For those of you who might happen to get Parade Magazine as an insert in your Sunday newspaper, you might have come across an article written by Rebecca Webber and Dr. Ranit Mishori in the section called Intelligence Report. This is an excellent example of taking the best set of numbers you can find to fit your personal world narrative. Parade Magazine has always been a very liberal piece of Sunday entertainment, but in the last few years it has become blatantly biased toward the Socialist agenda. So, what was wrong with their report?
In their article they try to show that other countries are in worse shape than the US and conclude that we are not so bad off. The title of their article was "Does America Owe Too Much?" They start out by saying that "the US public debt was $7.5 trillion - about 53% of the country's gross domestic product (GDP). Technically, that is factual, but what is wrong is that they are including only part of the debt, the public debt, not the gross national debt. The Gross National Debt, which includes the total of our obligations is actually around $13 trillion and is estimated to be over $14 trillion at the end of this year and that is nearly equal to the entire (GDP). These kinds of distortions are not just wrong, they are dangerous. They intentionally mislead the public into a false sense of security. They go on in the article to site other numbers used by the Congressional Budget Office (CBO) as though these were official numbers that we should all use. The CBO is not an official source for any economic numbers. They use the numbers supplied by others to estimate outcomes based on various scenarios. The source for most the official government numbers comes from the Department of Commerce and the Treasury Department. Do not be mislead by these spinners of political narratives. The truth lies with the facts and we should let the numbers speak for themselves.
It is also important for citizens to understand that there is no bottomless pit of investment money around the world waiting to absorb our debt. Nearly all money that is available for investment is already invested in something. In order for markets to be willing to buy our debt through treasury notes, they have to be more attractive than what the money is already earning in other investment instruments.
At the moment, Congress and this Administration are on a very dangerous path and something will eventually have to give. There is simply not enough money in the system to be able to support these massive numbers that are being spent. Americans must wake up because only they can stop this drunken spending spree.
Sunday, March 28, 2010
Wednesday, March 10, 2010
The Fiscal Monster
In February, a New York Times columnist, and college professor, Paul Krugman wrote one of the strangest articles related to national debt ever written by someone professing to be an economist. Krugman is well known for two things. He is a devoted a socialist and winner of a Nobel Prize for which being a socialist now seems to be a prerequisite. Nobel Prizes these days are handed out only to those who carry the party message and Krugman does that with some zeal, albeit more than a bit crazy. However, that credential seems to have given him access to the media and he has busied himself helping the Obama administration try to sell the notion that national debt is a good thing.
In this week's article, entitled "Fiscal scare tactics miscast deficit as a monster", Krugman claims that Republicans in Congress and other economists around the world are simply stirring up hysteria. He believes there is nothing to be concerned about and that the current deficits represent no threat. This is tantamount to someone telling you that even though you are bankrupt, you have nothing to worry about and you should just take it all in stride and keep right on spending. This is not just bad advice; it is lunacy at the top of the scale. It is no wonder that the Obama administration loves Krugman. It is like taking your alcoholic friend along to go drinking. Not only is Krugman wrong, I think it is probable that he is suffering from some kind of mental delusion. Certainly no sane finance or economics expert would consider such statements. On the other hand, this might be from spending too many years locked away in his office in his university. I can see why he remains where he is, safely tenured in his job, because no business would hire him.
Lest anyone actually believe Professor Krugman, let me assure them that this is certainly not the view of the real world business economists and finance community. Clearly around the world, there is great concern, not just for the deficits of the US, but even more for some of the major European and Asian countries. This is not mystical, not opinion as Krugman suggests, not guess work, it is fact. The numbers do the speaking, not the economists. They only have to gather the numbers and assemble them. The reality is very simple to understand. There are only so many dollars in our economy and only so many in all those of the other countries. We know where that money is, what is available to invest, what financial instruments each is invested in, and what can be supported. In order for the US Government to get people to buy their notes, money must be transferred from some other investment source that either offers less return or is less secure. Taking money out of the capital investment market means businesses stop growing and so do jobs. This normally means that others will have to increase their returns to investors, thus setting off another round of inflation and a new cycle competing for the same dollars. In order to meet these staggering deficit numbers, profits, and wealth will have to grow enormously or they will simply not be able to find buyers for treasury notes.
