Abstract: We are in a titanic struggle, measured in trillions dollars of debt, in
the West over the tacky problem of how to ‘stimulate’ economies wrecked by
socialist government spending. The debt levels of the US, UK and most of the EU
are so huge that there is no way to recover and new methods involving
cleptocracy[1] must be coupled with wealth
taxes or outright confiscation of assets for the socialist governments to even
survive. Government spending is out of control in the US and EU. Their best
hope at the present is to grunt and grab as much loot as they can and try to
stave off the next fiscal crisis which will sink several currencies notably the
euro and US dollar. Arthur Laffer gives a convincing set of data to argue that
such spending is counterproductive. Our debt levels are now too high so expect
a fiscal collapse in the next few years at best.
Our Western world is being degraded by those socialist
government officials who must, for ideological reasons[2],
dismiss the effect of global markets and attempt to set up their own prices,
quotas and costs. They have no future
unless they are in complete control. They have no long-term life anyway if we
look at the USSR, Cuba, People’s Republic, most of Eastern Europe, most of
Africa and other places. The price of this folly is masked by the incoherent
blather from the sorry, discredited John Maynard Keynes who taught us that
government spending is good for all of us. It is not when used in excess. There
are no known examples of successful Keynesianism outcomes where governments are
in deep debt.[3]
They all eventually default and inflation is the favorite escape. FDR defaulted
on the dollar by changing the price of gold in 1935.
This debt occurs and multiplies like some pneumonic plague
because of the ‘intellectual’ battle between those who believe, erroneously,
that government can solve social problems, fix prices and markets and provide
not only the necessities of life for its citizens but even more. The eternal
excuse is based on ‘equality[4]’
of the sort that has never been observed in human groups. The promise of more
gratuitous monies tossed to the low classes seems to guarantee that votes will
flow to politicians and their power base can be maintained. Adam Smith, Winston
Churchill, H. L. Mencken, Thomas Jefferson and others warned us about this
defect in democracy and the danger of giving the vote to the masses.[5]
Indeed, capitalism, the only successful way to grow
economies, is based on inequality[6]
because people must be chosen carefully for their specific duties or mistakes
will be made that may threaten the entire group. The selection of persons for various jobs
requires some skill base analysis or a proven track record thus defeating the
simple-minded notion of equality. This is the basis for all liberalism as they
attempt to force an equal outcome rather than sit idly by and watch the
pyramidal ladder of society erect its own rungs. Thus, massive taxes and phony
social programs like affirmative action, ‘education’, welfare and others are
required to maintain the illusion that equality can be achieved or, at least,
kept alive as a goal. The Bell Curve discusses this in detail and presents
millions of data to show that IQ is a major determent in success, however it is
defined. Thus, IQ tests discriminate against those who cannot get good scores
[what else would an IQ test do?] and predicts lower opportunities for those
with lesser cognitive skills. This observation infuriates the rabid left.
Inequality in education:
“For college students
who ranked among the bottom quarter of their high school classes, the numbers are even more stark[sic starker is
better, ed]: 80 percent will probably never get a bachelor’s degree or even a two-year associate’s degree.”[7]--Plan
B: Skip College By Jacques Steinberg New York Times. May 18, 2010. [Emphasis is mine in all quotes]
Bingo! But, how can this be? Where is the equality necessary
to proceed with liberal social programs? Why did ‘education’ fail to train us
all? And, now for the central but unaddressed question here: why did we ever
think that those on the bottom tail of the Bell Curve [below IQ = 80-90 where
average is 100] would ever be able to handle college? Does intrinsic IQ have anything to do with this?[8] This
is currently the thinking in some phony “Plan A” from the near-bankrupt New York Times—aka
the Walter
Duranty Papers[9][10]--
and it works in advanced education only for those with IQs greater than about
110. I think we already knew that and it
is called the education gap.[11][12] This
gap is the difference between average test scores of white and blacks or 100-
85 for a 15 point difference [one standard deviation]. These 15 IQ points have
even been acknowledged by the New York Times.[13]
This gap was first noticed about 1905.[14]
Such an observation clearly argues against equality in the cognitive sense. This
gap then forms the basis for ‘equal outcomes’ because the cognitive playing field
is not level for any race and shows disparities among certain races.
