by Peter Schiff, president of Euro Pacific Capital and author of Crash Proof 2.0: How to Profit from the Economic Collapse

As the unemployment rate crossed the double digit barrier for the first time since Michael Jackson learned to moonwalk, President Obama announced that he will convene a “jobs summit” to finally bring the problem under control. Using all the analytic skill that his administration can muster, the President is determined to figure out why so many people are losing their jobs and then formulate a solution. That’s a relief; for a while there, I thought we were in real trouble! In fact, the absolute last thing our economy needs is more federal government interference. If Obama really wants to know what’s behind entrenched joblessness, he should start by looking at the man in the mirror.

Obama is pursuing, with unprecedented vigor, the same policies that have for decades undermined our industrial base and yoked us to an unsustainable consumer/credit driven economy. This doubling down on Washington’s past failures is destroying jobs at an alarming rate. Today we learned that the September trade deficit surged by 18.2%, the largest gain in ten years. Much of the deficit resulted from Americans spending Cash-for-Clunkers stimulus money on imported cars – or “American” cars loaded to the sunroof with imported parts. In exchange for more domestic debt, we have succeeded only in creating foreign jobs.

An article in this week’s New York Times by veteran writer Louis Uchitelle confirmed a fact that I have been alleging for years. Uchitelle pointed out that foreign outsourcing of component manufacturing has led to consistent overstatement of U.S. GDP and productivity. The connection goes a long way to explain why we keep losing jobs even as GDP is apparently expanding.

As our economy becomes less competitive due to higher taxes, burdensome and uncertain regulations, and capital flight, more manufacturing and services will be outsourced to foreign firms. However, the flaw in GDP calculation allows the output of those foreign workers to be included in our domestic tally. Since we count the output but not the worker responsible for it, government statisticians attribute the gains to rising labor productivity. To them, it looks like companies are producing more goods with fewer workers.

The reality is that we are producing less with fewer workers. The added “productivity” comes from higher unemployment and larger trade deficits. This is a toxic formula that will have lethal economic consequences.

Don’t expect the brain trust at the President’s job summit to fret much about these details. That public relations stunt will likely ignore the root cause of the economic imbalances and instead stress the need for government spending on training and education, i.e. more public debt. The unemployed do not need government theatrics, they need actual jobs. But as long as the government props up failed companies, soaks up all available investment capital, discourages savings, punishes employers, and chases capital out of the country, jobs will continue to be lost.

To really fix the unemployment problem, the President must look past his peers in government and academia to understand how jobs are actually created. In the private sector, all individuals have a choice to either work for themselves or someone else. Since labor is far more productive when combined with capital (office equipment, machinery, business models, and intellectual capital), those who lack these assets themselves often choose to work for others who have sacrificed to accumulate them. This increased productivity is shared between the worker and the owner of capital, and both are better off.

However, for one person or company to choose to offer a job to another, there must be an incentive to do so, and they must have the necessary capital. In the first place, employers must commit to paying wages and benefits, comply with government mandates and regulations, and subject themselves to potential lawsuits from disgruntled employees. All of these costs must be measured against the extra profits an employer hopes to earn by hiring an additional worker.

If profit opportunities exist, jobs will be created. Otherwise, they will not. Of course, anything the government does to raise the cost of employment, such as a higher minimum wage, mandated heath care, or greater regulatory burdens, not only prevents new jobs from being created but also causes many that already exist to be destroyed. Anything that diminishes the profit potential of extra hiring will diminish the number of job opportunities that are created. Also, since it is after-tax profits against which employers measure risk, the higher the marginal rate of income tax, the less likely employers will be able to hire.

Finally, in order to hire workers, employers must have access to capital to expand operations. Anything the government does to discourage capital formation automatically diminishes job creation. By running the largest federal deficits in history, Barack Obama is diverting all available capital to the Treasury, and is in effect waging a war against private capital formation.

If the President’s summit truly intends to find the root cause of unemployment, his advisers don’t need Bureau of Labor statistics or complex modeling software, just the courage to drop their dogmatic belief in central planning and embrace the laws of economics.

