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.