– Ronald Reagan, 1961One of the traditional methods of imposing statism or socialism on a people has been by way of medicine. It’s very easy to disguise a medical program as a humanitarian project. Most people are a little reluctant to oppose anything that suggests medical care for people who possibly can’t afford it.
Employment numbers will be released this morning. I’m not sure what impact it will have on the markets, but today will be an interesting day for the S&P 500. Over the last few weeks I have spoke of the S&P trading in a channel or range that looks like this:
But watching the action closely now, it appears we may be hitting resistance right here:
If we are, does this mean we are fulfilling the prophecy of a slow downtrend on lower highs on each rebound? I’m not sure, but it is an interesting observation to ponder.
From Wall Street Cheat Sheets………….
595 Days Into Obama's Presidency Tuesday, September 7, 2010 at 11:58AM
President Obama has been taking heat from all sides lately on his handling of the economy, and the Democrats now appear to be in jeopardy of losing their majorities in both the House and Senate after the November elections. Instead of trying to defend their handling of the economy, maybe the Obama administration should be pushing the performance of the stock market since he took office in January 2009. Regardless of how or why it has done what it has done (we're not looking to get into a political debate here), the Dow has done well since Obama took office. Through last Friday (595 days since the close before Inauguration Day), the Dow was up 26.16%. Since 1900, Obama ranks fifth in terms of stock market performance at this point in the first term of a Presidency, handily beating the average Dow performance of 8.87% 595 days in.
The Dow was down 20.4% at this point in Obama's predecessor's first term, while it was up about 20% at this point in Clinton's first term. Ford, Coolidge, Harding, and FDR are the Presidents that rank ahead of Obama in this regards, with FDR way on top with a Dow gain of 76.26% from 3/4/1933 to 10/19/1934.
Again, we could all debate forever on why the market has done what it has done in recent years, but from a pure numbers standpoint, the stock market is up about 26% since Obama took office. If we all sent ourselves back to early 2009 and were asked if we would take +26% by September 2010, most of us would probably accept.
From Wall Street Cheat Sheets……….
Are President Obama’s New Proposals Good for the Economy? By Damien Hoffman
While most people were taking their last vacation before the grind to Thanksgiving, President Obama announced a new $50 billion infrastructure spending plan to boost employment as well as a permanent extension of R&D tax credits. Then today, the administration signaled they will announce a new tax break for plants and equipment.
Will these new plans benefit the economy and reduce unemployment?
Absolutely Not
“The only path back to robust growth and prosperity is to stop this agenda dead in its tracks, and then by stages to reverse it,” opines the Wall Street Journal. Stimulus I cost taxpayers $168 billion. Stimulus II cost taxpayers $814 billion. Plus, the Federal Reserve has reduced interest rates to zero and expanded their balance sheet over $2 trillion. All we have to show for it is a 1.6% recovery and hardly a dent in unemployment. Let’s not rinse and repeat.
You Better Believe It
Ben White at Politico says, “It’s all part of an aggressive White House effort to both boost a struggling economy heading into a difficult midterm election — and, in the case of the investment credit, to reverse a long-standing perception that the administration is hostile to the interests of big corporations.” This money will help businesses free up capital to hire new workers and transact new business.
Who Cares? It Won’t Pass Anyway
“Given a tight work schedule, plus Capitol Hill’s bitter partisan atmosphere, it’s unlikely that Congress will pass Obama’s new plan prior to the November elections,” says Peter Grier in the Christian Science Monitor. “Following that, expected GOP gains would make passage of such new efforts much more difficult.” So, get back to your post Labor Day work and don’t waste time loving or hating the new plan.
From the Daily Reckoning……..
When the Ruling Classes Can No Longer Buy Off the Mob by Bill Bonner
Still reckoning from London, England...
"I think Marx was basically right. History is largely a class struggle," said another friend last night.
"Back in the 18th century, people wondered how society could function without divinely-appointed kings to hold things together. But then came the American Revolution and the French Revolution...and then they booted out Napoleon...and turned kings and queens into celebrities. The ruling classes realized they had to find a way to keep a lid on the public.
"Bismarck created the welfare state. He figured he could buy off the public. As long as they were getting money from the state, people wouldn't revolt.
