Sometime later this year, we taxpayers may again receive an Economic Stimulus Payment. The Obama Administration is very excited about this new program. Let me try to explain to you how it works using a simple Q and A format:

Q. What is an Economic Stimulus payment?
A. It is money that the federal government will send to taxpayers.

Q. Where will the government get this money?
A. From taxpayers.

Q. So the government is giving me back my own money?
A. Only a smidgen.

Q. What is the purpose of this payment?
A.... That you will use the money to purchase a high-definition TV set, thus stimulating the economy.

Q. But isn't that stimulating the economy of China?
A. Shut up.

Below are some helpful hints on how to best help the US economy by spending your stimulus check wisely:

1) If you spend the stimulus money at Wal-Mart, the money will go to China.
2) If you spend it on gasoline, your money will go to the Arabs.
3) f you buy a computer, it will go to India.
4) If you buy fruit and vegetables, it will go to Mexico , Honduras and Guatemala.
5) If you buy a car, it will go to Japan.
6) If you purchase useless stuff, it will go to Taiwan.
7) If you pay off your credit cards or buy stock, it will go to management bonuses and they will hide it offshore.

Instead, keep the money in America by:
1) Spending it at yard sales, or
2) Going to ball games, or
3) Spending it on hookers, or
4) Beer or
5) Tattoos.

These are the only American businesses still operating in the US. So, the best suggestion is go to a ball game and drink beer with a tattooed hooker that you met at a yard sale.

Drudge links to this story:

Marsha Blackburn (R-Tenn.) spoke against net neutrality regulations today... Representing the songwriters, singers, actors, producers and other entertainers in Memphis and Nashville, she said the creative community does not want the federal government to interfere with how they are able to get content to consumers via the Internet.

"Net neutrality, as I see it, is the fairness doctrine for the Internet," she said. The creators "fully understand what the fairness doctrine would be when it applies to TV or radio. What they do not want is the federal government policing how they deploy their content over the Internet and they want the ISPs to manage their networks and deploy the content however they have agreed on with ISP. They do not want a czar of the Internet to determine when they can deploy their creativity over the Internet. "They do not want a czar to determine what speeds will be available....We are watching the FCC very closely as it relates to that issue."

But let’s peak at the Verizon policy blog:

Doubtless, there will be disagreements along the way. While Verizon supports openness across its networks, it believes that there is no evidence of a problem today -- especially for wireless -- and no basis for new rules and that regulation in the US could have a detrimental effect globally. While Google supports light touch regulation, it believes that safeguards are needed to combat the incentives for carriers to pick winners and losers online.

Both of our businesses rely on each other. So we believe it's appropriate to discuss how we ensure that consumers can get the information, products, and services they want online, encourage investment in advanced networks and ensure the openness of the web around the world.

Positively Obama-riffic!...Verizon and Google agree to chat about net neutrality over a warm (non-alcoholic) beer sometime real soon.

Ivan: “I say there’s ‘No basis for new rules’ and I say “potato.” Eric says ”potahtoe” with a little “light touch regulation” on the net.

Hey, regular ole users of the largely unregulated (and working extremely well as a result) internet, the guys at the top of two dominant companies are cooking up another public option for you.

This comes, no doubt, as a bit of a shock to free marketers, many of whom are all suited up for a WW3 over net neutrality waiting for the signal to charge. Meanwhile, behind the scenes, the two generals are..well, they are nodding to each other that hate is a four letter word. As is “lame.” And so is “deal.” Put ‘em all together and you can hate the lame deal.

Prediction: the FCC will move forward on some kind of a deal brokered in part by these two companies, which will trade your freedom for their safety.

What other area of commerce is left unmanaged by government? Any?

Light touch or not, regulation creates liabilities out of otherwise easily resolved minor matters which leads to litigation, not justice. Go ask the trial lawyers outside your door.

Have a nice day!

In this light, it’s not surprising that various nations, especially China, say the dollar should be dethroned as the world’s reserve currency, and the currency in which much global trade and investment is denominated. These cries come just as the U.S. government needs foreign investors more than ever to help finance record deficits and accumulated debt.

Is the Obama Treasury Department oblivious to all this? Surely it should be doing something, or saying something. At the least, our national prestige on the global stage is at stake. At the worst, our ability to fund our debt is in jeopardy.

Well, I had the opportunity last week to discuss the weak dollar with several of the highest-level officials at the U.S. Treasury. I can’t report that they have a secret plan to save the U.S. currency. In fact, they’re going to be carrying out some policies that they know will make it even weaker. But I think conservatives can take comfort in the fact that their approach to the dollar is both realistic and sensible.

For starters, nobody at the Treasury Department insulted my intelligence by spouting hollow clichés about a “commitment to a strong dollar.” It’s obvious that they aren’t doing anything to bring such a thing about, so at least they’re being honest.

