Christina Romer, Tribal-Economist For President Obama, Still Blaming Bush

She doesn't name him, you see, she just uses words like "inherited."

She also still thinks Cash for Clunkers was a good idea--willful suspension of disbelief and all that.

Apart from repeating the company line about how much things sucked when Obama took office and how he's done everything humanly possible to right the ship, Romer proposes even more government intervention in the private sector. This intervention will require even more government spending, natch.

Among other things, I'm reading Rose & Milton Friedman's "Free to Choose" (incidentally, an excellent Christmas gift idea). Given the incredible increase in the money supply over the last year both through government spending and the actions of Fed Chair Ben Bernanke, Friedman's cautions regarding the dangers of inflation seem timely. Page 275:

It takes time for these reactions to occur. On the average over the past century and more in the United States, the United Kingdom, and some other Western countries, roughly six to nine months have elapsed before increased monetary growth has worked its way through the economy and produced increased economic growth and employment [ed. note: matches up well with the recent "good" news that the US economy shed only ~167k jobs last month]. Another twelve to eighteen months have elapsed before the increased monetary growth has affected the price level appreciably and inflation has occurred or speeded up. The time delays have been this long for these countries because, wartime aside, they were long spared widely varying rates of monetary growth and inflation. On the eve of World War II wholesale prices in the United Kingdom averaged roughly the same as two hundred years earlier, and in the United States, as one hundred years earlier. The post-World War II inflation is a new phenomenon in these countries.

As sure as Obama and co. will continue to propose increased government spending, inflation will come.

When it does, it will act as a tax that robs the rich and poor alike.

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What A Return To The '70's Looks Like

It's not as cool & great as That '70's Show makes it look.

[W]e've largely forgotten our most recent brush with raging peacetime inflation, the 1970s. Although nothing like Germany's in the 1920s, ours was nonetheless powerful enough to be more dispiriting and more transformative of our culture than any stretch of post-World War II recession has been. It's probably not a coincidence that America began its long transformation from a nation of savers to one of consumers and debtors just after the inflation of the 1970s. . . .

To people who've worked their whole lives playing by the rules, that is, to the majority of adult Americans in the early 1970s, inflation at the hands of wayward government policy seemed to be a betrayal. People who had been thriftiest watched down payments for buying a home disappear, college savings accounts shrivel, retirement nest eggs vanish, the value of monthly pension checks shrink. Harvard Business School Professor Samuel Hayes recounted the damage to a relative of his in a magazine story: "He was the epitome of the Protestant ethic. He had inherited money, he had saved, he was very frugal, had a very modest house, had part of his investment money in bonds and short-term securities, had always maintained liquidity. And he came out of the Seventies looking like a fool."

This is no time to be responsible and save money. The Lesson, as always, taken from President Obama, get into as much (cheap) debt as possible and inflate your way out.

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Arthur Laffer: 'Double Digit Inflation & High Interest Rates'

Ready for a return to the '70's, writ large?

Some of you can go ahead and throw out the baby with the bath-water on this guy (Arthur Laffer) if you like, but to me, he's making a lot of sense.

Here we stand more than a year into a grave economic crisis with a projected budget deficit of 13% of GDP. That's more than twice the size of the next largest deficit since World War II. And this projected deficit is the culmination of a year when the federal government, at taxpayers' expense, acquired enormous stakes in the banking, auto, mortgage, health-care and insurance industries.

With the crisis, the ill-conceived government reactions, and the ensuing economic downturn, the unfunded liabilities of federal programs -- such as Social Security, civil-service and military pensions, the Pension Benefit Guarantee Corporation, Medicare and Medicaid -- are over the $100 trillion mark. With U.S. GDP and federal tax receipts at about $14 trillion and $2.4 trillion respectively, such a debt all but guarantees higher interest rates, massive tax increases, and partial default on government promises.

But as bad as the fiscal picture is, panic-driven monetary policies portend to have even more dire consequences. We can expect rapidly rising prices and much, much higher interest rates over the next four or five years, and a concomitant deleterious impact on output and employment not unlike the late 1970s.

