Empires have come and gone. Some lasted a blink of an eye and some millennia.
The question is, after 9/11, the rise of China and a great financial crisis, where does the U.S. empire stack up to its predecessors?
Well, it seems the one commonality they all have is the point when their might was undermined by sloth and greed. And entitlements: free bread and circuses. For some it took years, others centuries.
Here, in a compelling and unique address, is what Romulus Augustus, the last emperor of the Roman Empire, might say to President Obama now about how to keep America great.
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- DON’T BE SO ARROGANT, MR. PRESIDENT
- The Latest Obama Outrage: the Family's $100 Million Vacation
- Why The Fiscal Cliff "Deal" is Spelled P-O-R-K
- Why Japan's "Lost Decades" Are Headed to America in 2016
- Here's What President Obama's Win Means For Your Money
- Obamanomics: What You Can Expect if President Obama Wins the Election
- Iran is Now a Full-Blown Crisis, Stage Set for $200 Oil
- GDP Is a Lie – It’s Time for a New Measure of Economic Growth
- The Debt-Ceiling Debate: Three Federal Tax Increases That Could Save the U.S. Economy
- How to Fix the U.S. Housing Market
- Special Report: How the Government is Setting Us Up for a Second Subprime Crisis
- The Slow Death of General Motors
Empires have come and gone. Some lasted a blink of an eye and some millennia.
How much do you spend on your summer vacation? American households usually spend about $1,200 per person on summer vacations, according to a recent American Express survey.
Presidents spend more on their vacations than you or I. They have to. Air Force One and security does cost more than loading the Honda and heading to the beach.
Here's how much some recent presidents spent our tax dollars on vacation.
Ronald Reagan spent most of his free time at his California ranch. Taxpayers covered the cost of approximately $8 million for presidential travel during Reagan's first six years in office, according to the Los Angeles Times. That amounts to $1.3 million a year.
For George Bush the cost of flying Air Force One to his Texas ranch was approximately $56,800 per trip, for each of the 180 trips according to Media Matters. President Bush spent Christmas during his two terms at the White House so his staff and secret service could spend the holiday with their family, according to Conservative Byte.
Now Obama plans to blow away all previous presidents' leisure travel costs on our dime with a better than Disney World extravaganza trip to Africa.
However Obama had to cancel the safari because of the need to fill the surrounding jungle with snipers to guard the president from wild animals!
Behind the scenes of the Fiscal Cliff debate, there was plenty of f-bombing, poison pilling, and grandstanding leading up to the deal - and that was before the members of Congress and the Senate actually got serious with their usual ultimatums, followed by earnest- looking sound bites and posturing. But what gets me really riled up is the amount of "pork" contained in the bill...
The hope is that Abe's promises of fresh stimulus, unlimited spending and placing a priority on domestic infrastructure will be the elixir that restores Japan's global muscle.
As a veteran global trader who actually lives in Japan part time each year, and who has for the last 20+ years, let me make a counterpoint with particular force - don't fall for it.
I've heard this mantra eight times since Japan's market collapsed in 1990 - each time a new stimulus plan was launched - and six times since 2006 as each of the six former "newly elected" Prime Ministers came to power.
The bottom line: The Nikkei is still down 73.89% from its December 29, 1989 peak. That means it's going to have to rebound a staggering 283% just to break even.
Now here's the thing. What's happening in Japan is not "someone else's" problem. Nor is it something you should gloss over.
In fact, the pain Japan continues to suffer should scare the hell out of you.
And here's why ...
The so-called "Lost Decade" that's now more than 20 years long in Japan is a portrait of precisely what's to come for us here in the United States.
Perhaps not for a few years yet, but it will happen just as we have already followed in Japan's footsteps with a "lost decade" of our own.
The parallels are staggering.
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Evidently, the markets are struggling, too.
As was widely expected leading up to the election, all of the major averages got slammed in early trading on news of President Obama's victory. Just over an hour into yesterday's session, the Dow dropped 262.51, the S&P 500 tumbled 27.58 and the tech- laden Nasdaq fell 59.55. Oil tanked 2.95% and $2.62 per barrel to $86.08 while 10-year bonds saw yields plummet 6.20% to 1.63%.
There is a bright side, though. Now that all the hoopla is over, investors can get down to business.
Here's what I'm expecting:
However, when the markets begin to handicap the race it will be about a lot more than just picking the eventual winner.
Instead, everything will revolve around the policies and consequences that come along with the winner.
The difference in approach promises to be stark with "Obamanomics" on the left and "Romneynomics" on the right.
Each one comes with its own set of consequences, though.
Today I'm going to look at "Obamanomics II," or the policies we will get if President Obama is re-elected.
But those on the left shouldn't despair...In my next piece, it's Romney's turn.
As for the horserace itself, it's too close to call, with neither side having much chance of winning a big victory.
President Obama Has the EdgeEven still at the moment, President Obama appears to be ahead. Apart from his modest lead in the polls, my former home state of Virginia appears to be swinging definitively toward the Democrats.
