Editorial
Republican Sellout Invites Stagflation
While it may not be a surprise that the Republicans are preparing to yield on their vow to oppose tax hikes, it should raise investor concerns the world over that an upcoming budget agreement will likely involve a Congressional surrender of its authority to set the federal debt ceiling. In exchange for this, it appears that the Republicans have simply done nothing to halt, or even curb, the dangerous federal spending trajectories or the current drift towards greater state control of the economy. President Obama has politically outmaneuvered the Republicans, even going as far as evoking the Newtown massacre as a reason for quickly concluding a deal. As a result, it is likely that the GOP will bear the blame for any breakdown in fiscal cliff negotiations. They could wear such an outcome as a badge of honor, but nothing indicates that they have the political courage to do so.
Given the drift in Washington, those who had hoped for a significant improvement in the United States fiscal prospects will have nothing but lumps of coal in their Christmas stockings. At the same time, the Fed continues to hold its foot to the floor with increased quantitative easing that will pump massive liquidity into the system (see Peter Schiff's latest commentary for more on this). The combination can lead to stagflation and a debased U.S. dollar.
Republican House Speaker John Boehner has indicated a willingness to accept new taxes of $1 trillion, despite his party's pledge to halt tax increases. Diverting a trillion dollars out of the wealth-generating private sector into the government's coffers can only hurt corporate investment, particularly the venture capital sector that is so vital to the flow of new ideas and technology that stand at the core of America's highly profitable international technological lead.
But far more momentous than his capitulation on taxes is his agreement to pass debt limit power to the president. This decision removes any chance that the United States will ever do anything meaningful to address its fiscal imbalances.
Following the establishment of the Federal Reserve, the House of Representatives' approval of the Federal debt limit was needed to restrict a profligate government from endangering the credit of the United States and encumbering future generations with an unbearable level of debt service. But in order to pander to voters, both Republicans and Democrats have paid little heed to this important duty and have rubber-stamped continued increases in debt. In recent years, when Federal debt began exceeding GDP, Republicans finally withheld the stamp in order to force a real budget discussion. But a combination of their own hypocrisy and political mishandling has rendered those attempts futile.
In the meantime, both parties have avoided making any meaningful cuts in government spending and have instead offered accounting gimmickry as a poor substitute. Neither party appears willing to risk votes in order to curb the profligate and economically suicidal growth in out of control entitlement expenditures.
Last week, The Economist magazine published a list of 80 countries, ranked in order of quality of life as determined by such elements as economic well-being, intrusive government and crime. The United States has now fallen to sixteenth position (with Switzerland in first position). The combination of $1 trillion of new taxes and the likelihood of increased financial and commercial regulation will likely push the U.S. further down the list.
It is time for politicians, and particularly Republicans, to put the nation before their individual careers. Should they fail in this great patriotic call, they will be sentencing their fellow Americans to a future of falling living standards, currency decline and poverty.
But while the US struggles with its political and economic morass, other regions of the world do present more promising opportunities for investors.
John Browne is a Senior Economic Consultant to Euro Pacific Capital.
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Posted by taxesbyanyothername on 12/27/12 04:49 PM
The practical differnece at this point seems to be nil, the actual difference is intent.
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Posted by taxesbyanyothername on 12/27/12 04:48 PM
On this thread so far only I said anything about them. Yes, avoiding a fight, even of a milder sort would be preferable. I do not think we will be given that option.
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Posted by dave jr on 12/27/12 02:19 PM
Who said anything about iminant poverty or a fight to the death? That is what we are trying to avoid. Incompentenc? Malice? Whats the difference?
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Posted by taxesbyanyothername on 12/27/12 01:39 PM
Come on y'all. Their competence does not even matter. Some swallow the lies, hook, line and sinker, no matter how implausible. The rest of us should know, not think, know, that malice rather than incompetence is the source of our immminent poverty, and impending fight to the death.
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Posted by 1776 on 12/26/12 04:25 PM
Rand Paul 'I Will Work With Harry Reid To Let Him Pass His Big Old Tax Hike'
Click to view link
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Posted by dave jr on 12/26/12 01:23 PM
"... can the competent / incompetence of any party be objectively evaluated, degree of divergance from their REAL goals."
By their actions...
Statists are largely opportunists. They sell a happy package that we all wish were true. Seems reality is the hard part. What is fearsome are the enablers, the dark gloomy shadows.
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Posted by rossbcan on 12/26/12 01:02 PM
@dj
"What's worse than an incompetent government? A competent one."
... only if you KNOW their REAL goals (as opposed to pretexts) can the competent / incompetence of any party be objectively evaluated, degree of divergance from their REAL goals.
I perceive states as "problem solvers, tolerated to have a monopoly position". THEY realized, centuries ago that "solved problems EQUALS their unemployment". Thus, they REFUSE to admit the CAUSES of problems and, in actual fact "create problems".
Now, states have created a whopper of a problem. "We, the people" are waking up and are rapidly concluding that the survival of us and states or, arbitrary power in general is "mutually exclusive".
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Posted by dave jr on 12/26/12 12:30 PM
What's worse than an incompetent government? A competent one.
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Posted by amanfromMars on 12/26/12 12:09 PM
One is not alone in Fields Commanding Control Operations that Offer and Deliver Persons of Interest ... .. Click to view link
Methinks, rossbcan, at SMARTR Levels of Intelligence are one's concerns solely creative and enabling. And at Heavenly Heights, soully creative too.
And I particularly liked this unholy trinity... ."Public sentiment is everything. With public sentiment nothing can fail; without it nothing can succeed. He who molds public sentiment goes deeper than he who enacts statutes or pronounces decisions. He makes statutes or decisions possible or impossible to execute.
