Pondering a Hopeless Predicament -- Economic Commentary by the Mogambo Guru

"...It's all so easy; It's always about the money. "But," I can hear you thinking, "wages and salaries are still going up, and have been going up for years and years, ever since I was a kid, anyway, so how can there not be enough money for these people to buy the things they need?" And it is that answer that explains why you are having to repeat my class year after year after year, my young grasshopper, and yet never get beyond yellow-belt status. So I will explain it to you one more time. Because the aggregate prices of things, and the number of things that are necessary to live, have been going up faster than the increase in aggregate incomes. Ponder this awhile. And imagine that the bathtub is draining faster than the water coming out of the faucets. Like I said, ponder. And when you stop and examine the hopelessness of that predicament, you realize that doing this either gradually over the years, or all at once, is not a good thing..."

St Petersburg, Florida - Well, it was a busy week in the world of make-believe money, as the Fed, the Treasury and the willing co-conspirators all suddenly waded much deeper into the swamp of monetary irresponsibility. The latest reports indicate that they are still there, wading around in fetid and feculent water up to their noses, but seem to be enjoying themselves immensely.For example, let's saunter over to the government debt area, and maybe pick up a burger on the way, and ponder the news that John Snow's Treasury borrowed another $38 billion in one lousy freaking week! One week! One! That's thirty billion, plus another eight billion, for a total of thirty-eight billion dollars, in five business days! If I was a Southern Belle instead of the Manly Mogambo, I would surely catch the vapors at the news, and would raise the back of my hand to my forehead as I gently swooned, crying "Oooooh! Surely we are undone!" with a voice that dripped honey, with an accent thick as molasses and twice as sweet. But, of course, being the Mogambo, I stomp around the house fully armed in a state of terror mixed with anger, and just a touch of vengeful hatred for piquancy, dressed in full-body armor, psyching myself up for the assault by the government goon squad, which I figure is probably pulling up in the driveway right about, oh, now.

Like a little kid with a new toy, I think that I am getting the hang of using a calculator and would like to, you know, show off a little bit, so I had an interesting session with a calculator. But for some strange reason, whenever I multiplied $38 billion a week times 52 weeks in a year, I got a wrong answer. Guess what I got? I know you are going to laugh when you see it, and remember that the calculator was obviously broken, as I kept getting the answer $1.976 trillion! Seeing a number that huge is like getting hit with a sledgehammer to the skull, as you realize that no sane person would voluntarily plunge his own country farther into debt at that rate - and I am talking about amassing debt to the tune of 20% of GDP here! - so that is when I realized that the calculator was obviously broken.

And then, and this is the really weird part, not wanting to waste this opportunity for fame and glory, and maybe a little interest from pretty girls would be a nice touch, but I get up and start rummaging around in the house for another calculator, and whenever I found one, I would, with a single-mindedness and focus rarely found outside of the chronically mentally ill, again enter those same two numbers, and I would always get that same wrong number! After this happened four times in a row, a little light bulb went on over my head, and I said to myself "Hey, doofus! All the calculators in the house are broken!" All of them! I mean, don't you think this is weird, weird, weird? And gaze deep into my darling blue eyes to fathom my deepest sincerity, because I am talking, without exaggeration, "Twilight Zone" weird! Or CIA weird. Or FBI weird. Or one of those movies that has some evil extraterrestrial aliens are tracking us down, one by one, and replacing us with these large pod-things that develop into exact copies of somebody nearby.

Anyway, the point is that all those calculators broke the exact same way, and at the exact same time, and whenever you multiply $38 billion dollars in one week times 52 weeks in a year, every last one of those calculators all give the ridiculous answer of $1,976 billion, which is $1.976 trillion. Dollars! In one year! Hahahaha!

And that comes to $7,057 for every man, woman and child in the country. Every living being in the nation is being plunged into more debt at an annual rate of $7,057. So if you are a family of four, meaning you, your spouse and your two charming children, then your total indebtedness is increasing at a rate that would equal $28,228 a year. Nice going!

But, and I find this hard to believe, no matter how hard I rub my eyes, it never goes away, the really interesting part is that the Congress, and this is one for the books, just passed the Prescription Drug Welfare Plan, or whatever it is called. Which is not even a temporary stimulus bill in the usual sense, but a gigantic new permanent entitlement, described by some as "the most sweeping expansion of the Medicare system since its inception." Hell, even the most wild-eyed, goofy optimists admit will cost $40 billion a year forever! And by "forever" I mean "never," as this is just the start of a long, long and expensive, expensive road, and we have many, many layers of hell to transcend before we reach The Final Cost.

And then I look at the short one-year time frame wherein all this borrowing would be taking place. And then I look at the $7,057 per man, woman and child in the country. And then I look at the one year time frame. And then I look at the money. And then at the time. The money. The time. Money. Time. Money. Time.

Suddenly overcome by a dizziness that appeared out of nowhere, I try and gather my senses, and I happen to notice that a nice chunk of the money, that bought all that new debt, came from foreigners with deposits at the Fed. And when I try and imagine who the people are that decided to buy that much US debt, and who were so confident in themselves that they are apparently not the least bit timid or embarrassed to use $12 billion of their valuable money to buy US debt, which is denominated in dollars, which is a depreciating currency, meaning that it is not as valuable as it was yesterday, and one that will be even less valuable tomorrow and for many, many more tomorrows, which means that those selfsame foreign morons are making a huge, I mean huuuuuuuuge, mistake.

Imagine that we turn on the TV, snuggling down in the sofa, and are looking in on an episode of Jackie Gleason and the Honeymooners. The scene opens with Ralph Kramden, entering stage left, who just came home from his job of driving a city bus. Throwing his jacket on the chair, he announces to his wife Alice, played by Jerry Mathers, oops, I mean Audrey Meadows, "Well, dear, I made a gigantic investment in a debt asset today! I am proud to say that it is one that is grossly overpriced, and so it already yields less than the rate of inflation, which is good, because I want to get away from that inflation stuff! And it is denominated in a currency that is going down in relation to ours, which I am told is a really classy move! So that in the future when we cash it in to pay for golden years, we will almost certainly get back less than we put in, in terms of purchasing power!"

Now, being a real stupid guy myself, I am very familiar with the scent of stupidity, and my sensitive nose - sniff, sniff! - detects one that is particularly ripe. But it is the look of stupefied, uncomprehending disbelief in Alice's face that gets all the laughs.

- Doug Noland reports "Foreign issuers of dollar-denominated debt continue to revel in unprecedented global dollar liquidity." Hey! Maybe those doofus foreigners are smarter than we thought! Borrow valuable dollars, with the promise to pay back worthless dollars in the future!

But foreigners are not the only ones at that game. Bloomberg figures almost $23 billion of corporate bonds were issued this week, "one of the strongest weeks of the year and the most in two months." Not to be outdone, "Year-to-date junk bond flows of $25 billion are easily a new record." And we already looked into the Treasury doing it, too.

- China is having a little inflation, the kind that embitters and starves the poor, caused by poor harvests. According to the AP wire, in the last quarter wheat prices have shot up by 32 percent and corn prices have doubled. Rice is also up by double-digit amounts. Ditto prices of edible oil, vegetables, meat and other food products, which have also jumped.

- My old buddy, Philip Spicer, is back in town, and he calls me up and suggests we meet for lunch, and then to show you what a nice guy he is, didn't bat an eye when I launched into my "Gee! I must have left my wallet in my other pants" routine when the check came.

Anyway, he has this bag of books for me, most of them books printed by F.E.E., the Foundation for Economic Education. Now F.E.E. has been around since before I was born, and if every student was required to read just a few of the hundreds that are available, then this country would be a far, far better place.

But it gives me something new to read, and so I can get back to quoting smart guys, and makes me sink farther into my loathing of politicians and the Supreme Court, and my general contempt for the IQ of my fellow Americans, who kept voting for Democrats for so long that now that the damn Republicans are the same way. Only worse, to my profound horror and embarrassment.

Perhaps the big problem of economics is best summed up by Henry Hazlitt himself, when he wrote in his book "Economics in One Lesson" that "Economics is haunted by more fallacies than any other study known to man. The inherent difficulties of the subject...are multiplied a thousand-fold by...the special pleading of selfish interests." And it is this "pleading of selfish interests" that has spawned not only all the expansive and expensive entitlement programs extant, but now also a new gigantic, monumental, explosive expansion! And notice the way I alliterated all those "e's." I don't know how I do it! I just can! It's a talent, I guess.