For a more in-depth analysis of our financial problems and the inherent dangers they pose for the U.S. economy and U.S. dollar, read Peter Schiff’s 2008 bestseller “The Little Book of Bull Moves in Bear Markets” and his newest release “Crash Proof 2.0: How to Profit from the Economic Collapse.” Click here to learn more.

More importantly, don’t let the great deals pass you by. Get an inside view of Peter’s playbook with his new Special Report, “Peter Schiff’s Five Favorite Investment Choices for the Next Five Years.” Click here to dowload the report for free. You can find more free services for global investors, and learn about the Euro Pacific advantage, at www.europac.net.

His appearance was so positive that they end up telling him that he should come on the show as a special guest (as they have from time to time) for the full 2 hours of the show. Paul makes a joke in response. Check it out below.

“The Federal Reserve Accountability Act” was introduced by Democrat Jeff Merkley and Republican Bob Corker yesterday. The bill takes the cake out of Paul’s bill and leaves nothing but the frosting.

The bill avoids review of the Fed’s regular lending programs, such as the longstanding discount window, and its interest-rate decisions.

So, it excludes the fundamentals, the very actions 75% of the American people say they want to know about. The attitude of these so-called representatives is reprehensible.

I’m willing to bet that Merkley and Corker have some large donors in the banking industry.

This may be expected, but it doesn’t mean those of us that support a full audit as outlined in Ron Paul’s bill should just lay down. If anything, the fight has just begun. Please call your representatives and make sure they understand the difference between the full audit and the waterboarded audit introduced yesterday. Tell them that you will not accept anything other than a full audit. It is time to take off the gloves and fight. It’s going to get dirty in DC. Well, more dirty than it already is.

Here is a PDF of the new bill.

Here is a Press Release from the Campaign For Liberty about the bill.

As usual Dr. Paul defends the free market even when asked rather convoluted questions about “how much” the government should support the market. I found the interview a bit odd. In that both the host and Paul were trying to find some kind of middle ground between a government managed economy and a free market position. The common point implied that the government shouldn’t be bailing out these big Wall Street firms like Goldman Sachs yet they continue to use tax payer money to do so.

Check out the video below. NOTE: The audio/video sync appears to be off as is custom on some videos processed by Youtube.

Originally published Sunday, October 18, 2009 at http://towneforcongress.com/economy/press-release-congressional-candidate-jake-towne-stimulus-plan-ineffective-in-the-lehigh-valley

BETHLEHEM, PA – US Congressional Candidate Jake Towne related Thursday to a group of Moravian College students that the government’s stimulus plan simply isn’t working in the Lehigh Valley. He also covered the basic economic reasons behind the failure and a better alternative.

While economic planners predict the end of downturn in Q4 2010 and the creation of 3.675 million jobs, Recovery.gov demonstrates that only 0.030 million jobs have been “created/saved” since the plan began in Q1 2009. Only 495.2 jobs are reported as “created/saved” in all of Pennsylvania. including zero Lehigh Valley jobs and $0 spent. Out of the $2.05 billion allotted to Pennsylvania, only 0.15% has been allotted to the Lehigh Valley, or $3.2 million.

To date, Recovery.gov reports zero Lehigh Valley jobs “created/saved” and $0 spent. The allotted funds for the $3.2 million are:

• $154,817 allotted to Advanced Environmental Solutions for soil and groundwater contamination testing

• $1,129,049 to the City of Allentown for Homelessness Prevention and Rapid Re-Housing

• $737,917 allotted to the City of Allentown for Community Development Block Grant

• $687,480 to the City of Bethlehem for Homelessness Prevention and Rapid Re-Housing

• $449,326 to the City of Bethlehem for Community Development Block Grant. Funds allocated to provide lighting on 4th Street and a 12-foot pedestrian and bicycle path on a former railroad line.

Another way to look at the statistics is that the total cost of the stimulus plan – at $1.1 trillion divided by the American population comes to spending roughly $3,500 dollars per person. The amount allocated in the Lehigh Valley to-date comes to less than $5 per person.

Towne also related that there may be political reasons for not spending the money in the area, such as the time necessary to form the new bureaucracies to control the funds, the usual inefficiency and red tape, concentration of funds near Washington, and also to influence the future re-election cycle of the President and his party. However, he stressed that the problems of excessive spending will simply NOT be cured by more spending.