--- President Abraham Lincoln
One cannot wage war under present conditions without the support of public opinion, which is tremendously molded by the press and other forms of propaganda.
--- General Douglas MacArthur
The real target in war is the mind of the enemy commander, not the bodies of his troops.
--- Captain Sir Basil Liddell Hart, Thoughts on War, 1944"
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Posted by rossbcan on 12/26/12 11:22 AM
@dave jr
"It is almost comical watching the puppets... "
agree, when their strings and life support are cut off, "mission accomplished", "useful idiots", tools abandoned. I am "all in" and, likewise highly amused regarding their just (self chosen) fate. In fact, in my own small way, I have also fed them the "rope, by which they will hang themselves".
It is the "collateral damage" I weep for.
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Posted by dave jr on 12/26/12 10:48 AM
Bill,
It is almost comical watching the puppets wrap the cord around their own necks. Accept we know, in the next act, the puppets won't be so funny.
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Posted by Danny B on 12/26/12 10:37 AM
The GOP may have capitulated because it doesn't matter any more.
Click to view link
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Posted by theranger on 12/26/12 10:07 AM
Gentlemen: The Republicans are caving because they want more spending just a much as Democrats, and because spending equals power. They are like FBI agents addicted to cocaine: they cannot legalize drugs--they become unemployed and they cannot stop snorting cocaine-they love it too much. The strategy is simple: convince voters the other guy is addicted and accuse others of dealing drugs. Both parties are thieves and liars, and the media is the whore who has been invited to the party.
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Posted by mava on 12/26/12 09:36 AM
"It is time for politicians, and particularly Republicans, to put the nation before their individual careers. Should they fail in this great patriotic call, they will be sentencing their fellow Americans to a future of falling living standards, currency decline and poverty."
This presumes that politicians in general, and the republicans in particular, actually do care about America and all that. I propose that they do not, and never did, and never will. It is a mistake to think that they can possibly care.
Beyond this, Brown is right, saying that if they did care, then there is nothing they could do, as they have been outmaneuvered.
You have to get this thing out of your mind, - the childish belief that any of these rats can care for the country. Only then you will actually see where this is going.
There will be nothing done to stop the printing, or to restore the economy. This is my long forecast. It has been exactly on the money since 2005. I believe that the only things that will be done will be those that would harm the economy, such as raising taxes. I see right through everyone of these fools starting from Obama and to the last congressmen. None of them worth anything, and everything they think they know was based on lies. Pretty wide brush? You watch the events unfolding and tell me.
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Posted by WorkingClass on 12/26/12 09:22 AM
No mention of war spending or corporate wellfare of course. The financial sector is now exempt from the criminal statutes. How much more de-regulation do you need? These Grover Norquist nostrums are obsolete.
The course is set to monitize the debt. Appeal to Democrats or Republicans is useless. Exchange your FRN's for something tangable while you still can.
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Posted by rossbcan on 12/26/12 09:02 AM
Thanks Uncle Martin...
I respond that "human stupidity" is a false meme, countered by mankinds stellar PAST accomplishments in many areas, most significantly, the legal bulwarks and destroyed (by MSM / educational subversion) social awareness against arbitrary power running amok, predaors upon mankind.
I won't re-link "rule of law", y'all KNOW IT, reduced to a pretext of Machiavaillian "neccessity" by predators on the bench whom have rationalized their public servant and protection of civilization function of impartial predator control to MEAN (THEIR INTERPRETATION) that "THEY and their cronies are master predators"
If we accept the "human stupidity" "meme", then, we, by logical implication also accept that there is nothing we can do about it, apart from "genociding ther stupid", also acceptable to elites, because, the question of "who defines stupid" will inevitably arise and, elites and their power hiarchy lackeys "control the definitions", by unfortunately, "consent of the stupid".
THINK ABOUT IT:
Click to view link
... however THEY may define stupid, I, personally, make it a point of pride to be "top of THEIR list".
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Posted by amanfromMars on 12/26/12 08:43 AM
This could almost have been written specifically in reply to, and as a counter to your post, rossbcan, [Posted by rossbcan on 12/26/12 08:31 AM] which gives the distinctly false impression that there is nothing that ordinary folk can do ... ... Click to view link
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Posted by rossbcan on 12/26/12 08:31 AM
gonna be smited, VERY HARD by "Mathematics of Rule":
Click to view link
Neeed to ask: "cui bono", identify and DEAL WITH the psychopaths TOLERATED to be "in control"
is being "collateral damage" really a good TRADE, the exchange of "terror of the governed" for INACTION?
On Freedom (equals survival):
Click to view link
@dave jr
THEY are making it "their game". Those most affected (collateral damage) are oblivious to the fact they have been decreed "not stakeholders".
DEBT IS SERVITUDE. Is is REALLY a "good idea" to ALLOW others to decree what is and is not YOUR debt, YOUR obligations, extracted in the only way it can be, by the "barrel of a gun"? Which, as a point of fact, the people are decreed "not competent to possess" which, translated to realspeak MEANS: "not ALLOWED to defend themselves"
KNOW you know this, far too many DO NOT.
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Posted by dave jr on 12/26/12 07:20 AM
Wow! We all knew the "fiscal cliff" chatter was going to lead to the debt ceiling, but I had no idea it would blow the roof off. So what duties would be left to Congress other than looking out for themselves? They become more contemptible every day. All that would be left to do is nationalize the Federal Reserve. Then we would have unfettered, unadulterated totalitarianism.
