In 1941, the United States was first assigned the so-called “triple A” or AAA rating, a reflection of the widespread belief, at least in the free world, that the United States government could be relied upon absolutely to pay its debts. At the time, the United States had recently grown into the world’s largest economy. The dollar, after the end of the Second World War, became the world’s reserve currency under the terms of the Bretton Woods agreement. Other hard currencies were to be convertible to U.S. dollars, which were in turn convertible (for international investors, at least) into gold (the so-called “gold exchange standard”).
The general perception of the dollar as the world’s backstop currency and of U.S. government debt as being as good as gold survived President Nixon’s closing of the “gold window” in 1971 and the decade of economic malaise — which included significant inflation — that followed. This is surprising in hindsight because Nixon’s action certainly fulfilled the criteria for a partial default, being motivated by the inability of the United States to service debts incurred in the Vietnam War.
Every four years, the two major political parties choose their nominees for President of the United States. The Republican and Democrat standard-bearers, like the political parties themselves, then represent the opposing sides of the political divide between conservatism and liberalism — or so we are told. In truth, though the major-party standard-bearers certainly appeal to different constituencies, the substance of what they would do as President is much more similar than their rhetoric suggests.
For too many years, regardless of whether the occupant in the White House is a Republican or Democrat, the President has generally pursued a course of more socialism at home and more interventionism abroad. Consider the TARP bailout of the big financial institutions: GOP Senator John McCain and Democrat Senator Barack Obama both voted for the TARP legislation prior to the 2008 election — an election that supposedly pitted an opponent of redistributing the wealth (remember how McCain embraced “Joe the Plumber”?) against an advocate of socialism. Despite the rhetoric, if McCain were elected President in 2008, he could have been expected to continue supporting socialist bailouts, just like the last GOP President, George W. Bush, did.
Only 26 percent of the public approves of President Obama's handling of the economy in the latest Gallup poll, conducted Aug. 11-14, while a whopping 71 percent said they disapproved. That’s down from Obama’s previous low point of 35 percent on this top issue.
The public’s growing dissatisfaction shouldn’t be surprising. Going back to 1890, reports the National Bureau of Economic Research, the only U.S. president with a worse record than Obama in job creation in his first two and a half years in office, measured in terms of percentage change, was Herbert Hoover, presiding over the emergence of the Great Depression.
“Official unemployment is 9.1 percent,” stated a New York Times editorial on August 15, decrying the nation’s jobs picture, “but it would be 16.1 percent, or 25.1 million people, if it included those who can only find part-time jobs and those who have given up looking for work.”
Rep. Fred Upton (R-Mich.) made his position on cutting entitlement spending as part of the SuperCommittee’s attempt to reduce the deficit perfectly clear, sort of: "It’s awfully hard to tell someone … who might be 82, that they’ve gotta go back to work, because their benefits are gonna be chopped. That’s not going to happen. We’re not gonna allow that to happen." Of course, no one is suggesting any such thing.
The most ambitious of the various trial balloons on the entitlement issue have to do with reducing benefits slightly for future participants in Social Security and Medicare, not current beneficiaries. But some observers say this appears to be typical of Upton on many issues that have faced Congress in recent years: focusing on something that is irrelevant in order to avoid the important, or the embarrassing.
For instance, when Upton was nominated by House Speaker John Boehner to the SuperCommittee, he could have decided to keep the promise he made in taking his oath of office:
While the debate over the raising, lowering, or demolishing the debt ceiling is new(ish), the fact that the federal government’s financial house is in disorder is a situation that has existed for over a century. The last few Presidents (of both parties), in collusion with an all too compliant Congress (regardless of which party was in the majority), have spent money on a scheme of government expansion that would drive any nation into the abyss of fiscal desolation in which America now finds itself.
For example, Democrats, whether in the White House or on Capitol Hill, zealously protect their core bloc of voters by throwing themselves in front of any legislative attack on any of the myriad entitlement programs that assure their electoral success and support.
Republicans, on the other hand, are equally vigilant in their watch over the corporate welfare that lines the pockets of their big oil, big bank, military industrial complex-connected cronies. Some of this money, they rightly assume, will find its way into their own campaign coffer, thus perpetuating the cycle of deceit and destruction.
Wall Street professionals' expectations are modest over Federal Reserve Chairman Ben Bernanke’s highly anticipated remarks at the Jackson Hole symposium this Friday. Unlike last year when the chairman announced the start of his program to purchase government securities in order to keep the economy from slipping into a recession and possibly deflation, known as Quantitative Easing II (QE2), his options now are much more limited. The anticipated bounce in the economy has fizzled, inflation is increasing, the banks are stuffed full of reserves but few are borrowing, and interest rates are already at zero and are expected to remain there well into 2013.
