Copybook Headings Outbreak

I've noticed several references to Kipling's 'The Gods of the Copybook Headings' recently.  Here is the actual poem, by Rudyard Kipling:

The Gods of the Copybook Headings

 
 The Gods of the Copybook Headings: Haven't We Learned Our Lesson Yet? - CrownThomas

The point of this poem is that if we decouple ourselves from common sense & reality, we will ultimately pay for it in the end. And each time, as we begin to recover from our mistakes, the "enlightened" ones (who led us down the wrong path in the first place) always pop back into the picture. They once again tell us that 2 + 2 = 5, and we can have prosperity for everyone without having to work for it, thus leading us down the road and into our next crisis.

Hopefully someday we'll learn our lesson.

Instapundit


A God of the Copybook Headings  - Bret Stephens

In today's economy, the hard truth is that we can't spend, consume, manipulate and inflate our way to general prosperity—as opposed merely to the enrichment of Democratic Party interest groups. This was the dominant economic model of the 1970s, with results that were once well known. "The Great Money Binge" makes short work of the theory:

"Demand-side economics holds that the economy derives its momentum from consumption, and it is of little moment if that consumption is financed by credit," he writes. "But if that were true, everyone could merrily use his credit card to supply his wants and never have to work. Maybe there's a logical flaw there somewhere."

The great strength of Mr. Melloan's book is to show, in exacting detail, not only how we came to our current crisis—thank you, Barney Frank, Chris Dodd, Alan Greenspan and Tom DeLay—but where that logical flaw is destined to take us again.

The alternative is supply-side economics, which, for all the invective heaped upon it, boils down to the inescapable fact that "consumption must be paid for with production"—that if you don't work (i.e., produce) you die (i.e., can't consume). The obviousness of this is so manifest that the real wonder is how it has escaped the grasp of otherwise intellectually competent people.

The Economy - August 2011 (part 3)

David Stockman: Rick Perry Is Right, the Fed Is “Totally Wrong” - Peter Gorenstein

Wait! There's more:

One more on the looming Eurozone crack-up:

Consequences of Free Spending

Greece set for severe bail-out conditions - Peter Spiegel, Quentin Peel, Ralph Atkins

European leaders are negotiating a deal that would lead to unprecedented outside intervention in the Greek economy, including international involvement in tax collection and privatisation of state assets, in exchange for new bail-out loans for Athens.

People involved in the talks said the package would also include incentives for private holders of Greek debt voluntarily to extend Athens’ repayment schedule, as well as another round of austerity measures.

Officials hope that as much as half of the €60bn-€70bn ($86bn-$100bn) in new financing needed by Athens until the end of 2013 could be accounted for without new loans. Under a plan advocated by some, much of that would be covered by the sale of state assets and the change in repayment terms for private debtholders.

Eurozone countries and the International Monetary Fund would then need to lend an additional €30bn-€35bn on top of the €110bn already promised as part of the bail-out programme agreed last year.

Officials warned, however, that almost every element of the new package faced significant opposition from at least one of the governments and institutions involved in the current negotiations and a deal could still unravel.

In the latest setback, the Greek government failed on Friday to win cross-party agreement on the new austerity measures, which European Union lenders have insisted is a prerequisite to another bail-out.

In addition, the European Central Bank remains opposed to any restructuring of Greek debt that could be considered a “credit event” – a change in terms that could technically be ruled a default.

Markets Fret About Euro 'Slow-Motion Car Crash' - Catherine Boyle

Reports that Greece has not met any of the fiscal targets set by the International Monetary Fund (IMF) and the European Union (EU) as part of its 110 billion euros ($157 billion) bailout knocked down the euro Monday, as other countries in the euro zone are threatened with being dragged into the Greek morass.

...

“Europe’s debt crisis remains a slow-motion car crash. If sovereign wealth funds did not remain so determined to diversify out of dollars, the euro would surely be much lower,” Simon Smith, chief economist at FXPro, wrote in a research note.

