Watching the Presidential press conference on Friday I should have popped popcorn. It was extremely entertaining. The economy was of course the major theme and I loved watching the President dance around the question of why the O-ministration will not refer to this $50b taxpayer spending spree on infrastructure and proposed $300b in small biz tax incentives as a stimulus, “I have no problem with people saying the president is trying to stimulate growth and jobs. There’s no doubt that everything we’ve been trying to do … is designed to stimulate growth and jobs in the entire economy.”
Hello? It is. Just say the word. You won’t get cooties, I promise.
The unpopularity of the first stimulus is of course the reason why the O-ministration is avoiding the word “stimulus” like the plague. Many of my contacts tell me the similar spending path will only line the pockets of their special interests versus helping Amercians who are out of work and are struggling. Stephen Ross on Squawk Box this morning called America the “land of the unions”. He also added the salaries of the unions have gone up and there is a direct correlation between union salaries and the last stimulus. Those are his words, not mine. But when someone of his status says something like that it makes you think. And there are a lot of reports out there supporting his comments.
Many people think the uncertainty of this economy will be over after the mid-terms. My contacts are telling me that’s not the case. Unlike Y2K where there was fear about what would happen after the computer’s calendars changed to 2000- people planned for the uncertainity. But when the event was over, life went on. There was no more uncertainity. This is no Y2K. On November third our debt will still be sky high, China will continue on its path to over taking us in market cap and the hidden costs in the policies being made in Washington will still be hidden. The fears on inflation or deflation will still be there.
Its going to take a long time to get back on the road to prosperity and this road is covered in potholes. My CEOS and market people tell me the infrastructure plan set before us will not fill those potholes, it might actually create an economic sinkhole.
Lori Ann LaRocco 
Here’s another view how to enable [Gov’t Policy] the US Economy to generate jobs and rebuild the Wealth of Nations.
The reason US companies aren’t expanding is that [after we exported our industry] our domestic small companies don’t see markets here in the USA where they won’t be undercut by pegging in the currency markets.
Tax policy only works if there are profits in an industry to be taxed.
And, consumer and business consumption of goods from US producers keeps the $US here to be recycled, not exported.
Policy: Build it here to sell it here – America First. It’s OK for foreign companies to build plants here to sell here and take the profits home, but the jobs stay here.
[Until we have honest commodity-based money] The only method that occurs to me to make this happen is that we return to “a flat tariff” on all imports based only on the inappropriate pegging by foreign governments in the currency markets. For example, China devalued its currency by 40% when they pegged 8 Yuan = 1$US [Clinton says thank you for the $$ contribution]. So, we look at the current appropriate undervaluation and, for example, add a 40% tariff to all goods manufactured in China. USGov keeps the tariff revenue.
Protectionism of course, but we base it only on aggressive foreign currency pegging, not by industry, on currency.
Result: Small US companies see will markets for all types of essential products that they can manufacture and profit if the currency costs are leveled. They will expand to fill the market and in doing so, hire new workers and buy new “American High Tech Tooling”.
At some point it’s America First. Tariffs can be used or abused. Use to level the economic-cost playing field is a fair use of tariff tool, gives the Feds a revenue stream, and American industry a market into which they can expand.
ps. I went to Home Depot to get some copper pipe fittings: guess where they were made – China. Egads!
LikeLike
John, not sure where I agree or disagree with you, other than to reinforce tariffs should generally be reduced/removed to encourage commerce and trade. Sure, the playing field is not level, but in a game of chicken where neither party veers to safety, both participants lose–and lose big.
As for your allegations of currency manipulation, I totally disagree with your mainstream scapegoating of Chinese alleged manipulation. How are they manipulating the yuan? They are merely pegging it to the USDollar. It is the US that is manipulating the dollar. If the Fed were to stop debasing the dollar, the yuan would stop being devalued as well. Again, it’s a smokescreen to avoid pointing the fingers at themselves, and Congress is merely piling on the nationalistic propaganda to hide the fact that they have participated in the trashing of the dollar by recklessly spending funds we don’t have.
Do people notice the only time the USDollar gains strength is when another banana republic has a blow up, or if there is some financial crisis in another part of the world? What happens when the bond vigilantes finally figure out the next banana republic to suffer a sovereign debt crisis is the US itself?
LikeLike
Hi Greg –
Thanks for taking the time to comment. I’m looking for a sanity check!
We’re in synch with the impact of the Fed [Yes, I read “Creature ..”] and the money-printing approach of our Congress and Exec Branch to fund our foreign adventures and social programs so the Citizens don’t revolt when handed the Tax bill.
My intent was to propose an approach in this fiat-currency world for everyone’s consideration to returning to a internationally-balanced cost of production basis.
Up until the world’s governments began printing money preparing for WWI, we had a stable financial system using “Real bills with a 91 day expiration where upon they would be settled for face value in Commodity money in the banking system, and also traded between economic actors at a discount. [At a discount to Face, not interest-bearing]. Banks considered these Real bills as assets since they would be paid in honest money. Banks used depositor’s funds at interest for long-term capital projects such as machinery, buildings, etc. Gov’t bonds weren’t allowed to be held in banks because the Gov’t could renig on payment. Gov’t bonds were bought directly from the treasury and held as investments. With this economic and financial system, the only money growth was when commodities were mined and the Fed Treasury accepted them for minting of coin or backing for currency. [Google “Prof. Antal E. Fekete”, “F. William Engdahl”]
I know you understand the history of currency printing without commodity backing from WWI on.