The Bell Curve[15]
clearly shows this gap effect for the abilities of those with minimal cognitive
skills and they clearly have a difficult time getting a good paying job or
going on to college where prospects are much better. What is missing here is a
comprehensive set of standardized test results for those groups who have failed
and these must be compared to those from similar backgrounds who succeeded in
Western society. Teachers should also take these same tests to see if they
quality for their jobs. These testing data are inordinately difficult to obtain
as the mere mention of standardized testing gives rise to furious and emphatic
complaints over ‘equality’ and race differences. Such differences are not
discussed in liberal circles and such information on grades and related evidence
is closely guarded by various school systems. The truth is not important here;
a political mandate is more important than fact.
What IS important is that governments spend everything they
can get their hands on and try to hang on until a major fiscal collapse
happens. The QE or the incoherent printing of money to monetize the debt is
always in order when governments find themselves deep in unimaginable debt. They
are able to force ‘equal outcomes’ only at the expense of terminal debt. Leftists
have no other source of income other than taxing the successful with malice and
spite. This makes them feel better and it thought to be a punishment for
capitalism. It is not as corporations do not pay taxes at all. Think about
that.
Art
Laffer’s Position on QE and Stimulus spending:
“Policy makers in
Washington and other capitals around the world are debating whether to
implement another round of stimulus spending to combat high unemployment and
sputtering growth rates. But before they leap, they should take a good hard
look at how that worked the first time around.
It
worked miserably, as indicated by the table nearby, which shows increases in
government spending from 2007 to 2009 and subsequent changes in GDP growth
rates. Of the 34 Organization for Economic Cooperation and Development nations,
those with
the largest spending spurts from 2007 to 2009 saw the least growth in
GDP rates before and after the stimulus.
The four
nations—Estonia, Ireland, the Slovak Republic and Finland—with the biggest
stimulus programs had the steepest declines in growth. The United States was no
different, with greater spending (up 7.3%) followed by far lower growth rates
(down 8.4%).”[16]-- The
Real 'Stimulus' Record By ARTHUR B. LAFFER OPINION August 5, 2012, 6:11 p.m. ET
Since QE has failed, it is of interest to question why it is
employed and the answer is that such “free money’ helps keep government fully funded
and able to make more promises that it cannot ever deliver. That eventually culminates
in a fiscal disaster of the sort we are heading for. The government subsidizes
failure calling and encouraging more of this.
Art
continues:
“Often as not, the
qualification for receiving stimulus funds is the absence of work or income—such
as banks and companies that fail, solar energy companies that can't make it on
their own, unemployment benefits and the like. Quite simply, government taxing
people more who work and then giving more money to people who don't work is a
surefire recipe for less work, less output and more unemployment.
Yet the notion that
additional spending is a "stimulus" and less spending is
"austerity" is the norm just about everywhere. Without ever thinking where the money comes from,
politicians and many economists believe additional government spending adds to
aggregate demand. You'd think that single-entry accounting were the God's truth
and that, for the government at least, every check written has no offsetting
debit.”-- The Real 'Stimulus' Record By ARTHUR B. LAFFER OPINION August
5, 2012, 6:11 p.m. ET
Spending leads to massive and unmanageable debt levels[17]
and ultimately to default.[18]
Even Warren Buffett[19]
chimes in with a rare bit of truth on spending and debt. All stimulus efforts
have failed to produce results.[20]
Our phony government touted a ‘recovery’ in jobs with phony numbers.[21]
They still think they can spend our way out of debt.[22]
From the Sage of Omaha:
“Every country that has denominated its debt in its own currency and has
found itself with uncomfortable amounts of debt relative to the rest of the
world, in the
end they inflate,” Buffett explains. That becomes a tax
on everybody that has fixed dollar investments.”[23]--Buffett Sees
Massive Inflation to Handle Staggering Debt. Monday, May 4, 2009 By Dan Weil [Emphasis is mine in all
quotes]
Our debt is now $16 trillion
dollars with a 40% deficit that adds 8% more to the current 102% debt-to-GDP
ratio that will bring it to 110% in less than a year. A currency bubble is in
the making and has been for several years.[24] In a mere 5 years we will surpass Greece in relative debt.