What can he say and, more importantly, what can he do? Jim O’Sullivan with MF Global suggested: “We are not forecasting more easing,” while Tom Porcelli of RBC Capital Markets confirmed, “We expect news out of Jackson Hole will be more about getting a feel for the Fed’s opinion on its easing options.” Analysts at Barclays Capital are expecting Bernanke to “reiterate that the Fed predicts growth to accelerate,” while Capital Economics thinks that he “will probably emphasize that the Fed has the tools to boost the economy if deemed appropriate.” In other words, there will be a lot of words, but little expected in the way of change.
Which is probably very smart in light of the hole the Fed has dug itself in trying to stimulate the economy. As noted in Barrons magazine, Alan Abelson wrote,
The debt crises of European Union member-states have reached critical mass. Three of the "PIIGS" nations — Portugal, Ireland, and Greece — and likely the other two — Italy and Spain — are simply too deeply in debt to pay off the principal and interest on national government bonds without massive help from other European nations, specifically Germany. And Germans are increasingly upset at how their government and that of France are attempting to solve the catastrophe.
According to Spiegel Online,
A poll released Friday indicates Germans know little about the current euro crisis — but are overwhelmingly opposed to the way it is being handled by German Chancellor Angela Merkel and French President Nicolas Sarkozy, the two leaders spearheading efforts to solve the crisis.
The survey of 1,001 Germans conducted for the public broadcaster ARD by pollster Infratest Dimap found that three-quarters of Germans were either not very confident or not at all confident in Merkel's leadership during the euro crisis. Only 22 percent said they had strong faith in her leadership.
Officials in China have reportedly been cracking down on the latest trademarked merchandise rip-off in that country: phony Apple stores selling iPads, iPods, iPhones, and other popular “Mac” electronic gadgetry.
The Associated Press reported that an American living with her husband in the city of Kunming, in the southern Yunnan province, “stumbled on three shops masquerading as bona fide Apple stores in the city” in July. “She took photos and posted them on her BirdAbroad blog.” A subsequent blog posting includes a YouTube video walk-through of one of the stores to show the effort that was put into making the counterfeit store seem like the real thing.
The 27-year-old blogger said the phony stores were so convincing that even the employees appeared to think they were working for the real company. “It looked like an Apple store,” she wrote. “It had the classic Apple store winding staircase and weird upstairs sitting area. The employees were even wearing those blue T-shirts with the chunky Apple name tags around their necks.” But, she added, “some things were just not right: the stairs were poorly made. The walls hadn’t been painted properly. Apple never writes ‘Apple Store’ on its signs — it just puts up the glowing, iconic fruit.”
In today’s extremely unsettled financial climate, one can hardly blame Venezuela or its erratic leader, Hugo Chavez, for deciding to bring home the gold.
Oil-rich Venezuela also has the world’s 15th largest gold reserves, most of them squirreled away in Bank of England vaults. Now, Chavez has authorized the return of Venezuela’s gold to Venezuelan soil, fearing that, at some juncture, any overseas assets could be frozen and seized by foreign authorities, as has been done with those of Libyan dictator Muammar Gaddafi. The clownishly villainous Hugo Chavez has long worn the mantle, once borne by Cuba’s Castro, of America’s official enemy south of the border. His country and regime are now embroiled in a series of international litigations for Venezuela’s nationalizing of certain foreign assets — a Canadian gold mine at Las Cristinas and an American mining operation at Las Brisas, for example. Chavez is obviously worried that Venezuelan gold and liquid assets abroad could be seized and held as collateral.
Like the clichéd stopped clock that twice a day reads the correct time, Chavez’ militantly socialist regime appears to be doing a prudent thing, albeit for the wrong motives.
While unemployment nationwide remains above nine percent in the United States, the State Department continues to bring in foreign exchange students to work for American employers. And at least some of the students aren't happy about it when they get here.
More than 100 student workers walked off the job for the second straight day yesterday and gathered in front of the Hershey Story Museum in downtown Hershey, Pennsylvania, for a protest demonstration over pay and working conditions at the candy maker's Eastern Distribution Center III in nearby Palmyra. About 400 exchange students from as far away as China, Kazakhstan, Mongolia, Turkey, and Romania are employed for the summer at the plant, at wages ranging from $7.25 to $8.35 an hour. But several of the protestors said lifting heavy boxes in a warehouse all day is not what they expected and that the payroll deductions, including rent for the mandatory company housing, leaves them with barely enough to live on.
"I pick up boxes that are 40 pounds — I weigh 95 pounds," Yana Bzengney, a 19-year-old student from Ukraine, told the Patriot-News of Harrisburg. She paid $3,500 for the chance to come to the United States and to see the country and its people and maybe visit New York and Washington, D.C, she said. Instead, she has seen little more than the inside of the warehouse.