MCViewPoint

Opinion from a Libertarian ViewPoint

Posts Tagged ‘Great Recession’

Something Is Wrong: The Fed Is Offering $100 Billion A Day In Loans To Unnamed Banks

Posted by M. C. on October 1, 2019

https://www.shtfplan.com/headline-news/something-is-wrong-the-fed-is-offering-100-billion-a-day-in-loans-to-unnamed-banks_09302019

Mac Slavo

The Federal Reserve is once again secretly shelling out trillions of dollars in the dark, while Congress willingly looks the other way.  In other words, the central bank has initiated a replay of the 2007-2010 financial crisis.

You can call it QE4 if you want, or don’t call it QE4.  What it’s labeled isn’t as important as what it’s doing. Arguing semantics is not going to change the outcome.  The central bank is injecting $100 billion per day into the financial markets.  Any label on that cannot hide the fact that if this economy was doing well or was “robust” than there wouldn’t be a need for any of this.

The Federal Reserve Bank of New York first initiated its emergency overnight loans to Wall Street this year on Tuesday, September 17, starting off at the rate of $75 billion daily. It then increased its loans by adding, in addition to the $75 billion daily, 14-day term loans in the amount of $30 billion to be offered three times this past week. But after the demand for the first 14-day loan was more than double the $30 billion offered, the New York Fed boosted the next term loans to $60 billion and increased its overnight loans to $100 billion. –Wall Street on Parade

This mirrors the Great Recession of a decade ago.  When the Fed is secretly handing out money to banks at low rates to bail them out, you’ve got a repeat of the previous crisis. It’s hard to say, however, if this crisis will be worse than the last one. And simple math tells you that something is very wrong…

Be seeing you

Wumo Collection: Something is Wrong Hard Cover 1 (Andrews ...

 

 

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Data Show That Poverty in the U.S. Was Plummeting—Until Lyndon Johnson Declared War On It – Foundation for Economic Education

Posted by M. C. on June 26, 2019

We were winning until the government turned it into (another) war.

https://fee.org/articles/poverty-in-the-us-was-plummeting-until-lyndon-johnson-declared-war-on-it/

Daniel J. Mitchell

One of the more elementary observations about economics is that a nation’s prosperity is determined in part by the quantity and quality of labor and capital. These “factors of production” are combined to generate national income.

I frequently grouse that punitive tax policies discourage capital. There’s less incentive to invest, after all, if the government imposes extra layers of tax on income that is saved and invested.

Bad tax laws also discourage labor. High marginal tax rates penalize people for being productive, and this can be especially counterproductive for entrepreneurship and innovation.

Still, we shouldn’t overlook how government discourages low-income people from being productively employed. But the problem is more on the spending side of the fiscal equation.

The Welfare State’s Effect on the Poor

In Thursday’s Wall Street Journal, John Early and Phil Gramm share some depressing numbers about growing dependency in the United States:

During the 20 years before the War on Poverty was funded, the portion of the nation living in poverty had dropped to 14.7% from 32.1%. Since 1966, the first year with a significant increase in antipoverty spending, the poverty rate reported by the Census Bureau has been virtually unchanged…Transfers targeted to low-income families increased in real dollars from an average of $3,070 per person in 1965 to $34,093 in 2016…Transfers now constitute 84.2% of the disposable income of the poorest quintile of American households and 57.8% of the disposable income of lower-middle-income households. These payments also make up 27.5% of America’s total disposable income.

This massive expansion of redistribution has negatively impacted incentives to work:

The stated goal of the War on Poverty is not just to raise living standards but also to make America’s poor more self-sufficient and to bring them into the mainstream of the economy. In that effort the war has been an abject failure, increasing dependency and largely severing the bottom fifth of earners from the rewards and responsibilities of work…The expanding availability of antipoverty transfers has devastated the work effort of poor and lower-middle income families. By 1975 the lowest-earning fifth of families had 24.8% more families with a prime-work age head and no one working than did their middle-income peers. By 2015 this differential had risen to 37.1%…The War on Poverty has increased dependency and failed in its primary effort to bring poor people into the mainstream of America’s economy and communal life. Government programs replaced deprivation with idleness, stifling human flourishing. It happened just as President Franklin Roosevelt said it would: “The lessons of history,” he said in 1935, “show conclusively that continued dependency upon relief induces a spiritual and moral disintegration fundamentally destructive to the national fiber.”

In another WSJ column on the same topic, Peter Cove reached a similar conclusion:

America doesn’t have a worker shortage; it has a work shortage. The unemployment rate is at a 15-year low, but only 55% of Americans adults 18 to 64 have full-time jobs. Nearly 95 million people have removed themselves entirely from the job market. According to demographer Nicholas Eberstadt, the labor-force participation rate for men 25 to 54 is lower now than it was at the end of the Great Depression. The welfare state is largely to blame… insisting on work in exchange for social benefits would succeed in reducing dependency. We have the data: Within 10 years of the 1996 reform, the number of Americans in the Temporary Assistance for Needy Families program fell 60%. But no reform is permanent. Under President Obama, federal poverty programs ballooned.

Edward Glaeser produced a similar indictment in an article for City Journal:

In 1967, 95 percent of “prime-age” men between the ages of 25 and 54 worked. During the Great Recession, though, the share of jobless prime-age males rose above 20 percent. Even today, long after the recession officially ended, more than 15 percent of such men aren’t working… The rise of joblessness—especially among men—is the great American domestic crisis of the twenty-first century. It is a crisis of spirit more than of resources… Proposed solutions that focus solely on providing material benefits are a false path. Well-meaning social policies—from longer unemployment insurance to more generous disability diagnoses to higher minimum wages—have only worsened the problem; the futility of joblessness won’t be solved with a welfare check… various programs make joblessness more bearable, at least materially; they also reduce the incentives to find work… The past decade or so has seen a resurgent progressive focus on inequality—and little concern among progressives about the downsides of discouraging work… The decision to prioritize equality over employment is particularly puzzling, given that social scientists have repeatedly found that unemployment is the greater evil.

Encouraging Dependency

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