Saturday, September 18, 2010

BULLISH: Tea Party Economics and Political Revolt


From Larry Kudlow:

"Free-market capitalism is on the comeback trail. That’s one of the key tea-party messages. And make no mistake about it: The free-market power of the tea-party political revolt is totally bullish for stocks and the economy. In short, this is a revolution.

The political elites in both parties don’t get it. Nor do the mainstream media. But the tea-party movement is stopping Obamanomics dead in its tracks. And it will overturn the Keynesian big-government planning effort now in full force in our nation’s capital. The tea parties are Reaganism reincarnate, and then some.

Limited government, individual liberty, economic freedom. Defund Obamacare. No tax-and-nationalize energy scheme. Stop the tax hikes and move to a flat-tax system. No special favors and subsidies. No crony capitalism.  No runaway government spending and debt-creation. No TARP. No stimulus. No Obamacare. No Bailout Nation for GM, Fannie, Freddie, and AIG. Instead of federal spending running up to 25, 26, or 27 percent of GDP, look for our new tea-party representatives to move it back to 20 percent of the economy, or even less.

In other words, this is not going to be your father’s Congress. Nor is it going to be your father’s Republican party. The party of George W. Bush and George H. W. Bush is about to be totally transformed (see cartoon by Michael Ramirez above). Constitutional spending limits. Low flat-tax rates. Slam-downs on budget baselines. Pitchforks maybe, but not pork.

The new tea-party breed in Washington will unleash entrepreneurship and capitalism by holding back the government tide. In other words, folks, tea-party economics are very bullish."

27 Comments:

At 9/18/2010 11:56 AM, Blogger KauaiMark said...

I'm IN!! GO TEAm!

 
At 9/18/2010 12:54 PM, Blogger chalcala said...

Less governmental control and more power to the average man. Let the people make their way without having the greedy politicians line their pockets with behind the scenes deals. Politicians have pushed the people to the point of necessary revolt. I'm happy to see there are still people out there that believe in what the forefathers founded this great nation upon.

 
At 9/18/2010 1:17 PM, Blogger Bill said...

I'm all for limited government and low taxes, but I do believe the TARP was necessary to restore confidence in the banking system. Remember what happened in 1929 when Treasury basically said: "liquidate everything!" I think we would have had a long term depression if we had not had the TARP. I agree with the rest of the comments on stimulus, etc.

 
At 9/18/2010 1:35 PM, Blogger Benjamin said...

Odd. I have not heard a single Tea Party candidate call the abolition of farm subsidies.

Any mjnute now, I am sure.

 
At 9/18/2010 3:10 PM, Blogger Hydra said...

Those were the days, my friend
We thought they'd never end
We'd sing and dance forever and a day
We'd live the life we choose
We'd fight and never lose
For we were young and sure to have our way


La la la la la la
La la la la la la


Then the busy years went rushing by us
We lost our starry notions on the way
If by chance I'd see you in the tavern
We'd smile at one another and we'd say

Those were the days, my friend
We thought they'd never end

 
At 9/18/2010 5:13 PM, Blogger morganovich said...

bill-

the real issue is that TARP was done incorrectly. the original plan to buy/swap MBS's etc for cash would have worked better, cost less, and most importantly made a very key distinction:

it is correct and desirable for government to bail out illiquid banks. if you have a $1mn cash draw, but only $500k in cash, it's fine to lend to you if you also have $10mn in good loans on the books. that's just a timing mismatch and is the price of the sort of statistical multiplexing that makes lending possible.

if you want banks to make loans, then by definition, they will never be able honor all of their creditors for cash at once.

by using assets instead of equity injections, it would have immediately become obvious who was illiquid and who was actually insolvent.

firms that are actually insolvent should be broken up and sold.

the equity tarp that replaced asset tarp was the brainchild of pelosi, frank, and dodd who had to be sure the GSE's got yet another round of egregious patronage.

they were obviously insolvent and rtaher than doind a seperate bailout which would look bad, they botched the whole tarp so they could blame "wall st".

so, i guess what i'm trying to say is that a governmental role as an asset based lender of last resort seems like a good idea (though rates should be at least somewhat punitive) but that TARP as it was executed was a disaster and will continue to be a sink hole.

 
At 9/18/2010 6:16 PM, Blogger Jason said...

Kudlow implies changes to the constitution. I would really encourage such a thing - even a constitutional convention -but it will not happen in today's America.

 
At 9/18/2010 7:32 PM, Blogger Ron H. said...

"Odd. I have not heard a single Tea Party candidate call the abolition of farm subsidies."