The second factor, perhaps as powerful as the first, that he calls "the persistent tendency of men to see only the immediate effects of a given policy, or its effects on a special group, and to neglect to inquire what the long-run effects of that policy will be. It is the fallacy of overlooking the secondary consequences." To see the most famous section of this timeless and brilliant essay, I recommend that you click on over to the InvestmentRarities.com website and read it for yourself, as they have wisely seen fit to make this classic paragraph, which is more profound than the Gettysburg Address by a long shot, made it part of their home page, and for which the rest of us can at least say "Thank you."

And speaking of fallacies, Frederic Bastiat in his book "The Law," on the other hand, writes "Here I encounter the most popular fallacy of our times. It is not considered sufficient that the law should be just; it must be philanthropic. Instead, it is demanded that the law should directly extend welfare, education and morality throughout the nation." He calls this "the seductive lure of socialism."

Anyway, thanks to Phil for the books. And now you can see why my life is consumed with my loathing of politicians, who did it all, and the Supreme Court, whose perfidy made it all possible, and to tell you the truth I had to look up "perfidy," but I am happy to report that I was right, and since I did look it up I am proud how the word just came to me like that, because it describes those evil bastards and bastardettes to a freaking "T." Perfidy! Perfidy!

- Caroline Baum of Bloomberg has weighed in on the Bush tariffs, and she, like most people, is aghast that he would do something like that. She says, "It's hard to find much support for the President's latest misstep on trade." Then she goes on to show how other people have looked at the problems and have pretty conclusively shown that there is not much benefit to US workers from any trade restrictions. In fact, there are other reasons. And what could those reasons be? Well, grasshopper, the Mogambo reaches out his hand, and with a voice resonant and deep like a Tibetan gong, says "The reason is money, as the reason for everything is money, because everything is always about the money."

And sure enough, she cites "The farm bill, steel tariffs, anti-dumping duties on Canadian lumber and quotas on textiles from China are all examples of principles waived to garner votes."

But, and you knew there was going to be a "but," there are costs involved. She says, "Policy for the few comes with a cost. Ultimately it's consumers who bear the burden of higher prices and reduced choice."

So, in summation, we idiot proletariat consumer slobs will pay higher costs, for a reduced array of choices, all because Bush thinks that he is going to get a few extra votes. I suggest that he has forgotten to assess how many votes he has lost as a result. Speaking for myself, I know of one.

- If anyone is the least curious as to why American economy is so high-priced, let me refer that person to a column in last week's Parade newspaper insert, called "Parade's guide to better fitness." It's all about how fitness and exercise are supposed to be so good for you and all.

But the interesting part is that, and I quote, "Nearly 46% of employers offer a fitness program in one form or another." If you work in one of the Neanderthal companies that does not offer a program, then the author of the article suggests that you take your own exercise program in hand and do something physical on your lunch break. Or, and this is the part that I really love, he suggests that you "Coordinate with the human resources department to have a yoga class taught two or three days a week in an empty space."

- A Financial Times article "China Threatens Reprisal Over US Import Curbs" had this interesting thing to say about our placing tariffs on some Chinese textile imports; "It was meant to placate US companies and their congressional supporters, who feared China would be able to flood the US market with inexpensive manufactured goods."

Now, as a person who buys manufactured goods, this China thing was our chance to get some consumer goods on the cheap, which automatically raises our standard of living, and is the whole idea behind free trade. Remember?

And yet, here is Bush, telling you that you are NOT going to have a higher standard of living, but instead you are going to have a LOWER standard of living, by the simple expedient of making you pay higher prices for things, and that, in turn, by the simple expedient of placing a tariff on everything that crosses the border.

- Eric Lanteigne over at ScotiaMcLeod looks at things from a chart perspective, and says that the markets are in a rising wedge, and that means bad news. I include this pithy item because charts show what actually did happen, and a lot of people look at charts, and perhaps there ARE more things between heaven and earth than are dreamt of in our philosophies, Horatio.

- The Treasury reported that foreign investors bought only $4.19 billion of US securities in September, which is a big drop from the $49.9 billion they bought in August. Martin Weiss at the Safe Money Report figures that the reason is that those foreign devils know the nasty results of having huge budget deficits, and they are shying away from getting caught up in that nightmare. Plus, they have already been stung by the drop in the dollar, which has reduced the value of the monstrous hoard of securities that they already own. So, at the bottom line, they have taken a whack to the head, and they see bigger whacks to the head coming down the pike, and they are already disgruntled about the losses they have already taken, so what kind of an idiot would go out and buy MORE American securities? Ergo, lower demand.