They’re appropriately humble, too. They believe, correctly in my view, that the responsibility for the dollar ultimately rests with Ben Bernanke and the Federal Reserve. No matter what the Treasury does or says, if the Fed runs an inflationary monetary policy, the dollar eventually is going to weaken. Inflation erodes purchasing power, and that’s the final long-term arbiter of any currency’s value.

Officials at the Treasury also are keeping an appropriately cool head about the dollar, even though this coolness can be mistaken for insouciance. They note that the recent dollar decline has taken place in a very special context — that of a historic global credit crisis. This year’s 15 percent dollar drop began on March 9, the very day the stock market found its bottom. Tick for tick, the dollar’s decline has tracked the stock market’s monster rally. In this sense, the weakening dollar is a sign of economic recovery and strength.

Bear in mind that prior to the weakening trend the dollar had soared 24 percent since mid-2008, which is right when the credit crisis began to unfold. That’s because investors and banks worldwide desperately needed dollar liquidity, and not because the U.S. was an especially safe haven during the financial storm. (Obviously, it wasn’t.) U.S. dollars — the standard currency of world trade — were needed to settle dollar-denominated investment and credit flows in markets that to a large extent had simply shut down.

This is the key to understanding why so many nations are talking about diversifying out of the dollar standard now that the crisis has ebbed. Surely, if we have learned anything from the crisis, it’s that it is too risky to have so much global trade denominated in any one nation’s currency. In a pinch, that currency will become dangerously scarce, and the mad dash to acquire it will induce costly distortions that will make matters worse.

Yes, if the dollar does lose its current status in world markets, serious issues will be raised about funding our deficits. Today, the need of other nations to hold large dollar reserves creates an automatic need for them to hold our government debt — happily for us. But if world nations have to hold fewer dollar reserves, they’ll want to hold less of our debt. Right?

This makes sense in theory. But the Treasury officials I spoke with observe, quite correctly, that for all the talk about going off the global dollar standard — and despite very low interest rates on Treasury bills and bonds, and notwithstanding the dollar’s 15 percent drop this year — foreign nations just keep buying more and more of our debt. U.S. debt ownership by foreigners is at an all-time record level. So at least for now, no harm and no foul.

I did, however, find less encouraging the Treasury’s attitude about the currency policies of other nations, especially giant exporters like China. Many people argue — some sincerely, some for mercantilist reasons — that China and other nations deliberately manage their currencies, keeping them artificially low to make their exports more competitive on world markets. The Obama Treasury is committed to using diplomacy to stop that currency management, which was the exact same approach used by the Bush Treasury.

This may sound good on the surface. But the expectation of Treasury officials is that if the management stops, currencies like the Chinese yuan will rise in value. But that means, as surely as night follows day, that the U.S. dollar will fall in value relative to the yuan. Hence, urging the Chinese to adopt a strong-yuan policy is akin to pursuing a weak-dollar policy.

It doesn’t take a genius to figure out the winners and losers on this score. If you buy cheap Chinese-made goods at Walmart, you’re going to be a loser. Prices are going up. But if you are a union employee in the U.S. manufacturing sector, you’re going to be a winner. U.S. exports look more attractive in a weak-dollar world.

Treasury officials say it’s not about winners and losers. Rather, they say it’s an end in itself for currency values to be determined entirely by market forces — let the chips fall where they may.

The Treasury’s pressure on China and other currency managers will be subtle and quiet — it won’t have the stridency on the subject that Barack Obama employed during his presidential campaign. Recall that Timothy Geithner, back when he was being confirmed by the Senate for Treasury secretary, said un-subtly and un-quietly that China was an outright currency manipulator — and he was just quoting Obama. Last week the Obama Treasury released its semi-annual report to Congress in which, by statute, it must identify nations that manipulate their currencies, and China was not named. Apparently, it clarifies the mind to run a government dependent on China’s purchasing our debt.

The fact is that the Obama Treasury is playing a very difficult hand of poker here. Its failure to wave a magic wand and restore the prestige of the U.S. dollar does not originate in a willingness to acquiesce in American decline. Secretary Geithner told me that he rejects what he called the “existential narrative” so popular among global economic elites — the declinist doctrine of so-called “global imbalances” that envisions a lazy America being overrun by hard-working Asians. No, what’s holding the Treasury back from delivering a stronger dollar is, more than anything else, the absence of magic wands in the real world.

The closest thing we’ve got is the Fed’s magic checkbook, and that’s been wide open for more than a year now. So if you’re worried about our currency, you can spend your time more wisely than hoping for a “strong dollar” speech from Tim Geithner, or even trying to get him to lay off the Chinese for a while. Instead, hope for Ben Bernanke to start closing the Fed’s checkbook — before runaway inflation depreciates the dollar both on foreign exchange markets and in every American’s wallet.

Posted by Donald L. Luskin at 8:43 AM | link  

Posted by Donald L. Luskin at 6:21 AM | link  

Monday, October 19, 2009

Posted by Donald L. Luskin at 7:07 PM | link