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The Daily Reckoning | Wednesday, September 19, 2012 QE: How much is too much...and who wants to find out? From Bailout Nation to Handout Nation... Plus, Jeffrey Tucker on Mitt Romney’s “inadvertent and unscripted truth” and plenty more... ------------------------------------------------------ Your Chance to Live Longer? If you haven’t viewed this presentation from Patrick Cox about a new natural health supplement that doctor’s are recommending right now — and is available without a prescription... Do it now! Because not only does this supplement slow aging — adding 20 to 30 healthy years to your life — it also comes with a $1,200 check, just completing one simple step (details here.) But, that offer expires at midnight September 21st. So don’t let this opportunity slip away. View Patrick’s presentation right now. It may prove the be the most urgent presentation of the year.   Quote of the Day... “A fool and his money are soon elected.” — Will Rogers Financial Diabetes Serving Up a Third Scoop of Quantitative Easing   Eric Fry Reporting from Rancho Santana, Nicaragua... Distance, it is said, makes the heart grow fonder. But here we sit on the Pacific Coast of Nicaragua — roughly two thousand miles away from Washington, DC — and yet we have grown no fonder of Ben Bernanke’s wacky monetary tactics; nor have we grown fonder of the vitriol that passes for American political “discourse.”  That said, Washington, DC is not a total bust when viewed from a distance. We have, for example, grown somewhat fonder of the Redskins and their electrifying new quarterback, Robert Griffin III.  So thumbs up to RGIII, but thumbs down to QE3. Bernanke’s latest money-printing escapade ($40 billion per month is the Chairman’s promise) is not all bad, of course. Even your Daily Reckoning editors cannot despise it completely. That’s because condemning money-printing schemes like QE is a little like condemning sugar. Everyone knows sugar tastes wonderful. But no one know really knows how much is too much...and, more to the point, almost no one wants to know how much is too much. The delicious sensation is immediate; the adverse side effects are distant. That’s reason enough for most folks to make their double ice cream cone a triple...or their QE2 a QE3. And this time around, just for kicks, the Fed Chairman is going to indulge in QE3 as limitlessly as an unattended child would indulge in a 5-gallon drum of cookies and cream. It’s called a “non-traditional policy tool,” Dear Reader, and the Federal Reserve Chairman has assured us that it probably does the economy a lot of good...or at least a whole bunch of “less bad.” Maybe so, but the hard economic data suggest that the Chairman’s non-traditional tactics have also delivered lots of “more bad.” In other words, as we observed last week, “If this is the cure, should we try the disease for a while?” The chart above provides one very enlightening image of the Chairman’s handiwork. Let the reader decided whether this image be “less bad,” “more bad” or some other shade of “bad.”  But “good” is not part of this picture. During the last four years, the number of Americans on food stamps has soared by more than 17 million, while the number of employed Americans has dropped by more than 3 million. In percentage terms, the number of Americans on food stamps has soared 60% in four years! To folks lacking a Harvard education, these dismal data points might seem pretty awful. But again, as the Chairman explains, they are less bad than what might have been. In fact, according to the “Outreach” section of the USDA website, the soaring number of food stamp recipients is an absolutely fantastic success story: “SNAP [i.e. food stamps] is the only public benefit program which also serves as an economic stimulus, creating an economic boost that ripples throughout the economy when new SNAP benefits are redeemed. By generating business at local grocery stores, new SNAP benefits trigger labor and production demand, ultimately increasing household income and triggering additional spending.” So you see, what appears on its face to be a bad thing is really a super awesome thing. If only someone could just figure out how to increase the roles of food stamp recipients, the US economy would really come alive! Fortunately, the authorities are making rapid progress. At last count, 46 million Americans were on the food stamp roster. That’s more than 15% of the US population. Not surprisingly, there are always naysayers in the crowd. There are always folks who insist that increasing government’s role in the economy will impede growth. There are always folks who scoff at the idea that increasing handouts will increase national prosperity. Mitt Romney is one of those folks. A few days ago, the Republican dared to utter the unutterable: Americans have become increasingly dependent upon government assistance...and the more dependent they become, the more dependent they seek to become. Your editor takes no sides in the skirmish between Romney and Obama. But he does believe that America’s voiceless capitalistic spirit deserves to be heard from time to time. As such, Romney’s recent “gaffe” is a fascinating jumping off point to examine the current state of American capitalism...and its prospects for survival. In the column below, Jeffrey Tucker takes a closer look at Romney’s gaffe.   External Advertisement Little-Known Index Suddenly Set to Soar Most people don’t watch the Continuous Commodity Index (CCI). But they should. It tracks the 17 natural resources that feed our entire global economy. And it’s suddenly on fire... forming the rare — and coveted — “Golden Cross.” Technically, this marks the very beginning of a bull market. And in this case, it could be a roaring one for commodities. Here’s why. And get ready. It’s not often that you come across a smart company standing right in the middle of something this big... Watch. The Daily Reckoning Presents The Truth Behind the Romney “Gaffe”   Jeffrey Tucker Cover the kids’ ears! Hide their eyes! Shuffle the weak and frail from the room! A politician running for president has uttered a heresy that brings into question the holy grail of democratic politics. Romney has failed to pretend as if the country is one big happy family that uses our glorious voting system to discover ever better ways of governing ourselves.  Which is to say that Romney made a gaffe.  You know the definition of a political gaffe: inadvertent and unscripted truth. That’s what the supposed scandal of Romney’s off- the-cuff comments amounts to. He told potential donors an unvarnished truth that everyone knows but which is not part of the official civic creed of the land of the free:  “There are 47% of the people who will vote for the president, no matter what... All right, there are 47% who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it. That that’s an entitlement. And the government should give it to them. And they will vote for this president no matter what... These are people who pay no income tax.” The implied model here is that modern democracy is a system that enables mass confiscation of wealth by some from others. And who can doubt it? In older monarchical systems, only a tiny elite was privileged to steal from everyone else, and if they stole too much, people would get angry and overthrow them.  