Further down in the column, he suggests that the Fed contract the money supply by selling Bonds. Only they can't do it because the Obama administration is having to sell bonds to fund their outrageous expansion in government spending.

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Hyperinflation, The Politics Of Personal Destruction, &c. (UPDATED)

This article was emailed to me by Dan K. I would have preferred that he write it up & just let me link to his blog but oh well.

As Dan pointed out to me, it's by "John Taylor, a respected Stanford economist." So there you go, his bona fides are established.

I believe the risk posed by this debt is systemic and could do more damage to the economy than the recent financial crisis. To understand the size of the risk, take a look at the numbers that Standard and Poor’s considers. The deficit in 2019 is expected by the CBO to be $1,200bn (€859bn, £754bn). Income tax revenues are expected to be about $2,000bn that year, so a permanent 60 per cent across-the-board tax increase would be required to balance the budget. Clearly this will not and should not happen. So how else can debt service payments be brought down as a share of GDP?

The mistake Taylor and other responsible economic types make with regards to Obama and his policy is that they believe that he is a responsible actor. To believe this, they have to ignore the whole of what he has done and said he intends to do.

He effectively runs America's financial sector. He wants a 'systemic risk regulator' or some other such. He runs GM and Chrysler. He wants to run the whole of American health care. He wants to establish a cap & trade system which will create a whole new regulatory apparatus to, again, allow him to run that aspect of the American economy too.

He does not care what all of this might cost or how it puts the most successful economy in world history at risk. And when I say at risk, I mean of ever being what it once was. It is part of his overarching plan to remake America into a liberal utopia that all of these things happen.

Radical levels of inflation and other economic woes simply give the man pretext to control more and more.

For those of us who do not like the direction this country is going, we can at least enjoy one delicious little irony (I read this somewhere but I can't remember where to give credit): One of the chief criticisms of the Bush administration was that he used "fear" as a way to push through a conservative agenda. (Nevermind that many Democrats--including current leadership--collaborated and voted on things like the Patriot Act, authorization and funding for Iraq, Afghanistan, wiretapping, military courts, etc. You'll also have to forget that, of course, Obama has continued all of these Bush Admin. policies.)

Well, now their boy is doing exactly what they accused Bush of doing. Do the hypocrites have a problem with this? Of course not. Because it achieves their policy goals. Winning at any cost is part of the fabric of liberalism. Notice that when Republican presidents (Reagan with Bork; Bush 41 with Thomas; Bush 43 with Roberts & Alito) nominated judges for the Supreme Court, liberal groups full court attacked these men. Nothing was off limits. It was personal and it was nasty.

This is standard operating procedure for liberals. They wouldn't have it any other way. Its why, when they argue with you, and they start to lose (as, inevitably, they will) they begin to attack you personally and question your motives. They are unable to debate an issue on its merits.

Anyway, compare Democrats experience with Republican nominees to Republican treatment of Democrat nominees. Compare Bork, Thomas, et al to what you will soon see with Sotomayor and the Republican Senate. She'll get tough questions, but she won't be subjected to the "politics of personal destruction" or "a high tech lynching."

Back to the earlier point of this post: Every policy put forward by the Obama administration has been about re-shaping this nation and moving it towards a liberal dystopia. Inflation and continued economic turbulence aid him in this process and thus, are actually helpful to his cause.

John Taylor's and others' warnings fall on deaf ears in Washington DC. The only ones with ears to hear are either in the desert politically or forced to fall into line with Obama, Reid, and Pelosi.

UPDATE 29 May 11:21am BST: Ah, division of labor & specialization: Dan didn't write about the original article he sent me, but he did write about some sweet econ stuff--specifically, about his Q&A with the UK head of Islamic finance at PWC:

his explanation of the current financial crisis was the best I've heard yet, and I've heard and read many. No politicizing, no finger-pointing, clear, complete, and understandable. I've heard an interview with a journalist recently and he admitted that he and most journalists/news commentators have no idea what they are talking about when it comes to the matter of economics and finance. But since people are demanding answers, they pretend and make it up as they go. Mohammad Amin knew what he was talking about, and he knew better than most, and I'm not easily impressed.

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