Yes, Republican Bob McDonnell did win the Virginia governorship handily in 2009, but he was a very good candidate. Moreover, turnout in gubernatorial elections is normally low. Thus I believe the latest polls showing Obama with a 7% lead in Virginia are accurate, and without Virginia Romney has a very difficult path to the presidency.
If we believe the presidential election will be close, then it follows that Congress and the Senate elections must be close, too.
If Obama wins in November, the most likely outcome must be that the Democrats will hang on to the Senate, while the Republican House majority survives, albeit much smaller than at present.
With this combination, the president's more extreme wishes (or those of his team) will be restrained. But as a newly re-elected figure he will nevertheless have more power to get what he wants than he does currently.
Whatever the congressional numbers may be, the president's first task will be to face the "fiscal cliff" of January 2013, when the Bush tax cuts and temporary payroll tax cuts expire and automatic spending "sequestration" comes into effect.
There are three reasons for this - all happening within the last week:
- First was Tehran's successful launch of a satellite, viewed by all in the region as being for military intelligence.
- Second, in his toughest talk to date, Iranian Supreme Leader Ayatollah Ali Khamenei voiced defiance to Western sanctions and pledged open retaliation if they are instituted.
- Finally, last Thursday, U.S. Secretary of Defense Leon Panetta expressed concern that, if matters continue, Israel could attempt an air-strike takeout of Iranian nuclear facilities within a month. Iran has been frantically moving essential components of its nuclear program underground to withstand such an attack.
What's more, the EU decision to stop importing Iranian crude starting July 1 will cripple any chance Tehran has to combat escalating economic and political turmoil at home.
Yet Khamenei's defiant tone during his Friday prayer meeting speech indicates that Iran's religious leadership will not wait for the system to unravel.
And that is what makes this both a full-blown and an intensifying crisis.
Brinksmanship in the Straits of HormuzSo what's being done?
Washington has little - leverage, save its ability to temper an immediate escalation by Israel (leverage the U.S. can still apply, at least for the moment). It also has some indirect influence on what the E.U. does.
Meanwhile, Saudi Arabia also is a wild card. It will not tolerate a nuclear Iran.
And yes, there are ample indications that American and Israeli intelligence have concluded Iran will achieve the ability to develop nuclear weapons in the next 18 to 24 months.
Some elements of that process will be available earlier, but remember: A weapon is of little value unless it can be controlled and delivered. The logistical and infrastructure considerations need to be in place first.
Yet with such an inevitable conclusion staring them in the face, the West has decided to embark on a risky path...
The target here is not the nuclear project at all (over which there is less and less outside control). Instead, it has become about creating massive domestic instability to bring down a regime.
Now, this is not about ending the theocracy. With or without Mahmoud Ahmadinejad as president or Ali Khamenei as supreme leader, Iran will remain a Shiite-dominated country. Religion decisively controls politics, and the clergy oversees the society.
The West is seeking a more moderate application of what will remain the Iranian cultural reality.
However, as the brinksmanship intensifies, so will the price of crude oil. Tehran, in this dangerous game of international chicken, really only has one card to play - the Strait of Hormuz.
There has been much misinformation circulated about the strait. Here are the facts.
On any given day, 18% to 20% of the world's crude oil passes through it.
According to the Energy Information Administration, the Strait's narrowest point is 21 miles wide; however, the width of the shipping lane in either direction is just two miles, cushioned by another two-mile buffer zone.
Of greater significance, though, is the fact that most of the world's current excess capacity is Saudi. (This is the oil that can be brought to market quickly to offset unusual demand spikes or cuts in supply elsewhere.) And, unfortunately, Saudi volume must find its way through the same little strait.
If we're unable to access the Saudi excess, that loss guarantees the global market will be out of balance. That will intensify the price upsurge - an upsurge that is already happening.
Now for the question I'm being asked several times a day in media interviews...
Just how bad can it get?
That's right. GDP is a financial ruse - the biggest of the past half-century. And it's time to move past it to another, more accurate measure of economic growth.
Keynesian economist Simon Kuznets designed GDP at the height of the New Deal era. Kuznets first revealed the measure in a report to Congress in 1934. GDP takes into account consumption, investment and government expenditure to create a measure of economic growth.
But the Keynesians employed some chicanery, or sleight-of-hand, to generate this statistic. A close look reveals the dirty little secret about GDP: It intentionally overplays the importance of government spending - and in doing so inflates the role that Washington plays in each of our lives.
And it's been doing this for 77 years ...
The Biggest Lie of the 20th CenturyGross domestic product is supposed to be a measure of all the goods and services produced here at home.
But there's a discrepancy.
You see, private-sector output is measured by the price people are prepared to pay for it. But government output is fudged: It's measured by its cost.
That means GDP increases any time the government spends money. It doesn't matter if that money is actually put to productive use or not - GDP rises nonetheless.
