The Failure Of The Federal Confidence Game

The world’s largest entity in terms of gross revenue had a bad month in April. The IRS collected only $245 billion dollars in April 2010 compared with collections of $266 billion in April 2009. This was only part of the reason the U S government ran up an $82 billion dollar deficit in April of this year because the government spent $327 billion dollars in that month versus $287 billion in April of last year. For 43 of the past 56 years there has been a budget surplus in April owing to the fact that tax collections occur then.

Of course, none of this is news to voters in Virginia, New Jersey, Massachusetts, and Utah and, as of last night, West Virginia. In all of these states the “surprise” losers were either irreparably tainted by an Obama/Pelosi/Reid connection or ossified incumbents that finally felt the wrath of an electorate that has had enough of giving at the office, giving at home, giving at the store ad infinitum, ad nauseum and giving everywhere else the government has extended its insatiable desire for taxes. Add to that anger a state immigration law in Arizona that a majority of Americans broadly support but is wildly unpopular in the establishment media, academia and other elitist strongholds and you get one of those rare moments in U S history when events converge to create a wave.

We are witnessing a worldwide repudiation of big government and Keynesian economics. In the Unites States the evidence of this is found in the results of the several state elections I mentioned above, most if not all of which were plebiscites on national policy issues. However, this skepticism is becoming an international issue. In Europe the response is much starker, verging on panic. Last weekend, before the big Euro Bailout, European bank stocks and sovereign credits (government issued loans and bonds) were almost falling off the cliff. Monday morning brought news of the bailout and things looked rosy….for about a day. Today brought news of abject panic buying of gold in Europe.

AUSTRIAN MINT SAYS SOLD 243,500 OZ GOLD IN COINS AND BARS IN LAST 2 WEEKS, MORE THAN IN ENTIRE Q1

AUSTRIAN MINT SAYS GOLD ORDERS COMING ENTIRELY FROM EUROPE IN LAST FEW WEEKS, SIGNS OF “PANIC BUYS”

The Europeans that yearn for gold do so for a reason: they don’t buy the Euro bail out propaganda at all. And unlike most Americans, who buy gold as a hedge against inflation and currency devaluation, these Europeans are buying gold in anticipation of having to actually use it as a currency. (Imagine that, thinking of using gold as a currency.) Our modern economists must think that is so quaint but I will give the Europeans credit for one thing: when things get really bad over there their historical memory kicks in. That’s why they are hoarding gold. And rioting.

The reason why there is such a loud repudiation of the Obama/Pelosi/Reid agenda is that many fly over country citizens know that what is known as the European contagion can happen here also. As I have mentioned before, in the midst of these financial crises of the past three years there is an enormous confidence game going on. When that confidence is lost (as appears to be happening in Europe) the result is not something that can be contained by a press conference or a new stimulus plan.

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Posted by on May 12, 2010.
Filed under 2009 Spendulus Bill, Barack Obama, Business, Congress, Economics, Elections, Harry Reid, House of Representatives, Nancy Pelosi, Senate, Stock Market.
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  • retired military

    “the result is not something that can be contained by a press conference or a new stimulus plan”

    Or an Obama town hall meeting stacked to the rafters with SEIU members.

  • Jeff Blogworthy

    This is OT: Al Gore gets his honorary doctorate from the University of TN Friday. I am lucky enough to live in Knoxville, so I will be joining in protest tomorrow night with Tea Partiers, students, and other concerned citizens. I will get pics and video as it happens. Lord Christopher Monckton will be a featured speaker.

  • GarandFan

    “I will give the Europeans credit for one thing: when things get really bad over there their historical memory kicks in.”

    Yeah, you might say they’ve had experience when the whole country falls apart. Wonder what the ‘intellectuals’ will do when they find that their VISA or MC is no longer ‘accepted’.

  • cc

    Give ‘em hell Jeff!

  • http://ak4mc.us/cms/ ak4mc (McGehee)

    Dress warmly, Jeff. If Algore is in town you can bet the weather will be chilly.

  • Mjdzfun

    Wow. I don’t know why I don’t stop here every day. That was a great article. Especially love the parallels drawn between fly-over citizens and elitists.

  • Jeff Blogworthy

    Thanks guys. I’m looking forward to it.

  • Lee Ward

    “The Europeans that yearn for gold do so for a reason: they don’t buy the Euro bail out propaganda at all.”

    They’re not yearning – they’re panicing — big difference.

    And have no doubt that the Glenn Beck’s of the world will do their best to contribute to the panic.

    Beck is lining his pockets with your hard earned dollars are he spreads his lies and fear.

    When the system eventually collapses, and the government comes with guns and confiscates, you know, everything in your home and all your possessions, and then you fight off the raving mad cannibalistic crowds that Ted Turner talked about, don’t come crying to me. I told you: get gold.