- Since announcing my run for the Presidency of the United States, I am sorry to report that my election campaign has not gotten off to the soaring start that I had hoped for, which was something on the order of the Mighty Mogambo winning the election in a landslide victory, and who then proceeds to run the Leftists out of government, like the Pied Piper ran the rats out of Hamlin, which is a highly appropriate metaphor when you stop and think about it, and I secretly smile at the thought of Ted Kennedy and Charles Schumer and Daschle and all the rest of those horrid little people evacuating the Capitol and running down the Interstate with their nasty little suitcases in their nasty little hands, all squealing in those irritating little rat-voices of theirs, "squeak, squeak, squeak," and thus the Mogambo becomes a national folk hero who has Saved The United States, a guy who is a bigger and more beloved icon than Santa Claus, and which would explain why the name Mogambo became the most popular name given to babies by happy and grateful parents, not only here in the United States, but in every country around the world.

But, like I said, the week has not been that good. For those of you who prefer to have a statistical component to your election news, I have in my hand the latest computer printout of the first week of the Mogambo For President Political Movement which is not, as I already alluded, sweeping the land like a prairie fire. Jumping past the boilerplate, I read down to the bottom of the page and find that total dollars donated, to date, and remember that these are just preliminary figures, is exactly, let me check those figures again, zero. But I am happy to report that there is a surprising uniformity to all of the statistics, and that same zero figures prominently in other categories, such as media interest, requests for personal appearances, name recognition amongst voters, grassroots activity, and, well, let's just say that the list goes on. I'm sure that next week will be much better.

- Caroline Baum at Bloomberg wrote an interesting little article entitled "Anyone Think Inflation Is (Gasp) Understated?" She does a pretty good job of illustrating some of the lying and intellectual corruption that goes into massaging raw inflation into soothing, low-inflation numbers so that Greenspan can parade up and down like the pompous fool that he is, and crow about how he worries that inflation may be too low.

And you can tell by the low animal growl in my throat, a kind of a "ggggrrrrr" that makes small, furry animals scurry into their burrows, I am not happy about the chairman of the Federal Reserve even thinking that inflation might be too low, because it cannot ever be too low, and anybody who thinks otherwise is an idiot, and so the next time you see Alan Greenspan you can say, "Hey! Alan! The Mogambo says that you are an idiot!"

Now, and I think that this is very instructive, please notice that he never says those things when he is standing near me. No, he always says things like that when he is far away from me, because if he did say them "up close and personal" with me I would feel compelled, driven really, to reach out and slap his nasty little face for saying something so stupid. It is only thanks to my iron will and my overwhelming sense of self-restraint that he has gotten away with it this far.

- Bill Bonner is that rare class of guy, namely somebody that I really want to hate out of sheer, raw, seething jealousy, and I find that I am consumed with envy at his being extremely intelligent and tall and handsome and successful, writing best-seller books, writing profound and insightful commentary at the drop of a hat, and getting on TV, and strutting around like he owned the place, lording it over us earthy peasants, and just who in the hell does he think he is, and we smile and bow and scrape before his awesome talents, but we secretly smile to ourselves as we think, "Go ahead, Bonner, enjoy it! But remember that one day there will come a revolution, and then we'll just see who's on top THEN!"

But he has written another great piece at the DR Last Friday, entitled, "From Funeral to Funeral," at Daily Reckoning, and writes "Science evolves from funeral to funeral, it is said. Each corpse is another lesson...another scientist gone mad and another theory gone bad." Man, ain't that the truth! And it rhymes there at the end, too! See what I mean about how he makes you so damn jealous with his effortless literary talent? Ooooh! I get so angry sometimes!

He also notes that, "People believe that things improve. They think Darwin's Theory of Evolution describes a world constantly mutating towards perfection." Well, other people may believe that, alright, but other people do not speak for the Mogambo.

To the exact contrary, I believe that people themselves are not improving, but we are collectively going downhill, at least from the prevalence of mutant genes in the population.

And both the reason and the proof is contained within Bonner's own words: Namely, Darwinian evolution. In all the time in human history, the genetically mutant people got killed off pretty quickly, most of the them at birth or shortly thereafter. That's why there were so few population-altering epidemics of mutants. And those with intellectual mutations, like "born killers" and pathological sociopaths and Democrats, just took longer to get them removed, as first they had to get old enough so that their bizarre, aggressive and socially mutant behaviors would allow a victim to kill him without the usual moral objection to killing children, no matter how irritating. I'm not sure if there was ever a time when it was legal to kill a Democrat, like shooting a rabid dog in the street, but I am very sure it is NOT legal to do it today, although we routinely execute other dangerous and murderous vermin all the time. Especially in Texas, as it turns out.