So, when any country can print/ debase their currency to permit an export price advantage then I see no other mechanism but a flat-tariff. Agree that China might began selling our Treasuries but the Fed can always print the money buy them. Agree China will tariff US companies attempting to sell in China. But China is rapidly approaching the point where they don’t need anything we manufacture – they buy it from Japan or build it themselves. Further, another reason the large international companies moved offshore was to escape US regulation and US taxes. Good example is Haliberton moving their headquarters to Dubai.
So, if we place the flat tariffs in place the scofflaws still have a choice: Choose to build in the USA for USA markets or move their headquarters offshore to Dubai, India, Tiawan or Singapore to escape the tariffs.
Remember back in 1992 when Clinton and Bush I were pushing the Free Trade Act, and Perot was telling us it would result in a rush of jobs offshore. Perot also said he’d do something about the Gov’t overspending social programs and wouldn’t be puting the normal cadre of elites in his cabinet posts [no CFR, Roundtable, banking, etc.] but people from the business world. Perot was telling the truth and Clinton/ Bush I were lying. So, we elected one of the Liars and now live with the consequences.
So, here we are: Unless we go back to honest money and associated banking asset rules, the only other solution I see is to use Flat Tariffs to give the US markets back to the US-based manufactures. Without markets in which they can make a profit against “cheap inports” US manufactures won’t expand their businesses and hiring won’t expand.
Just think – if we had US businesses manufacturing again for the US markets, we would have jobs for the military when we bring them home.
I think we’re at the point where it’s USA-First, or roll-over for the Elite Globalists and accept that everyone is going to be poor. We can’t just complain about having no jobs because US Business won’t expand [I know you weren’t], we need a plan to turn this situation around – and here’s mine.
I’m looking for better solutions … Anyone?
LikeLike
I can’t reply to your last response, so I am replying to your original one. I don’t necessarily disagree with you–it’s just that we’re painted into a corner. And what you are proposing–raising tariffs to protect against “unfair” trading practices is exactly what the world did to plunge us into the Great Depression. Think Smooth Hawley.
LikeLike
Yes, I’ve read of Smoot Hawley. Google “Smoot Hawley” and one of the search results is by
“Buy and Hold.com”. I liked his discussion. Yes, it made everybody mad and cut our exports. But, then we had a trade surplus, today we have a trade deficit anyway, and no honest money. And, Congress eventually moved away from a flat tariff to one that protected certain industries.
Greg, I have no clue if this is the best move but we can always just put it in place for a few years then back off if we can get honest money. In the interim, it provides a level cost environment where American manufacturers percive profitable markets and will create jobs to expand into those markets.
We may as well move on since noone else is interested …. . 🙂
Kind Regards,
John T from the Banning Bunker.
LikeLike
Lori:
The midterm elections will resolve who will have a majority in each House of Congress — but why should anyone think that will change the impact of the situation we are in?
We are still dealing with the aftermath of the worst economic crisis in the history of the US, and the worst recession since the Great Depression. The mid-term elections will not resolve any of that.
If anything, it will insure that there will be even less Congressional action they we have seen so far. Gridlock is great when things are fine; its much less desirable when facing enormous military, economic, or regulatory challenges.
LikeLike
The avoidance of the word “stimulus” was a quality marketing technique. Why position something in a way that the target market perceives as unfavorable? Of course, I have seen examples in marketing/brand management where a product is positioned in an unfavorable light.
I don’t think the November elections will solve the ills of the economy. It could help, but it will be a long slow road to recovery. It could be 2014 before recovery is felt by the majority of those on Main Street.
I disagree with Barry Ritholtz above about gridlock. Less Congressional action might be a good thing. I believe taking no action is better than taking the wrong action. The majority of the actions of the 110th Congress (Jan. 2007-Jan. 2009) and 111th Congress (Jan. 2009-Jan. 2011) have not been the correct actions. Government policy should be limited with regard to interference in the free market economic system. It should also work to bolster the system as a whole. I think the 110th and 111th Congress has failed on both counts.
Despite the recession, there are still opportunities to make money.
LikeLike
Gridlock will help slowdown the “Stimulus” policies trying to get passed. But the scary thing is there are people out there that think once the election is over and a new Congress is in the troubles are over. Just sad to think you can flip a switch. It took us years to get into this mess we are in and spending more money to help prosper in the new economy is just scary. You can’t tax your way to prosperity and many in Washington do beieve that.
LikeLike
Lori Ann, again, I appreciate your insight…so much so that I have included your blog in my blog list. I just can’t believe it’s coming from a senior producer from CNBC. But hey, diversity of opinions is what we need. Short Keynesian economics. lol
LikeLike
Thanks for putting me on your blog list Greg 🙂 I love it when people start sharing ideas. I try to state my ideas but at the same time try to be open to others. It what makes our country great 🙂 it’s a basket of ideas that make things work 🙂 You never stop learning. When you do, you’re dead 🙂
LikeLike
The fact that Obama didn’t use the word stimulus indicated to me that the money was really a back-door subsidy to states with budget problems. We shall see just how many infrastructure projects will really get done.
Also, that so many people think that the Nov. elections are going to matter means they think our economic and financial problems have a political solution. Maybe they could, in theory, but only if the government is willing to purposefully extract itself from the economy and let markets correct themselves. No more mercantilism, “crony capitalism”, etc. Oh, and end central banking.
LikeLike
I would love to see how many infrastructure projects were made with the first stimulus. Scary fact is a lot of the last stimulus money that went to states went to payroll. Gov’t has a place and both Wall St. and Gov’t need to know what their roles are. Gov’t can create policy that should germinate, feed and grow business. Not stifle or punish.
LikeLike