Benji, first things first. There are thousands of more important and urgent things to deal with; economic heart attacks, cancer, and gangrene should be treated before the minor mosquito bite of farm subsidies can even be considered.

 
At 9/18/2010 8:11 PM, Blogger PeakTrader said...

Yes, but the defenders of big government are better defending big government than the defenders of the free market are defending the free market.

That's why we have a Marxist President, a Pelosi House, and a 60 seat Democrat Senate.

Too many Americans have no idea that $2 of private benefits is often given up for $1 of public (or state) benefits. Even intelligent Americans can be ignorant.

There's been too much focus on the benefits of big government and too little focus on the costs. Afterall, you cannot miss what you never had.

The Tea (Taxed Enough Already) Party senses government doesn't serve the people or even serve the country. Government serves government. When the government gains, the people, and the country, lose even more.

 
At 9/18/2010 8:30 PM, Blogger geoih said...

Qpute from Bill: "... but I do believe the TARP was necessary to restore confidence in the banking system."

All TARP did was socialized the costs of failed business practices and give tax payer money to the politically connected. The only confidence this restored was in the political elites to dispense largesse to the financial elites, all at the cost of the tax payer.

 
At 9/18/2010 8:42 PM, Blogger geoih said...

Quote from morganovich: "it is correct and desirable for government to bail out illiquid banks. if you have a $1mn cash draw, but only $500k in cash, it's fine to lend to you if you also have $10mn in good loans on the books. that's just a timing mismatch and is the price of the sort of statistical multiplexing that makes lending possible."

You illustrate perfectly how fractional banking is a giant scam. It has nothing to do with bad timing, and everything to do with inflationary pyrimid schemes by creating money out of thin air.

 
At 9/18/2010 8:59 PM, Blogger PeakTrader said...

Geoih, I think, there's little doubt without TARP, the entire U.S. banking industry would've collapsed, traditional monetary policy would've become ineffective, and the global economy would've fell into depression.

 
At 9/18/2010 9:06 PM, Blogger bobble said...

This comment has been removed by the author.

 
At 9/18/2010 11:38 PM, Blogger Don Culo said...

"Less governmental control and more power to the average man. Let the people make their way without having the greedy politicians line their pockets with behind the scenes deals. Politicians have pushed the people to the point of necessary revolt."

**********************************
That right we need less government control, especially on Wall Street those folks know how to make money honestly and would never lead the county in a near depression as is Obama Socialism !!!

And we sure as hell don;t need Obamacare, I get all my medical needs taken care of at WallMartCare. I plan on getting my open heart surgery at WallMart !!!

 
At 9/19/2010 7:33 AM, Blogger Paul said...

Benji,

"Odd. I have not heard a single Tea Party candidate call the abolition of farm subsidies.

Any mjnute now, I am sure."

I think they're waiting for your boyfriend to say it first. Maybe he'll speak up when he finishes his project to spend billions on rural broadband.

 
At 9/19/2010 7:49 AM, Blogger juandos said...

"And we sure as hell don;t need Obamacare, I get all my medical needs taken care of at WallMartCare"...

Well if you think ObamaCare (which means leeching off of the productive ala medicare/medicaid) is the way to go then I urge you to visit a VA hospital to see it in action...

Regarding TARP consider the words of Bill Isaac of LECG Global FINANCIAL who thinks it wasn't a good idea...

"Odd. I have not heard a single Tea Party candidate call the abolition of farm subsidies"...

What's odd pseudo benny is how little you seem to know about the whole farm subsidy program...

Consider looking at the Farm Subsidy Database...

 
At 9/19/2010 9:32 AM, Blogger sethstorm said...


Free-market capitalism is on the comeback trail

That doesn't even pass the BS test. More like an opening for special interests of Wall Street and offshoring to take control.


Less governmental control and more power to

...people who will end up making the same behind-the-scenes deals, in defiance of those principles. Question them, get called for heresy; continue to question them, get punished for obstinacy. It's happened once already, it will happen again.