So the good news for Europe is that the U.S. dollar is being rapidly devalued by the Federal Reserve. Even with Greece, Italy, Ireland, Spain and Portugal going down the tubes, investors are exchanging their dollars for euros.

Quantitative Easing

Sarah Palin for the Fed? - New York Sun

The big question as Chairman Bernanke gets set for his first quarterly press conference is how Sarah Palin was able to figure out sooner than everyone else that the Federal Reserve’s campaign of quantitative easing wouldn’t work. Disappointment in the Fed’s policies is being reported this morning at the top of page one of the New York Times. It reports that “most Americans are not feeling the difference” from the Fed’s “experimental effort to spur a recovery by purchasing vast quantities of federal debt.” It reports that “a broad range of economists say that the disappointing results show the limits of the central bank’s ability to lift the nation from its economic malaise.”

Plus, everything you need to know about QE2:



Via Liberal Compassion: Liberal Elite Tells Those Suffering From High Food Prices To Get "A Better Job"

The Market

Fed Policy Makers Signal Support for Abrupt End to Asset Purchases in June - Craig Torres, Scott Lanman and Steve Matthews

Federal Reserve policy makers are signaling they favor an abrupt end to $600 billion in Treasury purchases in June, jettisoning their prior strategy of gradually pulling back on intervention in bond markets.

“I don’t see a lot of gain to reverting to a tapering approach,” Atlanta Fed President Dennis Lockhart told reporters yesterday. “I don’t think that is necessary,” Philadelphia Fed President Charles Plosser said last month.

Central bankers, who next meet March 15, are about half way through their second round of bond purchases. To bring the program to a full stop in June, they must be confident that the economy is strong enough to endure higher long-term interest rates and rising expectations of an exit from the most expansive monetary policy in Fed history, said Dan Greenhaus at Miller Tabak & Co. LLC in New York.

“If this is a self-sustaining recovery that can withstand higher interest rates, then why not get the hell out?” said Greenhaus, Miller Tabak’s chief economic strategist. “Still, I am nervous about their ability to withdraw from this policy without broader disruptions.”

The Fed announced in November that it would buy $600 billion of Treasuries through June in a bid to boost the recovery and reduce an unemployment rate lingering near a 26- year high. The program, known as QE2 for the second round of so- called quantitative easing, followed $1.7 trillion of asset purchases that ended in March 2010.

QE To Infinity: Not? - DoctoRx

Fed staff members, such as Brian Sack, the New York Fed official in charge of carrying out the bond buying, have argued the total amount, or stock, of securities the Fed has announced it will make has more impact on longer-term interest rates than the timing of those purchases. That’s a view now held by several members on the Federal Open Market Committee, including the chairman.

“We learned in the first quarter of last year, when we ended our previous program, that the markets had anticipated that adequately, and we didn’t see any major impact on interest rates,” Fed Chairman Ben S. Bernanke told the Senate Banking Committee during his March 1 semiannual monetary-policy testimony. “It’s really the total amount of holdings, rather than the flow of new purchases, that affects the level of interest rates.”

Fed Vice Chairman Janet Yellen supported that perspective, saying at a monetary policy forum in New York last week that “the stock view won out over the flow view.”

The italicized paragraphs (my doing) above are key. We can hope that this signals that the parties in Washington have agreed, at least in principle, on significant deficit reduction, so that ordinary debt market mechanisms can finance the Federal deficit without the central bank adding to the money supply as it has been doing with quantitative easing. Presumably, it is a show of confidence in the economy. Of course, a year ago a similar show of confidence gave way to the summer slowdown and QE2. Will past be prologue?

Guest Post: The Coming Rout | zero hedge - Bill Quick

The Fed is currently pumping about four billion dollars per day of funny money into the markets (mostly), which has turned stocks, bonds, and commodities into helium-filled balloons.

Turn off the helium-money all at once, and watch all those balloons turn into bricks. Except for gold and silver…maybe.

I’m no longer of the opinion that we’re going to hit new highs on the Dow. I think we’re pushing on a string now, and if they pull the puppet master’s strings, look out below.

From the comments: In other words, “here, hold my beer and watch this…”