But getting back to our history lesson, we note that now, after millions and millions of years of this, things are very, very different. Only recently in the history of mankind, in the last measly couple of hundred years, has it been possible to keep the genetically mutant alive and in the gene pool. Ergo, mutant genes are not systematically removed from the gene pool by the forces of nature anymore.

And this alone could easily explain everything, and as far as I am concerned, it pretty much DOES explain damn near everything, except how these mutants seem to swarm so strongly to the Democrat Party.

Mr. Bonner continues, "It has been a long time since the world's money system - or its reserve currency - have fallen apart. The event happens so rarely, it is practically unimaginable to most investors." Well, I raise my hand into the air, and announce in a loud, commanding voice, "Sir! I say, sir! I wish to register an objection to that!" Slowly standing up, and hitching up my pants with my thumbs as I do so, the audience instinctively gasps and recoils, as they know what is coming. Nervously casting about, the crowd realizes that the security staff has orders to lock the doors, trying to prevent a mass stampede for the exits, as the maddened crowd tries to escape the coming Mogambo broadside, that will almost certainly be as tedious and bombastic as they always are. Children cry. Dogs whimper.

But to everyone's surprise, the Mogambo was unusually succinct. "I say that it has NOT been a long time since the world's currency system- or its reserve currency - has fallen apart. I say they are falling to pieces every day, every hour of every day, and every minute of every hour of every day, sir! That is the fate of fiat currencies! Heed my words well, pilgrims! Thy currency shall be debased to complete worthlessness! Verily, to utter, I say to utter worthlessness, sir!"

So, where was I? Oh, yeah, the collapse of the monetary system and/or the currency. Like the Mogambo says, it is always about the money, because everything is always about the money.

It's all so easy; It's always about the money. In the case of entitlements, it is, more specifically, the lack of money. "But," I can hear you thinking, "wages and salaries are still going up, and have been going up for years and years, ever since I was a kid, anyway, so how can there not be enough money for these people to buy the things they need?"

And it is that answer that explains why you are having to repeat my class year after year after year, my young grasshopper, and yet never get beyond yellow-belt status. So I will explain it to you one more time. Because the aggregate prices of things, and the number of things that are necessary to live, have been going up faster than the increase in aggregate incomes. Ponder this awhile. And imagine that the bathtub is draining faster than the water coming out of the faucets. Like I said, ponder. And when you stop and examine the hopelessness of that predicament, you realize that doing this either gradually over the years, or all at once, is not a good thing.

And that is where we are now, and believe it or not, that arch-villain Alan Greenspan, is still, at this very moment, lamenting the fact that inflation is not rising higher and higher! It is running about 3-4% a year, and yet this is not high enough for him! He wants more inflation!

People right this very freaking second are getting all grumpy and are going on strike for higher wages, seniors are using the threat of their voting strength to extort a prescription-drug benefit for themselves, the government is imposing tariffs and enforcing quotas! And why?

Because Americans need higher incomes! And why do they need higher incomes? Because prices are too high! And why are prices too high? Because the damnable Federal Reserve, and if there is a yin-yang, Karma-balancing force in the universe, then Alan Greenspan will rot and writhe in pain in some dark Stygian hell for eternity for what he has done to us, created too much money and credit, which has worked its cancerous, destructive way into prices, and now people predictably suffer. See how easy this all is?

And now we are going to pay. Well, not WE, you understand. Only the guys in "we" who did not put their current holdings of fiat currency into gold, because there is a big percentage of people who also call themselves "we," namely me and my hoodlum friends, who DO have gold, and parenthetically we consider ourselves to be superior beings, and whenever we get together in a group, we always laugh - Hahahaha! - at the people who do NOT own gold, whom we refer to as "them."

- Howard Troxler is a columnist for the far-left commie-rag of a newspaper where I live, namely the execrable St. Petersburg Times, and today Howard decided that he would enlighten all of us economically illiterate proletariat boobs out here in Newspaper Land. First off, he admits that people are always writing to him and saying things like "Hey! Howard! Don't you know that when you tax a business, that the business just passes along that tax to the customers? Thus, businesses do not pay taxes; their customers pay them in the form of higher prices!"

