Why Optimism and Ice-cream Are Mutually Exclusive - Burke Libertarian for Governor

Face it, eventually the ice-cream on your ice-cream cone is going to melt.  You can be optimistic that it won't, but it will.  This is the paradigm our debt based economy operates within.  This is a special debt cone because each year we need to eat more debt ice-cream than the debt ice-cream and interest toppings than the year before.  It's a requirement of the system or we have an ice-cream depression.  So we all pick up our debt cone and cheer as our debt cone is filled, simply because we could.

Like all debt Ice-cream on a debt cone easy money tastes good to the economy in the early years. This occurred in 1982 with Reaganomics and the now famous "Trickle Down Economics" theory.  This first cycle came to it's natural end just in time for GHW Bush to lose the 1992 election allowing Bill Clinton to claim fame to the Mid-90's American debt ice-cream binge re-growth, followed in the late 90's by an attempt to ingest a ton of technology stock debt ice-cream while creating an internet bubble.  Around 2001 we threw up for two years with help from 9/11 and added some draconian new banking measures and wars. 

So we all needed more fresh debt ice-cream printed out of thin air to keep the machine churning so GW Bush gave out $1000 checks for debt free ice-cream, except was actually more debt ice-cream in disguise the US had to borrow the ice-cream.  Oil hit $140 a barrel and tankers started stacking off the coast waiting for the price to go up.  The average American's mortgage ice-cream cones were far to big and Lehman Brothers cone collapsed in September 2008 and became an awful mess.

So what The Powers That Be (TPTB) did was dish out even more canisters of ice-cream at the banks and begged them to find more people to eat their debt ice-cream, especially in housing, student, and auto loans.  However, as interest rate temperatures rose in mid 2013 the ice-cream melted faster and spilled into markets causing creamy asset bubbles in the Dow, S&P, Russel 2000, and of course once again-Nasdaq.  There are also ice-cream bubbles in student and auto loans which accounted for 94% of March consumer loans.  

Finally, Governor Walker's friends in Beijing have a problem on their hands that he should be aware of as well.  Mao Daqing is the Vice-Chair of the largest Chinese property developer and his speech at a private dinner was recorded and released.  Couple'O things the governor should hear, it has implications for everyone.

From The Telegraph's Amrbose Evans-Pritchard:

Mr Moa Said China’s house production per 1,000 head of population reached 35 in 2011. The figure is below 12 in most developed economies “even when the housing market is hot; no country has a figure of greater than 14”.

“By 2011, housing production per 1000 people reached 30 in Tier 2 cities, excluding the construction of affordable houses. A persistently high figure such as this should cause alarm,” he said.

There's much more but I think his conclusion bears attention:

On balance it is better for China to get the trauma over and done with sooner rather than later. But the rest of the world should be under no illusions as to what it means. 

This policy decision – should President Xi stay the course – is equivalent in global scale to the decision by Fed chief Benjamin Strong to pop the US speculative bubble in 1928, causing a commodity slump that was transmitted worldwide through the dollar based currency system (Inter-War Gold Standard) and which later snowballed into something far worse.

The US was then the world’s rising creditor power, with foreign reserves above 6pc of global GDP, almost exactly the same as China’s holdings today. When China sneezes … you will catch a cold, wherever you are.

In short, where US Federal Reserve triggered the "cold" in 1928, China is the epicenter of this cold and he thinks they should burst and let it spread sooner than later.  

The Federal Reserve needs to be audited and that is exactly what the Congress voted with a veto proof majority to do recently.  The companion Senate bill has been reintroduced by Senator Paul with 29 co-sponsors, down from 37 in the last bill attempt, and still lacking any sponsorship by Wisconsin Senators Johnson and Baldwin.  Interestingly, this comes from a Johnson post-mortem visit blog May 20, 2013:

So what did I ask?  I asked if he did his own grocery shopping.  The idea that food inflation is under 2% is absurd and I pointed to Economist John William’s data which points to a 10% inflation rate if we remove the government manipulation of the numbers.  I also asked if he would support a full audit of the Federal Reserve and his answer was, “I think we already know what the Federal Reserve is doing.”

Unlikely.

Johnson is not a co-sponsor to the legislation even though the Red team state convention resolution has been approved for audit for at least two years.  Perhaps when it collapses we can get Senator Johnson on board and Senator Reid to bring it up for a vote.

It's not a bad thing to be optimistic, but be careful of the ice-cream trap.