"There was a long boom in the 19th century. Everything seemed to be going along smoothly. But then came WWI and the Bolshevik uprising; the rich saw that socialism was real...and dangerous. They knew they needed to come to terms with it...to protect themselves - or they'd be ruined.
"Essentially, the deal that Bismarck struck was the one that caught on and endured. The rich agreed to pay a lot in taxes so that the poor would stay in their places. Then, every time this new order was threatened - in England after WWI, in France before and after WWII, in America in the 1960s - governments just gave out more money. They spent money on guns AND butter...military and social welfare programs.
"In France after WWII a quarter of the population voted with the communist party. And the communists were armed. But the government bought them off with more social spending.
"Then they started to run out of money. They tried taxing the wealthy classes even up to 100% of their income. In Britain and Scandinavia, the marginal rate went up above 100%. But that just depressed the state's revenue. Kennedy proved that you could lower tax rates and still squeeze more money from the wealthy. Reagan tried that too, but the results were less positive. Art Laffer showed that you had to find the optimal tax rate...and once you had it, you could raise it or lower it, it didn't matter. Either way, you got less revenue.
"But the ruling elites just kept making more and more promises. That was how they were able to hold onto power. And now they can't make more promises. The welfare state has reached the end of the road."
If our friend is right, we are facing more than just a sovereign debt crisis. We are facing a crisis in democracy. The ruling classes can no longer buy off the mob.
In a sense, democracy was always based on a fraud. Imagine that you are the government. You go to the taxpayer and you say: "Give me your money. I'll take 10% or 30% or 50% off the top and then give the rest back to you in services."
Not a good deal for the taxpayer, right?
So, instead the implied deal is this: "Give me your money. I'll give you MORE in services than you gave me."
That is the deal that makes sense to the voter. Trouble is, if you're the state, you can't really do it. Overall, taxpayers get back in "services" what they paid in taxes minus overhead, waste, corruption and so forth. You can rob the rich on behalf of poorer voters, but after you've already pumped the rich at the optimal rate, what do you do? You then have to turn on future generations. You take one generation's pension contributions and spend them in the present. Then you use the next generation's pension contributions to pay off the first generation... It all works until 1) you've promised too much and 2) the next generation is smaller or poorer than the one that preceded it and 3) a credit contraction makes further borrowing impossible.
Then, the mob feels betrayed. It looks for a leader to give voice to its disappointments...and make new promises... and start new wars.
Oh! Bama! Wherefore art thou?
And more thoughts...
"It's really stupid, I agree...but I can't even serve you a glass of water."
There is a noxious trend developing all over the world - an alarming increase in lawfulness. Even in such famously scofflaw countries as France and Italy...people are obeying the law.
Yes, dear reader, all over the world, humans are developing into a race of sheep...led by jackasses...
Two boys entered the café in the 16th arrondissement of Paris on Saturday morning. Approximately 9:30 AM. One was about 10. The other about 12. On their way to play tennis; at least that was the implication of the rackets hanging from their shoulders.
At approximately 9:35 AM these two delinquents attempted to break the law of the land...flagrantly, and in broad daylight.
"Can we have a glass of orange juice...we'll share it," asked the older boy.
"No, I'm sorry," replied the waiter...the last rampart of law and order...guardian of all that is good, upright, and fair...defender of the La Republique. Surely there will be a statue to him erected in the square nearby. He deserves at least the honors accorded to the French soldiers in WWII. In a moment of trial, he stood his ground, fearlessly facing up to these miscreants.
"We're a licensed bar. We can't serve kids unless they're with a parent."
For a moment, it was tense. The kids might have escalated their attempt at misdemeanor. They might have asked for a cup of coffee! Instead, well brought up kids that they were, they retreated...
"Okay, Monsieur," they said...their faces downcast...on their way to tennis without a glass of orange juice to give them energy. They headed for the door while the coast was still clear. Then, they made their getaway down the Avenue Mozart.
Thank God for the waiter! What would the Fifth Republique do without men of such steady nerves? Quick-thinking...right thinking...and plain old dumbbells. Who knows how that might have turned out?
We all know that orange juice is just the beginning. Pretty soon these reform-school escapees will be knocking down Perrier water. Then, a few years later, it will be 40s.
We are deeply disappointed in the French. We never thought they'd become law abiders like the Americans. We had hoped for more.
Regards,
Bill Bonner,
for The Daily Reckoning
