Let’s imagine that the gold standard was not abolished in 1971, and was instead maintained — or, alternatively, assume that only gold is money and that other things are merely paper intermediaries. What would be the shape of economic data under that paradigm? Here’s retail gasoline:
The Great Crunch
[Today[ U.S. stocks fell, capping a fourth straight weekly slump for the Standard & Poor’s 500 Index, as the cheapest price-earnings ratios since 2009 failed to lure investors amid concern the global economy is weakening. The yen touched a post-World War II high against the dollar.
The S&P 500 dropped 1.5 percent to 1,123.53 at 4 p.m. in New York, after rising as much as 1.2 percent. The Stoxx Europe 600 Index fell 1.6 percent to its lowest close since July 2009. The Japanese yen reached 75.95 per dollar, its strongest postwar level as investors sought refuge in the currency. Oil fell 0.1 percent as it also swung from gains to losses. Gold futures topped $1,880 an ounce for the first time. Ten-year Treasury yields were unchanged after reaching a record low yesterday.
Citigroup Inc. and JPMorgan Chase & Co. lowered their growth forecasts for the U.S. economy. German Chancellor Angela Merkel stepped up her rejection of jointly issued euro-area bonds, following speculation the European Union will start joint bond sales. Technology stocks in the S&P 500 retreated 2.8 percent, the most among a group of 10 in the index, as Hewlett- Packard Co. slumped 20 percent, its biggest drop since at least 1980.
Teabagging for the Military Industrial Complex
From Tea Party Nation leader Judson Phillips, via the Economist:
If we decided to build a couple of new carriers, thousands of workers would be hired for the shipyards. Thousands of employees would be hired for the steel mills that would provide the steel for the hull and various sub contractors would hire thousands. Do you know what that means?It means they would receive paychecks and go out and spend that money. That would help a recovery. That is a shovel ready project!Increasing spending for the military does a couple of things. It not only not only stimulates the economy, it protects our nation. That is a better investment than say spending money on teaching Chinese prostitutes how to drink responsibly.
I hold very strong views regarding the claim that military spending helps the economy. As I explained previously:
The most obvious example of the unproductive use of money is war. Time, labour, materials, ideas and spending go into warfare, and what comes out? Destruction — bombs are destroyed when they hit the ground, and they destroy the area around which they hit. They destroy infrastructure, they kill people, and they create hatred and resentment that very often triggers more and greater warfare.
Most bizarrely, the Tea Party has since its inception (supposedly) been committed to reducing government expenditures, to pay down debt. Military expenditures are still huge. And is America safer than ever? Is the additional military spending helping us pay down debt?
No. America’s indebtedness allows China to boss America around. The level of taxation and debt necessary for high military spending is preventing America from investing in the poor, in youth, in alternative energy, and in infrastructure that would create wealth, opportunity and security for the nation, instead of short-termist gains for corporations, bureaucrats and the military industrial complex.
Phillips’ bizarre statement adds fuel to the fire of the view that the Tea Party is (largely) a manipulated group of poor and lower-middle class voters who are in fact manoeuvring for the interests of a tiny corporatist and industrialist elite. The “all government spending is bad” rhetoric has quickly been turned around to “spend less on welfare, spend more on bombing brown people to death”, the rallying cry of big government neo-Conservatives like George W. Bush and Dick Cheney. That administration increased the national debt by a higher proportion than any Presidency in history, creating deeper debt woes, and handing huge power and wealth to investors like the Communist Party of China. Those early anti-tax and anti-debt protests were long ago astroturfed by corporatists who want more and more government handouts to big business and to the military industrial complex.
Should you hate the Tea Party? No. The Tea Party protesting on the street is not your enemy: the poor and lower-middle class are “taxed enough already”, often paying a higher nominal income tax rate than hedge fund billionaires. Like many in America, they and their children are increasingly unemployed. Their house prices have fallen. Their businesses have stumbled. They are having difficulty getting loans to invest in new projects and businesses. So the Tea Party are right to get mad. They are right to get angry. But their targets — immigrants, welfare recipients, climate change scientists, foreigners and liberals — are way off the mark. The real enemy of freedom in America is corporatism, and billionaires who live off government handouts and military spending, who prevent tax hikes on the super-rich, and who prevent spending on jobs and infrastructure for the poor. The Tea Party movement has been deliberately misdirected, and now we see what its leaders are gunning for: more military spending, more government handouts to big business, more jobs for the boys. This is what has to end for America to get back on its feet. So once again, I give you Eisenhower’s 1961 speech: