Tuesday, May 24, 2016

Of Course the US Government Will Default on Its Debt

Last week Donald Trump set the financial punditry class aflame with his suggestion that the United States may end up asking lenders to take a haircut on its debt obligations. The resulting firestorm created a race to see who could come up with the strongest condemnation of Trump, David Ader of CRT Capital Group told Bloomberg the comments were “stupid and ridiculous,” while Business Insider’s Josh Borro labeled them “insane.” Vox’s Matt Yglesias described the proposal as a threat to “incinerate the world economy.”
While Yglesias is correct that a US default would have major ramifications for the global economy, lost in all this hand wringing is the fact that the damage has largely already been done. As Jim Grant noted in his Time cover article this month, the United States debt situation is far more serious than most "experts" would like to believe. By accumulating a debt that now towers over $19 trillion, the United States government has written a check it will not be able to cash.

Of course the irony here is that many of the same pundits attacking Trump for his comments today are those who have encouraged on the fiscally reckless policies that have led us to this point. For example, The Weekly Standard described Trump’s comments as a “Plan to Destroy the U.S. Economy”, highlighting the pain that Americans would feel from such a move. Of course, this publication was perhaps the loudest cheerleader for the Afghanistan and Iraq Wars, which could end up costing taxpayers over 6 trillion dollars, and continues to campaign for further expansion of America’s military presence that currently costs over $700 billion a year.Meanwhile, conservative estimates of the cost of bailing out Wall Street — actions that would still be defended today by most of the mainstream financial class - weighs in at over $3 trillion dollars.
These expenditures, added on to firmly implanted and growing welfare state managed by a political class lacking the courage required to make serious attempts at debt reduction, has always made default, in some form, inevitable. As Congressman Ron Paul (who was discussing the reality of US insolvency during his last presidential campaign in 2012)  was always fond of pointing out, government spending is itself a form of taxation. So while the Weekly Standard is correct that a debt default will hurt the pocketbook of American families, this is an inevitable consequence of the spending it advocated — an insidious form of tax collection, the consequence of electing politicians who followed the publications own advice.
So the real question about an American default has always been less a matter of if, and more a matter of how and when.
While it is still popular to claim that the United States has never defaulted on its debt, this is a myth. The US has been forced to default a couple of times throughout history, the last of which being when Richard Nixon&rsquo closed the gold window. By cutting the ability of foreign governments to redeem US dollars for gold, America was allowed to pay back past debt with devalued fiat money. This form of default has long been a popular option for governments with debt obligations it can’t or won’t honor.
*I question if that's the actual last time. NDJ
Of course, as Peter Klein wrote last week, even Trump’s suggestion of the US restructuring its debt isn’t the doomsday scenario CNBC talking heads have made it out to be, noting that:
[T]he idea that the US can never restructure or even repudiate the national debt — that US Treasuries must always be treated as a unique and magical "risk-free" investment — is wildly speculative at best, preposterous at worst.
Murray Rothbard himself advocated for outright repudiating the national debt, arguing:
The government is an organization, so why not liquidate the assets of that organization and pay the creditors (the government bondholders) a pro-rata share of those assets? This solution would cost the taxpayer nothing, and, once again, relieve him of $200 billion in annual interest payments. The United States government should be forced to disgorge its assets, sell them at auction, and then pay off the creditors accordingly.
Trump himself has even touched on the possibility of selling of assets held by the Federal government as a form of debt reduction. This solution would have the added benefit of a number of additional benefits, including solving many of the issues that currently exist with the Federal owning of land used by ranchers. Plus, the country as a whole would benefit if Federal bureaucrats were kicked out of the various government buildings that pollute America’s capitol city — perhaps they could follow the lead of the old DC post office and be turned into Trump hotels?
Unfortunately, lost in the media firestorm over Trump’s comments about the debt is the rapid deteriorating hope that The Donald would offer a challenge to the reckless monetary policy that has helped facilitate the US government’s disastrous spending spree. As I touched on last week, Trump, in stark contrast to past comments, praised the work of Janet Yellen and fully endorsed a continuation of the US’s historically low interest rates. Even more troubling, he seemed to endorse some disastrous aspects of Modern Monetary Theory by suggesting that the United States could never default because it could simply print more money.
The ramifications for this are far more dangerous than his pointing out that the government has no real plans to pay back its debt. 
Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
Image source: House Financial Services Committee

The news you view is 100% controlled

Mass Media

"Mass media" is a deceptively simple term encompassing a countless array of institutions and individuals who differ in purpose, scope, method, and cultural context. Mass media include all forms of information communicated to large groups of people, from a handmade sign to an international news network. There is no standard for how large the audience needs to be before communication becomes "mass" communication. There are also no constraints on the type of information being presented. A car advertisement and a U.N. resolution are both examples of mass media.
Because "media" is such a broad term, it will be helpful in this discussion to focus on a limited definition. In general usage, the term has been taken to refer to only "the group of corporate entities, publishers, journalists, and others who constitute the communications industry and profession." This definition includes both the entertainment and news industries. Another common term, especially in talking about conflict, is "news media." News media include only the news industry. It is often used interchangeably with "the press" or the group of people who write and report the news.
The distinction between news and entertainment can at times be fuzzy, but news is technically facts and interpretation of facts, including editorial opinions, expressed by journalism professionals. Which facts are included, how they are reported, how much interpretation is given, and how much space or time is devoted to a news event is determined by journalists and management and will depend on a variety of factors ranging from the editorial judgment of the reporters and editors, to other news events competing for the same time or space, to corporate policies that reflect management's biases.

Image result for media censorship pic

Importance
Mass communicated media saturate the industrialized world. The television in the living room, the newspaper on the doorstep, the radio in the car, the computer at work, and the fliers in the mailbox are just a few of the media channels daily delivering advertisements, news, opinion, music, and other forms of mass communication.
Because the media are so prevalent in industrialized countries, they have a powerful impact on how those populations view the world. Nearly all of the news in the United States comes from a major network or newspaper. It is only the most local and personal events that are experienced first-hand. Events in the larger community, the state, the country, and the rest of the world are experienced through the eyes of a journalist.
Not only do the media report the news, they create the news by deciding what to report. The "top story" of the day has to be picked from the millions of things that happened that particular day. After something is deemed newsworthy, there are decisions on how much time or space to give it, whom to interview, what pictures to use, and how to frame it. Often considered by editors, but seldom discussed, is how the biases and interests of management will impact these determinations. All of these decisions add up to the audience's view of the world, and those who influence the decisions influence the audience.
The media, therefore, have enormous importance to conflict resolution because they are the primary -- and frequently only -- source of information regarding conflicts. If a situation doesn't make the news, it simply does not exist for most people. When peaceful options such as negotiation and other collaborative problem-solving techniques are not covered, or their successes are not reported, they become invisible and are not likely to be considered or even understood as possible options in the management of a conflict.
Negatives
The news media thrive on conflict. The lead story for most news programs is typically the most recent and extreme crime or disaster. Conflict attracts viewers, listeners, and readers to the media; the greater the conflict the greater the audience, and large audiences are imperative to the financial success of media outlets. Therefore, it is often in the media's interest to not only report conflict, but to play it up, making it seem more intense than it really is. Long-term, on-going conflict-resolution processes such as mediation are not dramatic and are often difficult to understand and report, especially since the proceedings are almost always closed to the media. Thus conflict resolution stories are easily pushed aside in favor of the most recent, the most colorful, and the most shocking aspects of a conflict. Groups that understand this dynamic can cater to it in order to gain media attention. Common criteria for terrorist attacks include timing them to coincide with significant dates, targeting elites, choosing sites with easy media access, and aiming for large numbers of casualties.[1] Protesters will hoist their placards and start chanting when the television cameras come into view. It is not unusual for camera crews or reporters to encourage demonstrators into these actions so they can return to their studios with exciting footage. The resulting media coverage can bestow status and even legitimacy on marginal opposition groups, so television coverage naturally becomes one of their planned strategies and top priorities. The "30-second sound bite" has become a familiar phrase in television and radio news and alert public figures strategize to use it to their advantage.
In most parts of the industrialized world, the news has to "sell," because the handful of giant media conglomerates that control most of the press (media outlets) place a high priority on profitable operations. Their CEOs are under relentless pressure to generate high returns on their shareholders' investments. Media companies face tight budgets and fierce competition, which often translate into fewer foreign correspondents, heavy reliance on sensationalism, space and time constraints, and a constant need for new stories. Reporters with pressing deadlines may not have time to find and verify new sources. Instead they tend to rely on government reports, press releases, and a stable of vetted sources, which are usually drawn from "reliable" companies and organizations. Most overseas bureaus have been replaced by "parachute journalism," where a small news crew spends a few days or less in the latest hotspot. These same media outlets are also dependent upon advertisement revenue, and that dependence can compromise their impartiality. Many newspapers and television stations think twice before reporting a story that might be damaging to their advertisers, and will choose to avoid the story, if possible. According to a survey taken in 2000, "...about one in five (20 percent) of local and (17 percent) (of) national reporters say they have faced criticism or pressure from their bosses after producing or writing a piece that was seen as damaging to their company's financial interests."[2] The drive to increase advertising revenue has led many local news shows to measure out world news in seconds to accommodate longer weather and sports reports.
The news that is reported in the West comes from an increasingly concentrated group of corporate- and individually-owned conglomerates. Currently, the majority of all media outlets in the United States and a large share of those internationally are owned by a handful of corporations: Vivendi/Universal, AOL/Time Warner (CNN), The Walt Disney Co. (ABC), News Corporation (FOX), Viacom (CBS), General Electric (NBC), and Bertelsmann.[3] These companies' holdings include international news outlets, magazines, television, books, music, and movies as well as large commercial subsidiaries that are not part of the media. Many of these companies are the result of recent mergers and acquisitions. The U.S. Federal Communications Commission (FCC) is currently considering revising media-ownership rules that would encourage even further consolidation in the future.[4]
In addition to the control exercised by owners, there are also government controls and self-censorship. The United States, governed by a constitution where the First Amendment guarantees freedom of the press, has arguably one of the most free presses in the world, and is one of the few countries where the right to free speech is expressly written into the constitution. Yet even the U.S. government exerts control over the media, particularly during times of war or crisis. In many other countries around the world, especially emerging nations and dictatorships, governments impose tight restrictions on journalists, including penalties ranging from fines to imprisonment and execution. In these environments, rigorous self-censorship is necessary for survival. In a major survey of 287 U.S. journalists, "about a quarter of those polled have personally avoided pursuing newsworthy stories."[5]
Positives
Without the media, most people would know little of events beyond their immediate neighborhood. The further one goes outside of one's circle of friends and family, the more time-consuming and expensive it becomes to get information. Very few, if any, individuals have the resources to stay independently informed of world events. With the news, however, all one has to do is turn on a television or turn to the Internet. Even when it is biased or limited, it is a picture of what is happening around the world.
The more sources one compares, the more accurate the picture that can be put together. In addition to the media conglomerates, there are also a range of independent news outlets, though they have a much smaller audience. Some of these provide an alternative view of events and often strive to publish stories that cannot be found in the mainstream media. Technological advances in many industrialized (primarily Western) countries make it possible to read papers and watch broadcasts from around the globe. While language skills can be a barrier, it is possible to live in the United States and watch Arab-language broadcasts from the Middle East, or to get on the Internet and read scores of Chinese newspapers. Having access to these alternative voices limits the power of monopolies over information.
Another important benefit of a functioning mass news media is that information can be relayed quickly in times of crisis. Tornado and hurricane announcement can give large populations advance warning and allow them to take precautions and move out of harm's way. In a country suffering war, a radio broadcast outlining where the latest fighting is can alert people to areas to avoid. In quieter times, the media can publish other useful announcements, from traffic reports to how to avoid getting HIV. It is a stabilizing and civilizing force.
Along the same lines, the news media allow elected and other officials to communicate with their constituents. Frequently, the delegates at a negotiation will find they understand each other much better over the course of their discussions, but that understanding will not reach the larger populations they represent without a concerted communications effort. If constituents are not aware of these new understandings (and subsequent compromises) during the course of negotiations, they will almost certainly feel cheated when a final agreement falls far short of their expectations. To achieve ratification, delegates must justify the agreement by discussing it with and explaining it to their constituents throughout the entire process[6] and the media is often used for this purpose.
"CNN Effect"
A recent media phenomenon dubbed the "CNN effect" occurs when powerful news media (i.e. CNN) seem to be creating the news by reporting it. It has been argued that CNN, with its vast international reach, sets the agenda by deciding which items are newsworthy and require the attention of government leaders. Traditionally, agenda-setting has been seen as the prerogative of government. It is also argued that emotionally-charged footage of people suffering, such as mass starvation, bombed-out markets, and burning houses, arouse the public to demand immediate action. This gives leaders little time to think through an appropriate response and can force them to take valuable resources from more urgent, less photogenic issues.
