Thursday, April 29, 2021

The Biden Agenda-- Spend Like There's No Tomorrow

A quick take-away from Joe Biden’s speech to Congress last night. The theme was: spend like there’s no tomorrow. And there’s some truth to that-- if you spend like there’s no tomorrow there will be no tomorrow.

Roger Kimball watched the speech and declared that we should entitle it: Make America Poor Again.

Biden is here to bring us MAPA: ‘Make America Poor Again.’

Here’s how we do it. First, spend more money than anyone thought possible. Promise free stuff for everyone (except Republicans). Second, destroy the engines of prosperity. Start with the energy industry. Tax it, regulate, mount a huge ‘green- new-deal PR campaign against cheap, abundant energy. It’s working! Hundreds of thousands are out of work and gas prices are up some nine percent in just 100 days! Good going, Joe!

And, of course, the great uniter declared that his true enemy was white Americans, aka, white supremacists. After all, Biden’s is the rump Obama administration, and the Obama administration funded Iranian terrorists, funded Hamas and Hezbollah, and allowed ISIS to metastasize across Iraq and Syria.

Senile old Joe has probably forgotten that President Obama never used the term, ISIS, which referred to the Islamic State in Iraq and Syria. Obama preferred ISIL, which refers to the Islamic State in Iraq and the Levant. The difference is quite simple-- the Levant includes the state of Israel. You have to hand it to American Jews, for glorifying a president who wished for the annihilation of the state of Israel, for its inclusion in a greater Islamic state. 

For all his talk about fighting ISIS, Biden is going all in for appeasing Iran, and, incidentally, allowing Iranian forces to harass American Coast Guard ships in the Persian Gulf.

Now that the Biden administration is prostrating itself in order to return to the JCPOA, the Iranian government has understood perfectly well that a pathetically weak American president can easily be rolled. It has understood that a weak America can be harassed and humiliated in international waters. And, with the exception of the Wall Street Journal, the American media will not report it.

The Journal has the story:

A group of boats from Iran’s elite Islamic Revolutionary Guard Corps harassed two U.S. Coast Guard ships earlier this month in the Persian Gulf, Navy officials said, the first such incident in a year.

The incident occurred April 2, just as the U.S. and Iran announced they would conduct negotiations toward renewing the 2015 multilateral nuclear accord. Those talks began earlier this month in Vienna. The episode hasn’t been previously disclosed.

U.S. Navy officials confirmed that three fast-attack crafts and one ship known as Harth 55, a 180-foot, twin-hulled support vessel, swarmed the two Coast Guard ships while they were patrolling international waters in the southern portion of the Persian Gulf.

As for our future economic prospects, modern monetary theory tells us that we can spend as much as we like and never pay for it. To that Canadian market strategist David Rosenberg differs. Writing in the Canadian Business Quarterly he tells us to prepare for a post-pandemic boom and bust:

The major point I need to emphasize right out of the gates is that it can’t possibly be lost on anyone that what we had was a health crisis that morphed into an economic crisis and then somehow managed to morph into a financial crisis that was ten times worse than anything we saw in the Great Financial Crisis and forced the Fed and the Bank of Canada to probe the outer limits of monetary intervention. We simply refuse to stop these cycles of redressing debt crises by adding more debt, which merely compounds the adverse effects from the recession that is inevitable, and yet at the peak of the cycle nobody ever seems to be prepared for one.

The vaccination process is no reason to believe we are not in some form of economic depression that has only been disguised by unprecedented policy stimulus. Just because your kid has training wheels doesn’t mean he (she) knows how to ride the bike. And we have an economy on our hands that could not survive without large-scale deficit finance and central banks suddenly acting like hedge fund managers. This is why it’s going to be a depression because what comes next is a secular change in attitudes towards credit and towards savings. I mean, seriously, over half of American households didn’t have enough cash on hand to even get through three months of a job loss — quite remarkable when you consider we went into this mess with a 50-year low unemployment rate of 3.5%. Not to mention the corporate sector where, for some reason, the word “liquidity” became a dirty nine-letter word this past cycle. Now every business has working capital they have to cover with a fraction of last year’s cash flow. And this got me thinking about how the future will be one of treating “savings” as sacrosanct.  Beyond the quarter or two of pent-up demand release in 2021, frugality is going to emerge as the primary theme. It’s not the end of the world, either, unless you’re an advocate for a sustainable and vigorous economic expansion.  

Of course, the stock market is booming. To which Rosenberg says, something that cannot last forever will not last forever.

The average American, having been stupidified to the point of mindlessness, does not understand the concept of the national debt. He does understand free stuff, so, as they say, enjoy it while it lasts:

Then we have to consider, when we get to the other side, the massive government debts we will have built up and how that, along with even more bloated central bank balance sheets, will get dealt with. Will the debts get monetized, or not? Or God forbid, will taxes have to go up on the middle-class? Just some things to contemplate in 2021 as we get our booster shots and then race to the local brasserie. The stock market is not the economy so don’t believe for a second that record equity prices means the road ahead isn’t going to be a bumpy one.

For the record, monetizing the debt means stoking inflation. Or, should I say, hyperinflation. Right now, the debt is in trillions, if we go all Weimar Germany and let inflation run wild, we will pay it all off with cheap money. But, as Weimar taught us, a country where people need wheelbarrows full of cash to buy groceries is not long for this world.


Ares Olympus said...

I'm glad I'm not responsible for any of this.

Perhaps we're admitting MMT is the future, or bust, since no one, not even Republicans who passed cut taxes under Trump with no plans to pay for it, believe federal debt will be paid off.

Inflation is certainly the open question in our future, but apparently as long as the rich can suck up the money faster than the rest of us can get a hold of it and spend it, inflation doesn't happen. Or we can say asset inflation is happening, to explain real estate prices that mean young people can never aspire to own their own home, unless they inherit one.

And I don't know about $15/hr minimum wage, or at least it is probably way too low for many places, and too high in others. Overall higher wages mean THINGS are cheap, but labor is expensive, so we can buy lots of cheap stuff at Walmart, as long as China keeps making it for us. And when things break, throw them away, and buy a new one. I don't see how this reduces climate change in a new low carbon future.

Sam L. said...

But Tomorrow is "whatzername"...Kamala!

"Inflation is certainly the open question in our future," Not "a question", it's the "future".