Raised in Nazareth, Jake Towne is running an independent private citizen against Mayor John Callahan of Bethlehem and the multiple-term incumbent, Representative Charles Dent of Allentown. His novel yet simple idea for a system of open, accountable, transparent government called ‘Our Open Office’ can be found at TowneForCongress.com, as well as the text of the lecture. Towne is extremely concerned about the integrity and future of the dollar, the absence of the Constitution’s rule by law in society, the loss of civil liberties, and reckless warfare and welfare state spending. Details can be found on his website as to his solutions.

Towne for Congress is endorsed by Retake Congress and 9/12 Candidates, and Towne will appear on the FOX show ‘Freedom Watch’ with Judge Napolitano later this month. The campaign, in cooperation with five other liberty candidates running for United States Congress, issued its first online ad campaign last week and is listed at www.ThisNovember5th.com for a fundraising event that is billed as the largest single day multi-candidate fundraising event in history. Towne will be a keynote speaker at the Constitution rEVOLution Tea Party in Philadelphia on November 22 which is being held simultaneously at major cities nationwide.

Contact: Campaign Manager Jessica Roth

Email: TowneForCongress@gmail.com

Website: TowneForCongress.com

Moravian Lecture:  http://towneforcongress.com/economy/lecture-why-the-stimulus-plan-will-fail-and-a-better-alternative-1

Our Open Office: http://towneforcongress.com/mission/our-open-office

_______________________________________________________________________

Jake Towne is running for U.S. Congress in Pennsylvania’s 15th District in the 2010 election as a citizen unaffiliated with any political parties. Jake also writes at www.LibertyMaven.com and www.CampaignForLiberty.com. A novel campaign website where you can comment on articles and start discussions is available at TowneForCongress.com.  [Reach the Author Here!]

_______________________________________________________________________

We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

As always, unlike the NFL, the author grants full permission to allow any accounts of, rebroadcasts, retransmissions, repostings of this article to your blog or anywhere else in order to promote the Restoration of our Republic.

Veritas numquam perit. Veritas odit moras. Veritas vincit. Truth never perishes. Truth hates delay. Truth conquers.

Tu ne cede malis sed contra audentior ito. Do not give in to evil but proceed ever more boldly against it.

Quote of the Day:

“It has been argued that full disclosure of details of funding facilities like TALF and PDCF, that enabled massive bailouts of Wall Street, would damage the financial position of those firms and destabilize the economy. In other words, if the American people knew how rotten the books were at those banks and how terribly they messed up, they would never willingly invest in them, and they would fail. Failure is not an option for friends of the Fed. Therefore, the funds must be stolen from the people in the dark of night. This is not how a free country works. This is not how free markets work. That is crony corporatism and instead of being a force for economic stabilization, it totally undermines it.” — Congressman Ron Paul

You’re not allowed to know who got how much, and under what terms. This information was NOT heard at the hearings about the “Audit the Fed” bill. Therefore, the only way to learn the answers is to . . .

Audit the Fed!

Please use our Educate the Powerful System to send Congress another letter demanding that they pass the Audit the Fed bill.

Use your personal comments to say something similar to what I’ve said in my own letter to Congress . . .

The “Audit the Fed” hearings proved that the Federal Reserve will not reveal its activities without an audit. A majority of the House has co-sponsored the Audit the Fed bill. This leads me to wonder what dark forces are keeping it from coming to a vote. I elected you to represent me, so please do your job. Force the leadership in the House and Senate to bring this bill to a vote! You must lead your “so-called” leaders. Make it happen! I URGE YOU TO DO IT NOW!

You can send your letter here.

Share this message with others. Digg it on our blog so more people will see it. Spread the word on Twitter and Facebook. Audit the Fed!

Thank you for being a part of the growing Downsize DC Army. To see how fast your army is growing please check out the Keeping Score report below my signature.

Jim Babka
President
DownsizeDC.org, Inc.

KEEPING SCORE REPORT

Your Downsize DC Army grew by 2 net new members yesterday. This brings our total growth for the year to 3,906. The Downsize DC Army now stands at 28,254, 25% of the way between 28,000 and 29,000.

YOU can make the army KEEP GROWING by following our quick and easy instructions for personalized recruiting.