Laffer
continues:
“Well, the truth is
that government spending does come with debits. For every additional government dollar
spent there is an additional private dollar taken. All the
stimulus to the spending recipients is matched on a dollar-for-dollar basis
every minute of every day by a depressant placed on the people who pay for
these transfers. Or as a student of the dismal science might say, the total
income effects of additional government spending always sum to zero.”-- The
Real 'Stimulus' Record By ARTHUR B. LAFFER
But, the argument
against QE or other massive government spending raises the sticky hackles of
so-called economists like Paul Krugman and Joseph Stiglitz:
“One note: I see David
Glasner ragging on Art Laffer over a terrible op-ed on stimulus; Brad DeLong
too, for different reasons.
Oddly,
neither of them catches Laffer’s extraordinary assertion that Estonia and Ireland
are the leading examples of failed stimulus. Weren’t they supposed to be heroes of
austerity? How incompetent do you
have to be not to get that story straight?”[25]—The
Conscience of a Liberal By Paul Krugman August 7, 2012, 5:34 AM
“The four
nations—Estonia, Ireland, the Slovak Republic and Finland—with the biggest
stimulus programs had the steepest declines in growth. The United States was no
different, with greater spending (up 7.3%) followed by far lower growth rates
(down 8.4%).”-- The Real 'Stimulus' Record By ARTHUR B. LAFFER
This works in economic theory because the efficiency[27] of government runs by the inverse ratio of G/GDP where G is government spending and GDP = C +I+G where C is consumption and I is
investment. The more the government spends the fewer dollars are available for
investment hence tax revenues so this is a big negative. A ratio of G/GDP more than about 15% leads to massive debt.
“Sorry, Keynesians.
There was no discernible two or three dollar multiplier effect from every
dollar the government spent and borrowed. In reality, every dollar of
public-sector spending on stimulus simply wiped out a dollar of private investment
and output, resulting in an overall decline in GDP. This is an even more
astonishing result because government spending is counted in official GDP
numbers. In
other words, the spending was more like a valium for lethargic economies than a
stimulant.”-- The Real 'Stimulus' Record By ARTHUR B. LAFFER
We must prepare for a fiscal collapse because there is no political
reason on either political isle to cut down the 40% deficit and avoid becoming a
PIIG as Greece, Ireland, Portugal and next year Italy. Buy gold and hope.
Comments: ryckki@gmail.com
[1] The process of
government stealing the wealth of its citizens to make up for excessive
spending and terminal debt.
[2] From a singular
devotion to the Marxist slop from Lenin who copied much of that from the
parasite and pervert J. J. Rousseau who set up the philosophy for the French
Revolution in 1789.
[3] Defined here as the
debt-to-GDP ration exceeds 30%.
[4] The Destruction of the US Constitution So ‘Equality’ can
be Forced Upon the Masses for the Benefit of Leftist Government and their
Political Allies.
The Futile Attempt of Forcing Equality Among the Masses.
[5] We have a federal republic not a democracy. That
later word is not found in the Declaration of Independence or Constitution or
in any of its amendments.
“The best argument against democracy is a
five-minute conversation with the average voter.”
― Winston Churchill
― Winston Churchill
“The Democracy will cease to exist when you take away from those who are willing to work and give to those who would not.”
― Thomas Jefferson
“Socialism is a philosophy of failure, the
creed of ignorance, and the gospel of envy, its inherent virtue is the equal
sharing of misery.”
― Winston Churchill
― Winston Churchill
“As democracy is perfected, the office of
president represents, more and more closely, the inner soul of the people. On
some great and glorious day the plain folks of the land will reach their
heart's desire at last and the White House will be adorned by a downright
moron.”
― H.L. Mencken
― H.L. Mencken
[6] The
Pyramidal Theory of Capitalism Explained in Simple Terms.
[7] The New York Times Advises: Plan B: Skip College. They
Missed Plans A, C and D. http://rycksrationalizations.blogtownhall.com/2010/05/18/the_new_york_times_advises_plan_b_skip_college_they_missed_plans_a,_c_and_d.thtml
Abstract: Individual differences in intelligence, as a
scientific construct, can be reliably measured and indexed as IQ. IQ is the
best single predictor of scholastic achievement, and has other occupationally,
economically, and socially important correlates. Individual variation in IQ is
largely genetic, as shown by heritability analysis of kinship data. Social
class differences involve genetic factors, and many lines of evidence suggest
it is a reason- able hypothesis that genetic factors may be strongly implicated
in the one standard deviation average IQ difference
between whites and
blacks.