Without any waffling around, Howard offers up this brilliant rebuttal to that nasty fact of life: "First of all, that's not necessarily true." Huh? It's not? At first I am confused and dazed, and like a whining little crybaby my bottom lip starts quivering in my perplexity, and then I realize that, and this is the part where I was really getting excited, that finally, after all these years, somebody is going to set me straight on this taxing-business thing!

I and all those similarly silly people who have been writing to Howard all these weary years are now in for a real treat, as an intellectually gifted, economics-literate powerhouse like Howard Troxler himself is now going to take some of his very valuable time and will now condescend to show us dimwitted jerks out here where we have been so, so wrong for so, so long. Any second now, and I can hardly contain my excitement at the prospect, this Famous Newspaper Columnist Guy (FNCG) is going to show me, and you, and all the other little retarded children of the world who are, like me, out here playing with our crayons and drooling all over ourselves in our abject stupidity, how it is that a government can levy a tax, or a fee, or a charge, or an expense, or any demand for money, on a business that is NOT passed on to the customers of the business.

I know that you are holding your breath in anticipation, and I am gleefully bouncing up and down in my chair with the excitement of it all! And to keep you from getting any more blue in the face, I will not keep you in suspense any longer. I now reveal what has been revealed. He writes, and maybe you ought to think about getting this tattooed on your body somewhere so that you can refer to it in the future, "There can be market pressures on a company to keep prices lower." What can one say except "Oooh! Wow! Oooh! Wow! Market pressures! Why didn't WE think of that? How could we have been so stupid not to see the effects of market pressures!"

Okay, and here we see the Leftist mind-think at work: If there are market pressures, and believe me when I say that there are ALWAYS market pressures, even though newspaper columnists are about as tuned-in to markets as geese are to gigabytes, and if market pressures immediately prevent a company from raising prices to cover increased costs, then it is a good thing? And it is a lasting thing? And companies never raise their prices to cover increased costs because they like going bankrupt? And the shareholders of the companies are always happy that costs are not passed along to the customers? Man! I never knew any of this stuff! It's all so obvious now that it has been pointed out to me! Thanks!

Okay, and this is the part I hate, where I have to admit that I do not understand, and have to raise my hand and ask a question that seems so stupid that all the other kids in the class actually turn around in their seats in stunned disbelief to get a good look at the guy who asked such a supremely stupid question, and I can feel their eyes and their raw hatred and undisguised loathing at my incompetence burning into my very soul, but in my pathetic little pea-brain all I see is, on the one hand, a company that paid a tax, and then had less money because they couldn't pass the tax along in the form of higher prices, versus, on the other hand, a company that paid the tax and made the CUSTOMER have less money because they COULD pass the tax along in the form of higher prices! And now one of these is a good thing, a GT, and one of them is a bad thing, a BT?

A little later, he does kind of waffle his position a teeny bit, and writes, "But, you know, let's pretend for a second that the claim were true, that corporations magically are sticking customers with every penny of the tax." How cute.

But now that he has made a tactical mistake and blundered into cute, this is where I pull out the Big Mogambo Assault, and with a biting, sarcastic sneer I note that if Howard had spent any time at all thinking about this, or asked somebody who knows something about economics about this, or done any reading on the subject at all, or had paid the least bit of attention to the, I assume, thousands of people who had written to him over the years, all pointing out the grievous errors in his thinking, then he WOULD have written, "But, you know, let's pretend for a second that the claim were true, that corporations magically are NOT sticking customers with every penny of the tax."

Because, brother, I am here to tell you that a company that decided NOT to stick the customer with any cost is truly magical, as in "It has never happened before," and in fact, most companies are constantly engaged in trying to figure out ways to stick customers, and NON-customers, and sometimes even total strangers with higher prices, are feverishly trying to stick the government with their higher costs, and avoiding taxes so that they will not have to raise prices, etc. and these same companies are actively firing managers who do NOT manage to pass along higher costs and taxes and fees and assessments, and these terminated guys bounce along from one bad job to a worse job, one after another, until one day they finally land in the gutter with all the rest of us miserable failures, and then we spend the rest of our lives being angry and sullen.

But nooOOOooo! He even seems to relish going the extra mile down Leftist Lane so much that he writes, and forgive me because I am giggling so hard that it is hard to type, "Rubin Askew, governor of Florida from 1971 to 1978, made the point brilliantly. He stood on the Georgia-Florida state line and held up products that were priced the same in both states, even though Georgia already had the tax and Florida didn't." I assume he meant the tax on businesses.

