By Monty Pelerin, on February 24th, 2010
In Jimmy Carter’s reign, the Wall Street Journal editorialized about “Ratcheting to Ruin.” The title derived from the fact that each cycle high in unemployment was higher than previous ones, and each cycle high in inflation was also. “Stagflation” was coined to describe what up until then was believed to be impossible in the Keynesian world. This period ushered in a new era in both politics and economics. Carter was replaced by Reagan, and Keynes was replaced by Friedman.
Thirty years later Keynes is back in vogue, Obama has ascended to the White House and times are again reminiscent of the Carter era. The economy is awful. Fear and dissatisfaction prevail. Politicians are held in contempt. There is one major difference – Carter did not face an “ides of March” event.
In Shakespeare’s Julius Caesar, a soothsayer warned Caesar to “beware the Ides of March.” The prescient warning did not help Caesar. As Obama approaches his March moment, no warning can change his fate.
Ben Bernanke promised to end Quantitative Easing (the printing of money to stimulate the economy and fund the deficits) by the end of March. Some believe his commitment was a “campaign promise” to ensure his Senate reconfirmation. Others believe it was a real commitment, necessary to maintain a stable dollar. Shortly, the world will find out.
Mr. Bernanke, quite unintentionally and through no fault of his own, will be Obama’s Brutus, regardless of his decision. To understand why, some numbers are necessary. Government needs funding this year
Continue reading Obama’s “Ides-of-March” Moment is Near
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By Monty Pelerin, on January 29th, 2010 For those who want to understand more about money and inflation, the following piece by Bill Bonner of the Daily Reckoning is good reading.
The Descent of Money
By Bill Bonner
Paris, Fance
Science and technology have produced many wondrous breakthroughs. But there are some things it cannot improve. A kiss from natural lips is still the lover’s choice. Baby formula proved no match for the real thing. Ersatz money is a flop too. That last item is not so much a fact as a prediction.
The first modern competition between gold and paper money ended like the pre-modern ones. Gold won. Herewith, a short summary:
A rogue, John Law, was the protagonist of the story. He killed Beau Wilson in a duel. Then, he went on the lam…first to Scotland…then to Amsterdam…and finally to Paris. Like Alan Greenspan or Ben Bernanke, he made himself useful to people in high places – in this case the Duke d’Orleans, who needed money. Law had a way to get it:
“I have discovered the secret of the philosophers’ stone,” he is said to have remarked, “it is to make gold out of paper.”
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By Monty Pelerin, on December 9th, 2009 Ron Paul on CSPAN’s Washington Journal, Dec. 3, 2009
This is a highly recommended watch. There are four parts, each about 10 minutes. Links are provided for the last three at the bottom.
Part 2
Part 3
Part 4
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By Monty Pelerin, on December 3rd, 2009 Senator Jim Bunning provides a brutal and thorough summary of Bernanke’s role in the financial crisis.
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By Monty Pelerin, on December 3rd, 2009 The Fed has reached the point where there are two choices — Allow the government to shut down or allow itself to be the Treasury’s ATM machine.
Inflation is, as Milton Friedman was fond of saying, “always and everywhere a monetary phenomenon.” It is insidious. It becomes a part of everyday life, sometimes overlooked. It is cumulative and devastating. The US dollar has lost 96% of its purchasing power since the formation of the Federal Reserve in 1913. Most of that loss occurred from the late 1970s. The US abandoned Gold as backing for its currency in 1971, which left the entire world on fiat currency, unbacked by anything but government promises.
The American worker was clobbered during the past 30 plus years, whether he realized it or not. Today’s real weekly wage is below that of 1966. It has been so since 1977. During the late 1970s and early 1980s inflation was more than insidious, it was blatant. Mortgage rates, the prime rate and inflation rates rose well up into double digits. Inflation then was not some mild background music to life. It was a cacophony. As Reagan described it: “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man.”
We are likely now on the eve of an inflation that will make the Carter-Reagan era appear mild. The political class and their actions assure that.
This chart shows rather dramatically what has happened to the Monetary Base.
Continue reading The Fed Is Nothing But An ATM Machine
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Friedrich von Hayek
Friedrich von Hayek founded the Mont Pelerin Society.
“Monty Pelerin” is a pseudonym chosen by this blogger to convey general agreement with the philosophy, goals and spirit of the Mont Pelerin Society. No other connection exists between the blogger and the Society.
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