We can also grow faster by spreading the word through the media. Please help us do this by starting a monthly credit card pledge — it can be as low as $5 a month (which is just 17 cents per day). You can start your pledge using our secure online contribution form.

Please let us know if its okay to advertise your support here:

NEW MONTHLY PLEDGERS IN SEPTEMBER: Gerry Benton, Henrik Pedersen, James Spaller, John Houghton, Poul Petersen, Mark Wilczek, Mann Page Ciesemier, Leslie Thomas-Rieser, Jim Lorenz, Chelsea Moller, 3 unlisted — (12 new pledgers total) PLEDGERS FROM AUGUST: Glen Ihrig, Gary J Leidy, David Bergland, Gary T Gorski, Don J Crites, 8 unlisted — (13 new pledgers total)

Or, you could make a one-time donation. Please let us know on our secure contribution form if its okay to advertise your support here:

NEW ONE TIME DONORS IN SEPTEMBER: Jamie Sigler, M. W. Baumeister, Pamela Sanderson, Brad Peters, Michael Lord, David D Segesta, John O’Donnell, Robert C. Jones, Jr., A.J. Stukenborg, Nathan Bailey, 6 unlisted – (16 new donations total) DONORS FROM AUGUST: Sharon Mears, John Matthews, Patricia Barnum, Brian Travis, Sarah Franke, Dirk Doebereiner, James Wahler, Meredith Weaver, Stephen Moffett, Matthew Whitlock, Dan Litwin, Russell Kominski, Veronica Arnold, Michael Bayback, Ann & Todd Secoy (in memory of Julia Bitner), James Marranca, Kay Samalin, David Hyatt, Douglas Steinschneider, Lily Riker, Nicholas C. Beason, Mr. Marlin, Edward J. Krieger, Lynnette Thompson, 17 unlisted — (41 total)

If a tax deduction is important you can get one by contributing to the educational outreach efforts of the Downsize DC Foundation. Contribute at the Foundation’s secure contribution form.

D o w n s i z e r – D i s p a t c h
is the official email list of DownsizeDC.org, Inc.

& Downsize DC Foundation

If the Fed gave its actual arguments against a full audit, they would not have mentioned anything about political independence or economic stability. Instead they would admit they don’t want to be audited because they enjoy their current situation too much. Under the guise of currency control, they are able to help out powerful allies on Wall Street, in exchange for lucrative jobs or who-knows-what favors later on. An audit would expose the Fed as a massive fraud perpetrated on this country, enriching a privileged few bankers at the top of our economic food chain, and leaving the rest of us with massively devalued dollars which we are forced to use by law. An audit would make people realize that, while Bernie Madoff defrauded a lot of investors for a lot of money, the Fed has defrauded every one of us by destroying the value of our money. An honest and full accounting of how the money system really works in this country would mean there is not much of a chance the American people would stand for it anymore.

Read the whole article.

More later, but for now watch Grayson hammer on the Fed lawyer. To see more highlights from the hearing see this article.

Let’s head to Merriam-Webster to clear this up. Which one of the following best describes America today?

capitalism: an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.

corporatism: the organization of a society into industrial and professional corporations serving as organs of political representation and exercising control over persons and activities within their jurisdiction.

The correct answer is, of course, corporatism. A  key phrase in the definition of capitalism is “by investments that are determined by private decision“. How do government bailouts of private industry reconcile with this definition? They don’t. And if you think this is a recent phenomenon then I urge you to consider the Savings and Loan bailouts back in the 80’s and 90’s.

Another assertion in the definition of capitalism that does not compute in America today is that the prices, production, and distribution of goods are supposed to be determined by a free market.

A free market does not exist when we have the Federal Reserve artificially holding interest rates low, heavy government regulation of industries, and government subsidies that bastardize the natural rules of supply and demand. We haven’t had a free market in the United States for a very long time. Capitalism can not exist without a free market.

What we have in America is corporatism. And this is the essence of what Michael Moore is railing against in his new film. Unfortunately, he doesn’t offer useful solutions because he doesn’t even understand the problem.

The big corporations hire lobbyists to protect their own interests in their respective industries. The lobbyists go to Washington, D.C. and influence lawmakers to pass laws that give special advantage to the corporations. So, in essence what we have is corporations cozy  in bed with the government while Joe Citizen sleeps naked on the floor.