The bureaucrat devising regulations that damage business? His salary increases GDP. The $300 million Alaskan "bridge to nowhere" of a few years back? That was $300 million added to GDP. The jet-fighter project that costs billions, and is plagued by huge overruns that lead to its cancellation? Those billions add to GDP.
Even public-spending "stimulus" programs, however foolish, are always effective according to the GDP definition, because their cost is simply added to output.
It's obvious why big-government Keynesians would like this calculation: It substantiates their claim that government spending stimulates economic growth.
In the real world, however, this makes no sense. Indeed, none of the examples above actually add to economic welfare.
Don't misunderstand - some government output is very valuable. We could not exist in a free society without a court system that protects our property rights and a national defense that protects our borders. In most other cases, however, if government output were truly cost effective, the private sector would've already taken the initiative (and probably done so at lower cost and greater impact).
So how can you get an accurate measure of economic growth?
Arithmetically, there's a simple solution: You take Line 1, "Gross Domestic Product," in the Bureau of Economic Analysis' GDP Table and subtract from it Line 21, "Government Consumption Expenditures andGrossInvestment. "
That gives you a net number, which we can call "gross private product," or GPP. It's a measure of all the output produced by the private sector. In general, it will underestimate national "welfare" unless government is really bad. But it will give you a much better idea of the output the market economy is producing.
Indeed, looking at GPP's past performance helps to explain some things that GDP doesn't.
Keynesians like to proclaim that World War II got America out of the Great Depression: Thus, if you make stimulus big enough, it will solve economic problems.
This is the biggest lie of the 20th century.
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Although Republicans then said that tax hikes were "off the table," this statement is reminiscent of a toddler who threatens to hold his breath until he turns blue if you make him eat spinach.
Given that our elected leaders in Congress just can't seem to curb their spending addiction, the unpleasant reality is that some types of tax hikes are essentially inevitable.
Truth be told, I can show you three tax increases that should be enacted.
As a taxpayer, that statement will probably make you wince in anticipated pain.
But once I've made my case, I'm betting that the investor in you will agree that these three federal tax increases could save the U.S. economic recovery.
Let's take a look ...
Federal Tax Increases We Don't Want to SeeIf we ignore the debt-ceiling debate (and the Aug. 2 deadline for increasing the ceiling) for a minute, and just consider the health and welfare of the U.S. economy, we can see that there are a number of federal tax increases that would be highly counterproductive.
One example: boosting the corporate tax rate above 35%.
Except for Japan, the United States already has the highest corporate tax rate in the Organisation for Economic Co-operation and Development (OECD). Corporations don't pay much tax because they are able to keep profits overseas in tax-free jurisdictions and employ leasing and other tax breaks. It would make much more sense to lower the corporate tax rate - perhaps to 30% - and close many of the loopholes so that the "yield" (what's actually collected) is the same or perhaps even a little higher.
Similarly, it makes no sense to increase the 15% tax on dividend income. Dividends are paid by corporations out of their after-tax income. The levy on dividends - paid by the company's shareholders - means those companies actually suffer from a "double-taxation" rate of about 47%.
This encourages companies to fool around with stock options, repurchase agreements and with overpriced acquisitions, thus ripping off ordinary shareholders and reducing the economy's efficiency.
But here's what those reports didn't tell you: If the housing market isn't fixed soon, it's going to drag the rest of the economy down into a hellish bottom that will take years, if not decades, to crawl out of.
The housing market is our single-most important generator of gross domestic product (GDP) and, ultimately, national wealth.
It's time we fixed what's broken and implemented new financing and tax strategies to stabilize prices.
Contrary to the naysayers - and in spite of political pandering and procrastination - we can almost immediately execute a simple two-pronged plan to fix mortgage financing and stabilize U.S. housing prices.
I call it a not-so-modest proposal.
The Worst Since the Great DepressionThe facts are frightening: We are in a bad place. The plunge in housing prices we've seen during the current downturn is on par with the horrific freefall the U.S. housing market experienced during the Great Depression.
And without an effective plan to arrest the double-dip in housing, there's no bottom in sight.
Hope Now, an alliance of lenders, investors and non-profits formed at the behest of the U.S. Department of the Treasury and the U.S. Department of Housing and Urban Development, counts 3.45 million homes being foreclosed from 2007 through 2010. Current estimates of pending and potential foreclosures range from another 4 million to as many as 14 million.
According to RealtyTrac, a real-estate data provider, the country's biggest banks and mortgage lenders are sitting on 872,000 repossessed homes. If you add in the rest of the nation's banks, lenders and mortgage-servicers, the true number of these REO (real-estate owned) homes is closer to 1.9 million.
These shocking statistics illustrate just how large the current overhang of bank-owned properties actually is (at current sales levels, REO properties would take three years to unload). And they help us to understand how the staggering number of yet to-be-foreclosed, repossessed, and sold homes will depress U.S. housing market prices for years to come.