The size of national debts that are being run up, exceed not just the amount of cash available in every kind of investment instrument, but in the entire gross domestic products (GDPs) of the countries that are creating them. Not only that, the unfunded liabilities for government programs like social security and Medicare are becoming many times larger than the GDPs and at current rates there is simply no money in the system to pay them. To suggest there is nothing to worry about is just insanity. Anyone that buys into Krugman's ideas is either as crazy as he is, unbelievably naive, or is trying to destroy the nation. We should speak out strongly against any such attempts to undermine the drive to fix these national problems. They must be fixed soon, or they will fix themselves with dire consequences.
In this week's article, entitled "Fiscal scare tactics miscast deficit as a monster", Krugman claims that Republicans in Congress and other economists around the world are simply stirring up hysteria. He believes there is nothing to be concerned about and that the current deficits represent no threat. This is tantamount to someone telling you that even though you are bankrupt, you have nothing to worry about and you should just take it all in stride and keep right on spending. This is not just bad advice; it is lunacy at the top of the scale. It is no wonder that the Obama administration loves Krugman. It is like taking your alcoholic friend along to go drinking. Not only is Krugman wrong, I think it is probable that he is suffering from some kind of mental delusion. Certainly no sane finance or economics expert would consider such statements. On the other hand, this might be from spending too many years locked away in his office in his university. I can see why he remains where he is, safely tenured in his job, because no business would hire him.
Lest anyone actually believe Professor Krugman, let me assure them that this is certainly not the view of the real world business economists and finance community. Clearly around the world, there is great concern, not just for the deficits of the US, but even more for some of the major European and Asian countries. This is not mystical, not opinion as Krugman suggests, not guess work, it is fact. The numbers do the speaking, not the economists. They only have to gather the numbers and assemble them. The reality is very simple to understand. There are only so many dollars in our economy and only so many in all those of the other countries. We know where that money is, what is available to invest, what financial instruments each is invested in, and what can be supported. In order for the US Government to get people to buy their notes, money must be transferred from some other investment source that either offers less return or is less secure. Taking money out of the capital investment market means businesses stop growing and so do jobs. This normally means that others will have to increase their returns to investors, thus setting off another round of inflation and a new cycle competing for the same dollars. In order to meet these staggering deficit numbers, profits, and wealth will have to grow enormously or they will simply not be able to find buyers for treasury notes.
The size of national debts that are being run up, exceed not just the amount of cash available in every kind of investment instrument, but in the entire gross domestic products (GDPs) of the countries that are creating them. Not only that, the unfunded liabilities for government programs like social security and Medicare are becoming many times larger than the GDPs and at current rates there is simply no money in the system to pay them. To suggest there is nothing to worry about is just insanity. Anyone that buys into Krugman's ideas is either as crazy as he is, unbelievably naive, or is trying to destroy the nation. We should speak out strongly against any such attempts to undermine the drive to fix these national problems. They must be fixed soon, or they will fix themselves with dire consequences.
Friday, March 5, 2010
The Public and Media Weigh In
Perhaps it is in the nature of humans to make quick assumptions and judgments. Maybe our early ancestors had to do that to survive. That’s a question I certainly am unqualified to answer, but like others, have asked. There are dozens of media reports every day about subjects such as an air traffic controller who let his kids speak from the control tower, how government bills that have not yet been written will affect us, how new tax systems will solve our problems, and so on. Before anyone has the facts on these issues, many in the media are writing stories suggesting who is at fault, who should be fired, who should apologize, how our lives will be affected, and so forth. The public immediately begins choosing sides, yet no one has any real facts on either side of the debates. Why do we do this?
