Phrases like dead-cat bounce, house of cards, stagflation, W-shaped, U-shaped, lackluster, sucker’s rally, deflation spiral, run-away inflation, and great depression were all in their pronouncements.

The bad news bears have pointed to a fearful, unemployed consumer who has cut up her credit card, has no more savings, and a government that has . . . → Read More: Bad News Bears Battle Break-Neck Bounce]]>

Phrases like dead-cat bounce, house of cards, stagflation, W-shaped, U-shaped, lackluster, sucker’s rally, deflation spiral, run-away inflation, and great depression were all in their pronouncements.

The bad news bears have pointed to a fearful, unemployed consumer who has cut up her credit card, has no more savings, and a government that has only racked up more national debt — the dollar is dead — they claim.

But the Q3 business realities continue to paint a starkly different picture.

Stimulus programs are firing up. Inflation is under control. Manufacturing lines are back on-line. Equities are on a roll. Optimism is accelerating.

So what are the doomsters missing?

Here’s what Barton Briggs (Managing Partner of Traxis Partners Investment Fund) writes in Newsweek:

“First and foremost, they are betting against America, the greatest entrepreneurial engine ever created. History says buy America when it’s down. In addition, emerging economies may well be the new dynamo of growth. They now account for 35 percent of world GDP and are growing two to three times faster than the developed world. S&P 500 companies now collect almost 50 percent of their revenues from overseas, and almost half of that portion comes from these fast-growing developing countries. Another factor could be that stocks currently despite the rally are still deeply undervalued. The rule of thumb is that stocks should sell at a price/earnings ratio equal to 20 less the inflation rate. Assume S&P 500 operating earnings are $70 to $75 next year and inflation is 1 percent, you get a theoretical price far higher than the current level of 1060.”

Not only will the second half of 2009 continue to be strong, but 2010 will likely reap the benefits of this new international growth dynamo. It will be interesting to see where and when the dead cat lands.

“Then there’s the argument, well, this is full of pet projects. When was the last time that we saw . . . → Read More: Spending Is Not Stimulus President Obama]]> Amid cheers, President Obama showed his true colors when it comes to his plan to deal with the recession (soon to be a depression). Valiantly fighting off all takers on his stimulus, Mr. Obama exclaimed,

“Then there’s the argument, well, this is full of pet projects. When was the last time that we saw a bill of this magnitude move out with no earmarks in it? Not one. (Applause.) And when you start asking, well, what is it exactly that is such a problem that you’re seeing, where’s all this waste and spending? Well, you know, you want to replace the federal fleet with hybrid cars. Well, why wouldn’t we want to do that? (Laughter.) That creates jobs for people who make those cars. It saves the federal government energy. It saves the taxpayers energy. (Applause.) So then you get the argument, well, this is not a stimulus bill, this is a spending bill. What do you think a stimulus is? (Laughter and applause.) That’s the whole point. No, seriously. (Laughter.) That’s the point. (Applause.)”

Now I understand that President Obama was speaking in front of a group of Democrats, trying to rally his comrades, but this type of message should outrage American citizens. Mr. Obama promised the people change, yet he makes the argument that since there are always earmarks in bills, the government should get a free pass for porking up its latest monstrosity.  Apologies to the already suffering American people that have to pay for this.

When it comes to buying a new fleet of green cars, the true politician in Obama comes out, spinning this ridiculous confiscation of private money as creating jobs. If this creates jobs, why doesn’t the government buy every taxpayer a Prius? Why not throw in some solar panels for every taxpayer too?  Because this money has to come from somewhere of course. This is a textbook example of the broken window fallacy in action. Basically, Obama will be taking taxpayers’ money and transferring it to the auto sector. All of the taxpayers are going to be subsidizing one particular industry. One interest gains at the cost of all others. This is what American democracy has become. It is not about the public good; it is about the good of a specific set of interests.

As to Mr. Obama’s final point that spending bills and stimulus are synonymous, one has to wonder how much longer this country will be able to stay afloat. Can Mr. Obama explain how taking $800 billion or most likely more money out of the private sector, and using some of it for pork, some for income redistribution and the rest for “shovel-ready” projects is stimulative? Can Paul Krugman or Larry Summers point to a situation in which wealth taken from the hands of the people has ever been used more productively by the government?  Government spending has NEVER — not once pushed an economy out of a recession or depression. Even for those who acknowledge that the New Deal failed to bring us out of the Depression, most argue that it was only World War II that got the economy back rolling. Yet even this is false, another example of the broken window fallacy that somehow you can mobilize all resources under a command economy, and by allowing the government to channel them towards specific uses (in the case of war, towards bombs and fighter planes) leave yourself better off. As Robert Higgs shows, our productivity did not recover until after the war, when productive forces were released into the free market.  The government cannot plan our economy and allocate resources profitably. Let me repeat this: THE GOVERNMENT CANNOT PLAN OUR ECONOMY AND ALLOCATE RESOURCES PROFITABLY. Not in the Soviet Union, not in Nazi Germany, not in Cuba, not in the United States.  Even if I leave out the moral issue that people should have the right to choose how they use their money, productively or unproductively, and grant that somehow, some way, President Obama can spend the money as the people would, it is a proven fact that we are going to have to issue hundreds of billions of dollars in Treasuries to fund this.

As George Melloan noted in the Wall Street Journal recently, this will inevitably prove inflationary. Our friends in China and Japan, already strapped for cash given their own economic problems will not be able to subsidize our profligacy much longer. They might even sell some of their existing Treasury holdings to raise cash. As has been noted repeatedly, Ben Bernanke may have to come in and buy Treasuries issued by his own government. Quite a queer concept.  To carry out this plan, helicopter Ben will have to print up more dollars and thus we will see inflation in prices. You can also bet that with the collapse in demand for treasuries abroad, and the government’s inflationary actions, interest rates will rise for all of us. We will suffer from stagflation, and the government will have no way to pay for all of its entitlements without printing more money, generating more inflation and higher and higher interest rates. We will be crushed under our own debt.  While the proper solution to all of this would be to allow ourselves as a nation to deleverage, paying off our debts and liquidating the bad assets, and forcing the government to reduce its spending and cut taxes, instead the President and the congress are sealing our fate to depression. The above steps would be the true stimulus. What the President proposes is no stimulus. As the Wall Street Journal quips, “The spending portion of the stimulus, in short, isn’t really about the economy. It’s about promoting long-time Democratic policy goals, such as subsidizing health care for the middle class and promoting alternative energy. The “stimulus” is merely the mother of all political excuses to pack as much of this spending agenda as possible into a single bill when Mr. Obama is at his political zenith.”

One has to wonder if the reason Mr. Obama keeps telling us that things are going to get worse is intentional, a self-fulfilling prophecy. Perhaps he knows the true history of the Depression, that the more the government intervened the worse things got. He knows that this crisis will allow him to cement his place as President for at least eight years. As is the government’s wont, it will exploit any situation to gain more power.

Every single citizen must realize that in allowing our representatives to pass this bill, we are dooming our children and our children’s children to pay for our mistakes, sacrificing our property without just compensation and allowing our representatives to further imperil our economy. This is taxation without representation. This is immorality. This is the death knell of a once great nation.