Our G-20 Saviors: Spend your way to prosperity

Quotable

Sometimes I grow restless o’er piteous minds,
A billion screaming voices to the abyss,
And there’s only a handful of worthy kinds.

Sometimes I desire a smaller world than this,
So twas easier to be loved or reviled,
And life’s true purpose was harder to miss.

Sometimes I see that life’s patterned and tiled,
Monotonous, monochrome, simply too long.
I wish I were once again only a child.

Sometimes I want not to follow along,
To be as an island, though is said Man cannot.
For some reason ’tis solitude that’s thought wrong.

Sometimes I laugh at what I should not
For the world is stupid, and large, and mundane.
I wish to live as a Cartesian dot.

Sometimes I think I know what would be sane,
That God would do better with me at his side.
But I see all the same I am hopelessly vain,
And that even He could not compete with my pride.

                          Hubris, by Joseph Simmons, alias Túrin Húrinson

FX Trading – Our G-20 Saviors: Spend your way to prosperity

Interesting that just as the American people may have reached the point of government spending fatigue:

WASHINGTON—Spooked by concern about deficits, the Senate shelved a spending bill that included an extension of unemployment benefits, suddenly cutting off a federal cash spigot opened by President Barack Obama when he took office 18 months ago. (WSJ)

…as its government heads into the G-20 to tell other countries they need to spend more.

I keep saying to JR that you just couldn’t make this stuff up if you tried. No, really JR, it wasn’t always this way. We have had governments in the past run by at least semi-competent people. Really! No, really!

I did a piece a while back exploding the many fallacies of Keynesian pump-priming economics. When will we finally drive a wooden stake through the heart of this draconian pseudo intellectual clap trap?

This economic stuff really isn’t hard. Economics Professor Dick Armey, which is what he was back when I knew him, used to say this in class on a regular basis:

“Taxing moves money and spending moves resources.”

In other words, why on God’s green earth would anyone with a pulse believe taking money (taxes) from the most productive side of the economy (private sector), which uses resources efficiently thanks to the invisible hand of the market, and give it to the most unproductive side of the economy (government) who continually wastes finite resources (spending), thanks to the visible boot of the market?

Three answers:

1) Brainwashed by the Temples of Keynesian Hell, often referred to as Ivy League economics departments
2) Hubris, and a deep-seated belief in one’s ability to structure the lives of others
3) Pay off political cronies and “interest” groups

These are the qualities embedded in our illustrious team headed off to Montreal to tell others they need to spend more. It is to laugh.

I can just imagine the conversation among other country leaders and their closest confidants. It would probably go something like this: “These ridiculous clowns are in control of the most powerful economy on earth? OMG! What did we do wrong?”

And so it goes…but don’t worry, be happy; we are told by these same masters of economics “the recovery is here.”

But the money not being taken by the public sector is still being used to deleverage. Two charts on the next page tell the story we think better than anything else we can look at.

1) The average serf’s largest asset—his house—continues to lose value and looks like it can go a lot lower to reach the mean.
2) Consumer installment credit, as we’ve said before, is turning south for the first time since forever.

This is sea change stuff. Government needs to let it happen. But, because of 1-3 reasons above, they just can’t help themselves …

US Home Prices: Looks like more to go here…

US Consumer Installment Credit: Looks a lot like the housing chart above

…yes, but the stock market is roaring! Well, is it?

If we re-calibrate stocks in terms of real purchasing power, using gold as our standard, it ain’t looking so hot…..

Dow Jones Industrial Average (Black) versus DJIA divided by Gold (Red) Wekly:

Consumption is wealth! Believe that and I have some property in south Florida I’d like you to look at.

Happy Friday!