present era is no exception. In seeking a saviour, we should not put our faith in any politician or group of politicians.
If we have a saviour, he is the man in the mirror. If we are to be saved, we alone must do the research, make the plans, vote with our feet, and establish our own liberty.
Editor’s Note: The U.S. government is broke and bleeding money. Like most governments that get into financial trouble, we think American politicians will keep choosing the easy option…money printing on a massive scale.
This has tremendous implications for your financial security. These politicians are playing with fire and inviting a currency catastrophe.
Most people have no idea what really happens when a currency collapses, let alone how to prepare…
Les doy cordialmente la bienvenida a este Blog informativo con artículos, análisis y comentarios de publicaciones especializadas y especialmente seleccionadas, principalmente sobre temas económicos, financieros y políticos de actualidad, que esperamos y deseamos, sean de su máximo interés, utilidad y conveniencia.
Pensamos que solo comprendiendo cabalmente el presente, es que podemos proyectarnos acertadamente hacia el futuro.
Gonzalo Raffo de Lavalle
Las convicciones son mas peligrosos enemigos de la verdad que las mentiras.
Quien conoce su ignorancia revela la mas profunda sabiduría. Quien ignora su ignorancia vive en la mas profunda ilusión.
“There are decades when nothing happens and there are weeks when decades happen.”
Vladimir Ilyich Lenin
You only find out who is swimming naked when the tide goes out.
No soy alguien que sabe, sino alguien que busca.
Only Gold is money. Everything else is debt.
Las grandes almas tienen voluntades; las débiles tan solo deseos.
Quien no lo ha dado todo no ha dado nada.
History repeats itself, first as tragedy, second as farce.
We are travelers on a cosmic journey, stardust, swirling and dancing in the eddies and whirlpools of infinity. Life is eternal. We have stopped for a moment to encounter each other, to meet, to love, to share.This is a precious moment. It is a little parenthesis in eternity.
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