The only sensible solution to this problem is to set the market free. In a free market Joe Citizen consumer has the power. He votes with his dollars. Badly run businesses fail because there just aren’t enough people voting with their dollars to keep them afloat. Well run businesses flourish and create opportunity for Joe Citizen and higher growth in production for the country as a whole. As a result less people are unemployed and innovation is encouraged.

Certainly some will fall through the cracks and will need help. This is why churches and charitable organizations exist. It is what they do best. They have a more natural incentive to help and will always do a better job than some government program.

It’s strange that Michael Moore believes that more government is the solution to a problem that is being made worse by that very same government. Moore got one out of three right. He is good at telling everyone about the problem. He confuses people by calling the problem something it’s not. His solution to the problem actually is part of the problem in the first place.

Granted, there’s never a “perfect” solution, but there is a “best” solution. It’s the free market silly man, not more government.

———————————–

For more on Capitalism vs. Corporatism see this excellent piece from a year ago from Radley Balko at Reason.com.

There has never been a pure free market capitalistic system just as there has never been a pure communist or socialist system, where there is government ownership of the means of production and each individual has equal access to society’s resources. However, we can rank economies as to whether they are closer to capitalism or closer to communism or socialism. If one ranked countries according to whether they were closer to the capitalistic end of the spectrum or the socialistic or communistic end, then ranked countries according to per capita GDP and finally rank countries according to Freedom House’s “Map of Freedom in the World,” he would find a pattern that is by no means a coincidence. The people in those countries closer to the capitalist end of the economic spectrum have far greater income and enjoy greater human rights protections than those toward the socialist and communist end.

According to the London Telegraph article, Moore’s film features priests who say capitalism is anti-Christian by failing to protect the poor. This is pure nonsense and revealed as such by asking, “If you’re an unborn spirit, condemned by God to a life of poverty but allowed to choose the country in which to be poor, would you choose a country near the communist end of the economic spectrum or the capitalist end?” If you chose the United States, you’d find that according to the government surveys, the typical “poor” American has cable or satellite TV, two color TVs, and a DVD player or VCR. He has air conditioning, a car, a microwave, a refrigerator, a stove, and a clothes washer and dryer, and whether he has health insurance or not, he is able to obtain medical care when needed. Try to find that in Cuba, Russia, China or North Korea. If we buy into the nonsense of Moore’s priests, the world’s poor people are incredibly stupid. Whether fleeing legally or illegally, their destination country is likely to be closer to capitalism than their departure country.

Go read the whole article here.

Is she now going to try to undo the neo-conservative views she expressed while campaigning as McCain’s running mate? It would certainly be a good political move for her, but can she be successful doing it? I’ll be reserving judgment until she makes another statement on foreign policy and interventionism, but at least she’s joining the chorus of critics against the Federal Reserve.

During her Hong Kong speech today she took aim at the Fed for playing a role in causing the economic crisis. The Wall Street Journal blog reports:

Former Alaska Gov. Sarah Palin fired a shot at the Federal Reserve in her coming-out speech in Hong Kong today, blaming the central bank for the current crisis and disagreeing with the idea that the Fed should have a greater role in preventing the next crisis. It was an echo of fellow Republican and Texas congressman Ron Paul, who has led the charge in Congress to perform an audit of the Federal Reserve with an eye to eventually eliminating it.

“How can we discuss reform without addressing the government policies at the root of the problems? The root of the collapse? And how can we think that setting up the Fed as the monitor of systemic risk in the financial sector will result in meaningful reform?” she said. “The words ‘fox’ and ‘henhouse’ come to mind. The Fed’s decisions helped create the bubble. Look at the root cause of most asset bubbles, and you’ll see the Fed somewhere in the background.”

More generally, Mrs. Palin took the tack that the financial crisis occurred because government got in the way of free enterprise.

So, thanks for jumping on the anti-Fed bandwagon Sarah, now do liberty-loving Americans another solid and start preaching non-interventionism and a strong focus on national defense rather than preemptive national offense. Do that, then continue it and over time some of us may start believing you.

Last week McKinley appeared on Fox Business News channel after an editorial was published in the Wall Street Journal about his lawsuit.