But the point is that just because Rubin Askew, a far-Left governor from thirty years ago, was able to hire some aides who had enough functioning brain cells that they were able to fan out across both sides of a border and root around in the aisles of some stores until they found find some items that were priced identically, is NOT an argument that taxes have no effect on prices, or that taxes are not passed along to customers, or anything of any relevance whatsoever. It just proves that local prices tend to homogenize, as they do.

But to be fair, Howard is not advocating higher taxes. He uses all of this as a mere springboard to denounce the tax loopholes that let so many corporations pay little or no tax. Without these loopholes, see, more businesses would be charging, collecting, and remitting to the state more taxes. In the end, once these loopholes are closed, everybody will be somehow happy that more businesses are paying taxes, and the government is bigger and more expensive, and there are more and more people collecting more and more money from the government.

And the people will all be paying higher prices as a result, as it is inescapable. Regardless of what Howard Troxler, the St. Petersburg Times, or any of those people think. But because they are Democrats, I know, and you know, and we all know, that they are wrong. Ugh.

---Mogambo Sez: This is all insane, as I have read many things about economics off and on through the years, and a program to print money to finance a borrow-and-spend consumerism is pure lunacy.

And just because I can't remember the last time that I ever heard of a lunatic's ideas working out, doesn't mean that lunatics don't have a contribution to make on the altar of diversity-for-diversity's sake. But, and you can't help but notice, that they were also the ones who said that gold was a barbarous relic, and which had no value. And now gold is the best-performing asset for the last five years running! Makes you scratch your chin and say "hmmmm" about all the other things that they say, doesn't it?

Richard Daughty is general partner and C.O.O. for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise the better to heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning, and other fine publications.

It's getting close to showtime.

Richard W.

Title: The High Price Of Free Trade
Source: EagleForum.org
URL Source: http://www.eagleforum.org/column/2003/nov03/03-11-26.shtml
Published: Nov 26, 2003
Author: Phylis Schlafly
Post Date: 2003-11-30 18:19:53 by Red Jones
11 Comments

The High Price of Free Trade

Nov. 26, 2003

Trade representatives from 34 Western Hemisphere countries (all except Cuba) are now gathering in Miami to take the next step to expand NAFTA (North American Free Trade Agreement) into the hemisphere-wide Free Trade Area of the Americas (FTAA). They are hoping they won't be plunged into disarray by the same protestors who upset the meeting of 148 World Trade Organization nations in Cancun, Mexico last year. NAFTA, which is celebrating its tenth anniversary this year, is not a fortuitous model for FTAA. When the first President Bush and candidate Bill Clinton were persuaded to support NAFTA, Mexican President Carlos Salinas promised that all three big North American countries would benefit, that NAFTA would open up a large market in Mexico for U.S. products, and that increased wages in Mexico would keep Mexicans at home and stop the tide of illegal migration.

Salinas said Mexico would be exporting tomatoes, not tomato pickers. But it didn't turn out that way.

Instead, the United States exported jobs rather than products, and the U.S. trade deficit with Mexico grew from $9 billion to $87 billion. Real wages in Mexico are lower than before NAFTA, and the influx of illegal aliens and illegal drugs grew into a mighty invasion, with 29 U.S. states reporting more-than-100-percent increases in their Mexican- born populations.

Expanding NAFTA to all of Latin America will only exacerbate these trends because of the enormous gulf between living standards. U.S. per capita income is eight times the Latin American average.

The United States produces six times the goods and services of all 20 Latin American nations combined, and 20 times the goods and services of Brazil alone. Since free trade is based on the theory that economic differences and resources are exploited until there is equality, and cheap labor is the chief resource of other countries in the FTAA, the result must be to reduce American wages.

The economic disparity is only one measure. The differences are just as immense in government and police corruption and in respect for property rights, contracts, and copyright and patent protections.

Yet, FTAA appears to be a cherished goal of President Bush. He signed the Declaration of Quebec City on April 22, 2001, making a commitment to such globalist goals as "hemispheric integration," "greater economic integration," "interdependence," and "national and collective responsibility" for the Western Hemisphere.

Orange juice is a major issue in Miami between the United States and Brazil, the biggest economy in Latin America; free trade would wipe out the Florida citrus industry. Why is the Bush Administration even negotiating about a deal that would be so hurtful both economically and politically?

