Distance, it is said, makes the heart grow fonder. But here we sit on the Pacific Coast of Nicaragua — roughly two thousand miles away from Washington, DC — and yet we have grown no fonder of Ben Bernanke’s wacky monetary tactics; nor have we grown fonder of the vitriol that passes for American political “discourse.”
That said, Washington, DC is not a total bust when viewed from a distance. We have, for example, grown somewhat fonder of the Redskins and their electrifying new quarterback, Robert Griffin III.
So thumbs up to RGIII, but thumbs down to QE3.
Bernanke’s latest money-printing escapade ($40 billion per month is the Chairman’s promise) is not all bad, of course. Even your Daily Reckoning editors cannot despise it completely.
That’s because condemning money-printing schemes like QE is a little like condemning sugar. Everyone knows sugar tastes wonderful. But no one know really knows how much is too much…and, more to the point, almost no one wants to know how much is too much.
The delicious sensation is immediate; the adverse side effects are distant. That’s reason enough for most folks to make their double ice cream cone a triple…or their QE2 a QE3. And this time around, just for kicks, the Fed Chairman is going to indulge in QE3 as limitlessly as an unattended child would indulge in a 5-gallon drum of cookies and cream.
It’s called a “non-traditional policy tool,” Dear Reader, and the Federal Reserve Chairman has assured us that it probably does the economy a lot of good…or at least a whole bunch of “less bad.”
Maybe so, but the hard economic data suggest that the Chairman’s non-traditional tactics have also delivered lots of “more bad.” In other words, as we observed last week, “If this is the cure, should we try the disease for a while?”
The chart above provides one very enlightening image of the Chairman’s handiwork. Let the reader decided whether this image be “less bad,” “more bad” or some other shade of “bad.”
But “good” is not part of this picture. During the last four years, the number of Americans on food stamps has soared by more than 17 million, while the number of employed Americans has dropped by more than 3 million. In percentage terms, the number of Americans on food stamps has soared 60% in four years!
To folks lacking a Harvard education, these dismal data points might seem pretty awful. But again, as the Chairman explains, they are less bad than what might have been. In fact, according to the “Outreach” section of the USDA website, the soaring number of food stamp recipients is an absolutely fantastic success story:
“SNAP [i.e. food stamps] is the only public benefit program which also serves as an economic stimulus, creating an economic boost that ripples throughout the economy when new SNAP benefits are redeemed. By generating business at local grocery stores, new SNAP benefits trigger labor and production demand, ultimately increasing household income and triggering additional spending.”
So you see, what appears on its face to be a bad thing is really a super awesome thing. If only someone could just figure out how to increase the roles of food stamp recipients, the US economy would really come alive! Fortunately, the authorities are making rapid progress. At last count, 46 million Americans were on the food stamp roster. That’s more than 15% of the US population.
Not surprisingly, there are always naysayers in the crowd. There are always folks who insist that increasing government’s role in the economy will impede growth. There are always folks who scoff at the idea that increasing handouts will increase national prosperity.
Mitt Romney is one of those folks. A few days ago, the Republican dared to utter the unutterable: Americans have become increasingly dependent upon government assistance…and the more dependent they become, the more dependent they seek to become.
Your editor takes no sides in the skirmish between Romney and Obama. But he does believe that America’s voiceless capitalistic spirit deserves to be heard from time to time.
As such, Romney’s recent “gaffe” is a fascinating jumping off point to examine the current state of American capitalism…and its prospects for survival.
Eric Fryfor The Daily Reckoning
Eric J. Fry, Agora Financial's Editorial Director, has been a specialist in international equities for nearly two decades. He was a professional portfolio manager for more than 10 years, specializing in international investment strategies and short-selling. Following his successes in professional money management, Mr. Fry joined the Wall Street-based publishing operations of James Grant, editor of the prestigious Grant's Interest Rate Observer. Working alongside Grant, Mr. Fry produced Grant's International and Apogee Research, institutional research products dedicated to international investment opportunities and short selling.
Mr. Fry subsequently joined Agora Inc., as Editorial Director. In this role, Mr. Fry supervises the editorial and research processes of numerous investment letters and services. Mr. Fry also publishes investment insights and commentary under his own byline as Editor of The Daily Reckoning. Mr. Fry authored the first comprehensive guide to investing internationally with American Depository Receipts. His views and investment insights have appeared in numerous publications including Time, Barron's, Wall Street Journal, International Herald Tribune, Business Week, USA Today, Los Angeles Times and Money.
Why is Ben worried so much about unemployment?
Once they manage to somehow become disabled while drinking beer and watching Jerry
Springer re-runs the un-employment rate will be
“It’s called a ‘non-traditional policy tool,’”
can a policy with so much history behind it be called “non-traditional”?
Of course ‘private’ corporations also get big welfare from the state and Rommney is all for those and quiet about it.
Daily, I engage in political, energy, and economics debates, especially from the progressive perspective……. But if I may just divert this coming day: Sept 22/23, this day is quite special. It is the Equinox.
A few things make this day really interesting:
1.) the day length worldwide is 12 hour;
2.) the night length worldwide is 12 hours;
3.) spring begins south of the equator, and autumn begins north of the equator;
4.) the new 12 hour night at the North Pole is a twilight all night;
5.) the new 12 day at the South Pole is a dawn all day;
6. the loss of daylight per day north of the equator is at its greatest;
7.) the gain in sunlight per day south of the equator is at its maximum;
8.) not much change along the equator, but a dramatic shift at the poles
Ukrain's new anti-Russian government may soon privatize the country's energy sector... at least according to one pro-Russian news agency. Of course, if the reports are true, this could have significant implications for entire region, and may be a win-win scenario for anyone reckless enough to buy Ukrainian government bonds. Dave Gonigam explains...
People tend to believe they are endowed with a few specific "rights" - property, liberty, happiness, etc. Unfortunately, as Harry Browne explains, rights only exist in theory. In practice they don’t accomplish much - no matter how much people may discuss them. Read on...
Politicians and bureaucrats are notorious for manufacturing euphemisms - clever but deceptive substitutes for what they really mean but don’t want to admit. That’s how the phrase “revenue enhancement” entered the vocabulary. Apparently, some courageous government officials can't bring themselves to say "tax hike." Lawrence Reed continues...
Whatever your feelings on global warming, the fact is, right now, the world produces an unsustainable amount of carbon dioxide. So much so, that the UAE - a nation that depends almost solely on oil production - is committed to the development of renewable energy sources in the near future. Stephen Petranek has more...
In the vain of great thinkers like Ayn Rand and Rose Wilder Lane, libertarian novelist L. Neil Smith has for many years imagined heroes who tell truth to power at great risk. Today, Doug French reviews his latest non-fiction work, and why it's such a great introduction to the ideas espoused by libertarian thought. Read on...
There are only two possible outcomes of the Russian annexation of Crimea. And neither one involves Putin withdrawing from the region. But what does this conflict portend for the financial markets? Anatole Kaletsky explains, with an examination of how similar scenarios developed, along with the corresponding market reactions. Read on...
As the old saying goes, the only two certainties in life are death and taxes. But while the former may be inevitable, there are ways to mitigate the latter's influence on you and your personal wealth. So today, the late Harry Browne offers a few timeless tips on how to minimize your tax burden. Read on...