Tag Archives: inflation

REAGAN vs. OBAMA ON THE ECONOMY

President Obama often asks the voters to understand that he inherited a very bad economy, and he did. But in many ways it was not as bad as the economy Reagan inherited from Carter.

On Reagan’s Election Day in 1980, unemployment was at 7.5 percent and headed for 10.8 percent; inflation was at 12.5 percent, headed for 13.6 percent, and interest rates were at 15.5 percent, headed for 21.5 percent by Christmas, well before Reagan was sworn in.

Obama inherited an unemployment rate of 6.8 percent and no inflation problem. Inflation was only 1.1 percent in comparison to the crushing 21.5 percent left by Carter. By the time Reagan was sworn in in January business men, farmers and home buyers (if you could find one) were paying 23 to 24 percent interest rates on loans.

Reagan wasted no energy on blaming Jimmy Carter. He approached the problem by lowering marginal tax rates in gradual steps over three years. He eased the regulatory burden on businesses, making it simpler to open or expand a business. His infectious optimism reminded people “the best is yet to come.” America was still “the shining city on the hill,” and Reagan reversed the country’s mood from a Carter-induced “malaise” to a can-do spirit.

In stark contrast, Obama did just the opposite with predictable results. He increased the regulatory environment increasing the cost and difficulty of opening or expanding a business. He introduced new law burdening business with new costs that are significant and beyond measurability at the same time. He fought for a return to higher taxes before acquiescing. Obama made his belief clear that America never was a shining city on a hill; it was a country in need of complete transformation. For America’s leader to wear a flag pin on his lapel was to honor a nation that was undeserving of such respect, a country that was in no way exceptional.

Reagan’s policies worked. By the end of his first term, inflation was down, employment was up, the economy was in good shape again and the mood of the nation had gone from morose to bright and cheery. In the bid for a second term, Reagan won every state with the sole exception of Minnesota.

Today we are where we are because of the president we picked in 2008, not because of what he inherited.

This post was adapted on an article by Peter Hegseth.

RANDOM THOTS – THE COLUMN

Inflation
Don’t look now, but inflation is peeking around the corner.

We are getting a very, very sharp rebound in core inflation and much more than the Fed had bargained for.”  Eric Green, chief economist at TD Securities in New York.

Overall consumer prices were up 3.6 percent from a year earlier,   Reuters

Last months drop in gasoline prices masked the increases in everything else. The wholesale price of cheese is up 23% since year end, butter 45%. Grocers are absorbing much of the price increase but that won’t prevail very long.

The debt thing
Obama says the American public is crying out for higher taxes. It’s just stubborn ideologues in Congress who are opposed to paying more income tax. He may be 45% right. That’s the number of people who pay no taxes but still enjoy benefits paid for by those who do.

The President says Congress is ignoring the will of the people by keeping taxes down. The solution is simple; add another line to the income tax form so all the unhappy people can add whatever extra amount makes them happy.

Big oil profits
ExxonMobil’s has operations in more than 100 countries around the world. The part of the business that refines and sells gasoline and diesel in the United States represents less than 3 percent – or 3 cents on the dollar – of Exxon’s total earnings. For every gallon of gasoline, diesel or finished products the company manufactured and sold in the United States in the last three months of 2010, Exxon earned a little more than 2 cents. That’s not a typo. Two cents.

Large oil companies risk capital, have big holdings confiscated by nations, transport crude from well to refinery, refine or pay for refining and transport the final product to thousands of service stations.  For that they make about 2 cents a gallon.  Federal and State governments do none of it, yet they make an average 50.1 cents per gallon in taxes.  Then the demagogues call the oil companies rapists.

VENEZUELA ACCELERATES DOWN

Inflation is not an increase in prices.

Inflation is a decrease in the value of a currency.

Hugo Chavez, the socialist leader of Venezuela is giving the world yet another example of how central planning works. Under his leadership the Venezuelan Bolivar is experiencing rapid depreciation. As of April 2010, the Bolivar was declining in value at a 32% annual rate.

CHAVEZ AND A FAN

The Chavez government has nationalized privately owned oil companies (sixty of them), metal companies, newspaper companies, universities, banks, food supermarkets, the communications industry and general merchandise retailers. The justification, expressly stated in many cases, was to control inflation. Most recently the Venezuelan stores operated by a large retailer based in France were closed by the Chavez government, without notice, only because they raised their prices in tune with inflation.

The government is running most industries, and inflation is “still” rampant so Chavez reasons the problem must be somewhere else. Now he thinks he has found the cause. Venezuela imports most of its food. “Venezuelan businessmen buy abroad, come here and ask for more than it really costs” he said in fractured English. Translation – If businessmen are unwilling to operate at a loss the government will confiscate their businesses and do it for them.

The Financial Times reports:

Chávez seems to think he can decree low inflation. But it’s absurd,” said one local businessman who is broadly sympathetic to the government.

Last week, he said private companies exploited their workers for economic gain, and then sold their goods for inflated prices. He particularly singled out the country’s largest food and beverage producer, Polar, and recommended that the bourgeoisie read more Karl Marx.

But then Mr Chávez was undone by his own socialist project’s contradictions when 30,000 tons of rotting food were discovered at a warehouse run by state oil company PDVSA. Mr Chávez conceded that corruption and inefficiency was involved, but remained undaunted: “This will not divert us from our route toward our main goal . . . Socialism!”

Yet my liberal friends ask what is wrong with Socialism.

CHAVEZ IS ALSO STUPID

Hugo Chavez, the socialist leader of Venezuela is giving the world yet another example of how collectivism works. Under his leadership the Venezuelan Bolivar has been experiencing rapid depreciation. As of last month, April 2010, the rate of decline is at an annual rate of 32.9%.

His government has nationalized privately owned oil companies (sixty of them), metal companies, newspaper companies, universities, banks, food supermarkets, the communications industry and general merchandise retailers. The justification given in many cases was expressly to control inflation. The Venezuelan stores of a large French retailer were closed without notice because they raised their prices in response to inflation.

The government is running all these industries and inflation is running rampant. Nevertheless, Chavez reasons the problem must be elsewhere, in the private sector. He believes he has found the cause. Venezuela imports most of its food. Hugo, in his fractured English declares  “Venezuelan businessmen buy abroad, come here and ask for more than it really costs”. Abomination! If businessmen will not operate at a loss Chavez will take away their businesses and do it for them.

Please God, no profits !


Bob B

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