    Sad thing is — conservative morons believe him.

  • _Mike_

    Yes, Europeans are buying gold because of Glen Beck. The PIIGS are fine. Ignore the riots in Greece and the strikes in Spain. Nothing to see – all is fine. It’s Glen Beck that’s moving the gold market…

    Wee Lard has reached a new level of stupid.

  • _Mike_

    Oh.. almost forgot. LIAR!

  • GarandFan

    Europeans listen to Glenn Beck? I thought Europeans were like Lee Ward; they worship at the feet of the Obamassiah. Why would the Euro’s listen to a guy who trashes their Lord?

    I’m confused Lee. Can you enlighten us?

  • Constitution First

    “You don’t need a Weatherman to tell you which way the wind blows.” -Dylan

    The Weatherman of the New Millennia are the Malfeasant Media.

    Beck isn’t telling us much we don’t all ready know, except that: The gold train has already left the station, if you buy now, you’re buying at a historical high, with all it’s attendant dangers. Ten years ago, 2000, was the “golden moment”.

  • Jim Addison

    The April deficit was The Biggest Ever. I expect Obama to come out and proudly proclaim his “unprecedented achievement.”

    Perhaps lost in the panicky euphoria – or is it more of a euphoric panic? – over the Grecian Formula Bailout (“use every day to control how much crisis you slowly get rid of!”) is the realization that it really does almost nothing to deal with the systemic problems. In this it is eerily similar to the Obama policies, which is a pretty good indicator of where it will lead.

    The Germans are beginning to understand now, however, that their sound fiscal approach means they will bear much of the brunt of bailing out all the hard-partying southern Euro countries, and somehow they are displeased with the prospect.

    ~~~~~~~

    As for Lee and the other America-hating leftists, we should understand what they are going through. They had a huge House majority, a filibuster-proof Senate, and a Marxist in the White House. They were close – so close! – to their dream of instituting their semi-benevolent brand of socialism in their despised AmeriKKKa, finally being able to arrest Limbaugh and Beck and cut off DJ Drummond’s health care, etc., on their way to bringing a socialist Utopia where all people would be equal (under the Commissar class, of course), only to find that Obama was truly as incompetent as Carter, Pelosi is hated throughout the country, Obama is having to arrest terrorists – their whole world is collapsing around them.

    We just have to let them get their freak on over it for a while. They will resume their normally even-keeled stupidity in a few months.

  • http://mikesnoise.typepad.com Michael Laprarie

    Congratulations on the InstaLanche, Hugh.

  • http://patterico.com/jury Kevin Murphy

    Note that, according to the Department of Commerce, federal worker compensation is about double that of the average private sector worker (and that includes military pay). And, given the generous retirement bennies, it’s a gift that keeps on giving.

  • jackv

    The EU is close to dissolving. Unless it can be a fiscal union as well as a monetary union the EU will cease to exist. By a fiscal union I mean that a centralized government will have the ability to contain deficit spending at the country level. This will never happen as the nationalistic tendencies of the European countries reassert themselves. Goodbye EU, hello the pre-WWII dynamics. I give it ten years before another European world war breaks out. The Islamification of Europe will be a rallying cry for the extreme right wing, just like the “Jewish problem” was during the post Weimar Republic. Russia is resurgent, so you have all the elements that contributed to WWII. I pray that I am wrong.

  • sean

    Euro nations are users of the currency without the ability to issue. The US is issues the currency in which its debt is denominated so the assertion that what is happening in Greece or Spain can happen here is just flat wrong.
    Those countries can become operationally insolvent. The US or Japan or the Uk can not. If the markets were so worried about contafgion as many say, why did the currency of the country with the largest debt in the history of the industrialied world strengthen? (the yen and the dollar both strangthened).
    Why has the yen strengthened for 15 years and rates stayed just above 0?

  • Don Meaker

    Optimists buy gold. Pessimists buy brass and lead (and cordite).

    FDR made individual ownership of gold illegal, required that it be sold to the government for 20 dollars an ounce, then raised the price to 35 dollars an ounce. That works out to a 75% rate of inflation…

  • Pink Pig

    Gold is a poorly understood commodity. The trading firms that specialize in gold made a mistake in 1990 because they thought there was a special aura about gold, or at least that the public thought so. There wasn’t (and it didn’t) — gold is just another commodity. The result was that the price of gold, as a commodity, dropped from $900 an ounce to a bit more than $300 an ounce, and the trading firms that liquidated their popsitions at that level took a bit of a bath (actually, most of them had a realized profit, because they had bought in even more cheaply).

    The firms that couldn’t afford to liquidate held their long positions, expecting that the market would come back by 1995 (it didn’t) or by 2000 (it didn’t) or by 2005 (it didn’t) or by 2010 (it did, finally). Now, if they can manage to liquidate their positions, they stand to make an enormous profit, but they can only do that if the public is gullible enough to buy gold (“which has never been worth zero”). Feel free to show the world how gullible you are.