Democracy solved the problem by granting everyone the privilege once reserved to elites. Now we can all steal from each other, and even from ourselves. This way, it is no longer clear who the enemy is. We don’t know whom to blame when things get bad. There is no one to overthrow but ourselves.  And things are indeed getting bad. As income falls, the household budget is ever more squeezed, we are living ever longer, and as the boomers retire, government benefits are soaring on autopilot.  Indeed, the 47% figure might be low. Other estimates put it closer to half. And it is rising. A smaller percentage of household income comes from wages than ever before. Food stamps, Medicaid, unemployment benefits, disability benefits, Social Security...Tthis stuff adds up and amounts to dependency.  He also helpfully noted that 47% do not pay income taxes. That doesn’t mean that they don’t pay tax. They are actually heavily taxed at the payroll level — a tax that pays into the very benefits that have made them dependent, a tax that has been more heavily raised under Republicans than Democrats. Everyone is taxed for every dollar earned and on the sale of nearly everything. But of course, neither party wants to talk about those taxes.  Also presumed in Romney’s talk: People vote their economic interest. Again, experience bears this out. If household economics don’t stack up, nothing else works. Politicians have limited time and money and need to get the biggest bang for their buck. No, this is not writing off half the country, as the partisan pundits are saying. It is the mapping out of an electoral strategy based on the “median voter theorem.” This is the idea that elections are won not by the partisans or extremes on either side, but by the people in the middle. This is the business of politics. It is about finding and appealing to the interests of the median voter.  Shocking? If so, you have never bumped into a campaign consultant at a cocktail party. This is how they all talk and think. Indeed, this is how politics has worked for, oh, 200 or so years, and ever more so since the expansion of the franchise.  In the video, Romney goes on to say that his job is to appeal to the independent 5% who will turn the election in his direction. Notice that this outlook also “writes off” all the people that he already knows will vote for him. He is also giving himself a license to put their interests on the shelf as well, at least in rhetoric.  For this reason, anyone who dedicates himself or herself to getting Romney elected, as a means of protecting personal wealth from confiscation, will be sorely disappointed. Republicans as much as Democrats find ways to take what is yours.  And by the way, Obama thinks the same way. Obama will never convince voters who are already dedicated to Romney, and every single Obama adviser knows this. This is a fight for the remaining 5%. And what’s more, politics is business in another form. It is about giving and getting. Political parties represent interests, not ideas.  But oh, how precious is American political culture! We must not hear these things. We must never be permitted to hear what is true. Instead we have a Victorian sensibility about our civic religion. We sing the national anthem, say the pledge and reflect on 19th-century mythologies about our revered Founders, because, after all, we have the greatest system of government ever conceived, one so wonderful that it should be exported and imposed all over the world.  Or so we tell our youngsters. As adults, we should know the truth. Politics is a means of wealth redistribution. Electoral strategy is a race to the bottom. After all, it is emphatically not the case that Romney’s chosen constituents are free of dependency. Note that he is ramping up his imperial warmonger talk in recent days.  Every day, there is a new enemy that he accuses Obama of not slaying. And it’s not only about the military. It is about our trading partners. He has blasted the Obama administration for being soft on China.  What’s this about? It’s about reassuring his supportive pressure groups that he supports their interests. He will protect the American corporate class against foreign enemies who attempt to bypass the corporate oligarchs by selling cheap stuff to you and me. No, he won’t let that happen. And it is about reassuring the military-industrial complex that its subsidies will continue.  In fact, Romney represents a different class of dependents. Large banks. Financial institutions on the dole. Monied elites who live off cheap credit and infinite liquidity courtesy of the central bank.  Either way, the rest of us get looted. The election is about who controls that margin of loot that remains after the autopilot spending administered by the permanent class of bureaucrats is finished doling out its entitlements left and right.  In a way, I feel sorry for the bourgeoisie gathered in that small room to hear Romney’s talk. He wanted their money — a payment in exchange for his promise to protect their wealth from the grasping hoards. But he still wanted their money. Whether he will actually do this is another matter. And why should they have to pay at all?  There once was this idea called freedom. You keep what you earn. You don’t live off others. You mind your own business. Society works out its own problems without politicians, police, bureaucrats, and power elites running their lives.  Is what both Romney and Obama are doing a corruption of the idea of the political party? Ludwig von Mises, whose book Liberalism (a Laissez Faire Club selection) explains everything you need to know about democracy, says that this is precisely why political parties were founded. “All modern political parties and all modern party ideologies originated as a reaction on the part of special group interests fighting for a privileged status against liberalism.” The best statement on this topic was framed by Frederic Bastiat: “The state is the great fictitious entity by which everyone seeks to live at the expense of everyone else.” In his book, The Law, Bastiat explains that the purpose of law is precisely to prevent the mutual looting that goes by the name democracy. But once property rights are no longer secure, political elites can plunder with impunity.  That’s why no truly independent minded person can depend on any political machine to protect his or her interests. To keep our liberty and property from their clutches is our job. Regards, Jeffrey Tucker for The Daily Reckoning --------------------------------------------------------- Here at The Daily Reckoning, we value your questions and comments. If you would like to send us a few thoughts of your own, please address them to your managing editor at joel@dailyreckoning.com