I am increasingly troubled by these leaps to judgment because rather than learning the truth and making good rational decisions, we may end up with the exact opposite of what we thought we were going to achieve. Even being a professional researcher, I am still inclined to jump to conclusions myself, and am constantly battling with myself to remain objective and to get the facts before forming an opinion. I know that I have expertise in certain subjects, but even then it is limited to some fairly narrow areas. I try my best to confine my advice to others based on what I actually know, not on what might be. The world is full of misinformation, now more than ever because of the internet and cable TV. We are flooded with it daily.
One of the important things we try to teach our children at home and at school is how to think. Hopefully, the most important thing we try to learn in college is to not assume but deductively analyze what we read. I wonder at times if we are failing there too. When examining any issue it is as important to know what we don’t know as it is what we know. Much more often, what we don’t know is far greater. We need to challenge the information we get and not just accept it on face value. I frequently hear pundits taking positions about things that they have absolutely no expertise or experience to even know the right questions to ask. Many of these issues are highly technical and even those within those professional fields don’t have all the information or answers. Those leaps to judgment seem to be especially true in the media and politics.
We are currently faced with many national and state issues that could affect our lives for many years. It is critical that we try to inform the public and not mislead them. Trying to lead the public through emotional pleas from one side or the other may create unintended consequences that will severely damage our way of life. I believe it is critical for all leaders in government, business, and professional organizations to refrain from jumping to conclusions until they have the facts. They should question what they are shown and told. They should ask those who claim expertise for their own credentials to advise. Not all opinions are equal and simply because someone agrees with your position does not make them an expert or qualified to make an assessment. They must know what they don’t know and seek the truth, regardless of where that truth leads. I am not naïve enough to think that those who have personal interests in the outcomes of the decisions will stop spinning their versions. However, those who represent the public’s interest must stop the misrepresentations, the withholding of contradictory information, and jumping to conclusions about things of which they know little or nothing. We, the citizens, should do the same and demand it of our leaders.
I am increasingly troubled by these leaps to judgment because rather than learning the truth and making good rational decisions, we may end up with the exact opposite of what we thought we were going to achieve. Even being a professional researcher, I am still inclined to jump to conclusions myself, and am constantly battling with myself to remain objective and to get the facts before forming an opinion. I know that I have expertise in certain subjects, but even then it is limited to some fairly narrow areas. I try my best to confine my advice to others based on what I actually know, not on what might be. The world is full of misinformation, now more than ever because of the internet and cable TV. We are flooded with it daily.
One of the important things we try to teach our children at home and at school is how to think. Hopefully, the most important thing we try to learn in college is to not assume but deductively analyze what we read. I wonder at times if we are failing there too. When examining any issue it is as important to know what we don’t know as it is what we know. Much more often, what we don’t know is far greater. We need to challenge the information we get and not just accept it on face value. I frequently hear pundits taking positions about things that they have absolutely no expertise or experience to even know the right questions to ask. Many of these issues are highly technical and even those within those professional fields don’t have all the information or answers. Those leaps to judgment seem to be especially true in the media and politics.
We are currently faced with many national and state issues that could affect our lives for many years. It is critical that we try to inform the public and not mislead them. Trying to lead the public through emotional pleas from one side or the other may create unintended consequences that will severely damage our way of life. I believe it is critical for all leaders in government, business, and professional organizations to refrain from jumping to conclusions until they have the facts. They should question what they are shown and told. They should ask those who claim expertise for their own credentials to advise. Not all opinions are equal and simply because someone agrees with your position does not make them an expert or qualified to make an assessment. They must know what they don’t know and seek the truth, regardless of where that truth leads. I am not naïve enough to think that those who have personal interests in the outcomes of the decisions will stop spinning their versions. However, those who represent the public’s interest must stop the misrepresentations, the withholding of contradictory information, and jumping to conclusions about things of which they know little or nothing. We, the citizens, should do the same and demand it of our leaders.
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