Meanwhile, steel is the current hot problem for the United States in the World Trade Organization. The WTO ruled on November 11 that if the United States doesn't remove our current tariffs on steel, European countries are authorized to impose $2.2 billion in retaliatory sanctions against U.S. exports.

Our so-called European friends have maliciously targeted their retaliation against U.S. exports from swing states that are politically important in the coming elections. The Europeans want to exert economic pain to force U.S. officials to acquiesce in WTO rulings.

This is only the latest in a series of WTO rulings that are harmful to U.S. interests. How did we get in a box where a handful of unelected, unaccountable foreign bureaucrats can override decisions of the U.S. President and Congress?

It all happened on December 1, 1994 when a lame-duck Congress, under Fast Track procedure, passed the Uruguay Round of the General Agreement on Tariffs and Trade. The 14-page WTO Treaty was slipped into the 22,000-page GATT legislation in order to evade our Constitution's rules for ratification of treaties.

With both NAFTA and WTO, we didn't get merely a reduction of tariffs; we got global governance. We got NAFTA panels ordering us to admit Mexican trucks that don't comply with the regulations U.S. trucks must obey, and we got WTO panels in Geneva making trade decisions that can influence the U.S. elections.

In another affront to our sovereignty, the WTO ordered the United States to raise our taxes on exporters to appease high-tax Europeans. Congress is scrambling to comply.

The U.S. Constitution expressly grants Congress the sole power "to regulate commerce with foreign nations" and "to lay and collect taxes, duties, imposts, and excises." That power is now exercised by the WTO, which controls 90 percent of international trade.

WTO's dispute panels are composed of foreign "trade experts" who are not screened for conflicts of interest, and whose motive is to force American workers to complete with low-wage socialist countries that lack safety, environmental or workplace regulations and benefits. WTO's panels hold hearings and announce rulings in secret, and force compliance by authorizing punishment.

It's time for the American people to realize that free trade is a Pied Piper that leads us to global government.

From our friend REd Jones:It would be good if we looked to the wisdom that was built up by previous generations on this subject. The problem is that what was the conventional wisdom decades ago has been left out of the schools' curriculum and generally ignored by the journalists and academics of today.

The founding fathers thought it was in our interest for congress to set all policies by law concerning trade and tariffs. We used that system up until Bush 1 and it worked very well for us. Under Bush 1 we decided to take the formal control over this out of congress and give it to the white house. But then under bush & clinton and now another bush the white house has decided to give the power over to negotiators who have engaged us in treaties. These treaties have teams of bureaucrats to make their rulings. Thus, our policies are not set by elected representatives who can be voted out if they displease us, but by foreign bureaucrats who care nothing for us at all.

We could listen to Adam Smith's advice. He said in Wealth Of Nations that when nations practice mercantilism that other nations are obligated to avoid trading with them. China, Japan, India, Vietnam and other countries practice persistent mercantilism, sometimes to the extreme. By trading with them under these conditions we are throwing out centuries worth of conventional wisdom all so we can pursue ideologies that are untried and new.

We should pay attention to Karl Marx also because he weighed in on this subject. In 1849 he gave a speech on the subject of free trade as it was an issue in germany at that time. He cited german academic studies that showed that when trade barriers are taken down completely that wages for the laborers go down and profits for the owners go up. So, Marx reasoned that this would quicken the oncoming of his revolution and thus supported complete free trade with no barriers.

We could listen to our actual experience in our times and make decisions in an effort to enhance our nation's prosperity and welfare in a practical way. As the article hints at, but is well documented elsewhere the free trade fetish has not benefited us as a people. The engine of progress has slowed dramatically in latin america in the last 20 years. In Mexico's case in particular they have been hurt and this contributes mightily to the migration north. If a set of policies hurts your people, then it is a good idea that you should scrap them and not go in that direction.

So, I can understand your ignorance Ghost. But I do not like your defeatism. But I remember that you are a loyal republican. In order to be either a loyal democrat or a loyal republican you must accept the concept of civilizational suicide. You are allowed to pretend that the others (either the dems or the repubs) are worse than your party, but you are not allowed to fail to believe in civilizational suicide if you are going to vote for either of those two parties. I think that this explains your incredible pessimism where you think that further decay is inevitable. Of course it is inevitable if the masses of americans continue to vote like you.

But please answer, why do you think that we are doomed to failure? Why can the achievements and prosperity of our forefathers not be reached by us?

Your thoughts?

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