  • http://www.liberalcapitalist.com Peter Jackson

    You know this really could be the final repudiation of economic leftism, it really could be. It is still entirely possible for us to put ourselves back on the path of capitalist progress. But you know what? We can blow it too. And the fastest way to blow it would be to let the anti-immigration populists to successfully attach themselves to the Tea Party movement. Indeed, any introduction of any identity politics into the movement will doom it. That’s what the leftist desperately try to do every day, tie the Tea Party movement to some identity group. Let’s not do the left’s job for them.

  • Old One

    Pink Pig is as dumb a a post and the post tutrtle he/she and fellow leftists installed in the White House in November 2008.
    A wise investment is one that can be acquired at a low price in the early stages of a working life and liquadated in old age at a profit or passed on to heirs.
    Re myself. Had I bought gold early in my good high earning years when it first again became legal for Americans to again own it I would have paid circa $42 an ounce. Today could have sold it for $1235 an ounce. Had I used the $30,000 I spent on a downpayment for a house in 1979 for gold I today would have walked away with more than $878,000.
    I will, to spin gold a bit differently apply the the gold investment “standard” to my father who purchased a farm in 1922 for $24,000. Had my father purchased gold at the then going price of $16 and ignored the dictator Roosevelt’s gold grab in 1934 by 1986 even at an imaginary low price of $300 he would have had $450,000 far more than he netted from the sale of his land in 1984.
    Throughout history the rich stayed rich by owning and holding gold. The idiot lib socialists New Deal Ivy League professors thought in 1934 they could repeal economic reality with fiat money. How is that version of hope & change working for you socialists in your Euro fantasy world and soon here too thanks to Marxist Obozo.

  • egoist

    Abu Daiby – hotel installed a gold-coin vending machine. China encourages people to buy gold (from their banks). The wheels came of, amazing that this wagon has defied gravity this long.

  • Banjo

    Peter Jackson wants us to peel the anti-immigration people from the Tea Party ranks. After that we can throw the pro-life people under the bus. Then the left will pretty much have us right where they want us, splintered and divided and unable to cohere around conservative candidates.

  • Chester White

    “We are witnessing a worldwide repudiation of big government and Keynesian economics. In the Unites States the evidence of this is found in the results of the several state elections I mentioned above, most if not all of which were plebiscites on national policy issues.”

    Well, it’s starting here. We have one hell of a long way to go.

    A large number of Democrats, mostly in cities, are dug in and can’t be dislodged because of the makeup of their electorate. Bobby Rush of Chicago won’t be beaten no matter what happens in this country. Obama couldn’t even do it a few years ago; Rush killed him in that House race.

    It only takes 41 in the Senate to block anything. I don’t see how we are going to be able to make the kind of progress we need, unless the productive half of the country goes on strike. Man, I’d love to see that.

  • Oyster

    Are you aware, Hugh, that you got a shout out for this post at Instapundit?

  • Oyster

    Oh, looks like someone already told you :)

  • HughS

    Thanks Michael and Oyster, I saw it this morning

  • HughS

    Thanks for the link Glenn.

  • willis

    “The Islamification of Europe will be a rallying cry for the extreme right wing, just like the “Jewish problem” was during the post Weimar Republic.”

    You went to a lot of trouble to sneak that little lie in whacky Jacky. The Nazis were extreme left-wing. National Socialist Party, not National Freedom Party. I’m sure you’d like to forget that, but we won’t let you.

  • C Brown

    Average Americans, when polled, always come out favoring “small government” in the abstract. If you ask those same average Americans to give up a specific government benefit (which would thus shrink the size of government) they will tell you to pry it from their cold, dead hands. Until this changes – and people agree to actually make sacrifices – nothing is going to change.

    The biggest two threats to the economic viability of the US in the medium to long term – Medicare and public pension underfunding – are great examples. Despite a general distaste for big goverment as a concept, you don’t see candidates winning elections anywhere running on a platform telling people they must work 10 years longer for a pension that’s 70% lower. Who’s fault is that – the elected or the electorate?

  • http://www.liberalcapitalist.com Peter Jackson

    Banjo: I’m not suggesting the Tea Parties throw anyone under the bus. But the Tea Parties resonate politically because they’re about one thing: individual freedom. Capitalism, Constitutionalism, those are derivatives of freedom. We already have an anti-abortion, anti-gay, anti-Mexican group in the US, it’s called the Republican Party. And the second the Tea Parties become about anything other than freedom first they will just be another tribe arguing for their interests over those of other tribes, just like the GOP, just like the left, and like both of those groups they will fail. Individual freedom is the diametric opposite of tribalism.