[9] The
Babbling Brooks of the NYT Babbles about Israel and Hamas
[10] In honor of that
celebrated Communist stooge and liar and winner of the Pulitzer Prize for the NYT . The color RED is used in my essays in honor of Walter Duranty,
a saint, if there could be one, in the Marxist Archives of
Honor.
“He said that these people had to be
"liquidated or melted in the hot fire of exile and labor into the
proletarian mass". Duranty claimed that the Siberian labor camps were a
means of giving individuals a chance to rejoin Soviet society but also said
that for those who could not accept the system, "the final fate of such enemies is death."
Duranty, though describing the system as cruel, says he has "no brief for
or against it, nor any purpose save to try to tell the truth". He ends the
article with the claim that the brutal collectivization campaign which led to the famine was
motivated by the "hope or promise of a subsequent raising up" of
Asian-minded masses in the Soviet Union which only history could judge.” http://en.wikipedia.org/wiki/Walter_Duranty
[11] “The
Education gap is a common term for describing differences in educational
attainment measured by grades, test scores or other measures between different
social groups. The groups compared often are categorized by race or ethnicity
but may also include gender or other features.”
[12] “The
Education gap is a common term for describing differences in educational
attainment measured by grades, test scores or other measures between different
social groups. The groups compared often are categorized by race or ethnicity
but may also include gender or other features.”
[13] An Emerging Theory on
Blacks' I.Q. Scores by Daniel Goleman; Daniel Goleman Covers Psychology For The
Times. Published: April 10, 1988 “Most social scientists
know - though few publicly discuss it - that there has been a puzzling gap of
about 15 points in I.Q. test scores, on average, between blacks and whites in
America ever since the tests were first widely used more than 70 years ago.
After long debate over why blacks score lower, and what it means, a fresh
theory is putting the discussion into perspective.“
[14] The Measurement Of Intelligence by Lewis M
Terman. Published by George G. Harrap
& Co. Ltd, 1905.
[15] This book[The Bell
Curve: Intelligence and Class Structure in American Life (ISBN: 0029146739) by Herrnstein, Richard J. and Murray, Charles Free Press of Glencoe , Inc, Old Tappan, New
Jersey, U.S.A., 1994.] is blacklisted in leftist circles because it shows that when standardized test
scores are sorted by race that blacks and Hispanics score much lower than
whites and Asians. Thus, a refutation to this vast array of data must somehow
be accomplished.
[16] Arthur
Laffer: The Real 'Stimulus' Record
[17] Krugman
of the NYT Confuses Wealth
Transfers with Job Creation and Calls for Higher Taxes or More Spending
[18] The
Coming Age of Debt Defaults: The US May have to Lead the Way and Default on All
Debts. We Must Learn New Ways to Live and Survive.
Buffy the Bozo Buffett Blows his Baloney Wad in Rails? He
must have Another Sweetheart Done Deal in the Bag. II
[20] Imaginary Numbers in the Starry Skies and the Quest for
a Crystal Ball: Our Government Announces Job Creation Success with their
Stimulus Program!
[21] 650,000 Strawdogs Bark at the Moon. The Obama ‘Recovery’
is a Numerical Monkey Circus
650,000 Strawdogs Bark at the
Moon. The Obama ‘Recovery’ is an Hallucination
Imaginary Numbers in the Starry
Skies and the Quest for a Crystal Ball: Our Government Announces Job Creation
Success with their Stimulus Program!
[22] The Fed is Battling Debt Deflation with
More Debt—an Essay in Lunacy. http://rycksrationalizations.blogtownhall.com/2008/12/19/the_fed_is_battling_debt_deflation_with_more_debt%E2%80%94an_essay_in_lunacy.thtml
[23] Buffett Sees Massive
Inflation to Handle Staggering Debt. Monday, May 4, 2009 2:34
PM By: Dan Weil http://moneynews.newsmax.com/headlines/warren_buffett/2009/05/04/210480.html?s=al&promo_code=7F1D-1
[24] The Bubble that will Burst Higher than all Previous
Bubbles: Depression Looms as the Dollar Crashes.
[26] Mr. Laffer, chairman of Laffer Associates
and the Laffer Center for Supply-Side Economics, is co-author, with Stephen
Moore, of "Return to Prosperity: How America Can Regain Its Economic
Superpower Status" (Threshold, 2010).
[27]
Inefficiency in California, Greece and Other Places and the Socialist Disease
of Parasitism: They will NOT stop spending and WILL default.
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