This use of sensational imagery is cited as being responsible for the United States' ill-fated involvement in Somalia : "In the words of one U.S. congressman, 'Pictures of starving children, not policy objectives, got us into Somalia in 1992. Pictures of U.S. casualties, not the completion of our objectives, led us to exit Somalia.' "[7] On the other hand, failure of the media to fully report on the genocide that claimed an estimated 800,000 lives in Rwanda during a 100-day period in 1994, made it easy for Western governments to ignore the crisis that they preferred not to acknowledge until long after it ended.
The CNN effect also brings up issues of accuracy. The New York Times, with its vast resources, has long been known as "the newspaper of record; once something is reported by this leading news outlet it is accepted as fact (unverified) and carried by other outlets, even when errors creep into the Times' account.
Some observers argue that the CNN effect is overrated, if not complete myth. Warren Strobel and Susan Carruthers, for example, argue that the U.S. government has not been forced into doing anything; rather, it used reaction over media stories to introduce policies that it already desired. Strobel also argues that any action a politician undertakes as a result of this pressure will be merely a "minimalist response" -- a limited action that suggests a greater response than has taken place.[8]
Theories of Journalism
Any discussion of media and conflict eventually leads to the purpose and responsibilities of journalists. A Western audience expects objectivity of its news reporters. While most citizens take this for granted, objective reporting has not been the historical norm. The concept of objectivity itself has often been the focus of debate. As Susan Carruthers states, "... news can never be 'value-free,' from 'nobody's point of view.' "[9] It is a sentiment voiced by numerous journalism professionals and teachers.
Deciding what the news is requires a value judgment. In the Western news media there is a consensus that news is something unusual which departs from everyday life and is quantifiable. For example, the outbreak of war is news, but any fighting thereafter might not be. As the war continues, its newsworthiness depends on whether the news agency's home troops are involved, whether the troops of close allies are involved, how many casualties are reported, how photogenic the victims are, whether reporters have access to the fighting and information about it, and what other stories occur at the same time. Western news consists of events, not processes. This bias can result in news reports where events seem to have no context.
In response to the drawbacks of 'objective' journalism, some journalists have begun advocating for alternative models, such as "peace journalism" and "public journalism." Peace journalism advocates the belief that journalists should use the power of the media to help resolve conflict rather than report it from a distance. Its detractors argue that "[o]nce a journalist has set himself the goal of stopping or influencing wars, it is a short step to accepting that any means to achieve that end are justified. ... There can be no greater betrayal of journalistic standards."[10]
Public journalism seeks to explore issues affecting a community and stay with those issues long enough to give the community enough information to understand the conflict and get involved. This, however, often requires a long-term commitment by the journalist and news media to follow a story over the course of the conflict. If the story is of continuing high importance to the readers -- such as a war that involves local troops, such coverage is common. If the story is not deemed continuously "newsworthy," however, it takes a committed journalist to continue to write about it. [11]
[1] Schaffert, Richard W. "The Media's Influence on the Public's Perception of Terrorism and the Question of Media Responsibility." Media Coverage and Political Terrorists. New York: Praeger Publishers. 1992: 61-79
[2] Kohut, Andrew. "Self-Censorship: Counting the Ways." Columbia Journalism Review. May/June 2002.http://www.cjr.org/year/00/2/censorship.asp
[4] Sanders, Edmund. "Results of FCC's Media Studies Are Released." Los Angeles Times. Oct. 2, 2002.http://pqasb.pqarchiver.com/latimes/202977141.html?did=202977141&FMT=ABS&FMTS=FT&desc=California%3b+Results+of+FCC%27s+Media+Studies+Are+Released
[5] Kohut, Andrew. "Self-Censorship: Counting the Ways." Columbia Journalism Review. May/June 2002.
[6] Laws, David. "Representation of Stakeholding Interests." The Consensus Building Handbook. Thousand Oaks: Sage Publications. 1999.
[7] Carruthers, Susan L. The Media at War. New York: St. Martin's Press. 2000. p 206
[8] Strobel, Warren. 1996. Managing Global Chaos: Sources and Responses to International Conflict, eds. Chester A. Crocker and Fen Osler Hampson with Pamela Aall. Washington, D.C.: United States Institute of Peace Press. p. 366.
[9] Carruthers, Susan L. The Media at War. New York: St. Martin 's Press. 2000. p. 17.
[10] Weaver, Tim. "The End of War." Track Two. Vol. 7, No. 4. http://ccrweb.ccr.uct.ac.za/archive/two/7-4/p21-endofwar.html
[11] Special thanks to Richard Salem, President of Conflict Management Initiatives, for his assistance in drafting this essay.
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Monday, May 23, 2016

What to Know About the Presidential Race Today


1
Though Bernie Sanders says he is still focused on the campaign, some liberal Democrats are wondering whether his chance to build a legacy and political apparatus for progressive causes that will outlast him is slipping away.
2
On the trail: Hillary Clinton is in Michigan, while Mr. Sandersis in California, which votes on June 7. Donald J. Trump has no official campaign events scheduled on Monday, before heading out West for rallies the rest of the week.
3
Mrs. Clinton continues to have a general election focus, warning that Mr. Trump is not a "normal" candidate.
4
Deep resistance from some of the biggest Republican donors stands between Mr. Trump and his $1 billion fund-raising goal. We look at why top donors refuse to give him money.



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