 
At 9/19/2010 10:34 AM, Blogger morganovich said...

geoih-

that's a pretty dramatic view.

so, in your world of no fractional banking, how do you expect to get anything done?

from where will people borrow? how will you buy a house or expand a factory? do you have any idea how much the ability to borrow capital increases growth and social mobility?

banks will charge you to hold your money if they can't lend it out.

are you ready to pay them interest?

there is nothing wrong with fractional banking. its benefits are vast and risks are only occasional and easily mitigated so long as the banks are still solvent. TARP was originally designed to do just that (and would have worked and provided a profit, just as it did in the UK) before it was hijacked by peolsi frank and dodd.

what is it you suggest? that we all go back to stuffing money in our mattresses, crush the velocity of money, and go back to the 0.2% growth rates we had before banking?

i suggest you read berenstein's excellent book "the birth of plenty". it traces how growth got to modern levels and identifies 4 factors that must all be present for serious growth to occur:

property rights

scientific rationalism

capital markets

fast transport and communications

http://www.efficientfrontier.com/ef/404/CH1.HTM

take away any one of the 4, and you don't grow.

keep your own money in your mattress if you want to, but please leave the rest of us out of your antediluvian poverty trap.

 
At 9/19/2010 9:51 PM, Blogger juandos said...

"That doesn't even pass the BS test. More like an opening for special interests of Wall Street and offshoring to take control"...

Hmmm, for someone mired as deep in BS as you are sethstorm how can you tell?

"Question them, get called for heresy; continue to question them, get punished for obstinacy. It's happened once already, it will happen again"...

Hmmm, sounds like the old Soviet Union or China under Mao...

Are you a Russian or a Chinese person sethstorm?

 
At 9/20/2010 7:44 AM, Blogger geoih said...

Quote from PeakTrader: "Geoih, I think, there's little doubt without TARP, the entire U.S. banking industry would've collapsed, traditional monetary policy would've become ineffective, and the global economy would've fell into depression."

You're claiming we are not in a depression now? TARP was just more of the unsustainable fiscal and monetary policies that created the mess that you think TARP fixed. TARP pushed the costs of failed business decisions, abetted by failed government policies, on to the backs of all the tax payers. All it changed was who paid for these mistakes, not the costs of the mistakes.

 
At 9/20/2010 8:40 AM, Blogger sethstorm said...


juandos said...

You only prove my point further.

I'm a US citizen through and through. Just not one that makes a point of handing the government to businesses, especially ones that have very fickle loyalties to this country.

 
At 9/20/2010 8:53 AM, Blogger juandos said...

"You only prove my point further"...

Well per your usual style sethstorm you didn't answer the question I asked regarding, "It's happened once already, it will happen again" but that's not suprising for someone who couldn't make it in the Information Technology field...

 
At 9/20/2010 9:47 AM, Blogger geoih said...

Quote from morganovich: "so, in your world of no fractional banking, how do you expect to get anything done?"

People save money. Other people borrow that same money. No money is created out of thin air by allowing banks to pyramid loans on top of non-existent reserves.

When $100 dollars gets deposited in a checking account in one bank, that bank suddenly has $90 to loan out. That $90 gets deposited in a bank, creating $81 dollars to loan out, and so on until an additional $900 dollars has been created out of thin air from the first $100.

There hasn't been any creation of wealth. All that has happened is the money supply has been expanded. It's purely inflationary.

Fractional reserve banking is just an inflationary scam. The dollar is worth less than 5% of it's value of 100 years ago. Fractional reserve banking, built on the additional pyramid of the Federal Reserve, has destroyed the dollar. Creating money out of nothing does not create wealth.

 
At 9/20/2010 2:02 PM, Blogger sethstorm said...


juandos said...

I answered your question. Read again, and more carefully.

 
At 9/20/2010 9:02 PM, Blogger juandos said...

"I answered your question. Read again, and more carefully"...

You're joking right sethstorm?

 
At 9/24/2010 3:19 PM, Blogger VangelV said...

In other words, this is not going to be your father’s Congress. Nor is it going to be your father’s Republican party...

Sadly the Pledge to America shows us that the GOP leadership is resiting the needed change and must be dumped if the party is to move forward.

 
At 9/24/2010 3:25 PM, Blogger VangelV said...

I'm all for limited government and low taxes, but I do believe the TARP was necessary to restore confidence in the banking system.

What confidence? The financial system is insolvent and needs the Fed to buy most of its bad assets at par just to stay afloat.

Remember what happened in 1929 when Treasury basically said: "liquidate everything!"

On what planet did this take place? It certainly was not on this one where Hoover prevented liquidation and by doing so permitted a contraction to become a Great Depression.

The real lesson comes from Harding who did allow liquidation to take place. After a sharp decline in employment and GDP the economy bottomed and a lasting recovery began.

I think we would have had a long term depression if we had not had the TARP. I agree with the rest of the comments on stimulus, etc.

I disagree. What you have now is more debt, a weak economy, and a currency that is about to go over the edge and take the bond market with it.

 

Post a Comment

Links to this post:

Create a Link

<< Home